'Tis the season

As the annual bonus tree blooms again on Wall Street, firms that were used to making multimillion dollar payouts to incompetant bankers are finally making some practical changes to their compensation structures.

But it was Morgan Stanley’s claw-back announcement, which will affect some 7,000 workers, that captured the attention of employment lawyers and recruiters. It is similar to a rule introduced by UBS, the big Swiss bank, in late November, but Morgan’s is far broader in its language. Pay can be retracted from workers who engage in “conduct detrimental to the firm,” according to an internal memorandum announcing the move, or who cause “a restatement of results, a significant financial loss or other reputational harm.”

Morgan Stanley already holds on to 35 to 60 percent of high earners’ bonuses, but in the past it has held that money entirely in stock and stock options. Now a large portion will be cash, the bank said. “So if you’re a trader and you’ve had a huge year and you get paid a lot of money and then the following year it turns out you were taking outsize risk, we can go back and ding your pay from the year before,” said
Jeanmarie McFadden, a spokeswoman for Morgan Stanley.

Bonus reductions

Projected bonus cuts on Wall Street here. About time those millions were cut (in my view) and redistributed. Of course, some of this might be companies posturing to the market in the hope of driving up stock prices. The same strategy employed when companies announce layoffs... Has anyone gone back a year later to some of these companies that garner headlines when they project layoffs and asked them exactly how much they laid off or exactly how much they cut bonuses? No. I am sure not. Yes, posturing for the markets is an important aspect of this exercise...

Two links

For the policy wonks, here is a Brookings institution guide on fixing the financial quagmire that talks about longer term fix's to the economy and ideas for a better regulatory framework. Both of which are absent from the current bailout plan that the Senate hope to vote on this evening...

The report gives examples of how the following high level recommendations that actually could create a better regulatory system to prevent such a quagmire from occurring in the future.

First, financial instruments and institutions should be more transparent. Second, financial institutions should be less leveraged and more liquid. Third, financial institutions should be supervised more effectively, with greater regard for systemic risks.

Wow, this is the second time I seen the word quagmire being used to describe a set of catastrophic global events that have happened over the last six years. The first being Iraq...

Crude, How Wall Street is screwing America: A cogent explanation of how we came to $4/gallon oil and the eminent contributions of Mr. Clinton and the current POTUS. Of how actual regulation was whittled away slowly but surely to create a feeding orgy for commodities traders on Wall Street and of how the word ‘stay-cation’ became suddenly popular.

In stark opposition to the oil crisis of the 1970s that left Washington in a state of panic and Americans lined up at the gas pumps, the seeds of the current condition may well have been planted not in the Middle East by the OPEC nations, but right here at home, by the very lawmakers now scrambling to undo what they set in motion.

oil is going down. Has India and China dramatically cut back? Nothing has changed and, in fact, the supply-demand factor has probably gotten worse because of Russia's aggression [and] the severe weather, but oil is sinking, sinking, sinking. How can that possibly be?"