07/17/2009

JP Morgan Abandons CDO Underwriting

J.P. Morgan is no longer interested in underwriting collateralized debt obligations.

The bank pulled the plug on its once-active CDO-underwriting division at the end of June, culminating a gradual withdrawal that began in 2007. Employees of the unit were given the option of looking for other positions within the bank or accepting severance packages.

Those who chose to leave include vice president David Goldfinger, who had been originating and structuring CDOs since joining J.P. Morgan in 2002. Also rumored to be gone is Vivek Mathew, another vice president with a CDO-structuring focus.

Meanwhile, Sean Griffin appears to be staying behind temporarily as the sole member of J.P. Morgan's CDO group - with the mission of unwinding the unit. He has worked at the bank for about eight years.

Goldfinger, Mathew and Griffin were among just a handful of personnel left in J.P. Morgan's CDO operation following numerous staff exits amid the credit-market collapse. In October 2007, for example, the bank severed a team brought in just a year earlier to boost its presence as an underwriter of deals backed by structured-product portfolios.

Industry players say the broader CDO division's fate began to look especially dim with the October 2008 resignations of Brian Zeitlin and Jim Kane. Zeitlin presided over CDO underwriting as global structured credit product chief, while Kane led North American structured-product distribution. The two now run a New York advisory shop called GreensLedge Group.

They had joined J.P. Morgan in 2004 from Deutsche Bank - along with ex-Deutsche colleagues Yale Baron, James Millard and Steven Weinreich - as part of an aggressive build-up of the institution's CDO-underwriting capabilities. At its peak, Zeitlin's unit encompassed about 50 staffers.

Then the credit crisis struck. Under Zeitlin's guidance, J.P. Morgan ran the books on $20.6 billion of CDOs worldwide in 2006, according to Asset-Backed Alert's ABS Database. That figure held at $19.4 billion in 2007, only to plunge to $4.7 billion in 2008 as market-wide deal production stalled. So far this year, J.P. Morgan has completed just $2 billion of CDO-underwriting assignments.

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