The war has been going on for decades, though the fight is just now heating up. It’s bankers versus regulators: a classic case of the rich against the…slightly richer? Wait, what?
A controversial new op-ed in the Wall Street Journal, penned by Paul Kupiec, a resident scholar at the American Enterprise Institute, takes Wall Street regulators to task, mostly for the same reason the general public lashes out at bankers: they make too much damn money. Kupiec’s argument is an illuminating one, though he bobs and weaves around facts like a slalom skier.
The average compensation at three top U.S. regulatory bodies – the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC) and the Consumer Financial Protection Bureau (CFPB) – was more than $190,000 in 2012, a stunningly high number considering all the recent chatter from regulatory heads about high turnover rates. The Federal Reserve, Kupiec surmises, likely pays north of that average figure, though it doesn’t release its comp numbers.
While regulators typically employ highly trained specialists – lawyers, mostly – they also hire plenty of general staffers. Secretaries, for example, who take home an average of nearly $80k, and human resources management trainees, who earn roughly $110k at the CFPB. Around two-thirds of employees at U.S. banking regulators made six figures in 2012.
The main issue at hand is that, unlike at many other Federal bodies, the salaries of banking regulators aren’t subject to Congressional control – and most regulators’ budgets are pulled directly from the balance sheets of banks through insurance payments.
The pockets of regulators were deepened years ago to help them recruit highly-specialized, difficult-to-find talent with the knowledge and will to take on big banks. What’s happened, at least according to Kupiec, is that regulators started throwing money around in all directions – like paying drivers $82k – while failing to compensate lawyers and economists with premium wages.
While it’s an interesting take, Kupiec sullies his argument by offering up facts that belong in quotations marks, like the average banker salary falling shy of $46,000. Clearly he’s looping in local small-town tellers and the like. The average compensation for Wall Street bankers – the ones regulators dedicate most of their time to – was $360,000 in 2012, according to another government body, the New York State Controller.
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In fact, the only big bank to post a decent quarter in fixed income was Morgan Stanley. Strangely enough, they owe most of their success to the recent climatic turbulence in the U.S.
Despite recent headaches, Citi execs had their pay packages approved by shareholders on Tuesday. CEO Michael Corbat also confirmed in the meeting that the bank will move more employees from Midtown to its downtown location in TriBeCa.
It seems hedge funds can’t do any wrong, even though they have had a historically rotten quarter. Hedge funds raised a net $26.32 billion of new cash in the first quarter despite the industry having its worst three-month performance to start a year since 2008.
Barclays on Tuesday confirmed earlier media reports that it will exit the majority of its commodities business and refocus on electronic trading. The bank currently has 160 employees in its commodities unit. That number will shrink significantly.
Babson Capital has been on a hiring spree. The Charlotte hedge fund has added 12 new members to its emerging markets debt team since October.
A former Deutsche Bank salesman in Japan admitted to bribery charges but suggested that the German bank’s brokerage unit condoned the behavior.
Buzz Around the Office
Here’s NBC’s Brian Williams with his rendition of Snoop Dogg’s “Gin and Juice.” Not half-bad.
Quote of the Day: ““You say you got the numbers right but the process is wrong, how can we have confidence in the numbers if we don’t have confidence in the process?” – a Citi shareholder discussing the bank’s failed stress test