Citi, M. Stanley may pay $3 billion to keep brokers: report (taxpayers dollars)

[UpInArms]

Source: Reuters via Yahoo

NEW YORK (Reuters) – Morgan Stanley (MS.N) and Citigroup Inc (C.N) are preparing to pay $3 billion of retention awards to brokers to keep them from fleeing a brokerage joint venture, the Wall Street Journal said on Friday, citing people familiar with the matter.

Terms are not expected until later this month, but the issue could grow politically sensitive because the government has injected money into both companies, the newspaper said.

Morgan Stanley is paying Citigroup $2.7 billion to take control of the joint venture, which will combine its brokerage operation with Citigroup's Smith Barney unit.

Citigroup has taken $45 billion from the Troubled Asset Relief Program, while Morgan Stanley has taken $10 billion.

<snip>

According to the newspaper, not all of the joint venture's 20,000 brokers would get retention payments. It said a broker who brought in $1 million in revenue last year might expect to get $500,000 to $1 million, depending on how much he continues to produce.

Read more: http://news.yahoo.com/s/nm/20090214/bs_nm/us_citigroup_morganstanley_brokerage

[Warren Stupidity]

1. No no no no no no no no no no no.

no.

Seriously, this is arrogant corrupt oligarchic perfidious nonsense. Obama and Geithner need to make it clear that you cannot simply call a bonus a retention award and start handing out 500K to 1M checks to your pals using our tax dollars.

This is the line in the sand. They cannot be allowed to pull this shit.

[ixion]

8. spot on...

very well said. :applause: :woohoo:

[saigon68]

45. Corporate Thugs and Robbers

I'll bet they get that money

[BR_Parkway]

2. Bring in a $1 million and get paid as much as a retention bonus?

No wonder the banks are broke.

[independentpiney]

4. Unbelievable, isn't it? nt

[Bill219]

3. These MFers just don't get it

It is time to nationalize them!

[TheCoxwain]

5. they are cockraoches that refuse to die .....

[radfringe]

6. give'm pink slips

let them collect unemployment for a few weeks

them hire them back at 1/2 pay

better yet - let them go belly-up

another suggest - since it's OUR TAX DOLLARS, equally apply the money to credit card holder accounts and reduce balances, cut the interest rates

[Lucky Luciano]

9. So, the banks should fire their better producers and keep the

losers? Does not sound like a good way for them to pay back the TARP money. That said, paying them more than 1/2 of what they produce is a bit much - I think normally they may get about 25% (Need further verification here) for retail brokers. The institutional brokers probably make about 10% of their commissions, but they bring in $20MM of revenue and the company brand name brings in a lot of revenue so the individual broker will not take down 25% in that case.

[mbperrin]

17. What better producers? These bastards are insolvent, and guess who

got them there? If a 7-11 is missing cash and inventory and has been losing money for months, believe me, everyone there will get FIRED and new somebodies will be given a chance.

They will not give the least worst employees there a nice bonus and beg them not to go to work for Allsup's.

That's MY money they're giving away, and before anyone even starts in on those "separation of funds" junk, money is fungible.

[asolarski]

26. The banks should fail

Better producers?  What the hell does a broker produce?  Not a
goddamned thing.  Overpaid paper pushers and sleazy salesmen
to begin with, we don't need these assholes period.

The fact that they are good at manipulating their customers
into buying whatever the head office is trying to push, with
the highest fees possible against your better interest is why
we are in this mess.  We should care if these guys have to go
back to selling used cars because they have no real skills? 
We should use taxpayer money to keep them around to scam us on
the next round of derived garbage secuurites they dream up to
keep "producing" big numbers?  These big numbers
they "produce" are just what they can skim off the
deal as you try to buy an investment.  It's a big frickin
monopolized (oligarchized actually) racket.  They produce
nothing.

[Alcibiades]

32. Where are they going to go?

Supply of these folks probably outpaces demand, so their wages should go down. That's what happens to us regular folks, the ones governed by the rules of the marketplace. This money was intended to help the free market work, but they are using it to counteract natural market forces.

Retention award, my ass. It's a bonus. If your enterprise is losing money, then you are obviously not being sufficiently productive, and, hence, no bonus. Those are the rules for folks on the factory floor, and it should apply to these well-connected insiders as well. If they are so smart, they should have no problem finding a way to live on a million a year, even in Manhattan.

Pay them the all a flat rate of 200k a year. Most regular Americans who are not part of a well-connected elite would be happy to get half of that. If they yelp, they can seek other employment, and see how well they laissez-faire.

:nopity: :nopity: :nopity: :nopity: :nopity: :nopity: :nopity:

[TNDemo]

7. Retention from what?

There are no other jobs to go to.

