Huffpost Business

Those Bank Revenues Won't Just Shrink Themselves: Seven And A Half Things To Know

Posted: Updated:
BANKER PAY
Banker pay is rising even though bank revenue is falling, according to a new report. | Getty Images

Science has determined that people need to know 7.5 things per day, on average, about the world of business. You can't argue with science. Lucky for you, the Huffington Post has an email newsletter, delivered first thing every weekday morning, boiling down the day's biggest business news into the 7.5 things you absolutely need to know. And we're giving it away free, because we love you, and also science. Here you go:

Thing One: Money For Nothing: There should be a banking corollary to the Peter Principle: The more useless bankers get, the higher their pay rises.

Worker compensation at 32 big, publicly traded U.S. banks is set to rise to a record $207 billion this year, writes Shayndi Raice of the Wall Street Journal, with the average worker's pay likely to rise 4.2 percent from 2011. This is happening even though revenue at these banks is due to fall for the second year in a row, leaving it down 7.2 percent from its peak in 2010. Bank profits are actually likely to rise this year, Raice writes. I'm no Pythagoras or anything, but I'm guessing you cannot exactly grow profits and pay forever while revenue shrinks.

But banks face a stark choice, Raice writes: Keep jacking up pay or get left behind: "Expense-reduction efforts are particularly snarled by rising pay for top workers, who often are coveted by rivals." Yes, you can't just wander out onto the street and find people with the skills necessary to almost succeed in modern banking. For example, not just anybody could come up with ways to help foreign clients dodge Dodd-Frank regulations on derivatives, the way high-paid employees of Goldman Sachs and Morgan Stanley have been doing lately, according to a Reuters report.

And without constantly jacking up pay, there's surely no way you could ever lure top rainmakers like Glenn Hadden, the guy who runs Morgan Stanley's global interest-rate trading desk and was once a big earner and partner at Goldman Sachs. Hadden is now under investigation by exchange operator CME Group on suspicion of manipulating Treasury futures, the New York Times reports. Morgan Stanley lured Hadden away from Goldman Sachs, with a pay package that made him one of the highest-compensated people at Morgan Stanley -- even though Goldman had placed him on prolonged leave after complaints from the New York Federal Reserve that he was trying to manipulate a Fed bond-purchase program, the NYT writes. Do you think that kind of talent comes cheap? Neither Hadden nor Morgan Stanley nor Goldman offered any comment to the NYT.

Thing Two: Lying Libors: Speaking of market manipulation: Swiss bank UBS is about to become the next contestant in Let's Make A Libor Deal, the New York Times writes. UBS will soon settle with U.S. and European regulators charges that it manipulated interest rates on a regular basis, the NYT writes. According to the NYT, UBS will likely pay more than the $450 million Barclays Capital paid earlier this year to settle charges that it was constantly manipulating the London Interbank Offered Rate, a key short-term lending rate that sets borrowing costs throughout the economy. If the story is true, then this will be the latest spot of trouble for UBS, whose well-paid bankers can't seem to stop costing their bank billions in rogue trades and penalties, the NYT writes.

Thing Three: 'Cause You're Growns Up And You're Growns Up And You're Growns Up: President Obama has caused all kinds of problems for the global economy because he has apparently finally learned how to negotiate. Fiscal-cliff talks are at a stalemate, writes the Washington Post, because Obama has refused to do what he normally does in negotiations: Give the other side everything it wants immediately. Instead, he has demanded everything he wants from a deal and is now waiting for the Republicans to make a counter offer, the New York Times writes. Either because they are unaccustomed to such tactics, or because they are totally bluffing and have no idea what they really want, as Paul Krugman suggests, the Republicans are flummoxed and saying nothing. So does that mean our economy is in danger of going down in a flaming wreck of tax hikes and spending cuts? Maybe not, say some economists. In the meantime, tell us how you feel about Obama being all growns up now, Vince Vaughn.

Thing Four: Stormy Ports: Without much fanfare, the two busiest ports in the United States have been shut down for nearly a week now by a strike, potentially costing the U.S. economy $1 billion a day, Reuters writes. National trade groups have asked President Obama and Congress to intervene and get workers at the ports of Los Angeles and Long Beach back to work. After the last such walkout, 10 years ago, it took several months for the economy's supply chain to get back to normal, Reuters notes.

Thing Five: Not Everything Is So Big In Texas: In a continuing must-read series about the mountains of money given away by federal and state governments to corporations, the New York Times writes about Texas: The Lone Star state gives out more corporate subsidies than any other state in the union, but still has among the highest poverty rates and lowest wages in the country.

Thing Six: Fracking: Not Just Anybody Can Do It: Terrible news, everybody: It is apparently not as easy as it looks to suck natural gas out of shale by hammering it with chemicals and bajillions of gallons of water, the Wall Street Journal writes. That means much of the rest of the world will not get to enjoy a fracking boom like the one in the U.S., meaning they will just have to get by with their normal, non-flammable drinking water.

Thing Seven: Delta Wants To Land A Virgin: Delta Air Lines is in talks to buy a 49 percent stake in Virgin Atlantic Airways from Singapore Airlines, the Wall Street Journal reports. Such a deal would give Delta access to London's Heathrow Airport, the world's busiest international air hub. But a deal could be pricey: Singapore paid Richard Branson nearly $1 billion for its Virgin stake 12 years ago, the WSJ writes.

Thing Seven And One Half: Romney In Winter: BuzzFeed's Ben Smith has the heartwarming tale of how, in defeat, Mitt Romney has managed to achieve the one thing he couldn't during seven years of running for president: humanity.

Now Arriving By Email: If you'd like this newsletter delivered daily to your email inbox, then please just feed your email address to the thin box over on the right side of this page, wedged narrowly between the ad and all the social-media buttons. OR, if you are logged into a HuffPost account, you could simply click on this link and tick the box labeled "7.5 Things" (and any other kind of news alert you'd like to get). Nothing bad will happen to you if you do, unless you consider getting this newsletter delivered daily to your email inbox a bad thing.

Calendar Du Jour:

Economic Data:

10:00 a.m. ET: ISM Manufacturing Index for November

10:00 a.m. ET: Construction Spending for October

All Day: Auto and Truck Sales for November

Corporate Earnings:

Nada.

Heard On The Tweets:

And you can follow me on Twitter, too: @markgongloff

Also on HuffPost:

Close
10 Bankers Behind Bars
of
Share
Tweet
Advertisement
Share this
close
Current Slide

Suggest a correction

Around the Web

Investment Banker Salaries Vs. McDonald's: Hourly Pay | Mergers ...

THE GAME: Believe It—Bankers' Pay Takes a Tumble - WSJ.com

JPMorgan cuts banker pay, a sign of more frugal times on Wall St ...

Wall Street Employees Think Banker Pay Would Increase Under ...

Barclays Is Cutting Senior Banker Pay - Business Insider

JPMorgan Chase Cuts Banker Pay

Bainbridge Group, Former Banker to Pay $5.1 Million for Insider Trading in ...

EU countries to discuss caps on banker bonuses

What should bankers be paid?

Latest departure reignites bankers' pay debate

Bullish bankers struggle to adjust to bonus cutbacks

Demand and salaries rise for commercial bankers

Bank Bonuses May Face Weaker Limits in Watered-Down EU Plan

EU seeks to prod bank pay curbs forward