Reviving Animal Spirits

If you're in transition and striving to sail back to Wall Street, this week's headlines suggests the wind is finally at your back.

With stock and bond markets on the mend, U.S. bulge-bracket banks "are suddenly racing to fill empty seats," enthuses Reuters. At the same time, "plenty of B-list firms ... are prospering and hiring" traders, says The Wall Street Journal. Even the Federal Reserve is "aggressively" hiring traders, the Financial Times reports.

The hiring pickup is palpable, documented by numerous individual hires whose names are sprinkled throughout the various stories.

Employers Prefer to Hire Survivors

Is anything wrong with this picture? Well, if you're on the outside looking in, you won't be comforted by this particular detail: "There is a bias towards hiring people from other banks that survived the crisis rather than hiring those who lost jobs in the last two years," Reuters observes. That helps explain the related surge of news stories about the return of guaranteed bonuses - primarily a tool to lure stars away from current employers.

Still, although hiring remains selective, many institutions clearly have switched from reining in costs to adding staff. The shift is broad-based, ranging across fixed-income, equities and commodities businesses and encompassing traders and dealmakers. There is also a move to strengthen senior management teams through key hires, Michael Karp, chief executive of the Options Group recruiting firm, told Reuters.

Among second-tier securities firms adding staff, the WSJ cites Schonfeld Group, First New York Securities, Execution LLC, Bright Trading, Schottenfeld Group and DRW Trading. Many of those houses are seeking proprietary traders from bulge-bracket institutions, which are less eager to place big bets with their own capital than before the crisis.

Naming Names

Recent hires include:

Bank of America lured senior investment banker Sanaz Zaimi from Goldman Sachs, leveraged-loan capital markets leader A.J. Murphy from JPMorgan, and energy-sector banker Alan Murray from Citigroup.

Morgan Stanley hired prime brokerage head Alex Ehrlich from UBS and fixed-income trading head Jack DiMaio from Credit Suisse.

Citigroup hired as many as 10 managing directors for its U.S. investment bank this year, according to Reuters.

Outside the bulge bracket, Schonfeld Group has hired more than 20 traders from big banks in the past year and its chief executive "wants a dozen more," according to the WSJ.

First New York Securities says it's added more than 50 traders in the past year, including hires from JPMorgan and UBS.

Execution LLC, based in Greenwich, Conn., reportedly opened a new Manhattan office to make room for traders it took from larger firms including Goldman Sachs and Morgan Stanley.

Jefferies Group cited its addition of about 80 new traders, analysts and bankers from larger firms as a factor that helped lift the firm's second-quarter profit to $61.9 million.

Growth at the New York Fed

Finally, the Federal Reserve Bank of New York - whose traders both implement monetary policy decisions of the Federal Reserve Board and manage various emergency liquidity programs - is in the process of expanding its markets staff to 400 from 240 at the end of 2007, according to the Financial Times. The Term Asset-Backed Securities Loan Facility (TALF) alone, for instance, will have about 25 permanent staffers at the New York Fed.

To accommodate all the new bodies, the New York Fed has leased three extra floors near its downtown Manhattan headquarters.

The emergency liquidy programs, in which the Fed committed to prop up markets by purchasing various kinds of debt securities, are slated to conclude by year-end. But because the Fed didn't own corporate or mortgage securities before the crisis, it will continue to need staff with experience managing such assets and controlling their risks.