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Bonus Blues: Morgan Stanley will cap the upfront cash portion of employee bonuses at $125,000 this year, the papers report. Any employee's bonus amount above that threshold is to be paid out over two years, and the entire 2011 bonus is being deferred for handful of top executives, including Chief Executive James Gorman. Regulators think deferring bonuses discourages irresponsible risk-taking, and the Journal, which broke the Morgan Stanley news, also notes that the practice "can also ease pressure on a firm's compensation expenses," which surely helps at a time when trading revenues are weak and compliance costs are climbing. Meanwhile, the Times has a feature article looking at compensation consultants, which advise securities firms and banks on setting pay. One of these consultants estimates that industry bonuses will fall 20% to 30% this year. Wall Street Journal, Financial Times, New York Times
Bleeding Indicator: JPMorgan's disappointing fourth-quarter results, released Friday, set a somber tone for this earnings season. The performance was "at best … middling," the Journal's "Heard on the Street" writes, with revenues and profits off by double-digit percentages and a surge in noninterest-bearing deposits pressuring returns. Another Journal article noted that the bank's earnings took a hit, on paper, from a gain in the value of JPMorgan's debt, reversing profits booked on a decline in that value in the third quarter. On the bright side, Tom Braithwaite at the FT notes that JPMorgan lowered the ratio of compensation expenses to revenues in its investment bank to 27% in the fourth quarter and 34% for the year, from 37% in 2010, possibly a reflection of that legendary Dimon discipline. And "BreakingViews" in the Times suggests that JPMorgan's stock is undervalued, citing, among other reasons, an uptick in lending in the company's traditional commercial banking business.
The World's Financial Mountie: Speaking of Jamie Dimon, the JPMorgan CEO claimed on Friday's earnings call that "basically there's no one in charge of the global financial system." Try telling that to Mark Carney. The FT ran a pair of stories over the weekend about the Canadian central banker and new chairman of the Financial Stability Board, the international body working to end the scourge of Too-Big-to-Fail. One story focuses on Carney's effort to increase global regulation of "shadow banks," such as investment funds and special-purpose vehicles, which together are now "half the size of the traditional banking sector and growing still, even as many banks scale back their lending." The other piece includes biographical details about the 46-year-old Carney (he played hockey in college, he worked at Goldman Sachs for more than a decade) and quotes him suggesting that bankers who argue tightening regulation will hurt economic growth are deliberately conflating "the consequences of a global deleveraging ... with financial reform." At the end of the piece, though, Carney basically admits he has no idea how the FSB can make any of its 24 member countries adopt its recommendations if they don't do so voluntarily.
Wall Street Journal
A federal probe of Standard & Poor's ratings of mortgage-backed securities during the bubble years "is focusing on whether the firm's managers ignored its own standards when assessing the mortgage products in an effort to cater to banking clients eager to sell the securities," the Journal reports, citing anonymous sources.
"Investigators on the hunt for an estimated $1.2 billion in customer money missing since MF Global Holdings Ltd. collapsed are zeroing in on the securities firm's back-office operations in Chicago." Seems like a logical place to look, since Jon Corzine kind of pointed a finger at the back office in a Congressional hearing last month.
Even though the unemployment rate is 8.5% and the position is CEO, it might be difficult to attract talented candidates if the pay is $1 a year. Although some officials have suggested paying Freddie Mac's new CEO the token sum, the true figure will like be between $250,000 and $500,000, less than the base of $900,000 paid the previous head of the government-controlled company. Fannie Mae is expected to copy Freddie's pay plan.
Next month, British payments companies are expected to unveil the plans for a database linking people's mobile phone numbers to their bank accounts, so bank customers will need only the former information to send someone money.
New York Times
Are you now, or have you ever been, a member of the Shinnecock Hills golf club? An executive at a midsize private equity firm tells the Times' Andrew Ross Sorkin that the attacks on Mitt Romney's record at Bain Capital - and, by implication, the PE industry overall - carry "a tinge of McCarthyism."
Private bankers and wealth management firms (unhelpfully referred to here under the maddeningly amorphous rubric of "Wall Street") are courting Silicon Valley tech entrepreneurs who have become rich during the current start-up boom.
"The account information for millions of customers at Zappos.com, an online shoe and clothing company, may have been compromised by a hacking attack."