Banking on it
Big banks are responding to the “Great Resignation” by writing big checks. To keep workers from leaving, Wall Street institutions have been raising pay and bonuses for everyone from senior executives to junior bankers. The thing is, it may not be enough, The Times’s Lananh Nguyen reports.
Job churn at the country’s biggest banks is accelerating, fueled by a war for finance talent, both inside and outside the industry, and burnout from working punishingly long hours during the pandemic. “I was just so tired of it. It wasn’t making me happy,” said Amy Wu Stratton, who left Citi in June, even though it was her most lucrative year after almost 16 years in banking. “The pandemic slowed me down and made me take stock.”
The six biggest banks collectively spent nearly $178 billion on compensation last year, up 12 percent from the year before. Steven Eckhaus, a Wall Street employment lawyer at McDermott Will & Emery, said he had negotiated a handful of eight-figure pay packages on behalf of top bankers in the past few months, including a $20 million signing bonus for a client after a four-month bidding war. At the other end of the scale, the typical base pay for recent graduates in their first or second year on Wall Street has reached $100,000, from about $85,000, and that’s before bonuses.
But “money doesn’t always make you happy,” said Alan Johnson of Johnson Associates, a Wall Street compensation consultancy. Some bankers are moving elsewhere in finance, to smaller banks where they can have more control over their hours or to fast-growing fintech and crypto firms. Others are leaving finance altogether. Stratton left Citi to start a website for Asian women who are focused on careers and social impact. “I was so happy to get out of that thinking of always having more and more,” she said.
Further reading: DealBook’s investigation last year about burnout among junior bankers.
HERE’S WHAT’S HAPPENING
The U.S. trade deficit soars. The deficit rose 27 percent last year, to nearly $860 billion. The reason: Americans bought mountains of imported goods, while the U.S. suffered a drop in demand for its services, particularly with foreigners spending far less on tourism and education.
Americans take on more debt. Borrowing rose at the fastest pace since before the financial crisis, driven by purchases of homes and cars, according to economists at the New York Fed. But they said that they weren’t too concerned, given the overall rise in wealth during the pandemic.
Johnson & Johnson pauses production of its Covid vaccine. The company quietly shut down the only plant that produces the shot and manufactured another, potentially more lucrative vaccine unrelated to the coronavirus, The Times reports. While the halt is expected to be temporary, it came after J.&J. had already fallen behind on deliveries to poorer countries.
A bipartisan effort to ban congressional stock trading emerges. Senators Steve Daines, Republican of Montana, and Elizabeth Warren, Democrat of Massachusetts, will propose preventing lawmakers and their spouses from owning or trading individual stocks, according to Axios.
Meta’s woes may provide an unexpected benefit. The drop in shares of Facebook’s parent company lowered its market cap to just below $600 billion — the threshold for proposed Big Tech antitrust regulation in the House. But those bills are far from becoming law, and legislators could revise that limit.
Our notes on Peloton
Peloton’s major shake-up yesterday made waves, not least in the connected fitness company’s share price, which rose 25 percent, regaining some — but not nearly all — of its decline over the past year. We shared our initial thoughts about the moves in yesterday’s newsletter, and then spent the day talking with sources about what happens next. Here’s what we learned:
On Barry McCarthy. The appeal of Peloton’s new C.E.O., who was formerly the finance chief of Spotify and Netflix, is clear: He knows how to run a subscription business. And having worked alongside the founders of those companies, McCarthy knows how to do the same with Peloton’s co-founder, John Foley, who in shifting to executive chairman from C.E.O. won’t be going far.
On turning around the business. Peloton is looking to save $800 million annually by cutting costs on staff, marketing, real estate and more. It also faces a challenge in moving mounting inventory, which reflects slowing demand for its bikes and treadmills. But when — or if — Peloton can reduce its losses, it will need a strategy beyond emergency resuscitation. Could that include partnerships? Or increasing the price of its streaming plans?
On those takeover rumors. We quizzed Wall Street sources on what McCarthy’s hiring meant for a potential sale, as the activist investor Blackwells Capital has urged. Overwhelmingly, the answer was that hiring someone like McCarthy signals that there isn’t an immediate plan to sell the company. Peloton may still do a deal, but as a source told DealBook: “It buys them some time.”
The couple behind the crypto heist
The Justice Department yesterday said it had seized over $3.6 billion worth of stolen Bitcoin and arrested a married couple, Ilya Lichtenstein and Heather Morgan, accused of laundering the crypto. It’s a case full of big numbers — and other eye-catching details.
The stash is the department’s largest financial seizure ever. About 119,754 Bitcoin was stolen in 2016 from the Bitfinex exchange, according to prosecutors. (It was worth $71 million at the time of the heist and is now valued at over $4.5 billion.) Law enforcement officials recovered 94,636 Bitcoin, valued at more than $3.6 billion, from a wallet belonging to Lichtenstein.
