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Morning Coffee: The investment banking MDs struggling on $2m-$4m a year. Pay per hour in the law

Five years ago, we wrote something here about bankers who were struggling to subsist on $1m a year. Since then, it seems inflation has hiked the banking breadline: there are now managing directors in investment banks for whom $2-$4m a year is the range to elicit sob stories.

One of the managing directors in question was unearthed by Gary Shteyngart, the author of Super Sad True Love Story, a novel about a futuristic New York City in which everyone has a popularity and credit score that can be viewed through Google Glass and girlfriends get pinched by an ancient Silicon Valley type who's rendered himself immortal.  Shteyngart came across him while researching a New Yorker article on the ex-Goldman Sachs partner and hedge fund founder, Michael Novogratz.

"An older managing director at a large bank complained of the struggles of the middle class," says Shteyngart, "When I asked him to define “middle class,” he spoke of people like him, earning between two and four million dollars a year."

Shteyngart's MD is unlikely to be alone. There are many of these forgotten seniors with have serious spending habits and associated angst about their ability to sustain them. These are the MDs who won't retire. Meanwhile, at the bottom of the banking hierarchy,  Shteyngart found juniors who were struggling too: "Young analysts told me they were being priced out of Brooklyn, much less Manhattan, by rising hedge-fund plutocrats and their ilk." In Manhattan, banking now, "carries the same sad also-ran cachet as “doctor” or “lawyer,” says Shteyngart. - Everyone wants to be on the buy-side instead.

Shteyngart's portrait of Novogratz helps explain why. Since being ejected from the Goldman Sachs partnership in 2000 for "lifestyle issues" (Novogratz  says he was "partying like a rockstar", his wife says he was, "hedging his bets, literally, in work and in life,"), Novogratz has had an exciting time attempting to recreate Goldman, first in the form of Fortress, the hedge fund that was to be the "Goldman Sachs of the Asset Management industry," and now in the form of Galaxy Digital, an investment bank for crytpo currencies that's to be, "the Goldman Sachs of crypto." He's made and lost big money. Worth over $2bn at his peak, Novogratz's net worth crashed to that of the, "mere centimillionaires," when he was ejected from Fortress after his FX bets went wrong in 2015.

Nowadays, Novogratz is a big deal in crypto. And he's ready to torment bankers who settled for less. "Recently, Novogratz showed up at a staid dinner for retired Goldman Sachs partners wearing his speed-racer pants," says Shteyngart. Life in hedge funds is more exciting and remunerative than life in banking, and life in crypto is the most exciting of all. This could be why a Goldman VP just quit to be Novogratz' chief operating officer. Penny-pinching banking MDs can look on in wonder.

Separately, lawyers might take issue with their categorisation as also-rans. The Financial Times tells the tale of Scott Barshay, a "superstar" lawyer at Cravath in London, who quit for a rival firm which offered him $10m a year. Equity partners at Cravath typically earn $4m a year, while juniors start on $180k. For this kind of pay, the FT says most law firms expect anything from 1,800 to 2,500 billable hours of work.


Achleitner: "It's not about a departure from investment banking...Marcus Schenck had signaled to me before Easter that he wanted to leave the company, because he wanted to enlarge the investment bank, but the bank would not currently support him in that way." (Handelsblatt) 

The nail in the coffin of Cryan's relationship with Achleitner was his call to top up the bonus pool with an extra €1bn. (Financial Times) 

Garth Ritchie at Deutsche is a rare trader: He's spent most of his professional life working for an institution. He also came through the financial crisis without being tainted by scandal. (Handelsblatt) 

"The bank will now be steered more strongly from Germany." (Bloomberg) 

The trouble is that Deutsche’s home market is a weak base from which to rebuild. The retail business only managed a 1.9 percent return on tangible equity last year, and costs swallowed up more than 90 percent of revenue. A merger with domestic rival Commerzbank might improve returns, but would also increase exposure to the low-margin German market. (BreakingViews) 

Enthusiasm for Sewing: 'One top-five shareholder described him as an “OK” choice.'  (Bloomberg) 

A male VP at Goldman Sachs has been fired for being aggressive and intimidating to women and threatening his pregnant boss outside the office. (Financial News) 

MiFID II's grace period for equity researchers is over: the exemption period and free deals are over and clients are now being billed for their interactions with researchers. (Financial Times) 

Pot shop uses Citibank logo. Citibank sues. (NY Post) 

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AUTHORSarah Butcher Global Editor

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