Morning Coffee: Goldman Sachs’ discarded bankers may want to try JPMorgan. Bank CEO channels Jack Nicholson
It may not be much consolation to those affected, but it in many cases, it’s a kindness when a bank decides that it’s going to be the first to make serious redundancies. When employees are cut early in the cycle, they go into a labor market in which there are usually at least some players still hiring. People who are made redundant a few months later usually end up starting their job search in much worse circumstances – typically, they can look forward to a prolonged period of unemployment and if past cycles are anything to go by, many of them never come back to the industry at all.
So there are two crumbs of comfort for Goldman Sachs bankers as they sip their slightly less fancy coffee this week and wait for what some are apparently calling “Dave’s Demolition Day” (“The Judgement Of Solomon” might have been a more classy nickname). First, it appears that the cuts are about 20% smaller than previously rumoured. And second, Jamie Dimon has confirmed at a conference that “So far we're still in the hiring mode …We have a lot of growth plans. You know, I tend not to stop growing because you have a recession”. There are still some lifeboats to swim for.
Of course, Dimon might take exception to the idea that his bank would be a natural location for Goldman Sachs cast-offs. The 3,200 redundancies are being decided partly on performance grounds, and JPMorgan obviously wouldn’t agree that someone who was unwanted at their biggest rival was a catch for them. But nonetheless, it’s likely that over the next twelve months, the ranks of JPM bankers will be swelled somewhat by people who will hopefully have the good manners to unpick the GS logo from their favorite fleece vests before wearing them to work.
For one thing, Goldman is going to be making a lot of cuts at Marcus while JPMorgan is still investing in the Chase digital retail banking platform. Goldman and JPM both have very large software assets on the AWS public cloud, and although financial cloud computing isn’t quite as red hot as it was a year ago, there are still plenty of vacancies.
But also, there may be some bankers who are not by any means unwanted at Goldman Sachs, but just feel a bit unwanted. As well as cutting headcount, the “biggest cost-cutting program since the financial crisis” is looking at travel expenses (including private jets and gorgeous beachside offsites), outside vendors and conferences.
That last one might be tricky to manage and might provide opportunities for competitors like JPMorgan. For good reasons, senior bankers often regard their annual sector conference as a key part of their franchise. If their budget is cut, they take that personally, and might be considerably more open to offers from the competition. It’s often a big consideration in hiring; bankers occasionally promise to take a big conference with them when they move, and are sometimes even able to deliver it. One of the biggest challenges in investment banking is the one that David Solomon has taken on – to try to cut costs without affecting revenues.
Elsewhere, the latest letter from the desk of Jefferies’ Rich Handler is addressed to shareholders rather than employees, so it’s considerably less blunt with the “there’s less money this year” message. But although it’s tempered with a bit more optimism that “capital formation is not dead, it is just resting”, the overall picture is the same as in the last Leadership Letter; the interest rate cycle has changed, and there is no point hoping for the era of volatility to come to an end. As the letter says, “There is a relatively obscure movie where an aging Jack Nicholson looks back on his frustrating life and wonders: “What if this is as good as it gets?”
The movie in question is, of course, “As Good As It Gets”. Compared to other possible Nicholson roles, this largely sympathetic romantic comedy isn’t that bad a choice. We’ll know that things have got worse if future Jefferies letters start telling shareholders “You can’t handle the truth” or “All work and no play makes Jack a dull boy”.
Meanwhile…
What do you get if you put together a financial services headhunter with a meme account? “Litney Partners” is the new joint venture between Whitney Partners and Litquidity, managed by a former contestant on “The Bachelorette”. Presumably the idea is that one side of the partnership can deliver a never ending stream of finance bros, and the other side can pass them on to clients whose diversity and inclusion teams don’t ask too many questions. (Bloomberg)
Coinbase is reducing headcount by 25%, which means that 950 crypto employees are being let go. They will be “shutting down some projects where we have a lower probability of success”. (Coinbase blog)
The blame game between the Winklevoss twins and Barry Silbert of Digital Currency Group is continuing, as Silbert writes to his shareholders defending himself against calls for him to be sacked. (FT)
Mike Platt and his partners at BlueCrest continue to be among the best paid people in hedge fund land – the fund, which now only manages the partners’ personal wealth, was up 153% last year. (Bloomberg)
Halfway down this longread investigation into aggressive marketing tactics in the burlesque industry, there is the tantalising revelation that a prominent figure involved is “a 53-year-old bank regulator” who has been performing for the last ten years under the stage name “Red Velvet”. (New York Post)
Apparently it “hurts” Lex Greensill that people might think that, just because Greensill Capital went bust, they might need slightly more robust legal protection than a handshake and his word of honour. He’s involved in a planning dispute over 200 acres of land bordering on his farm in Cheshire, and the resulting squabbles have descended into the kind of rage and chaos for which English parish councils are famous the whole world over. (AFR)
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