The couple now face charges of money laundering. The pair, who describe themselves as entrepreneurs, led a flashy life. Morgan in particular has built up a outsized public profile, writing for Forbes and Inc. and rapping under the name Razzlekhan, the self-described “crocodile of Wall Street.” (Here are some of her music videos.) They posted online often and publicly about crypto: “The amount of spam I’m getting about sketchy crypto get rich stuff really makes me feel like this bubble is gonna pop soon!” Morgan tweeted in December.
Are unions on the rise?
Headlines suggest that the unionization movement in the U.S. seems to be gaining momentum. It certainly has support from the Biden administration, which issued a report this week outlining dozens of steps it will take to promote union membership. Here are some of the recent union developments making news:
Congressional staff members started a unionization effort last week, noting that they are employed by politicians who say they support the labor movement. Before their workers can unionize, however, House members must pass a resolution allowing it. Representative Andy Levin, Democrat of Michigan, plans to do that this week. President Biden supports the union drive, the White House press secretary, Jen Psaki, said yesterday.
Starbucks workers in California this week joined their counterparts in more than 50 locations in 19 states, pushing for union elections after the first company-owned store unionized in Buffalo, N.Y. at the end of last year. Yesterday, the company fired several employees in Memphis who were seeking to unionize their store, for what the company said were violations of safety and security policies.
Amazon faces another union vote at a warehouse in Alabama, after the National Labor Relations Board threw out the results, citing misconduct by the company. A rerun of the vote started last week, and workers at a Staten Island warehouse also recently collected enough signatures to warrant a vote.
But taking a step back, union membership is on the decline, to just above 10 percent of the U.S. work force last year, half the share of the early 1980s. In absolute terms, union rolls have lost about four million members over that period.
What’s in a bank?
Sarah Bloom Raskin, President Biden’s nominee to lead bank supervision at the Fed, faces stiff resistance from Republicans based on her progressive positions and on apparent ethical questions that some believe are really intended to push one state’s cryptocurrency agenda.
Republicans questioned Raskin’s contacts with the Kansas City Fed. Raskin, a former Fed governor, joined the board of a fintech company that was approved for a Fed “master account,” and faced questions about these dealings at her confirmation hearing. The Kansas City Fed responded on Monday, saying communication with company directors is “routine.” But Senator Cynthia Lummis, Republican of Wyoming, said yesterday that the real problem was that a “connected non-bank” secured Fed approval while requests from “actual banks” in her state “have been stonewalled.” Wyoming created the Special Purpose Depository Institution, or SPDI (pronounced “speedy”), a new kind of financial institution that handles digital assets.
It all depends on how you define “bank.” Lee Reiners, a Duke University law school fintech expert and a former New York Fed lawyer, told DealBook that Lummis’s “outlandish accusations” are actually part of a wider effort to pressure the Fed into “letting lightly regulated crypto companies into the national payment system.” Lummis characterizes Wyoming’s applicants for Fed access as “banks,” but Reiners says that SPDIs do not meet the definition of banks under the current rules. (Lummis declined to comment when contacted by DealBook.)
“We have to think about the broader safety and soundness implications,” the Fed chair, Jay Powell, said at his renomination hearing last month in response to Lummis’s questions about granting SPDIs access to Fed master accounts. There are “good arguments” in favor, Powell said, but it would be “hugely precedential, which is why I’m taking my time.”
All five of Biden’s Fed nominees, including Raskin, are set for a vote by the Senate Banking Committee on Feb. 15. Yesterday, in a letter, 20 high-profile economists urged Senate leaders to confirm the nominees.
THE SPEED READ
Microsoft is reportedly in talks to buy the cybersecurity consultancy Mandiant. (Bloomberg)
Investors are struggling to value the SPAC that is taking Donald Trump’s media start-up public. (WSJ)
The media mogul Byron Allen said he planned to bid for the Denver Broncos, potentially becoming the first Black majority owner of an N.F.L. team. (Bloomberg)
New York is dropping its indoor mask mandate, joining other states in easing Covid rules. (NYT)
The House passed a sweeping bill to overhaul the Postal Service’s finances. (NYT)
British lawmakers again sought to require pornography sites to use age-verification technology; previous efforts have drawn criticism from privacy experts. (Insider)
Best of the rest
Streams of Neil Young’s music are up nearly 40 percent after his boycott of Spotify. (Bloomberg)
“The Real Reason America Doesn’t Have Enough Truck Drivers” (NYT)
Carl Icahn’s secret activist campaign: pushing McDonald’s to improve the treatment of pigs. (WSJ)
The best show that Jeff Zucker produced at CNN was one almost no one saw. (Charter)
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