Morning Coffee: The bank designed for bankers who remember the old days (and the old pay). Eco-Goldman
Are you an M&A banker who remembers the vibe of 2002 to 2006? Do you resent the traders and the structurers who blew-up the industry in 2007 and 2008? Do you entertain dreams of the days when pay in banking was eight figures for a mere line guy? Then Guggenheim Securities may be the place for you. Or not.
In a long article on Alan Schwartz, the ex-Bear Stearns CEO who moved to run Guggenheim in 2009, the Financial Times first explains Schwartz's big intentions for Guggenheim and then proceeds to repudiate their existence in actual fact.
When Schwartz moved to Guggenheim, he says he was with the intention of creating something that was, "like what some of us got to be part of building in our careers." The intention seems to have been to satisfy the nostalgia of people who, "missed what our industry was when they grew up in it.” Precisely what this thing was isn't articulated, but the implication is that Schwartz was after some sort of old- school banking vibe with less of the regulatory 'oppression' that has allegedly made banking more boring than before.
Pay was part of the deal. Like Jefferies, it seems Guggenheim pays its people a lot of commission: if you kill something for Schwartz, you might get to eat quite a lot of it. For newly-recruited M&A bankers who bring in deals, this means 60% of the associated fees could turn up in their pay. In turn, this means some people at Guggenheim are floating about on a cloud of money as if the financial crisis never happened. The FT says a mere Guggenheim M&A banker who is not an executive is earning more than $24m. Someone else is earning tens of millions. Wall Street pay tsar eat your heart out.
Burned by the incineration of Bear Stearns, Schwartz also determined that he didn't want Guggenheim to make big leveraged bets with its own balance sheet. His new place would be pure and untainted by the sorts of crazy bets that might see it sold to J.P. Morgan for $2 a share in the style of Bear Stearns.
And yet, none of this should be taken to indicate that Schwartz's Guggenheim is a purist advisory house which is a consistently big payer. The man himself is strangely sniffy about advisory boutiques (which he refers to as "monolines") and therefore intends to offer trading and underwriting as well as pure M&A advice (despite the associated risks). Similarly, he seems to be operating a bait and switch model when it comes to pay - which he is at least overt about. People joining Guggenheim might take home 60% of the fees they generate in the first year, but the FT says this falls to 40% in time. “We said [to potential hires], you’re going to have to risk more than you do somewhere else to make similar to what you would make somewhere else ...," says one senior Guggenheim executive. Interesting sales pitch.
So, what is Guggenheim exactly? Ultimately, Schwartz says it's a, "full-service investment bank driven by intellectual property, not balance sheet.” If that's what you're looking for, Schwartz is waiting.
Separately, Goldman Sachs is burnishing its eco-credentials. Bank of America wants to be carbon-neutral by 2020. J.P. Morgan wants to use 100% renewable energy by the same date. And Goldman Sachs is doing away with plastic straws, plastic cups, and plastic lids. Henceforth, Business Insider says Goldman employees will need to sip drinks from reusable mugs. Progress.
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