Morgan Stanley is now (like, right this second, according to Alley Insider) laying off an additional one thousand employees, on top of the thousand from a few weeks ago. The Journal says the cuts will affect mortgage employees, though we hear “no one in Fixed Income is safe.” And yet, Two and a Half Men is being allowed to come back with new episodes, as early as mid-March. Doesn’t seem fair. Got any more info? About anything? Anything at all? We're listening.

Morgan Stanley to Lay Off 1,000 Mortgage Employees [WSJ]
Morgan Stanley Prepares To Lay Off 1,000 Workers [WSJ]

The new Trader Monthly is out today and since a lot of it is unavailable online and I've never seen or heard of anyone voluntarily buying the print edition, I decided I would read it for you and say something if anything good happened to come up. I never thought I'd say this, but something did. A profile of Morgan Stanley CEO John Mack, by CNBC reporter Charles Gasparino, which begins with, I shit you not, a quote from Goodfellas. My original intention was to humorously summarize the verbal stylings of this mythical creature, but I ultimately realized that to try and imitate/compress the work contained within is akin to etching a stick-figure rendition of the Sistine Chapel. Thus, I will simply submit this excerpt, and invite all to buy a copy for themselves (or deign to read the free one in the office). Before I do, a couple of words: I get the sneaking suspicion we are seeing the Observer Effect at work here. No Sleeves knows full well we are chronicling his every dagoesque utterance, and we submit he is subconsciously ginning up his I-talian in response to our observations. This sucks for two reasons: First, he is muscling in on my turf: this shit is getting hard to parody. Second, it's a pose: Any pipe-banging paesano would cut this make-up wearing blow dry boy down before breakfast, sleeveless sweatshirt and all. Anyway. I can’t stay mad at him. Let us behold:

“IF YOU’RE PART of a crew, nobody ever tells you that they’re going to kill you — doesn’t happen that way. There weren’t any arguments or curses like in the movies. See, your murderers come with smiles, they come as your friends, the people who’ve cared for you all of your life. And they always seem to come at a time that you’re at your weakest and most in need of their help.” — Henry Hill, Goodfellas

New York’s five major families, despite decades of turf wars and nasty infighting, have coexisted remarkably well in recent times, which isn’t surprising considering how much money they’re raking in — more than enough for everybody.

I’m speaking, of course, about the StreetMob: Goldman Sachs, Morgan Stanley, JPMorgan,Merrill Lynch and Lehman Brothers. I’ve always found the similarities between Wall Street and La Cosa Nostra striking. Bosses. Made guys. Foot soldiers. Tribute. Sitdowns. Cozy ties with politicians. Hits.

Of course, people don’t get “whacked” on Wall Street — not literally, anyway. But they do get shot down execution-style, and such hits are often rather Mob-like. Firings are usually preceded by fake smiles. Demotions often occur with disingenuous gestures of support. Take, for example, the number Morgan Stanley’s CEO, John Mack, recently did on Zoe Cruz.

Out Comes The Knife [Trader Monthly]

So who is on this list of 14 companies under investigation by the FBI for their involvement in the subprime mortgage crisis? The FBI apparently intends to keep us in suspense because they won’t give details. All we know is that they are looking into “allegations of fraud at various stages of the mortgage process, from companies that bundled the loans into securities to the banks that ended up holding them.”

So let’s recklessly speculate. Two companies that are sure to be on the list are Bear Stearns—which is already under investigation by federal prosecutors and the SEC—and Countrywide, which is both the biggest home loan lender and also facing an SEC inquiry. Goldman Sachs is very likely on the list. It was accused on the pages of the Sunday New York Times of misleading clients by packaging CDOs while shorting the mortgage market. We know that at least one Senator read the article and has been making a stink, and we know that federal investigators often get their leads by reading the paper. What’s more, Goldman Sachs has said that it is cooperating with an unnamed government agency.

Morgan Stanley has also admitted to cooperating with unnamed government authorities. At first, everyone assumed this was the SEC. But why wouldn’t they come out and say that? More likely they declined to name the agency out of fear that saying they were cooperating with the FBI would tar them with serious criminality—rather than the everyday Wall Street shenanigans implied by an SEC investigation.

So that gives us four good leads. Who else is a cylon on the list? No doubt some additional mortgage companies and some home builders. Maybe the ratings agencies are also. Leave your guesses in the comments section below.

FBI Launches Subprime Probe [Wall Street Journal]

A (very) recently fired Credit Suisse employee tells us that “Every conference room on the CMBS floor has an HR representative working through people as they show up for work. Analysts and Associates seem to be the first out the door.” We understand that for the victims, this might seem like bad news, and yeah, you’ll probably feel weird about going to Shake Shack for a while, but the flipside is that you won’t have to deal with the embarrassment of being employed by Bear Stearns, when the two banks merge. In related news, Morgan Stanley has announced plans for its own population restructuring, as modeled after the redistribution project in the Sudan. If you have any other info, feel free to share, or not share, otherwise, enjoy this one on me:

Bonuses out of Morgan Stanley will increase from $8.39 billion to $9.93 billion this year. The extra spending money will serve MS employees well, when they're all fired to make up for a near-$10 billion writedown. Taking one for the team is CEO John Mack, who will reportedly be pulling a Jimmy Cayne and forgoing his pile of unmarked twenties this year, and however unlikely, we move that for this statement alone, CFO Colm Kelleher should be stripped of his bonus, too, or given his plus Mack's, I can't decide: "If you were to normalize our business and take out this $9.4 billion charge, you would see that we had a record year across the whole enterprise."

Morgan Stanley Bonus Pool Rises as CEO Forgoes Pay [Bloomberg]

[Alternative headline: Morgan Stanley: Okay, We're Thinking Of A Number Between 1 And 4 Billion. Know What It Is? Analysts: Your Credit Score. Your 900 Number. Your- MS: Stop. None Of These Are Right. None Of Them. Analysts: The Number Saltines John Mack Can Eat In A Minute Without Water. MS: Wrong...But Also Right...If You're Picking Up What We're Throwing Down. Preference?]

Morgan Stanley beat analysts' expectations for how badly this last quarter went, when it announced a net loss of $3.59 billion ($3.61/share), compared to last year's net income of $1.54 billion ($1.44/share). Analysts had previously predicted losses of 39 cents/share. The extra dollar or so probably has something to do with the $9.4 billion in write-downs, and unforseen costs related to MSIM's holiday party at the China Club last week. Speaking of China (Investment Corp.), the sovereign wealth fund was on hand to soften the negative $450 million revenue blow, by acquiring a 9.9 percent stake in the company, as China is wont to do. (Watch as it blows up in their faces, it'll be funny.) Also helpful for distracting from the facts was CEO John Mack's comment that "these [are] isolated losses by a small trading team in one part of the firm." I don't want to say we're hoping that the entire team is going to get laid off, because we're not, but should it come to that, wouldn't it be nice if they could go out in style? You know what to do.

