According to the CEO of Unicredit, if you think there was a moral hazard problem before with folks taking excessive risk to maximize short term profits and bonuses, just see what happens if you remove the carrot and just pay them everything as a fixed salary.With the global push towards bonus reduction in full force, Alessandro Profumo had some words of caution for those wanting to see guaranteed bonuses morph into guaranteed salaries.
“If you don’t have any link of your compensation to your long-term results, you are incentivized to take risk, by definition,” Profumo told journalists at a meeting in Istanbul.
“If you have only fixed compensation you don’t have any link between your compensations to the value of the company,” he said. “I can take all the risk I want and my compensation won’t change.”
Sounds like a perfect reason to implement performance-based compensation in DC.
If you need a hint, the context: Thursday, September 18, 2008. Andrew Ross Sorkin reports in his new book that Lloyd Blankfein had just received an email from one of his traders claiming that JPMorgan was trying to steal Goldman hedge fund clients by spreading rumors the firm was going under. LB was pissed and immediately called up Dimon to find out where JD got off (allegedly) screwing him over like this. Jamie said he didn’t know about any ungentlemanly conduct going on, but that it was conceivable some of his guys could be doing shit without his knowledge. Blankfein was sick of these attempts to evade the question and knew what he had to do. Show JD he meant business with a pop-culture reference. But which flick did the movie buff decide to quote for his big speech? Was it:
A. Backdoor Sluts 9 LB had recently finished the entire series so it was fresh in his mind, most especially the harrowing scene that was performed sans lube, which felt disturbingly similar to what was going on right now.
B. Saving Private Ryan Blankfein loves a good WWII movie and at the time, this really did feel like war.
C. Kingpin If the Goldman CEO has said once, he’s said it a thousand times: “Take that, you freaky piece of shit. You don’t mow another guy’s lawn. ” (The follow-up was also apt: “It’s a small world when you’ve got unbelievable tits Jamie.”)
D. Beaches The entire thing, all parts. What? It was a tense time and LB was feeling very emotional. He was hoping there was a chance Bette Midler spoke to Dimon on the same level.
E. The Big Lebowski Perhaps JD hadn’t yet seen what happens when one fucks a stranger in the ass.
F. All of the above.
G. None of the above.
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With Bobby Benmosche $10.5 million pay package getting two thumbs up from Ken Feinberg, the question is whether or not BB can earn his keep to the tune of 8 figures. To answer that you need somebody who really knows the guy. Somebody who has walked the Croatian vineyards with him. Somebody who knows when there are two outs in the bottom of the 9th with the game on the line whether Bobby B comes through in the clutch or strikes out. Former UBS Paine Webber CEO Joe Grano is such a person
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Doubtful! Oh, but not so, says the the Post, claiming that not only does SK want the job, but that she “went public with her ambitions to run the bank” yesterday on CNBC. Those of you who saw the appearance live might be wondering when exactly Krawcheck revealed her plot to take over Bank of America. Were you in the bathroom at the time? Was the TV on mute? Were you momentarily distracted by Caruso and Cabrera? Apparently, according to the paper, it was when the Kraw made the statement that she’s “very much focused” on what she’s doing running BofA’s wealth-management unit. If that doesn’t say “Krawcheck for CEO 2010,” the Post don’t know what does. Confused? Let us assist you in following the giant leaps in logic.
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One-Third of Wall Street Workers Expect Bigger Bonus This Year (Bloomberg)
About 36 percent of the 1,074 people who responded to an e-mailed poll by eFinancialCareers.com said they are anticipating a bigger annual payout from their companies and 11 percent said it will jump by at least half. Oh, and FYI: “This finding may rile regulators who have concluded that compensation arrangements often created incentives for risk- taking with insufficient regard to longer-term risks,” the company said in the statement.
Pay Czar Targets Salary Cuts (WSJ)
It’s not clear what portion of an employee’s salary will be diverted to stock but a person familiar with the matter said that in some cases it could be more than 50%.
Wall Street Cedes To Bay Street As Canada Banks ‘Play Offense’ (Bloomberg)
“The profile of the Canadian banks on the global scale has been heightened exponentially over the course of the last year,” said Rose Baker, a managing partner in Toronto with executive recruitment firm Heidrick & Struggles International Inc. “They look more powerful and are able to attract talent that was historically not available to them.”
Société Générale plans €4.8bn capital-raising (FT)
The frogs: they’re just like us. They want the government out of their business. (SocGen said it would use the money to repay the government’s €3.4bn capital aid, of which half is in the form of preference shares and the rest a subordinated loan.)
