eFC Briefing: Bailout Vendors Chosen
BNY Mellon, investment consultant Ennis Knupp and law firm Simpson Thacher & Bartlett are among Treasury's early picks to help manage the Troubled Asset Relief Program.
The details around the government's $700 billion rescue package of Wall Street are starting to be filled out, including plans to hire the firms and the professionals needed for the massive undertaking. The Treasury Department chose Bank of New York Mellon to provide a broad range of services for the Troubled Asset Relief Program, including accounting of record for the portfolio, holding of cash and assets, and pricing and valuation services. Chicago-based Ennis Knupp & Associates was chosen as investment counsel, while Simpson Thacher & Bartlett, which has offices in New York and Washington among other cities, was named legal advisor.
Treasury's new executive-pay regulations under the Troubled Asset Relief Program law will influence the compensation of far more individuals and far more companies than the small circle of senior executives within participating firms who are formally subject to those rules. The limitations could hinder firms' ability to attract and retain top talent, warns The Wall Street Journal. Companies that participate in the bailout will be permitted to count only the first $500,000 of each specified senior executive's compensation as an expense for tax purposes. The government's new rules also bar any exit payments for senior executives leaving "systematically failing" institutions that receive direct aid from the Treasury, require clawback of past awards under certain conditions, and say executives cannot be paid for taking "unnecessary and excessive risks."
Fidelity Investments is grabbing lucrative prime brokerage accounts away from bulge-bracket banks whose capabilities and reputations have been pulled down by the credit crisis. The Financial Times reports that Fidelity's prime brokerage operation added 20 percent more hedge fund clients and 40 percent more client assets in the past month, and expects to add 50 more clients in the next two to three weeks. About half the unit's 300 clients have $1 billion or more under management. Fidelity is investing heavily overseas to develop a global presence for the five-year old, heavily U.S.-based Fidelity Prime Services.
Thousands of support jobs will be eliminated once Merrill Lynch is absorbed by Bank of America, says John Thain, Merrill's chief executive. Most cuts will fall in corporate and services areas such as information technology, Thain said Monday in Dubai, according to the Financial Times. B of A is expected to complete its purchase of Merrill Lynch's investment and wealth management businesses by year-end. The bank has previously said it expects to save $7 billion largely through staff reductions in overlapping departments after completing the deal. Thain himself is set to remain after the merger, heading up global banking, securities and wealth management for B of A.
Separately, Reuters reports that several top financial advisers from Merrill and other firms have defected to Morgan Stanley's global wealth management group during the last few weeks. While Merrill's 16,000 advisors await retention offers, the story cites concerns that a focus on the cost-cutting voiced by B of A Chief Executive Ken Lewis will impede prospects of brokers who stick with the merged firm.
The number of financial jobs in Massachusetts continued to drop last month as firms in the Bay State felt the effects of the worldwide financial crisis. According to the Massachusetts Executive Office of Workplace Development, 1,200 finance, real estate and insurance jobs were shed in the state during September, mostly because of losses in the finance and insurance industries. The sector lost 300 jobs in August.