eFC Briefing: Bleeding Continues After Bailout Law
As passage of the $700 billion Troubled Asset Relief Program failed to calm markets, the Treasury appointed Assistant Secretary Neel Kashkari, a former Goldman Sachs banker who joined the department in 2006, to temporarily lead the office overseeing the program.
Congress enacted and President Bush signed legislation that will let the government spend up to $700 billion to buy banks' distressed bonds and loans. The law establishing the Troubled Asset Relief Program also imposes clawback provisions for executive bonuses and authorizes the Treasury to take "ownership stakes" in banks that sign on. Financial markets showed no initial sign of relief: Short-term funding remained frozen through Tuesday, and equity markets continued to plummet in the U.S. and around the world.
Making its first move under the bailout law, the Treasury named Neel Kashkari as Interim Assistant Secretary for Financial Stability, overseeing the new Office of Financial Stability that will manage the program. He'll also retain the title of assistant secretary of the Treasury for international economics and development, although those responsibilities are delegated to Assistant Secretary Clay Lowery, the department said. A former aerospace engineer and vice president in investment banking at Goldman Sachs, Kashkari joined Treasury in July 2006 as a senior advisor to Secretary Henry Paulson.
While risk managers may have gained influence and job security compared with other corporate departments, their compensation prospects for the current and coming year are hardly rosy. Bonus expectations are low for mid- to senior-level professionals in all areas of risk management, including operations, credit and market risk. What's more, new hires aren't garnering the same robust packages they might have a year ago. "I'll be shocked if we get bonuses that are even 50 percent of last year's," says a risk management professional in the operations area of a well known Wall Street firm.
Hedge funds continue prospecting for portfolio managers and analysts, even in the face of weakening returns, diminished access to credit and the threat of investor withdrawals and prime broker failures. While recruiters say their largest clients aren't cancelling searches, financial turmoil is forcing many smaller hedge fund firms to cut back and is slowing the hiring process even for funds that see the crisis as an opportunity to recruit top talent. Because gyrating markets are monopolizing fund managers' attention for now, one recruiter advises jobseekers to be patient and await the start of 2009, when he anticipates "a little bit better environment for searching for a job than right now in the hedge fund industry."
The financial crisis is set to take a major toll on the business of large U.S. executive search firms, according to analysts who follow the sector. Korn/Ferry's Chief Executive Gary Burnison told Reuters the financial industry is the most challenging sector for the company now. Burnison said Wall Street hiring is shifting toward risk management, operations and infrastructure. He also mentioned clients transferring executives to new geographic locations, as well as "pressure on the compensation level."
Meanwhile, Whitney Group LLC, a search firm active on Wall Street for 20 years, is reportedly winding up operations under New York's Debtor and Creditor law. Bloomberg News reports Whitney Group and its former chief financial officer are suing one another. The firm accused the executive of misappropriating some $7 million to an outside contractor, causing Whitney's collapse. In a countersuit, former CFO Jeffrey Sussman said his actions were authorized and alleged Whitney fired him to cover up its loss of major clients.