Morgan Stanley Swings to Loss Amid Mortgage-Related Woes [WSJ]

Not surprising given that John Mack used to work at a Gap, but:

"MS bonuses- a few of the high visibility/revenue guys were up as much as 20 percent but, broadly, most YE bonuses were -10 percent vs. 2006 for those in the highest tier in terms of performance appraisal. This applies to wealth management."

Also helpful if you happen to know how to unwind a large amount of exposure to CDOs or hung bridge loans for reckless LBOs, though in no way necessary. But you must be Vietnamese. On this point they are unwavering. Not Vietnamese? Hit the bricks.

Morgan Stanley is now saying that there will definitely be a recession and there's nothing you can do to stop it so you might as well just give up. We're all going to die eventually, it's just a matter of when. Related/unrelated? At MS's IED party last night, "There was a slideshow on a large screen that contained awkward photos of associates and analysts (most people were not smiling)...a lot of Sean Paul...a MD walking around with a blinged out Santa hat giving his business card to anyone that would compliment his style...and one very sad analyst talking to the bartender about how even the low hanging fruit he hoping to score with wouldn't give him the time of day."

Morgan Stanley issues full US recession alert [Telegraph]
Recession Watch: Morgan Stanley Finally Sees Weakness [Alley Insider]

Which is taking place tomorrow at Lotus. Yes, Lotus. The festivities begin at the usual time, but apparently the "real party is starting around ten,” which is when John Mack will be showing up, after having pregamed with us at Tortilla Flats, because, you know, when in Rome. Anal_yst will be TiVo'ing "Gossip Girl," and he doesn't even work at Morgan, so you know the expectations are high.

I haven't worked at a bank for about fifteen years so I don't know if this is standard and I'm just out of the loop but someone told me recently about Morgan Stanley's felony prevention program and I sort of love it. Apparently, in light of the number of finance professionals who have openly admitted to being down with insider trading and the proliferation of groups to support this very cause (not like "let us help you with your insider trading problem" but more "so you want to insider trade? here's how"), Morgan Stanley has created a program where they bring in felons to talk to prospective felons (these being MS employees) about how they once committed felonies AND IT RUINED THEIR LIVES. It's all very "Oh, you thinking about smoking some crack? Maybe just a little in the men's room, take the edge off the morning? WELL DON'T BECAUSE I DID IT AND LOOK AT ME NOW! THAT ONE HIT FUCKED EVERYTHING UP. NOW I CAN'T EVEN GET A JOB AT CITIGROUP."

But the one thing we wonder is: yes, this whole thing seems like it would be hilarious to watch and we definitely wouldn't turn down an invite to observe the next one taking place, but does it work? Afterwards, are the MS boys and girls all, "Wow, that scared the shit out of me, I will never do anything illegal (again)"? or more, "Yeah, you went to jail but look at this awesome gig you've got now. This is the sort of speaking tour Tim Sykes would kill for, and, I have to say, so would I"? That's an actual question to those of you contemplating insider trading right now. (The other is, to the LEH readers out there, does Lehman have a similar program? Doesn't it seem like something that would be right up Dick Fuld's alley? Can't you see him leaving important meetings early to take part in the sessions just so he can violently get in his employees' faces and maybe throw one or two up against the wall under the guise of "getting into character"? And if the answer's no, would you consider suggesting it, and letting me watch?)

Doesn’t it feel like we haven’t heard from Morgan Stanley in decades, besides the cryptic messages an analyst from the power and utilities group leaves on Carney’s voicemails every now and then that are mostly just heavy breathing punctuated by moments of epileptic crying? It’s probably because the securities firm hasn’t been screwing things up nearly as badly as everyone else. Luckily, that tide is turning. Mo’ Stan may write down $6 billion due some bad luck with mortgages, etc, and Fox-Pitt Kelton Cochran Caronia Waller analyst David Trone, the poor man’s Meredith Whitney, has cut his recommendation from ``in line'' from ``outperform.'' It’s not as impressive as the work Merrill Lynch and Citigroup have been doing, and John Mack can probably forget about being fired, but it’s something.

Morgan Stanley Writedowns May Reach $6 Billion, Fox-Pitt Says [Bloomberg]

Morgan Stanley recently--today-- informed its employees that it is no longer acceptable to “use firm computers to comment on blogs.” The first Morgan Stanley employee ballsy enough to post a comment on this post (we'll check the IP address to confirm it’s not some punk JPM banker) wins something pre-tay, pre-tay, pre-tay good (okay fine--it's drinks with Keith Hahn, on Carney, who owes him. Because he spotted him for lunch one time a few months back. Why, what were you thinking?).

Laid-off second year analysts at Morgan Stanley are said to be receiving sixth months of salary severance, which seems pretty nice, though not as nice as an actual job. No pro-rated bonuses, because apparently they received their first ones in August. Anyone know what the non-minion packages from Morgan look like, or what the other banks are giving out? The stingy bastards at Credit Suisse are rumored to be offering vouchers to Shake Shack, but they’re only good for the next week, and for only $3.50, which doesn’t even cover the cost of a Shackburger. Maybe JP Morgan and Bear Stearns are being more generous.

Morgan Stanley never called to answer our question as to whether or not it was putting off today’s scheduled layoffs until tomorrow or even next week, but apparently things are going as originally planned, with the bank eliminating 300 jobs this morning. The cuts are mostly from fixed-income, equities and
investment banking (about 200 jobs in the U.S., the rest in Europe), and are said to include senior personnel (David Warren, a managing director*) and a handful of plebes. We’ll let you know about the important stuff (pro-rated bonuses?) as it comes. (Want to speed things along? You know where to find us.)

*which sources, though not spokepeople, at MS confirmed as of 11:55 a.m.

Morgan Stanley Firing 350 I-Bankers Today [Silicon Alley Insider]
Morgan Stanley to cut 300 trading, credit jobs [Reuters]

Are the firm-wide layoffs coming on Wednesday at Morgan Stanley being delayed to Thursday or even next week? One Morgan Stanley employee (for the next few days, at least) says yes. Now, let’s hear from the others. Don't be shy, you don't owe John Mack a thing.

Morgan Stanley’s quantitative strategies group, which lost $480 million during the quarter ended August 31, disclosed in a regulatory filing today that out of its 14 losing days, on its best one, $390 million was misplaced. The securities firm said that it was “caught off guard” by “widespread” investor selling, which their models had not been designed to account for.

