eFC Briefing: Bleeding From Every Extremity
The size and shape of the financial sector rests in the hands of the U.S. government, although a majority of both lawmakers and voters might prove incapable of accepting that simple fact. If you work for a commercial bank or an investment bank, get ready for life under a new corporate roof if your employer hasn't changed hands already.
***
Efforts to design a financial-sector rescue package capable of winning Congressional approval continued into Wednesday after an initial version of the legislation was voted down in the House of Representatives Monday, causing the U.S. stock market (S&P 500 index) to close down 8.8 percent that day. The Senate was expected to vote Wednesday night on a new version of the plan.
Meanwhile, accounting regulators - responding to pressure from lawmakers and bank industry lobbyists - weakened existing rules by allowing companies to value illiquid assets in any manner they choose, instead of having to write the book values down to match recent market prices. Some lawmakers reportedly want to go still further, pushing legislation that would give companies greater leeway to cook their books than the just-adopted accounting rule "clarification" will allow.
***
Washington Mutual and Wachovia became the latest U.S. victims of the credit crisis. Citigroup acquired most of Wachovia's operations for $2 billion in a deal pushed by federal officials. The fate of 30,000 employees in Wachovia's remaining units that Citi didn't buy - a major retail brokerage operation, the Evergreen Investments asset-management unit, and insurance and retirement services businesses - remains unclear. Late last week, JPMorgan Chase acquired Washington Mutual's deposits $1.9 billion after the FDIC seized the Seattle-based bank.
***
With the mess that Wall Street's in, it's hardly surprising that Goldman Sachs and Morgan Stanley are delaying bonus decisions beyond their usual October time frame. The Financial Times says both institutions "are putting off their October meetings on bonuses until they have greater clarity about the fourth quarter." Goldman, Morgan and other banks are widely expected to award shraply lower bonuses to most employees this year, with the bulk of the money concentrated among top performers to a greater degree than in years past. Bonus expectations are poised to drop still further if the industry's downward spiral that continued into this week sparks further rounds of layoffs by year-end. A survey issued Monday by the Confederation of British Industry and PricewaterhouseCoopers forecast an additional 12,000 financial services job cuts between now and Christmas.
***
London-based HSBC is laying off 1,100 people from its global banking and markets division, including many support staff from the investment bank headquarters. Of the jobs being eliminated, Reuters says about 500 are in Britain, 300 elsewhere in Europe and the United States, and about 100 are in Hong Kong. The layoffs comprise about 4 percent of the division, whose remaining headcount will number about 26,000, according to Reuters.
***
Chicago-based Mesirow Financial International said it hired John Collins and Dermot Kegan for London-based roles within its alternative investments subsidiary, Mesirow Advanced Strategies. Collins, who was a senior investment consultant at Watson Wyatt, joins Mesirow as a senior analyst focused on European hedge fund manager research. Keegan will lead the UK and continental Europe client coverage group. He was head of the institutional marketing and client service group of Old Mutual Asset Managers.
***
Evercore Partners said it hired Jed Sherwindt from Citigroup as senior managing director in its advisory business. Based in San Francisco, he will advise technology companies. At Citi, headed the global software investment banking group.
***
James E. Scott joined Cadwalader, Wickersham & Taft's New York office as special counsel in the financial regulatory practice. He was Citigroup's assistant general counsel.
