Los Angeles is the nation's second-largest metropolis, and an economic powerhouse in the realms of manufacturing, entertainment and international trade.

But in the world of finance, at least on the surface, the region at times resembles a great backwater.

No major banks are headquartered here indeed, there aren't even any medium-sized banks here.

Gone are the names of First Interstate and Security Pacific, swallowed up by northern rivals.

With some notable exceptions, no major securities brokerage keeps much more than a glorified "business referral" branch of investment bankers here. New York, this is not.

And in the world of venture capital, Los Angeles is dwarfed by the Silicon Valley, and usually outranked even by Orange County and San Diego.

In short, the long-anticipated emergence of Los Angeles as a global center for high finance, or a place where high-potential companies get startup capital, is nowhere to be seen.

"At one time (in the mid- to late-1980s), the thought was that the San Francisco banks would have twin headquarters, with one down here. Instead, they bought our banks," said Dick Israel, president of Beverly Hills-based Sponsored Consulting Services Inc., a boutique investment banker.

"And in the last 15 years, we haven't really had a major regional brokerage house here. The financial business today is more transaction driven than relationship driven. The bricks and mortar (of banks and major brokerages) are gone. And most of the venture capital action is in the Bay area," he said.

But Israel, a dealmaker with his own shop for more than two decades, says there is a lot of action just beneath the surface in Los Angeles.

While perhaps not a rival to New York or San Francisco, Los Angeles does not have to bow its head to any other American city when it comes to finance.

Here are huge money managers, a respectable cadre of regional securities brokerages, a profusion of boutique investment banks and some heavy-hitter leveraged buyout shops, such as Westside-based Leonard Green & Partners LLC.

Too, some well-established names in investment banking have chosen to keep heavy troops here, such as New York-based Donaldson, Lufkin & Jenrette Securities Corp. and West Los Angeles-based Sutro & Co. Inc.

At Sutro, "we are up to 22 bankers, a long way from the seven we started with in 1994," said Thomas Weinberger, the firm's executive vice president. "There is tremendous market opportunity in the greater L.A. basin, and we want to have access to that."

DLJ has increased its presence here every year since 1990.

"This is a national office. We don't have to send deals back to New York to get it done," said Mark Lanigan, DLJ managing director in Century City, where more than 100 investment bankers hang their hats. "We expect to hire 10 more (investment bankers) by the end of the year. We want to do more business in Southern California."

Another big, emerging player in the investment banking and brokerage business is Westside-based Jefferies & Co. Inc.

Prior to 1990, Jefferies was a highly successful trader of large blocks of stock, usually off the exchanges.

Since then, it has added on a high-yield bond department, and a corporate finance department. Nationwide, Jefferies has more than 1,000 employees, and is easily the largest securities company headquartered in Los Angeles.

And not to be taken for granted is the collection of established regional securities brokerages, including Crowell, Weedon & Co.; Wedbush Morgan Securities Inc.; and The Siedler Cos., all based in downtown Los Angeles.

Sort of sui generis in Los Angeles is the Century City-based Houlihan Lokey Howard & Zukin, a speciality investment banking firm founded in 1970. It has 250 professionals coast-to-coast and works primarily with medium-sized companies. It is a national firm, but one that gets involved in deals that regional firms, or boutiques, might handle in any region.

Los Angeles does have a profusion of boutique investment banking shops, the smaller outfits with 20 or fewer bankers.

Some shops were started in the great "Drexel diaspora" after brokerage Drexel Burnham Lambert was shuttered. Other shops opened when New York houses sharply curtailed Los Angeles operations in the early 1990s.

Rather than move back to New York, many investment bankers such as Stephen Koffler of Westside-based Koffler & Co. just hung out their own shingles here.

Too, the profusion of local boutique investment banks reflects, in part, the fragmented, non-blue-chip nature of the region's economy. Smaller, entrepreneurial businesses need more-nimble financiers, and probably can't afford the big boys anyway.

"The environment had changed here, and the investment banking community is dealing with an entrepreneurial economy, a city of smaller businesses," said Bill Doyle, of Kerlin Capital in downtown Los Angeles, a boutique firm.

When it comes to managing money, Boston and New York have more people in the business, but Los Angeles, with such titans as Capital Research & Management Co. in downtown Los Angeles and the TCW Group, doesn't need to hang its head in shame.

The region has at least nine money managers with more than $10 billion in assets each, a significant representation.

Indeed, some local money managers are large enough that they are spawning new shops, such as downtown Los Angeles-based Oaktree Capital Management LLC, run by Howard Marks, a high-yield bond expert. He formerly worked for TCW.

In addition, there are some large leveraged buyout groups, such as Leonard Green & Partners and Freeman Spogli, as well as Pacific Rim-oriented investment funds, such as Pacific Gemini Partners LLC, which specializes in investing in South Korea.

So while Los Angeles may not be in the same league as New York or San Francisco, in some ways the region is a leader, and probably can hold its own against almost any other U.S. city as a place for financial action.

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