If you work at J.P. Morgan, then hopefully you’ve been walking the straight and narrow: showing up on time, not going to eyebrow-raising websites or saying anything that you shouldn’t in calls and emails … because all of that is being monitored.
Peter Cavicchia III, a former U.S. Secret Service agent, ran the special-ops insider threat group for J.P. Morgan that uses computer algorithms to monitor the bank’s employees “to protect against perfidious traders and other miscreants.” In 2009, J.P. Morgan hired data-mining company Palantir Technologies – founded in 2004 by Peter Thiel and fellow PayPal alumni – to apply the tactics it honed working for the Pentagon and the CIA in Afghanistan and Iraq to the bank’s employees, according to Bloomberg.
Many of the Palantir engineers rode skateboards to the bank’s Manhattan HQ and refused to cut their hair or wear a tie – each cost the bank $3,000 a day. They helped Cavicchia’s group to collect and analyze bank personnel’s emails and browser histories, GPS locations from company-issued smartphones, printer and download activity, and transcripts of digitally recorded phone conversations, Bloomberg reports:
“Palantir’s software aggregated, searched, sorted and analyzed these records, surfacing keywords and patterns of behavior that Cavicchia’s team had flagged for potential abuse of corporate assets. Palantir’s algorithm, for example, alerted the insider threat team when an employee started badging into work later than usual, a sign of potential disgruntlement. That would trigger further scrutiny and possibly physical surveillance after hours by bank security personnel.”
Through Palantir, Cavicchia gained administrative access to all of the bank’s corporate security databases that he combed through during continual forensic investigations. He had unprecedented 24/7 access to everything on a single platform.
However, eventually Cavicchia went rogue, with former J.P. Morgan colleagues comparing him to Marlon Brando as Colonel Kurtz in Apocalypse Now, hunched over his computers in his office suite eight floors above the rest of the bank’s security team. People in the department told Bloomberg that no one from the bank or Palantir set any real limits on Cavicchia as he listened to their calls, read their emails and watched them come and go.
His reign came to an end when the bank’s senior executives learned that he was also spying on them and allegedly played a role in leaking a document to the New York Times about a federal investigation of J.P. Morgan on suspicion of manipulating U.S. electricity markets.
J.P. Morgan’s experience is foreboding as Palantir tries to figure out how to be rewarded on Wall Street via a potential IPO without creeping out Main Street.
“The world changed when it became clear everyone could be targeted using Palantir,” a former J.P. Morgan cyber expert who worked with Cavicchia on the insider threat team told Bloomberg. “Nefarious ideas became trivial to implement; everyone’s a suspect, so we monitored everything. It was a pretty terrible feeling.”
Separately, Sidney Weinberg – a Brooklynite like current CEO Lloyd Blankfein known as “Mr. Wall Street” – started at Goldman Sachs as a janitor’s assistant before being promoted to the mailroom. He became a trader after serving in the Navy in World War I and eventually ran the firm for almost 40 years in the middle of the 20th century. Weinberg was full of advice for his son, John, the man who steered it through the 1980s: “No strawberries for lunch,” he used to tell him. He meant it as an analogy to convey lessons such as watch out for excesses, stay disciplined and stick to what you are good at.
David Solomon – Blankfein’s no. 2 and anointed successor known as "DJ D-Sol" – may need to heed that advice. Some Goldmanites have confronted Solomon about the risk of damaging Goldman’s advisory business if it goes too deep into cross-selling.
“Solomon is definitely a shrewd administrator, he knows how to operate inside a complex institution but he doesn’t truly get what we do and he despises us for punching above our weight inside Goldman,” an M&A banker told the FT.
The investment bank’s loan book has risen tenfold since 2012, but Goldman’s revenues stalled at around $34bn between 2012 and 2015, before slipping to $30.6bn in 2016. First-quarter results were goosed by a big drop in the tax rate and a lot of mysterious gains from the bank’s black box of proprietary investments, according to the FT.
Kim Hammonds is the latest senior executive to leave Deutsche Bank, and more big-name departures are likely coming. (Reuters)
Oops! Deutsche Bank accidentally sent 28bn euros ($35bn) to an exchange as part of its daily derivatives dealings. (Bloomberg)
A lot of the value of Barclays’s investment bank creates goes to the staff, and an activist investor has the issue of staff costs in his sights. (Reuters)
Britain’s shadow chancellor John McDonnell offered the City of London higher taxes in return for a seat at the policymaking table. (Reuters)
The Italian government is angry with Morgan Stanley. (Reuters)
Blackstone Group just keeps raking in money and will likely continue to hire to fuel its ambitious growth goals. (Bloomberg)
Matt Zames, the former J.P. Morgan executive who had been seen as a candidate for Deutsche Bank’s top job, was named the president of investment firm Cerberus Capital Management. (Bloomberg)
The party-poopers delivering a summer bummer to Wall Street's elite. (Bloomberg)
Growing macro hedge fund Rokos appointed a charity executive as its new CEO and chief strategy officer. (HFM Week)
Brummer’s Carve Capital taps Goldman’s William Wilson for research head focusing on opportunities in credit and equity arbitrage. (HFM Week)
Many hedge fund managers’ performance has been suffering for two years in a row. (Bloomberg)
Bitcoin’s terrible start to 2018 is highlighting the appeal of cryptocurrency hedge funds that make money in both bull and bear markets. (Bloomberg)
Facebook’s median compensation is $240k, while Amazon's is … $28k. (Bloomberg)
Emboldened by last year’s successful campaigns against excessive executive pay, some of the world’s biggest investors are shifting their focus to the dearth of women on corporate boards. (Bloomberg)
Moving a defiant small young woman from staring down a bull to outside the NYSE is definitely a metaphor for … something. (Dealbreaker)
Photo credit: a_Taiga/GettyImages