Unrest within the sprawling new BankAmerica and Citigroup has prompted one Wall Street analyst to review the history of Imperial Rome.
The two financial services empires hit early turbulence with disappointing earnings followed by the abrupt departures of David A. Coulter, president of BankAmerica, and James Dimon, president of Citigroup.
Market players can draw useful insights about management, power sharing, and problems of scale for large and diverse organizations from the ancient Romans, according to Sean J. Ryan of Bear, Stearns & Co., New York.
There are striking parallels between ancient Rome and the rise of massive financial services conglomerates after a dozen years of mergers and acquisitions.
Based on history, Mr. Ryan's guess is that competitors and the problems of bigness will force spinoffs and ultimately the breakup of some of the industry's largest institutions.
After centuries of glorious conquest the Roman Empire, stretching from Britain to Asia Minor, was deemed too big for one man to rule, Mr. Ryan said. So Emperor Diocletian opted in 286 A.D. to share the throne with a deputy, Maximian, who was named co-Augustus.
But power sharing seemingly was fraught with as many perils 1,700 years ago as it is today. Before long there were four emperors instead of two - a clear case of "bureaucratic bloat," Mr. Ryan said. After Diocletian abdicated in 303 A.D., civil war ensued until Constantine reunified the empire.
This fourth-century version of an aggressive chief executive then "marched into Rome with his adversary's head on a lance, and (remember, the Romans didn't have refrigeration) sent the severed head on to North Africa as a warning to would-be usurpers."
"Of course," Mr. Ryan wrote, "David Coulter and any cast-offs from Citigroup stand to receive much more attractive severance." Nevertheless, "the unchanging fate of power-sharing structures provides us with a refreshing sense of continuity with the past."
Investors infatuated with big banks and their much-touted economies of scale should take note that as the Roman Empire grew, it became harder to defend from more nimble rivals.
The Huns, Vandals, and Visigoths were no match separately for Rome's legions, Mr. Ryan said, but collectively their focus and home field advantage taxed the empire to the limit. "We find a striking similarity between this historical portrayal and the competitive landscape in banking," Mr. Ryan wrote.
Unable to vanquish his competitors, Constantine's novel solution in 330 A.D. was to spin off the empire's besieged, underperforming western half - Italy, Gaul, Spain, Britain, and North Africa.
He kept the more prosperous, faster-growing eastern empire - Greece, Asia Minor, Egypt, and the Middle East. "In so doing, he extended the life of the empire by a thousand years," Mr. Ryan said.
The new capital of Constantinople (formerly Byzantium, now Istanbul) remained the center of an empire that lasted until 1453-though the Turks had been attempting a hostile takeover since the mid-11th century. By contrast, Rome was sacked by the Goths in 476 A.D.
Mr. Ryan said the shedding of the western half of the empire is the kind of successful spinoff that will serve shareholders well when big-bank CEOs decide their companies have sprawled too far.
"The only question in our minds is whether some of today's bloated leviathans are broken up rationally and profitably by their own managements or are carved up and devoured during a period of weakness by smaller, more efficient rivals wielding the doomsday weapon of higher multiples," Mr. Ryan said.
Mr. Ryan, by the way, forsook majoring in Roman history in college for industrial labor relations. But he's a big fan of the history of the Eastern Roman Empire and has many books in his personal library on the topic. His wife recently bought him a three-volume edition of Edward Gibbon's masterpiece, "The Decline and Fall of the Roman Empire," but Mr. Ryan acknowledges he has yet to read it.
