If you’re a Morgan Stanley shareholder on the fence about whether to give the bank your non-binding vote in favor of its executive-compensation plan this year, and would like a proxy firm to make your non-decision for you, you are out of luck. Read more »
Morgan Stanley Shareholders Will Have To Think For Themselves Before Deciding How To Cast Their Purely Symbolic ProxiesBy Jon Shazar
The Fed has some “large U.S. financial services firms” by the balls. Morgan Stanley is not among them. Read more »
“The fixed-income rebuild hasn’t worked as well as they had hoped,” David Trone, an analyst with JMP Securities LLC in New York, said in a Bloomberg Radio interview. “They want to be more of an asset-gathering institution that also does investment banking and a little bit of trading. They’re not yet really to the point where they’ve convinced all of us what they are yet.”
One way to think about Morgan Stanley is that it’s a big room full of people who invest (or, trade with) other people’s money.1 That money finds its way into Morgan Stanley’s hands in different ways, and those ways change (slowly) over time. Some of it comes from individual investors whose wealth Morgan Stanley Global Wealth Management manages, globally. Some of it is from mutual funds and institutional assets managed by Morgan Stanley Asset Management. Some of it is from shareholders. Some of it is bank deposits. Quite a bit of it is repo and whatnot.
Here’s the mix of where it comes from over the past few years:2
This is pretty unscientific, and Morgan Stanley’s ability and desire to do stuff with its repo funding differs from its ability and desire to do stuff with non-fee-earning client cash. Still you can see some trends there I guess? Read more »
For the last number of years, private equity firms and hedge funds slowly moved up the time at which they recruit that gotta-have-it talent, junior banking analysts, until it got to the point that they were making offers of employment to people who had graduated college and started working on Wall Street but months earlier, and still had a year and half of servitude left at their respective banks. While employers were used to having second years check out vis-à-vis doing any kind of productive work a couple months before moving on, they finally decided enough was enough. Feet were put down, expectations (that people would stop interviewing shortly after their first day on the job) communicated.
Knowing it’s one thing to smile, nod, and then tell Apollo HR that you look forward to seeing them on Monday and another to put your name on a contract promising you’ll do no such thing or risk getting canned, Morgan Stanley sought to get a little extra assurance its worker-bees would fall in line, requiring them last summer to put it in writing or beat it.
One might think that being terminated by Goldman Sachs for taking “inappropriately large proprietary futures positions in a firm trading account” and “violating investment-related statutes, regulations, rules or industry standards of conduct” might make it hard to get another job on Wall Street.
Not at all. It might make it hard, however, to get your deferred compensation after you plead guilty to fraud, re: said inappropriately large futures position. Read more »
Every once in a while I almost write “I don’t envy big bank CEOs,” and then I consider my own finances and the mood passes. But it does seem hard, no? The job is basically that you run around all day looking at horrible messes – even in good times, there are some horrible messes somewhere, and what is a CEO for if not to look at them and make decisive noises? – and then you get on earnings calls, or go on CNBC, or sign 10Ks under penalty of perjury, and say “everything is great.” I mean: you can say that some things aren’t great, if it’s really obvious that they’re not. If you lost money, GAAPwise, go ahead and say that; everyone already knows. But for the most part, you are in the business of inspiring enough confidence in people that they continue to fund you, and if you don’t persuade them that, on a forward-looking basis, things will be pretty good, then they won’t be.
Also, when you’re not in the business of convincing people to fund you, you’re in the business of convincing people to buy what you’re selling and sell what you’re buying, which further constrains you from saying “what we’re selling is dogshit.”1
Anyway I found a certain poignancy in Citi’s correspondence with the SEC over Morgan Stanley Smith Barney, which was released on Friday. Citi and Morgan Stanley had a joint venture in MSSB, and MS valued it at around $9bn, and Citi valued it at around $22bn, and at most one of them was right and, while the answer turned out to be “neither,” it was much closer to MS than C. Citi was quite wrong, and since this was eventually resolved by a willing seller (Citi) selling to a willing buyer (MS) at a valuation of $13.5bn, Citi had to admit its wrongness in the form of a $4.7 billion write-down, and the stock did this: Read more »
Financial innovation gets kind of a bad rap, and one of my favorite parts of this job is when I get to celebrate it just for being itself. Sometimes this means breathtaking magic like the derivative on its derivatives that Credit Suisse sold to itself, or elegant executions of classic ideas like the Coke shares that SunTrust sold for regulatory purposes but not for tax purposes. Other times it’s a more prosaic combination of already-existing building blocks to allow people who were comfortably doing something to keep comfortably doing it in the face of regulations designed to make it more uncomfortable.
Yesterday a reader pointed me to a Bond Buyer article that, while perhaps neither all that scandalous nor all that beautiful, is sort of cozy. It’s about a new issue of callable commercial paper issued by a Florida municipal financing commission, and here’s the joke:
JPMorgan came up with the new product as a solution for variable-rate municipal issuers facing impending Basel III regulatory problems. The proposed regulations would require banks to have a certain higher value of highly liquid assets to be available to turn into cash to meet liquidity commitments that could be drawn within 30 days. Maintaining higher liquidity would be expensive for banks, which may try to pass on costs to its issuers, according to an analyst at Moody’s Investors Service. “What we did, starting over a year ago, is ask what we can do to change the product that will still work for all the players, including issuers, investors, and the rating agencies,” Lansing said. “And the ultimate result was this product.” The new product allows banks to continue to support variable-rate products after the regulations are implemented. The paper has a variable length of maturity, but always at least 30 days. Several days before the paper would have 30 days left to its maturity, the issuer calls the paper.
The joke isn’t that funny, though I giggled at the phrase “a solution for variable-rate municipal issuers facing impending Basel III regulatory problems.” Municipal issuers face no Basel III problems: municipalities are not subject to Basel III. Read more »
The bad news: James Gorman’s pay fell 30 percent this year. The good news: he’s now in a position to show employees how to take these setbacks like a man, rather than grumbling like someone who puts their compensation in a one-year context to define their overall level of happiness. Read more »