Morgan Stanley Traders Lost $390 Million in One Day in August [Bloomberg]

Former Morgan Stanley lawyer Randi Collatta and her husband Chris have been sentenced to four and three years of probation, respectively, including six months of home confinement which will likely be spent arguing whose idea it was to get involved in an insider trading ring on Wall Street for which they are being punished. The Collattas were among 13 people charged in March for participating in the $15 million scam, though the Bayport, N.Y. couple only made about $9,000 off of the scheme, prompting Judge Victor Marrero to say that they were at the “bottom of the food chain,” which has got to hurt. Ms. Collatta apparently “wept uncontrollably” after hearing that she “faces” disbarment. One wonders what she’ll do when she finds out that she’s “definitely” going to be disbarred. Depressed enough yet? Randi will also serve 60 days in prison on the weekends and evenings, a special provision she was given because her husband’s cancer and severe heart problems necessitate that she be able to provide medical insurance.

Ex-Morgan Insiders Get Home Time [New York Post]

Morgan Stanley has cancelled recruiting for next year’s institutional securities class, a (former) MS candidate was told by the firm yesterday (that’s got to be an awkward convo we would’ve loved to have been in the room for). Next June’s fresh meat will be comprised solely by those who received offers this past summer (and this bit of news is sure to make anyone on the fence accept immediately—they are now part of an “elite” group, which employees of Morgan Stanley hardly ever get to say). Think the bank will spin this by saying the cap is necessary because too many Mackophiles (that’s what they like to be called) from the summer said yes? If they have someone who’s even mildly competent in charge of PR, we think so!

Do you remember what you were doing on 9/11, pre-8:45 am? I was in math class, trying to come up with a totally bull shit but failsafe excuse for why I hadn’t done my homework. You were probably doing something like that too. A reason you hadn’t sent your associate that model. A justification for why your fund dropped 47 percent in two weeks. Then, something happened, and the world changed. I won’t get into it here, but suddenly, we all had the ultimate excuse on our hands, one that could work in any and every situation. One that put “my alarm didn’t go off” and “there’s been a death in the family" to shame. You know what I’m talking about—9/11. And we’ve used it in sickness and in health ever since (usually in health, because “I’ve got a head cold” is a pretty good excuse on its own). It’s almost, dare we say, the silver lining to a very unfortunate event.

Today we kiss that silver lining good bye. A dangerous precedent has been set, and Morgan Stanley is to blame. The bank agreed to pay $12.5 million to settle charges that it failed to provide arbitration plaintiffs with e-mails it claimed were destroyed on September 11, 2001, when, in fact, it was discovered that the e-mails had been saved on backup files, more or less ruining it for the rest of us. So, thank you, Stan O’Neal Phil Purcell. For a whole lot of nothing. We all now have our work (to get out of work, among other things) cut out for us. Ass.

Morgan Stanley to Pay $12.5 Million in E-Mail Case [Reuters]

Real estate blog Curbed recently sat down with an investor in the field to discuss whether or not Andre Balazs’ High Line-squatting Standard Hotel is symptomatic of a developmentification of Manhattan that’s turning the island into a place where only utterly lame (but sufficiently rich) people will live. A simple ‘yes’ would’ve sufficed, but the expert, perhaps going through some sort of personal problem or maybe having had the unfortunate pleasure of drinking at Joshua Tree last night, took it one step further.

Fuck it, I say. Manhattan is one big joke. I think they should let highrises go up anywhere at this point. What's the point of communities on the island anymore?

Everyone's so priced out, does it matter anymore?

If you want a neighborhood/community, move to Brooklyn.

Let Manhattan be just one big bullshit skyscraper. Tower of Motherfuckin' Babel. But for douchebags.

And the Lord spoke and said, "Let us make sure these douchebags do not understand each other, less they build a Tower of Douchieness. Let one douchebag not understand the other." And thus the languages of Goldman, Lehman, and Morgan were formed and the Lord saw it and it was good.

First of all, this tower already exists, and its name is Windsor Court (and on the UES, Dormandy). Second of all, and we’re just passing this along, analysts from Merrill Lynch and Bear Stearns would like to know, “Hey, why weren’t we included on that list?”

Investor Rant: 'Manhattan is One Big Joke' [Curbed]

Increasingly, it seems that the way up on Wall Street is reached via an exit ramp. There was a time when leaving Wall Street’s big firms to launch a small investment fund was viewed as a way of getting off the fast track. It may have been bold or it may have been a semi-retirement but it was seldom seen as a way of climbing upwards. Last year, however, things began to shift as Wall Street firm began buying hedge funds and hiring their managers to take over their own alternative management division. Suddenly the path to the top of the firm—or at least, the path to serious riches—led through places with names like Old Lane.

The latest version of this story comes from in the form of news that Morgan Stanley is in talks to buy a minority stake in Traxis Partners LLC, a $1.5 billion hedge fund run by the investment bank’s former chief strategist, Barton Biggs. The outspoken Biggs is a frequent guest on CNBC and the author of tell-all Hedgehogging. During his thirty years at Morgan Stanley, he became a well-known figure to many on Wall Street.

He comes from Wall Street blood. His father was chief investment officer of Bank of New York. After Yale, where he studied under the poet and novelist Robert Penn Warren, Biggs taught English at a prep school and wrote some short fiction. In 1961, he joined EF Hutton. He joined Morgan Stanley in 1973. He left the firm in 2003 to start Traxis.

He was well-liked by brokers and traders at Morgan Stanley.

"Barton Biggs was a joy to listen to every morning," one former broker tells us. "I felt like I got smarter just listening to him. He was one of those guys who seemed to have it all together. He had an amazing grasp of everything that was happening in the markets. He was an optimist, even in the dark, cold winter of 2001."

Traxis reportedly faired decently in August, losing just 2.5 percent for the month. It’s up about 9 percent this year, according to the Financial Times.

Morgan in talks over Traxis stake [Financial Times]

Argh, matey. Yesterday it looked as if Wall Street might have found a way to dodge serious losses from this summer's credit crunch. Lehman, which was widely viewed as one of the most vulnerable Wall Street firms (along with Bear Stearns), beat expectations with its earnings. The brokerages and banks soared after the Fed announced rate cuts.

This morning looks a little different. Morgan Stanley "missed" this morning, with earnings that fell short of analysts' estimates. The short fall seems directly tied to the credit crunch, with the biggest losses coming in loans for leveraged buyouts and a decline in fixed-income trading revenue.

Third-quarter profit from continuing operations declined 7 percent to $1.47 billion, or $1.38 a share, from $1.59 billion, or $1.50, a year earlier, the New York-based firm said today in a statement. The people who sometimes seem as if they are paid to get earnings wrong had estimated that Morgan Stanley would report $1.55-a-share.