Saudi Bank Governor Denies Talks to Replace Dollar (Bloomberg)
The Independent report is “absolutely incorrect” and there has been “absolutely nothing” of that nature discussed between Saudi Arabia and other countries, Saudi Central Bank Governor Muhammad al-Jasser told reporters in Istanbul.
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$$$ Bank of America has no idea who it’s going to name CEO. A suggestion– go through the list of talented employees KL “brutally fired” on account of being threatened by them, starting with this genius, whose canning apparently came down from the top. [NYT]
$$$ NYC Taxis Are Made Of Gold [Cityfile]
$$$ In Defense of Goldman’s $1 Billion Payoff From CIT [The Atlantic]
$$$ The Demise Of The Dollar [Independent]
$$$ Matt Taibbi Falls For A Naked Short Selling Hoax Video [BI]
$$$ “Mr. Eitel also spent a great deal of time wooing clients from his 80-foot yacht, Eitel Time. With his boat, which had 11 televisions, a hot tub on the flybridge and a sunken granite-topped bar in the salon, Mr. Eitel took customers out for cocktail cruises and junkets to Martha’s Vineyard. Drinks were always frosty, thanks to the on-board ice machine, which could churn out 600 pounds of ice a day.” [NYT]
This would not be the time he asked for more money to do less work but rather when he pulled John into a room to show his former boss how he was going to make a metric fuck-ton of money for the firm, which Bloomberg gets into in a profile of P-squared (which, awesomely, is actually what he calls himself):
“After hearing a lot of arguments for and against the presence of the bubble, we had a simple and clear insight of our own to go by,” Pellegrini says.
He recalls that Paulson broke into a smile when he showed him the proof that houses were overpriced. “John doesn’t smile,” Pellegrini says. “It felt great.”
Careful analysis shows that this statement is not exactly true. Paulson JP practically grins when seated next to Jack Welch’s German doppelgänger. No matter– Pellegs made Paulson smile once and then the two got back to making money and taking money, only occasionally glancing up to motion to a life-size cutout of Alan Greenspan and go “look at this idiot” to each other.
Fast-forward to the end of 2008 (and a bunch of dollars later) and Pellegrini, by several accounts, proposed to Paulson and Pals that his new purview permit him to indulge himself a bit more. Basically Pellegs wanted the go-ahead to spends his days waxing poetic on larger geopolitical issues that required constant consultations with peers like Henry Kissenger, David H. Petraeus, Tila Tequila, etc, and to spend less of his time slicing numbers to figure out if Ben Bernanke was going to survive the next option arm reset (he also wanted more money to do so). The two parties diverged from there, with P-squared being more encouraged to leave the building (as opposed to leaving on his own terms) than is necessarily suggested here. It’s not that JP and Pals were opposed to P^2 drastically redefining what he did for the firm but apparently the attitude that came with the demand that ‘Legs have a red phone to Putin installed in his office and be referred to as “The Talent” in front of the Limited Partners was rubbing people the wrong way.
And now you’re all going to potentially benefit! P.Legs struck out on his own with PSQR Management, which returned 80 percent through July and will be marketed to outsiders (for now it’s all his money) in 2010. Presumably he’ll be looking to hire a few more man boys to help run the the place sometime soon. Let’s try Pellegs on for size. If you like what you see, if it’s all you ever wanted (superficially) in a boss, considering shooting a res.
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The government is demonstrating it’s serious about clamping down on tax evasion. Forget people with Swiss bank accounts, Method Man is in trouble. The Wu-Tang member turned himself in today and faces two counts of tax evasion.after the IRS discovered he was in a bit of a fog when he was supposed to pay his taxes from 2004-2007. The $33k in back taxes plus additional penalties he owes could cost him 4 years in the big house if found guilty.
Method Man Arrested On $33,000 Tax-Evasion Charge [MTV]
If you received a mortgage that you had no chance of affording, Barney Frank has a message for you: help may be on the way. The internet gambling advocate wants to place a $2 billion bet on unemployed homeowners facing foreclosure. Doing his part to recycle, BF intends to take a couple billion in repaid TARP funds and loan them out to the jobless to stem another wave of foreclosures.
“We have a new wave of foreclosures coming not from people who got loans that they shouldn’t have gotten, but people who got loans that they clearly could afford but prolonged unemployment has put them in a tough situation,” said Frank, a Massachusetts Democrat.
Apparently even in this environment, B-Frank has few reservations about going double or nothing.
Frank Urges Using $2 Billion Repaid to TARP on Foreclosure Aid [Bloomberg]
