Moynihan’s pay holds steady; cryptocurrency scams flourish

Receiving Wide Coverage ...

Holding steady

Bank of America CEO Brian Moynihan earned $26.5 million last year, about the same as the year before. The package includes a $1.5 million base salary and $25 million worth of restricted stock. “His 2019 earnings put him slightly below other Wall Street chiefs like JPMorgan Chase’s Jamie Dimon, who made $31.5 million, and Morgan Stanley’s James Gorman, who made $27 million,” according to the Wall Street Journal.

Andrew Harrer/Bloomberg

“The flat compensation was a contrast with 2018, when Mr. Moynihan received a 15% raise, and follows a pattern established by other Wall Street banks’ recent pay announcements,” the Financial Times says. Dimon’s pay was “just 1.6% higher than the year before” and Gorman “took a 7% pay cut despite his firm posting record results.”

Well, that backfired!

“The vocal backing of a U.S. investor” and several other large shareholders for ousted Credit Suisse CEO Tidjane Thiam may have inadvertently sealed his fate last week. “The show of support for Thiam antagonized the board to such an extent that they resolved to remove the CEO, two people familiar with the matter” told Reuters.

“Whoever advised that campaign actually helped do in Tidjane,” a person involved in last week’s board discussions told the Journal. “The actions created their own ‘quasi-panic’ that forced the board’s hand, but not in the intended way.”

In an opinion piece, the FT claims "an internal battle has consumed the institution" in the wake of the spying revelations. “Questions have persisted” about how Thiam “could not have known about” the scandal, “and if he didn’t, why he didn’t,” the paper says. But chairman Urs Rohner “and the rest of the board must accept some of the blame for failing to get a grip on the scandal.”

“The acrimony surrounding Mr. Thiam’s departure threatens to destabilize a bank that has failed to get ahead of the scandal since it broke last September, and which had barely started recovering from its near collapse after the financial crisis,” the paper adds. “The fallout has also reignited allegations of xenophobia and racism that have hung over Zurich’s insular elite since Mr. Thiam — the first black chief executive of a major European bank — was appointed from insurer Prudential five years ago. At the center of the drama was a charismatic yet sometimes imperious chief executive accused of showing insufficient contrition over the scandal, which led to the suicide of one of the private investigators involved. Ultimately, he isolated himself from those who had hired and championed him.”

Wall Street Journal

Decoding the Fed

Investors are using artificial intelligence “in their never-ending quest to decode what central bankers are about to do.” For example, Prattle Analytics in St. Louis “compiles a list of keywords for each central bank, then uses machine learning to track how asset prices move when officials use those words in speeches or other public comments. The idea is to give an early warning when the Fed or another central bank might be preparing a policy shift. Some data experts are trying to determine whether facial expressions might reveal clues about future policy moves.”

Those systems will get another chance this week as Federal Reserve Chair Jerome Powell answers questions during his semiannual testimony before House and Senate committees.

Scam alert

“Cryptocurrencies have struggled to find acceptance in the 11 years since bitcoin launched. Still, there are plenty of inexperienced investors who have heard stories of bitcoin riches and think they can get rich, too.” That has prompted a boom in scams, as “fraudsters use that naiveté against them.”

“Ponzi schemes and other frauds involving bitcoin and cryptocurrencies lured at least $4.3 billion from investors in 2019. That was a bigger haul than the combined $3 billion in 2017 and 2018. Ponzi schemes have become among the most popular vehicles for fraud. The biggest ones have been prolific: Just six well-orchestrated scams were responsible for about 90% of the funds stolen last year.”

Financial Times

The urge to merge

"'Join or die’ appears to be the motto of the payments services industry, which is integrating vertically, horizontally, geographically — and quickly. The latest merger came last week, when Worldline agreed to buy Ingenico for $7.8 billion, forming the largest European payments company in a sector dominated by U.S.-based giants. The tie-up follows a blizzard of payments mergers in just the past few years,” the paper reports.

“A number of factors make the logic of consolidation compelling in the payments industry, once a sleepy backwater of finance that has emerged in the past few years as one of its most exciting sources of growth. Like many finance businesses, fixed costs — namely the required technology investments — are high, while the marginal costs of processing more transactions are negligible. Companies processing lots of payments therefore enjoy higher margins, and can reinvest the profits in better technology to extend their advantage over smaller rivals.”

Quotable

“You need to do [deals] because the amount of investment needed to keep up is going to make you unprofitable otherwise. If you don’t invest you’ll be out of the market very soon.” — A European investment banker commenting on the recent spate of mergers among payments companies