So how did Morgan Stanley get hit worse than expected and Lehman less? Some believe the difference may be a matter of accounting. With banks marking down assets due to the crunch there is some room for judgment calls.

"It looks to me that Morgan Stanley took a conservative, worst-case approach to the losses," one veteran Wall Street investor told DealBreaker this morning. "Lehman may simply more aggressive with its accounting, and may plan to roll the losses out over several quarters. Or it may believe it can overcome the losses as the credit markets ease."

London comes out on top again, as Morgan Stanely is shipping Walid Chammah, global head of M&A, across the pond. Morgan Stanley is the most relocation-happy out of the bulge brackets, now that London houses the bank's I-banking chief, securities division COO and global head of capital markets.

Some oft-stated reasons for the push, from breakingviews:

The reasons are manifold. First and foremost is London's geography. By straddling the time zones of Asia and North America, a globally-focused executive can wake up speaking with colleagues in Tokyo and pass the Jag ride home directing charges in New York. London is also more conveniently situated than New York for courting executives in Russia, China, the Middle East and India - the four horsemen of future industry growth.

The trend isn't just affecting top positions, and doing its best to scrape the bottom of the barrel. More and more banker and trader underlings are getting shipped from NYC to the UK, or taking exploratory mini-work-"vacations," to work a week or two in London. Some even say that the work environment in London as a result is becoming just as life-crushing, if not more so, than Wall Street. If anyone has any stories of the difference in work environment from any of these trips, comment or drop a line to *tips at dealbreaker dot com*.

Follow his Walid [breakingviews]

Finally, the National Pension Service (NPS) of South Korea is letting some of the bulge bracket banks into its $220 billion coffers. Morgan Stanley and Credit Suisse are the first to get a piece of the pie, although we hope they aren't that hungry. South Korea is condescending to let Morgan Stanley and Credit Suisse manage $500 million and $450 million respectively, for a whopping(ly disappointing) three years.

"Oh. Um...great. Well, thanks, I guess," said Morgan Stanley Investment Management's Asia Head, Blair Pickerell, while David Blumer, Credit Suisse's chief executive officer for asset management, reenacted the title track from Oliver! the musical ("Please, Sir, I want some more.").

Taking a note from its batty Northern neighbor, the NPS deals exclusively in five-year plans, from MarketWatch:

NPS plans to double the proportion of its offshore investment to 20% by 2012, when it expects to have assets worth KRW400 trillion, it said recently when it unveiled its 2007-2012 investment strategy. Global asset managers will manage all of its offshore investments during the period, but NPS plans to gradually increase its direct offshore investment after that. It also targets to further increase its international investment allocation to 50% sometime around 2040, when NPS's assets are forecast to reach KRW2,600 trillion.

NPS does plan on throwing scraps to some other major banks to manage funds in the future, although it's several five-year plans away.

Morgan Stanley, Credit Suisse to manage Korean national pension assets [MarketWatch via DealBook]

Morgan Stanley has taken an internal study over the cost of debt and done some basic math so you don't have to. The study figures that stock market corrections occur about six months after the cost of debt begins to increase. Since spreads began to widen in February, Morgan Stanley thinks that (let's see, take the 2, add the 6, carry the 1, integrate by parts... and yup, 8) August could see a 14% market correction, or 2,000 points off the Dow.

Historically, equity markets take a while to pick up on the bad market omens created by higher rates and wider spreads. The eerie similarities between now and the last bubble burst, from the Telegraph:

The current pattern looks similar to the relentless rise in spreads from February to September 2000 when the stock markets finally tipped over... the iTraxx Crossover index measuring risk appetite for high-yield bonds touched bottom at around 170 in February. It has since jumped to 320 - mostly this month - implying a 150 basis point rise in the cost of raising capital.

Morgan Stanley's internal Cassandras think the correction could begin with the unwinding of the yen carry trade in Japan, significantly impacting global liquidity. The Bank of Japan is expected to raise rates in August.

Morgan Stanley Predicts Correction [DealBook]
Morgan Stanley predicting correction [Telegraph]

We kid…we kid Morgan Stanley—no one thinks they’re the No. 2 BB, or even the No. 3 or 4 for that matter. But they were in fact served papers last week by Lisa LaMacchia, an MS employee who claims that her boss, Richard Dorfman, offered her some unwanted touching and then tried to “sexually assault her with a pencil.”

The suit seeks unspecified money damages from Morgan Stanley and Dorfman, who allegedly once “stole a pair of underwear from [LaMacchia’s] gym bag" and is described as a “hostile and aggressive” boss (and “11, maybe 12 years old,” one intuits). The defendant claims that HR told her “suck it up,” as they presumably had bigger problems on their hands, like the protractor incident on the sixth floor.

Morgan Stanley Hit By 'Sex-Pencil' Suit [NYP via CWS]

When the indoor putting green became a necessary accoutrement to the chief executive office, everyone assumed that the “golf or work?” conundrum had been answered with a resounding “both.” But, as the Times reported recently, there is no tenable substitute for well-manicured sand traps and tree-lined fairways, even when your hedge funds are collapsing.

Yesterday, the Bespoke Investment Group blog posted the recent scores and handicaps of five CEOs: Stanley O’Neal of Merrill Lynch, Richard Fuld of Lehman Brothers, James Cayne of Bear Stearns, John Mack of Morgan Stanley and Lloyd Blankfein of Goldman Sachs. The Dealbreaker question of the day: is there any correlation between a CEO’s golf game and that other hobby, making money? Here are the results:

CEOs Ranked by Handicap
1. Stanley O'Neal (9.9)
2. Richard Fuld (10.3)
3. James Cayne (15.9)
4. John Mack (17.0)
5. Lloyd Blankfein (32.1)

CEOs Ranked by Percent Change in Stock Price This Golf Season
1. Lloyd Blankfein (+6.9%)
2. Richard Fuld (+3.14%)
3. Stanley O'Neal (-1.3%)
4. James Cayne (-3.49%)
5. John Mack (-9.86%)

Lloyd Blankfein, by far the worst golfer of the bunch who, on a really good day shoots under 110, pushed Goldman stock up nearly 7% since April. This could mean several things: while other executives hit the links, Blankfein is holed up in the office; his short game is only strong in the financial sector; or he is confused about how golf is scored. You decide.

Alert the National Guard: Goldman has now been left out as a major underwriting playa in two—count ‘em, two—IPOs. First there was the Blackstone slap in the face, and now KKR is jumping on the “Don’t touch me there, Goldman” bandwagon. The same banks who lead the B-stone deal, Citigroup and Morgan Stanley, will be underwriting KKR’s as well.

