Morning Coffee: The worst thing about the new Wall Street bonus rules. Hedge fund hiring 70 people
Bankers on Wall Street are about to get some of the medicine already dispensed to their European colleagues. By the Wall Street Journal's calculations, 52,000 people working for JP Morgan, Bank of America, Wells Fargo, Citigroup., Goldman Sachs and Morgan Stanley could soon get at least 50% of their bonuses deferred over three years.
The rules are one of the final parts of the 2010 Dodd-Frank Act to be enshrined in legislation. They apply only to employees at firms with more than $250m in assets and then only to the top 5% of earners and to anyone, "with authority to commit or expose 0.5 percent or more of the capital."The rules also impose stringent clawbacks on bonuses already allocated. - Like the Bank of England, US regulators want to claw back bonuses for up to seven years after they've been paid, even if recipients have moved firms or spent them already.
Reuters says the rules could be imposed within, "months" - suggesting they might be implemented in time for the 2016 round. This is bad news for anyone hoping the new U.S. pay rules will be accompanied by a Europe-style increase in salaries. As Goldman Sachs' results this week made clear, U.S. banks still need to cut costs significantly. They are in no position to hike fixed costs. With bonuses typically accounting for at least half of senior bankers' pay, Wall Street's finest are therefore in for a 25% reduction in their spending power - and it will be 2020 before they've accumulated enough deferrals to make up for it.
Separately, if you lose your equities job, you could always move across to Citadel. Reuters reports that Citadel plans to hire "up to 70 people in the first year" for a new stock picking unit, for which it's already recruited Steve Cohen's brother-in-law as the main man. Citadel's plans were, in fact, first announced last June. As we noted this week, Citadel especially likes to hire from Goldman Sachs, but if you work for Citi or Nomura it's always worth a try.
The new bonus rules wouldn't have prevented J.P. Morgan's London Whale scandal. (Reuters)
Hedge funds and funds like Blackrock will not be affected by the new pay rules. (WSJ)
Just when you thought UBS was doing well, its wealth management business is faltering. (Bloomberg)
Crispin Odey's European fund is down 30% to the middle of April, wiping out all his gains since 2012. (Financial Times)
Bad news for house prices in the Hamptons. (Bloomberg)
Technology and consulting companies pay more than banks. (Bloomberg)
“Why are we working so hard to defend a guy who is now a managing director at Goldman so we can limit the case to the French guy in London?” (Propublica)
It was only 10 years ago that Goldman Sachs achieved an RoE of 39%. (Financial Times)
You'll be more likely to get a job if you tell a story. (Quartz)
Woman jailed for conning more than £250k out of her parents by convincing them she was a successful student at Oxford University. (Guardian)
Today's university students are more motivated by money and less motivated by learning. (BPS)