Sometimes one person can change an industry. Consider Barry Zamore, who fought for two years to eliminate the costly fees that huge banks have charged to institutional investors that buy and sell corporate loans.
In 2004, Zamore, a loan trader for Credit Suisse in New York, inspired investors to unite and press loan originators to waive so-called assignment fees. These charges are incurred whenever an investor trades a piece of a loan through a bank that didn't underwrite it; in each case, the underwriting bank charges the investor $3,500. The policy dates to the early days of the secondary loan market, when trades were infrequent and paper-intensive. By May 2004, however, the market had become far more liquid -- volume has grown by 1,500 percent in the past decade -- and largely computerized. Zamore's own firm had ceased to charge assignment fees. But the biggest loan arrangers, including Bank of America, Citigroup and J.P. Morgan Chase, still had them in place.
"It was frustrating. It stopped me trading loans in small sizes for clients, and it made the market less efficient," recalls Zamore, 36.
No matter how incensed he was, Zamore knew that one trader -- especially one working at a rival firm -- wouldn't be able to change the situation. So he issued a call to arms, urging investors to form an alliance by July 4, 2004, to push for change. "No better time than Independence Day to rid our market of this high-price cost of doing business," he wrote in an e-mail to clients.
Investors responded, forming a working group to pressure loan originators. By July 2004, Citi had waived assignment fees on trades done through any bank with a similar policy. Since then more than a dozen banks also have waived fees on a reciprocal basis. The latest: BofA, which underwrote the highest number of loans last year and changed its policy in January.
"The waiving of assignment fees lowers costs and increases the number of desks that can trade loans cost-efficiently," says Andrew Sveen, a trader at Eaton Vance in Boston. "Barry was instrumental in moving the ball forward."
J.P. Morgan remains a holdout; a spokesman for the bank won't comment on its plans. But Zamore is still happy with the changes he helped create. "Even without them, it's helped dramatically," he says.