What’s with 1-2 punch? When it happened the first time, many believed that GS and JP were working on another P.E. IPO, there was a non-compete and so on and so forth. Others wondered if Goldman’s own “aggressive pursuit of private-equity deals alienated Steve Schwarzman,” failing to take into consideration that a 5’6” tall man probably has pretty thick skin. But Blackstone’s in the past—what’s the deal with the second snub?

As Reuters points out, JPMorgan doesn’t have a private equity arm capable of competing with KKR, but Henry Kravis may “have beef with the bank,” re: First Data Corp.

Reuters reported in April that Henry Kravis and crew were fuming at the way JPMorgan handled its proposed takeover of First Data Corp. Long story short, JPMorgan owns a majority stake in a First Data joint venture. KKR tried to reassure JPMorgan that the JV was not under threat, but JPMorgan pushed back, offering to buy out First Data’s 49 percent stake in the venture or dissolve the partnership altogether, sources told Reuters. That didn’t sit well with Kravis, sources say.

So that’s JP Morgan, okay, but the lack of Goldman is still coming as a shock to those who believe Goldman Sachs rules the world and all of its inhabitants (really, though, Goldman does have the ability to make it rain). So what’s up there? Some theories:

• Goldman’s private equity arm competes directly with KKR for deals.
• As noted by the ‘Bookies, in March, Lloyd Blankfein said, “It’s impossible for us to be in every piece of business,” which is kind of like hearing your deity admit to being human and will thusly be chalked up to Blankfein being drunk, and struck from the record.
• Goldman has different looting and plundering strategies from those of KKR
• Goldman needs a nap
• There can only be one bald supermogul per IPO
• Goldman is advising Apollo, Citadel
• Goldman is the midst of a herpes outbreak
• Kravis just doesn’t think Goldman’s all that good at the private equity business
• Goldman has told KKR in the past that it would underwrite its IPO—when small mouth bass rule the world

Goldman, JPMorgan out in the cold for second private equity IPO [Reuters]
Underwriting Henry: Who’s In and Who’s Out [DealBook]
Goldman’s Hedge Fund Alumni Network [Deal Journal]

Business Week’s Matthew Goldstein reports that federal investigators are nearing the end of their 18-month probe into the “murky world of stock lending,” and it looks like it’ll be employees from Wall Streets stock-loan desks who’ll be going down.

The folks who’ve undergone the most scrutiny work for Bear Stearns, Janney Montgomery Scott, and Morgan Stanley. On June 18, Morgan Stanley vice-president Peter Sherlock, who’d been with the bank for 13 years, resigned after his name came up in the case. His lawyer, John Wallenstein, declined to say why his client had taken an early retirement, but did confess to “know[ing] there is an investigation by the Eastern District of New York” and “know[ing] the SEC is looking at it too."

Earlier: Trouble In Stock-Loan Scheme Town

Criminal Probe Snares Morgan Stanley VP [BusinessWeek]

The JPMorgan Corporate Challenge kicks off tonight in Central Park at 7:00pm with the first of two 3.5 mile races. The event, which started in New York in 1977, is now held in 12 cities on five continents with over 200,000 participants from 7,000 organizations.

The banks make up a large portion of the 15,000 race registrants. Here are the registration numbers for the top five:

Morgan Stanley – 1,605
JPMorgan – 1,450
Lehman – 800
Goldman – 550
Citi – its own version of the 1980 Olympics, boycotts on principle

Goldman limited its roster to 550 after almost 800 employees tried to register, according to the bank’s fitness center manager. Does anyone know why Goldman had to limit its registrants (and please tell me they had tryouts or cuts to determine who made the final 550)?

Last year, of the major banks, CSFB has the most outstanding individual performer - ’03 Harvard alum and track captain, John Traugott, who is an associate in the equity capital markets group. Traugott had the 2nd fastest time overall in the men’s division over the two races with a 17:48.

Karl Dusen of AIG posted the fastest overall time in the second race with 17:05 and Joseph Mcveigh of Morgan Stanley posted the 3rd best time with 18:18.

If anyone has any fun corporate challenge stories, or is planning to pull a Jeff Gillooly on John Traugott, please comment or drop a line to 'tips at dealbreaker dot com.'

Wall Street Rivals Run for Charity, Bragging Rights and Beer [Bloomberg]

Morgan Stanley, the last of the big independent brokers to post earnings, trended more toward Lehman’s expectation exceeding earnings than Bear’s subprime induced tumble or Goldman’s relatively flat quarter.

Morgan Stanley’s Q2 net income jumped 40% from last year to $2.58bn or $2.45 a share. The results handily beat the consensus analyst estimate of $2.01 a share. Morgan Stanley’s Q2 revenue jumped 32% from last year to $11.52bn and beat the analyst estimate of $10.03bn.

The main growth drivers were strong results in the institutional securities and global wealth management divisions, which posted pretax income growth of 55% and 67% respectively.

The institutional securities division was aided by a 65% jump in investment banking revenue and a 33% jump in equity sales and trading revenue.

Morgan Stanley’s strong earnings can partly be attributed to the firm’s ability to dodge the subprime bullet a bit better than its rivals. Merely sustaining a flesh wound from a revenue dip in residential mortgage securitized products, Morgan Stanley’s fixed-income sales and trading revenue surged 34% to $2.9bn and posted its second best quarter ever.

The much maligned and soon to be spun off Discover credit card unit experienced a 13% drop in revenue to $1.04bn and 38% drop in pretax income to $0.33bn. The unit’s growth number was negatively impacted by a 2006 benefit from federal bankruptcy law reform.

Morgan Stanley's Net Jumps 40% On Strength in Securities Business [Wall Street Journal]

Morgan Stanley is ready to let Discover go (pictured), as John Mack & Co are set to free the slightly autistic dove of a unit on July 2nd (Mack has his PR team hard at work trying to come up with better division slashing metaphors than the ones that contributed to his "Mack the Knife" moniker, although this one needs work).

Discover, the card that pays you back instead of simply lowering its rates (which always struck me as a clever incentive perversion - you spend more money on your credit card, which presumably increases the chances of not paying your bill at the end of the month, which means you get gouged by the high rates in place to justify the cash back feature), has been criticized for slowing down the growth of the bank almost since it was acquired in 1997. Investors argue that the capital intensive Discover division lowers the return on equity of the pure securities business, although much of that sentiment is pure Goldman envy.

Details of the independence declaration, from the Chicago Tribune:

Last week, Discover named its board of directors. Dennis Dammerman will serve as non-executive chairman. He retired in 2005 as vice chairman of the board of General Electric Co. after a nearly 40-year career with GE. Morgan Stanley's board set a June 30 distribution date for outstanding shares of Discover common stock to Morgan Stanley stockholders. After the distribution, Discover will be an independent public company trading on the New York Stock Exchange under the symbol DFS.

