As a result, 57 American banks were closed and the unemployment rate reached 8.5 percent. However, some financial firms survived because of their business model.
Wells Fargo had a diverse lending system and lent not only to real estate but also to small businesses and companies from various industries, including energy and agriculture.
The abovementioned E*Trade again survived thanks to having sold its mortgage portfolio in 2007 to Citadel, a Chicago hedge fund group. In addition, the company made management changes with a new CEO, which allowed it to hang on through the recession.
Even The Worst Crises Create Opportunities
Companies may explore different strategies to survive. For example, while most companies tighten their belts during a crisis, some refocus rather than cut spending, trading lower short-term profitability for long-term gain. Many of these companies eventually come out winners from the crisis.
It is very important to have the right prevention–promotion balance to get the most growth after a recession. Such companies evaluate every aspect of their business model, making near-term changes that reduce costs before and after demand returns.
All those companies that survived stayed closely connected to customer needs; this was the filter through which they made investment decisions.
Winning companies also used opportunities before the recession. Bain research reveals the following actions that helped companies outperform in stormy times: early cost restructuring and a combination of balance sheet discipline, aggressive commercial growth plays and proactive M&A. Conversely, the companies that cut costs and R&D, scaled back on sales and marketing activities, and fired valuable talent survived a difficult period but later lost ground to their competition.
To finish the story, I’d like to offer a quote from Alex Chalekian from Lake Avenue Financial:
“At this time, we need to stay strong and remain positive. I don’t think, for us in the US, that the worst is over. We have yet to see the full force of this virus and the impact on our lives. That being said, my hope is that we learn from this horrible experience and come back much stronger and prepared for anything that comes at us in the future. A positive that will come from this is how technology has helped us get through this crisis, as we shelter in our homes. Tech and Fintech has helped keep us connected with our families, friends and clients. When we emerge from this epidemic, technology, especially financial technology, will prove to be invaluable to advisors and their clients.
” I leave you with this quote: ‘Failure is simply the opportunity to begin again, this time more intelligently.’– Henry Ford”