[radfringe]

10. water retention - they're bloated, constipated....full of sh*t n/t

[Lucky Luciano]

11. There are places to go. The sales people and brokers can get a job

by walking into another brokerage and saying, "Here is my big list of clients that I can bring over here and start generating positive cash flow from day 1." Nobody says no to that. I would not be surprised to see some of the more enterprising ones leave and set up their own boutique brokerages so that they can get paid.

[edc]

13. Huh?

Please help me understand this. Are the brokers employees or independent contractors? Who owns the client lists? If the brokers are employees wouldn't the lists belong to the brokerage and wouldn't threatening to take them elsewhere for more money be an act of extortion? If the brokers are under contract why would you pay them performance bonuses?

[alcibiades_mystery]

18. Yes, brokers function more or less as independent contractors

There are a set of protocols relating to what clients they can take with them, and if they don't follow protocol a firm can enjoin them, but they actually do pick up and leave from time to time if the right "walk across the street" money appears.

[edc]

22. Thanks

[Ikonoklast]

38. Then the enterprising ones should do so.

The trouble is, in this economy the market will dictate what you are worth. Some might find out they are over-estimating their earning capacity.


If the firm you work for has to operate with tax dollars to stay solvent, it just may be in your interests to leave anyway. Seems like that should be a giant red flag that things aren't going so swimmingly.

[alcibiades_mystery]

39. They do it all the time

These aren't bonuses. They're transactions. This thread is really an example of misunderstanding and ignorance. These so-caqlled "bonuses" are generally structured in very specific ways. To wit, the brokers (and this includes their team, which might be comprised of two brokers, and analyst, and a sales assistant) don't get some up front cash pay-out, but a "forgivable loan" in some amount, that is then forgiven in increments over the course of five (or six, or seven) years. That way, the new firm locks in the production for some period of time. They are buying the client lists and client relationships, not handing out some give-away reward for good performance.

[Lucky Luciano]

24. The act of extortion you speak of is precisely what runs Wall St.

The stars always hold their employers hostage if they do not get paid well enough...jumping ship is very commonplace. There is no loyalty - only better offers to be had. My exboss generated $250MM in PnL (trading liquid securities with small profit swings on a daily basis relative to the final number - ie it was a great risk adjusted return on capital) for his firm in 2008, but unfortunately the firm also lost $6.3B in Q4, so he probably only got a 2% bonus or so instead of the usual 10%...I know he is highly pissed off and is scheming to go where he will get the respect he wants (his firm is not American and therefore took no TARP money or any government money for that matter). When he shows the alternative offers he gets at other banks (RBC is a good one to go to since the Canadians are in good shape) who can still pay well, perhaps he will make his employer flinch...and if not, then they will lose him.

[TNDemo]

14. Are they generating positive cash flow at their current place?

Why is every firm broke?

[Lucky Luciano]

21. Yes they are bringing in positive cash flow now - did you notice

the revenues they brought in from the OP.

Not everyone lost money. This is something that seems very lost on people. It is actually a pretty small percentage of people that fucked it all up for everyone else....believe me...I know. Brokers generally do not lose money - they might just not bring in revenues fast enough, but they do not really take risks. The traders take risks...and in particular the credit and MBS traders really blew things up - but even some of them made money...but the ones who lost...well they lost really big and fucked everything up.

[WriteDown]

33. So you want your best producers to leave and...

your worst producers to stay. Let me guess, you've never run a business? That's a recipe for bankruptcy or just plain failure.

[SOS]

46. Let them "produce" at a non-TARP bank.

There are plenty of banks that did not take tax money.
Let them get a job there.

[WriteDown]

47. Let me ask you a question...

Why are nurses getting great offers these days?

[mbperrin]

19. Then let 'em go! If they're REALLY producers, then their great efforts

are being swallowed by the total incompetents in their old firm, and why would they want to hang with a bunch of losers?

Any real talent is bound to show and collect by natural selection.

They're good? Let 'em prove it by going somewhere where the bonuses come from production, not MY pocket.

This is the same shit as letting the R's threaten filibuster and caving in to any demands they make.

I grew up in a bad neighborhood with several gangs intersecting there. Anytime someone threatened me by saying they would beat my butt up, I'd say, You might do that, but you'll HAVE to.

Same with these guys. Can produce elsewhere? Do it!

[Lucky Luciano]

23. "Same with these guys. Can produce elsewhere? Do it!"

...and hence the retention bonuses....

[mbperrin]

28. Make them go elsewhere and do it.

End the extortion and see if they can really do it.

Quit using MY money to allow them to claim they can do it when they have not so far.

[Lucky Luciano]

35. The point is that they have done it so far which is why

the banks are trying to retain them. NOT EVERYONE BLEW UP THE BANKS. Many actually made money for the banks so that they have lost less money as a result...these are the ones they are trying to retain...and a lot of poaching has indeed been going on. UBS just the other day paid up huge to steal a bunch of brokers from (I think it was) Merrill. They will go....then when they do go and there is no franchise at Citi/Morgan, they will have to make yet another writedown of their assets. Not the best way to get a return on the TARP money, eh?