Discover to gain independence July 2 in spinoff [Chicago Tribune]

Did a love of Parker Brothers board games, Monopoly in particular, get John Mack to return to the Dean Witter-tainted Morgan Stanley in 2005? According to the non-news driven article about the Lebanese Lothario* on Page One of today’s Wall Street Journal: maybe (always so vague, the Journalettes). As you probably know, after the train wreck that was the Morgan Stanley-Dean Witter merger, things got awkward between Mack and DW chief Philip Purcell, who became chairman and chief executive of the new company. So bad that Mack left in January 2001. Retirement (also known as running Credit Suisse Group) was going pretty well, until one day, Mack’s son, always the rabble-rouser, gifted his father with a “custom Monopoly board with a ‘Chance’ card that read: ‘A struggle with Phil Purcell finds you in a dilemma at MSDW. Should you stay or should you Go? You choose Go.” (Yes, let’s all pause to make sure we’ve taken that 72-hour pill within the allotted 72 hours. We’ll wait).

And that’s what it took to get the Mack Man back at helm of a Morgan Stanley whose business was in the toilet. MS had missed the train to private equity town. MS was dragging the dead weight that was (is) Discover. MS was making Merrill Lynch look good. Since sometime after that that fateful day, Mack’s been buying up everything from Tennessee Avenue to Waterworks (not to mention winning $10 after coming in second place in the beauty contest. True story).

As the J notes, “playing catch up” has come at a price. Namely: the $30 million to woo Stephen Trevor from Goldman and the concerns over the high risks of getting so involved in private equity by a staunchly investment banker bank. And they’re nowhere near Blankfein and Co., who have a $20 billion buyout fund/$28 billion in investments versus Morgan Stanley’s (projected to be) $6 billion buyout fund/$8 billion investments.

But Mack lives with the constant pressure of his Monopoly-gifting son breathing down his neck, and is working hard to make things better. He slashed paychecks for last year’s poor performers (a group that did not include John Mack, who got $41.4 million in 2006, a 38% raise). And Morgan Stanley’s share of global M&A deals grew to 39.6% this year, up from 2004’s 17.3% during Phil Purcell’s last full year in charge. And, of course, it landed the role of co-lead on the big Blackstone IPO. Morgan Stanley stock is up some ridiculous percentage too, although so is almost every other Wall Street stock.

A couple of years ago John Mack was telling Morgan Stanley’s bankers that they had lost their “swagger.” But, to judge from today’s Journal, it looks like the swagger is back with the Mack.

At Morgan Stanley, A Game of Catch-Up [WSJ]

*Carney'’s note: Calm down, boys. We’re not talking about Mack’s private life. We assume that the name “Mack the Knife” has nothing at all to do with his after-hours activities. We’re just referring to the fact that after he broke up with Morgan Stanley he certainly managed to get around Wall Street quite bit.

Earlier: Maybe If Dick Fuld Spent As Much Time Working On His Right Hook As He Did Worrying About Earnings, We Wouldn't Be Having This Discussion

In the movie Office Space, Initech employees decide to enrich themselves by skimming fractional amounts off transactions and pocketing it. Yesterday Morgan Stanley agreed to pay nearly $8 million to settle charges brought by the SEC that it had captured gains that rightfully belonged to customers by failing to offer them the best price available for stock they were purchasing. The official term for this is “failing to provide best execution” to customers. But we prefer to call it “The Office Space Trick.”

Here’s how the Wall Street Journal describes the skimming.

Morgan Stanley's automated system allowed the company to profit when it was able to obtain better prices than the best-publicized prices at the time, the SEC said. For instance, the complaint said, when the brokerage firm was able to buy a stock quoted at $10.01 for $10, it would charge the customer $10.01 and pocket the difference.

The SEC calculated that Morgan Stanley failed to provide the best execution on trades accounting for 3.7% of the OTC orders it executed for customers of Morgan Stanley's Private Wealth Management unit, Morgan Stanley Dean Witter Reynolds and third-party brokers working through Morgan Stanley. .

To Morgan Stanley’s credit, the problem with was with an automated trading program, and not fraudulent, skimming Initech-type employees. And, also to the bank’s credit, the problem was discovered by a trader who was amazed that he was making so much money.

The Journal again:

A Morgan Stanley trader uncovered the programming bias when he made nearly $400,000 of profit in a single stock in a few minutes of volatile trading one day in December 2004, the SEC said.

Morgan Stanley Set To Reimburse Clients [Wall Street Journal]

Husband and wife insider trading team Randi (a Morgan Stanley attorney who was a compliance officer at Morgan Stanley) and Chris Collotta (also an attorney) are expected to plead guilty this week for their role in the insider trading-ring-so-big-it-necessitated-a-white-board. The Collottas follow in the footsteps of Hafiz Naseem, a Credit Suisse investment banker who was charged last Friday with tipping off a banker in Pakistan with information about nine corporate acquisitions, including the TXU buyout. Randi and Chris have employed the services of separate attorneys-- apparently criminal ones and not yet those who deal with divorce (though we're actually thinking this is the kind of powerful aphrodisiac that savesa marriage).


Ex-Morgan Employee, Husband To Plead Guilty in Insider Case [WSJ]

Jim Cramer doesn’t want you to hate the game, or the playa. And in his column in the latest issue of New York, the “game” refers to making money; the “playas,” I-bankers (and I-bank CEOs, and, more generally, I-banks). Sure, you might be saying, why shouldn’t I hate the $54 million/year Lloyd Blankfeins and the Goldman Saches of the world? Not only are they terribly unhygienic, but they make more in an hour than I do in a month (or is that just us at DB? Don’t answer that) and I’m a jealous, small and petty person (to say nothing of my unresolved issues from childhood, which probably feed into the pettiness in a vicious, never-ending circle).

You’re saying that, right? Well Big J has the answer. If you invest said “playas,” you’ll get to be part of their “game” and your resentment will disappear because when you’re rich, you can buy the antidote to resentment. Another reason you shouldn’t hate these “playas” is because Cramer used to work for Goldman Sachs and never fails to mention this (or his relationship with Spitzer, which, let’s be honest, you really can’t blame him for, because Goldman Sachs is an incredible institution and Spitzer is essentially God’s special gift to the world and politics at large). Here are some other arguments for why you should cross Lloyd, Dick and Stanley off of your To Kill lists (hint: they all have to do with their outifts making you money, and Chuck Prince having less financial acumen than Cramer’s garbage disposal):

1. These guys are basically stay-at-home moms: underpaid and, more importantly, unappreciated.

Stop envying Goldman Sachs’ Lloyd Blankfein already. Don’t begrudge Bear Stearns’ Jimmy Cayne and Lehman’s Dick Fuld their millions. Let Merrill’s Stan O’Neal and Morgan Stanley’s John Mack get paid more than Croesus. You heard it here first: They deserve it. In fact, they deserve more than they earn now. Those five men are underpaid because they are about to make you very rich if you buy their stocks.

