Crazy Day at Wacky Bank
Originally Published In the News June 2, 2008 12:25 PM
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The succession planning at Wachovia Bank (WB-NYSE) in 2008 contrasts sharply with First Union’s handling of Ken Thompson’s ascension to the CEO in the late 1990’s.
The bank introduced Ken to Wall Street at their annual Nantucket Investment Conference in 1998, which normally is a showcase for the 100-odd companies that present, along with a marketing opportunity for the bank’s equity research effort.
Thompson’s reign was admirable for his length of service, but he is leaving behind a stock that cannot find a bottom:
Wachovia Corp. ousted Kennedy Thompson as chief executive officer of the fourth-largest U.S. bank after the board blamed him for losses that cost the lender more than half its market value in the past year. The stock fell as much as 4.5 percent.
``This company was run under Ken Thompson without very good controls,’’ Gerard Cassidy, an RBC Capital Markets analyst, said in a Bloomberg TV interview. Chances are even that Wachovia will seek a new CEO from outside the bank because there isn’t a clearly designated successor, Cassidy said. Bloomberg
Add Ken to the list of casualties of the credit crisis; hopefully the successors running the banks and brokers have learned from their predecessor’s mistakes.
Wachovia Ousts Thompson on Writedowns, Share Plunge
Bloomberg
Good News: NYC Body Count to Only Reach 25,000
During the Wall Street downturn of 2001-2002 unhappy worker bees who contemplated leaving their jobs were counseled by friends to ride out the storm and keep their seat until things blew over.
That period was brutal as everyone hunkered down, but the NYC comptroller does not think it will be quite as bad this time around. Although it is unlikely to provide little solace for Bear and JP Morgan employees who will soon be handed their walking papers:
New York City’s financial sector might only slice 15,000 to 25,000 jobs in the current downturn, which could prove shorter than the mayor has predicted, the city comptroller said on Thursday.
In contrast, the financial sector that is such a vital part of the city’s economy slashed 40,200 jobs in the previous retreat from 2000 to 2003 that straddled the September 11, 2001 attacks, Comptroller William Thompson said in his report.
The current job-losing cycle began in August 2007 and should run through March 2009, the Democrat added. Reuters
An improvement next spring might be a tad optimistic, but a strong global economy is sure to paper over some on Wall Street’s numerous sins. Idled workers might not want to start blogging, but might be wise to learn Mandarin, which is worth as much as a graduate degree in 2008.
Wall Street jobs cuts may only hit 25,000: report
Reuters
Bear’s Jeffrey Mayer Declines Job Offer and $27 million Payday
Originally Published In the News May 22, 2008 1:25 PM
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How much money will it take to get Bear Stearns co-head of fixed income Jeffrey Mayer to sign on with JP Morgan? He has turned down a $27 million offer after being offered a Vice Chairman role in the company.
Perhaps it is just his opening gambit in the negotiations, or maybe he is moving on to greener pastures with his long-time co-head of fixed income, Craig Overlander:
Last month, JP Morgan Chase said in a filing with the US Securities and Exchange Commission that it had an oral agreement with Mayer that if the deal completed, he would become vice chairman of the investment bank, focused on global markets.
He would have received a bonus of $12m for 2008, in a mix of cash and restricted stock units.
On the first day following completion of the deal and if he had started working for JP Morgan, Mayer would have received $15m in restricted stock. The filing said: “Mayer continues to have discussions with JP Morgan Chase regarding the terms of his employment.”
Mayer and Overlander have both told JP Morgan they will not stay with the investment bank after the merger, according to Reuters, which cited an internal company memo. Financial News
Mayer must be talented, an statement that some would debate given fixed income was Bear’s achilles heel, and deserves much of the blame in toppling the bank. But the compensation levels for Wall Street’s top dogs continue to dazzle; whether the recipients are truly worth the money is debatable.
But for some people on Wall Street, the talk of a recession and economic distress means very little, and the good life rolls on.
Bear’s Mayer turns down $27m from JP Morgan
Financial News
Bankers Compensation the Latest Crisis in the City
Are deep cuts in the pay of bankers going to be one of the enduring legacies of the credit crisis? I have not taken the possibility of massive pay cuts very seriously, but across the pond it is picking up steam, as they re-think the reward system that certainly seems to favor short-term risk taking:
The structure and scale of bankers’ bonuses will be taken into account by regulators when they assess banks’ exposure to financial risk.
Hector Sants, chief executive of the Financial Services Authority, told a City dinner on Tuesday night that although the regulator would not dictate pay levels, it would consider the implications of remuneration structures when judging the overall risk of individual institutions. “We will do this with increasing intensity,” he told the Investment Managers’ Association.
Mr Sants later told the Financial Times: “When we look at risk, we should be looking more than we have in the past at compensation structures that encourage risk-taking.” FT
With bailouts the flavor of the month on both sides of the Atlantic, regulators have more skin in the game, and are likely to continue to poke in the dark recesses, and even orifices, of investment bankers everywhere. The barn door is open, and not even Katie can bar it now.
The banker are sure to whine, but if they need to assign blame they must merely look in the mirror whilst they shave.
Get ready for the next swoon in this chart
City watchdog to focus on bankers’ bonuses
Financial Times
How Greg Coffey Walked Away From A $250 million Bonus
How? One foot in front of the other.
But why? Especially since he forfeited a $250 million bonus?
Greg Coffey, one of the hedge fund industry’s top performers with a pay packet to match, looks set to start his own hedge fund firm when he leaves GLG Partners in October.
Coffey, who finally resigned last week—forfeiting a bonus reportedly worth around $250 million (125 million pounds)—after last-minute talks with GLG about his future, has delivered performance in his specialist area of emerging markets that many managers can only dream of.
“He’s regarded by colleagues and peers as one of the most successful managers in that space,” said one hedge fund executive, who asked not to be named because he had worked alongside Coffey in recent years.
The 37-year-old Australian, who joined GLG in 2003 from a hedge fund backed by industry legend George Soros and now runs more than $7 billion of the New York-listed company’s $24.6 billion of assets, won the Fund of the Year award at the EuroHedge Awards for 2007 for his GLG Emerging Markets fund. Reuters
Coffey does not have much left to prove, but running his own shop and calling the shots on compensation, market strategy, etc must be the only motivation. Money managers are a prickly bunch, and nothing is worse than taking marching orders from an inferior managers, and have positions second guessed.
Coffey probably did not have to deal with these sorts of issues, but it could have been an innocuous comment the lead him down this path. We might not ever know what made him leave, but the point is now moot, and he will set sail and skipper his own strategy.
Good Luck Greg, although it sounds like you won’t need it.
The struggling shares of GLG might, however, as they have been moribund since Coffey’s resignation was made public.
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Media-shy hedge fund star Coffey set for own firm
Reuters
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
