Morning Coffee: Why Trump can't get in soon enough for Wall Street. Where you can earn 10X more than banking
Ever since the Dodd-Frank Act became law in 2010, the Obama administration has repeatedly encouraged U.S. regulators to complete the mandated new rules restricting bonuses for Wall Street executives, obviously one of the least popular provisions of the banking reform law among financial services professionals. The pay rules would limit “excessive” compensation, require executives to wait longer to cash out their bonuses and give financial services firms up to seven years to claw back pay in cases of misconduct.
However, now that President Obama is a lame duck and the days until President-elect Trump’s inauguration day keep ticking away, the probability of that restriction on compensation actually being implementing are slim to none.
What has taken so long? Why hasn’t six years been enough time for banking agency officials, especially since the original deadline was nine months? For one, regulators are perpetually understaffed due to budget constraints, and that has been exacerbated by a mass exodus of officials handing in their resignation since the election.
And now, with the clock ticking, a final push to make significant changes to the financial services industry’s pay structure before Obama leaves office is pretty much impossible for two reasons: A Republican board member at the National Credit Union Administration opposes any such reform, and the only Republican commissioner at the Securities and Exchange Commission can block rule change, according to Bloomberg.
Another issue is that, because lawmakers designed the rules for a wide range of financial firms, six agencies – overseeing large lenders, credit unions, asset managers, wealth managers and more – have to sign off on them.
With Trump set to become president in just a few weeks, there still isn’t a final version of the rule change circulating among the regulators, meaning Wall Street bankers are increasingly hopeful that their pay won’t be curtailed after all.
Separately, where do you earn the most on Wall Street? No not banking CEOs, but those leading private equity firms by a massive margin, at least among publicly traded companies. In fact, on average the heads of the top private equity firms earned nearly 10 times as much as the heads of the top banks, according to the New York Times.
Stephen Schwarzman, a co-founder the CEO of the Blackstone Group, got paid the most in 2015 – almost $800m, up from $689m in 2014. Of that amount, $350,000 was his annual salary, with no bonus, but significant dividends, distributions, carried interest, personal investment profits, stock and perks.
Hamilton James, the president of Blackstone’s, got $233m last year, while Jonathan Gray, the chief of Blackstone’s real estate division, took home $249m. Henry Kravis and George Roberts, the co-heads of KKR, combined for $356m in compensation in 2015. In 2013, the biggest winner was Leon Black, the head of Apollo Global Management, who got approximately $543m.
Gary Cohn's $266m is small fry compared to other Trump appointees (Bloomberg)
In tapping Cohn, Trump is turning to yet another Goldman exec and choosing a banker whose thinking about the economy differs from the president-elect’s bombastic nationalistic views. (New York Times)
Will investment-banking co-chief David Solomon or CFO Harvey Schwartz succeed Cohn as the No. 2 honcho at Goldman? (WSJ)
Deutsche Bank made changes to its global equity derivatives and synthetic sales business in Europe. (Financial News)
The German bank moved “one of the most profitable traders” in its European credit business who was leading the wind-down of a $1.1 trillion credit-default swaps portfolio to the head of local markets trading for EMEA on the emerging-market bonds desk. (Bloomberg)
Citigroup has promoted nine employees to managing director in its corporate and investment bank in EMEA. (Financial News)
How the son of a Soviet computer programmer survived the Chernobyl accident and went on to found the online financial services firm Affirm. (New York Times)
The European Central Bank rejected Banca Monte dei Paschi di Siena’s request for more time to raise capital, meaning the Italian government will have to rescue the bank. (WSJ)
Does the Italian bank have a Plan B? (Bloomberg)
French bank Natixis projects that its revenue from Asian corporate and investment banking will grow 20% this year, expanding when rivals such as Standard Chartered and Barclays are retreating in the region. (Bloomberg)
This is a big reason that Wall Street has become less popular across Europe. (New York Times)
A Goldman Sachs employee has staked a claim to being America’s best backgammon player. (Bloomberg)
Countless old-school salespeople and traders who came of age in the ’80s have been kicked to the curb as banks turn to youth and technology in the face of tighter regulation and lower profits, but some greying professionals have found a sweet new home in Chicago. (Bloomberg)
Here’s how financial services jobs stack up with occupations on the “susceptibility index” rating the likelihood that the skills necessary for your chosen profession will decline with age. (Bloomberg)
Photo credit: Nastasic/GettyImages