2. They will make you Kings of Great Neck, Dukes of Roslyn with Asset Management alone. And, not to brag or anything, but if you must know, Cramer predicted Asset Management would be a major money-maker YEARS AGO, before assets were even invented. Of course, no one at 85 Broad listened to him, just like they didn’t about gravity or 9/11.

How times have changed. It wasn’t so long ago that the SEC stood accused of letting Morgan Stanley chief executive John Mack’s reportedly close connection to the Bush Administration block an investigation into insider trading. Now Mack has endorsed Hillary Clinton.

Business Week reports:

One of Wall Street's big-time Republican fund-raisers, Morgan Stanley (MS) CEO John Mack, has told BusinessWeek that he and his wife, Christy, are endorsing Democratic Presidential candidate Hillary Clinton, whom they supported for re-election as senator.

Mack previously reached Ranger status in Republican campaign finance circles by raising at least $200,000 for President George W. Bush's reelection in 2004. (Former Goldman Sachs (GS) CEO Hank Paulson, now U.S. Treasury Secretary, raised a Pioneer-worthy $100,000.) Mack, who says he'll stay a registered Republican, was also considered a possible candidate for various Bush Administration posts over the years.

It's too early to tell who the other major bank chiefs will back. But Mack's switch could tip the balance of power toward the Democrats. According to nonpartisan contribution tracker PoliticalMoneyLine, three of the other top six bank CEOs (Goldman's Lloyd Blankfein, Lehman's (LEH) Richard Fuld Jr., and JPMorgan Chase's (JPM) Jamie Dimon) have favored Democrats in their political giving patterns over the past few years. Bear Stearns (BSC) CEO Jimmy Cayne is strongly Republican. Citigroup's (C) Charles Prince and Merrill Lynch (MER) CEO Stan O'Neal have bipartisan donation habits.

On Wednesday, Morgan Stanley settled a civil suit with eight of its former female employees who alleged that the bank discriminates against women in terms of how they are trained, paid, and promoted. This was at least the second time since 2004 that the bank has found itself involved in a fracas with the ladies. Following the verdict, we sat down with Jan Tyler, one of the plaintiffs.

DealBreaker: So. Were you happy with your portion of the $46 million settlement?

Jan Tyler: I’m not allowed to say whether I was happy or not, according to Cyrus Mehri [one of the lawyers who represented the eight plaintiffs], who I hate.

DB: Can you blink me an answer?

JT: No. I will tell you this—I’m writing a book. Based on my experience.

DB: Interesting—a memoir?

JT: It’s going to be like a James Frey book [, A Million Little Pieces].

DB: So you’re going to make stuff up?

An eighteen-month law suit against Morgan Stanley by eight of its former female employees was settled today. While no hanky-panky (the best kind of hanky) took place, the women felt that they had been discriminated against in terms of how they were trained, promoted and paid. The bank settled for a minimum of $46 million; Morgan’s 2,700 female brokers will see a pay increase of around $16 million, and the bank promised that it will “overhaul the way accounts are distributed in the firm’s retail branches — a practice that determined [the women’s] opportunities for pay and advancement,” favoring the men in the brokerage business.

We don’t want to make the generalization that men lie, and make promises they never keep (although Carney did swear he’d bring me beer today and yet, here I am, no beer!) but perhaps we’ll make the sweeping generalization that the men who run Morgan Stanley might. Back in 2004, the bank paid $54 million to settle a case by Allison Schieffelin for: discrimination against women, vis-à-vis pay and promotions.

Jan Tyler, one of the women named in the suit, spoke with us today, and while she wasn’t allowed to say whether or not she was happy with her part of the settlement (or blink us an answer), she did offer that she will be writing a book based on the experience. She holds no grudges against Morgan Stanley, and wishes them all the best. And John Mack is my biological father.*

Wall St. Firm Will Settle Sex Bias Suit [NYT]

*More on Jan later. James Frey is all we can say for now and we've already said too much.

The results of yesterday’s “Which bank has the dirtiest working conditions” poll are in. Some of the results may surprise you, some may not. If you actually read what we wrote about Bear Stearns’s in-house cafeteria and its 42 health-code points violations, for instance, you won’t (or shouldn’t) be surprised to learn that it landed in the top three (and if you read the part about contaminated food and inadequate levels of personal cleanliness and are still stunned, don’t invite us over to your home any time soon). If you didn’t know, though, that the 85 Broad is basically one step away from a gas station restroom on the Garden State Parkway (going South), you might be a bit caught off guard to learn that the Kingdom also landed at the top of the list of shame (all that glitters is not gold, indeed). Let’s examine the cold hard (dirty, disgusting, scatological) facts now.

Former Duke University lacrosse captain David Evans has landed a job at Morgan Stanley, Deal Journal reports. Evans was one of the Duke lacrosse players victimized by false accusations of a rape that never happened.*

From Deal Journal:

Now Evans has gained the trust of Morgan Stanley Chief Executive John Mack, a Duke alum and trustee (class of ‘68) who went to bat for Evans after serious questions were raised about the case against he and his two former teammates.

Evans now has landed one of the most prestigious jobs on Wall Street, Deal Journal has learned. Morgan Stanley has hired Evans, who graduated in May 2006, as part of its analyst program. Landing a plum job — which is paying well into the six-figure range these days — has to be a satisfying end to a bitter sequence of events for Evans since the rape allegations surfaced in March 2006.

The 24-year-old Maryland native had a job lined up at J.P. Morgan Chase’s investment bank that was rescinded in the wake of his May 2006 indictment, with the bank telling him it probably wasn’t the best time to be starting a new job. After he was cleared recently, J.P. Morgan came back to Evans and made a new offer, which he declined.

Also: a self-serving district attorney who will likely be disbarred for his conduct in the case, a gullible media, faculty and university administration all too eager to believe a story about privileged whites abusing a poor African American woman and a public culture too willing to accept verdict first trial by publicity.

Accused Former Duke Lax Player Lands Morgan Stanley Job [Deal Journal]

While Citi was busy preparing for today's bloodletting, Morgan Stanley's vice chairman of investment banking, Robert Kindler, threw a small get-together for Dana Vachon's Mergers and Acquisitions. But we didn't get many photos because Bobby told us that we should forget what we saw or we'd get his claw. Down tiger!

The last time we checked, the only reason to be envious of Lloyd Blankfein’s henchmen was because some of them were getting upwards of $100 mm in bonuses (and because B-fein had carried on a tradition instituted during the Paulson era wherein on Tuesdays and every first and third Friday of the month, the girls are on Goldman).