All that said, the TARP was run horribly. The government definitely got a raw deal - the government should have gotten a deal similar to what Buffet got when he invested in Goldman Sachs - 9% preferred stock (instead of 5%) plus at the money warrants (though those warrants of Buffets are underwater now).

[Baby Snooks]

12. Is there anything stop them?

Did Congress put restrictions into Part II? Or put restrictions on what remains from Part I?

If not, well, happy days are here again on Wall Street. They do not care what anyone thinks. Including the president. They, after all, control it all.

Welcome to the oligarchy.

[Gin]

15. wow..that is a reward...a million for a million....best bonus I ever heard of

[Baby Snooks]

16. A bonus from the taxpayers...

That is what is so outrageous. The bonuses are being paid for by the taxpayers. And if Congress does ask, Congress will be told the bonuses are being paid for out of profits, not the federal funds.

Congress of course won't ask why they need the federal funds if they have profits to pay their employees 50-100% "retention" bonuses.

The have-mores, it seems, are really the stole-mores.

[tomreedtoon]

36. To use your own grammar; there AM something stop them.

Bullets am stopping them. Torches shoved into them skin and burning to death stop them.

And grammar am dead.

Hulk am strongest one there is!

[notesdev]

20. Morgan Antoinette Stanley sez:

"Let them eat taxpayer-funded bonus dollars!"

[wroberts189]

25. and just 400k could secure anyone's future :( nt

[lumberjack_jeff]

27. A 50% to 100% commission?

Do taxpayers have "stupid" tatooed on their foreheads?

[mbperrin]

30. I should have "My asshole is sore." on mine.

In fact, I'm just pissed off all over.

Thousands of auto workers took pay cuts, some took buyouts, all lost benefits at the behest of Congress, but THESE parasites who created the problems for EVERYONE deserve a bonus?????

I know what I'd like to give them....

[droidamus2]

29. Total BS

The idea that if you don't give people huge bonuses they will run to some other company and therefore you have no choice is bullshit. Are they telling us that there are always 'other' jobs available?
Do all those companies pay the same kind of bonuses? If the other companies do is that sort of self perpetuating. So company A gives 'retention payments' so the workers won't go to company B. Then company B says they have to give bonuses so company A and company C won't get their workers. Ultimately everybody is giving 'retention payments'/bonuses because everybody else is. These people believe that they really deserve the amount their making and truly deserve to be rich. Funny I worked for a company that is in the 'privately held' Fortune 500 and when times got a little tight they told us that we would not be receiving our couple of hundred dollar bonuses and didn't really seem to care if any of us left or not.

[aquart]

31. Uh, who's looking to hire them?

Are they mentally defective, these idiots?

[Lucky Luciano]

34. There have been a lot of defectors lately. The brokers are

actually moving around. LOTS of poaching going on in the last month.

[alcibiades_mystery]

40. The brokers production is what it is

If a firm wants to get that production, they make an offer. It's a transaction. Just in the news lately, UBS was on a big push to pick up brokers from other firms in order to add that production to their balance sheets.

[mbperrin]

43. Keynes had an observation about our current system:

The decadent international but individualistic capitalism in the hands of which we found ourselves after the war is not a success. It is not intelligent. It is not beautiful. It is not just. It is not virtuous. And it doesn't deliver the goods.
John Maynard Keynes

Smart guy.

Now let's kill the looters.

[alcibiades_mystery]

44. You're preaching to the choir

Doesn't change the fact that these are specific transactions for services and not bonuses.

[aquart]

48. "Loters" is exactly what they are.

[mac56]

37. Didn't Citi and Morgan Stanley consider outsourcing the brokers?

Think of the savings!

:sarcasm:

[No Elephants]

41. You get a salary. You don't pay any of the overhead it takes to keep the business going. AND, if

you bring in a million, you get a million in bonus on top of all that.


Small wonder these guys needed a bailout.

[avaistheone1]

50. No kidding. The dollars don't add up to being profitable for the company.

It's ridiculous.

And now we are going to be ripped off of our tax dollars to pay those assholes.

:grr:

[pa28]

42. Citi is broke.

So the "different money" argument gets even thinner. And who, exactly, is going to be rushing to scoop up these brokers? The "talent retention" argument is even more puzzling.

Nationalization of the big institutions is the way to take control of the situation. The alternative is to passively get sucked into into a never ending spiral of leveraged losses and subsidies for millionaires just like this.

[avaistheone1]

51. I wholeheartedly agree. These banks need to be nationalized.

[Hannah Bell]

49. So with this 3 billion in bonuses & merril lynch's 4 billion, we're up to 7 billion.