Jim Sigmon

By Alfred Mazzorana

Penn Central Corporation ’ s financial collapse in 1970 was the bellwether event that — along with events that followed in its wake — led to an unprecedented demand for corporate bond credit analysis and bond indenture research . This demand emanated from both money managers — predominantly in Boston and Hartford , where the bulk of fixed income securities were managed at the time — as well as the major Wall Street bond trading houses . Out of these developments arose a job category that had not previously existed : the fixed income analyst .

An organization to advance the new profession followed within a few years . In late 1975 , during a financially stressed decade , a small group of credit analysts created the Fixed Income Analysts Society Inc . ( FIASI ) in New York City . The group was seeking an organizational structure from which the then small , but growing , community of bond analysts could discuss fixed income related bond research ideas . The New York Society of Securities Analysts ( NYSSA ), which had been serving the investment community since 1937 , catered to equity analysts . As such , it provided

H . Russell Fraser , founding president of the Fixed Income Analysts Society Inc . ( FIASI ), photographed in 1990 . little in the way of programs tailored to the interests of the bond credit analyst .

FIASI ’ s initial gathering took place in late 1975 at Harry ’ s Restaurant on Hanover Square , New York City . Calls went out to known bond analysts . Approximately 22 credit analysts attended for an evening of casual discussion over drinks and hors d ’ oeuvres . Before the evening ended , the attendees approved the idea of creating an organization dedicated to bond analysts and agreed to support the organization with annual dues .

The founders used NYSSA ’ s organizational structure as their template for structuring the association . They incorporated FIASI , with H . Russell Fraser serving as the organization ’ s first president .

Pre-1970s : A Period of Corporate Credit Stability

The years following World War II witnessed a remarkable period of corporate credit quality stability . According to Martin Fridson in his 1984 Bondweek article titled “ The Transformation of Credit Research ”:

From 1948 to 1965 , Standard & Poor ’ s did not alter its rating on any of [ that era ’ s ] five largest electric utility operating companies , a roster that include [ d ] Consolidated Edison , Consumers Power , Detroit Edison , Pacific Gas & Electric , and Southern

California Edison . With so little change from one year to the next , it was sufficient for the analyst to examine financial statements that merely reported what had already happened .

The 1970 collapse of the Penn Central Corporation signaled the end of this period of stable corporate credit ratings . Demand for a new approach to corporate bond research germinated and led to the birth of the fixed income analyst profession on Wall Street .

Economic Environment of the 1970s

By the mid-1970s , the easy-money policies the Federal Reserve initiated during the 1960s — designed to generate full employment , coupled with increased funding for the Vietnam War ( 1967 – 72 )— contributed to a period of unprecedented price inflation . The stage was set for a period of stressful events in the US financial markets . By 1975 – 78 , the US economy was experiencing a period of stagnating corporate earnings coupled with a high rate of inflation , known as “ stagflation .” The corporate bond market was in a state of collapse .

Beginning in late 1979 and continuing through 1985 , the Federal Reserve , under new leadership , reversed its prior policies . Paul Volcker ’ s Fed hiked interest rates to double-digit levels in an effort to stem the high inflation rate of the

30 FINANCIAL HISTORY | Winter 2024 | www . MoAF . org