Just to prove that even the blackest of clouds have a silver lining, the top performers at Bear are likely to find themselves at the centre of a feeding frenzy, as rival investment banks fall over themselves to hoover up the best talent. Now that Lehman Bros, Goldman Sachs and Morgan Stanley have reassured the market that they’re not about to go bust, they can concentrate on doing what they love best – trying to stitch up a rival (in this case JP Morgan) by swiping some of the top talent from its brand new asset.
According to the FT, JP Morgan boss Jamie Dimon has been desperately trying to glad-hand Bear’s star bankers to try and stop them defecting to another bank, visiting the Wall Street office last night to speak to more than 400 senior execs. The problem is that although he says he wants to keep Bear’s top performers, a sizeable number of the bank’s 14,000 staff are likely to get the boot as part of the takeover. So you couldn’t blame his audience if they were a little bit sceptical. Particularly since those whose wealth was tied up in shares have just lost a small fortune in the last week.
And it looks as though they’ll have no shortage of alternatives. Morgan Stanley has apparently been sniffing around already, no doubt buoyed by yesterday’s announcement that its quarterly profits were ‘only’ 42% down. Given that JP Morgan’s quick-fire takeover of Bear has effectively bailed out the banking system (and by extension all of its rivals) you might think this seems a bit ungrateful – but apparently all’s fair in love and banking….
So Dimon will probably have to dig deep into the $6bn pot he’s put aside for the takeover, to fund some generous retention packages for the ‘producers’ he really wants to keep. But this is unlikely to go down very well with JP Morgan’s staff and shareholders. It might be universally agreed that Dimon has bagged a bargain by snapping up the stricken Bear – but they weren’t expecting to shell out for the privilege of paying bigger salaries to its bankers.
We’re not sure whether to be reassured or horrified that (in some respects at least) it appears to be business as usual on Wall Street. One day these banks are apparently down to their last CDO, the next they’re luring traders from stricken rivals with the promise of a multi-million dollar bonus. And wasn’t it the relentless drive for bigger bonuses that got us into this mess in the first place?
Either way, it looks like Dimon’s Bear headaches are only just beginning...