According to the WSJ, however, there’s a new motivation for keying doctored league tables into the Goldies’ cars: trading floor envy. The Masters of the Universe are in the midst of erecting a “gleaming new building in lower Manhattan that will feature six gigantic state-of-the-art hangar-size trading floors (72,000 square feet each, with room for more than 900 traders on each floor)” and a Jamba Juice. If you’re the sort of person who’s made jealous by that sort of thing, you’re not alone—the top BB-banks are going to great—desperate, sad, whatever—lengths to keep up with the Goldmans. Let’s take a look at the competition.

Lehman Brothers Holdings:
Mulling over a deal with Vornado to build a HQ and trading floors where the Hotel Pennsylvania on Seventh Avenue still stands, i.e. Penn Station/MSG adjacent. Good for those commuting into the city on the Midtown Direct already/can’t resist Auntie Anne’s. Bad for anyone under 40/more importantly, those with an aversion to the types of people who ride the LIRR (read: anyone who doesn’t ride the LIRR and even some of those who do. Self-loathing. You know how it is).

Merrill Lynch & Co.:
Also considering the Hotel Pennsylvania site, in addition to the new WTC area currently under construction. Lease is up in 2013. The clock is ticking.

J.P. Morgan Chase & Co.:
Talks with the Port Authority are “progressing but not a done deal yet.” The only thing we know about the Port Authority is that it’s a good place to pick up hookers…and with our analyst and associate attrition…you do the math.

Morgan Stanley
Has “talked with several landlords about spaces large enough for improved trading facilities, though its plans are unclear.” A spokesperson for Morgan declined to comment though we’ve heard that Robert Kindler will only entertain the possibility of venues large enough to host the Mergers and Acquisitions book party.

Wall Street Firms Vie To Expand Trading Floors [WSJ]

Fewer transactions but bigger numbers in the US mergers and acquisitions market means the battle for league table placement in the quarter just ending was especially hard fought.

Goldman Sachswas the top adviser for US mergers, according to the research firm Dealogic, boosted by its role in the huge TXU buyout offer. It was followed by Morgan Stanley and JP Morgan Chase. While Dealogic’s tallies aren’t viewed as important as those assembled by Thompson Financial, you can bet there is some back patting and grinning over at Goldman this morning.

And maybe, just maybe, Lloyd Blankfein put a little extra sugar in his Styrofoam coffee cup this morning.*

*This whole Lloyd loves the Styrofoam thing was, as far as we can tell, made up by Bess Levin. Factual accounts of how Bankfein takes his coffee—if at all—are always welcome. Goldman could not immediately comment on this matter when contacted this morning.

Merger market unfazed by market volatility [Reuters]

Bloomberg tries its hand at our old “imagine you are inside the head of John Mack” trick. And they find the same thing in there that we did: a bright neon side flashing "Goldman Sachs was here."

Ten years ago, John Mack tried to turn Morgan Stanley into Merrill Lynch & Co. Now the firm's chairman and chief executive officer is chasing Goldman Sachs Group Inc.

Mack was president of Morgan Stanley in 1997 when he and then-CEO Richard Fisher sold it to Dean Witter, Discover & Co., seeking to blend their investment banking prowess with Dean Witter's herd of stockbrokers. At the time, New York-based Merrill Lynch, the biggest brokerage, was the top U.S. securities firm.

Today's Wall Street titan is Goldman Sachs, which last year produced a record $9.54 billion in profit through bigger trading bets and by building divisions in private equity and hedge fund investing. Mack, 62, drove a 70 percent jump in first-quarter earnings by increasing trading risks, profiting from investments and adding hedge funds of his own.
"He's trying to copy Goldman, but that's what he knows and what he does best,'' said Jon Fisher, who helps manage $22 billion, including Morgan Stanley shares, at Fifth Third Asset Management in Minneapolis. "If Goldman is putting up the best numbers, then if you're a competitor why wouldn't you do what they're doing?''

Poor Mack. Doesn’t he know trying to be Goldman is the old Blackstone?

Mack's Morgan Stanley, With Record Profit, Still Chases Goldman [Bloomberg]

JK! If John Mack’s been Googling himself much today—which his administrative assistant tells us he mostly certainly is*—, he’s got to be pretty pleased with the results. First, he beats Goldman and now Ron Perelman? We’d say it’s time for Mack to call it a day—something about quitting while you’re ahead and today’s episode of Oprah being one you “don’t want to miss.”

Reuters reports the bank’s major victory today over billionaire and former husband of the lovely Ellen Barkin, when a Florida state appeals court threw out a $1.58 billion award previously bestowed upon Perelman over the 1998 sale of Coleman Co. to Sunbeam Corp. In May 2005 a jury had ruled in his favor, when he alleged that Morgan Stanley had helped Sunbeam “hide its shaky finances” while working on the purchase of Coleman.

Coleman had received 14.1 million Sunbeam shares in the transaction. The stock became worthless after Sunbeam fired chief executive Al Dunlap and admitted it had inflated sales to prop up earnings. Sunbeam went bankrupt in February, 2001.

In a 2-1 decision [today], Florida's Fourth District Court of Appeal in West Palm Beach said Perelman failed to show he was damaged because he did not demonstrate what Sunbeam shares would have been worth had there been no fraud.

A spokeswoman for Perelman called today’s ruling a “temporary setback" and that Big P "plans to seek a rehearing," just as soon as he deals with the arduous task of assigning himself a fifth wife.

Morgan Stanley Wins Reversal of $1.58 Bln Award [Reuters]

*You get what I'm doing here.

The Wall Street Journal this morning tells the story of how a Chicago-born money manager based in London became the public nemesis of the chairman of the New York Times. It all started with something as simple as a phone call. Morgan Stanley's Hassan Elmasry called Arthur O. Sulzberger, Jr. and Arthur O., well, he doesn't answer phone calls from just anybody. And holders of five percent of the company's stocks were, apparently, exactly that: just anybody. As one of our friends likes to put it, "Sucking on a silver spoon is so much less taxing than talking to vulgar people."

And thus began the painful process whereby a man named Sulzberger learned that these days just because you may not have heard of someone--and indeed, that person may never have been invited to the same dinner as you even as a courtesy--doesn't mean that person is a nobody. And it certainly doesn't mean that person cannot publicly humiliate you.

How a Money Manager Battled New York Times [Wall Street Journal]

And previously on SuperMogul: Sulzberger vs. Elmasry – Round 3 and And this time, it's personal.

Morgan Stanley posted net revenue gains of 29% this morning. Or, as everyone keeps saying, "They matched Goldman's numbers." But really you should stop doing that. Do you have any idea what this kind of constant comparison is doing to poor John Mack?

Picture it. The office is still dark. John Mack's understated tie is slightly askew. He is fiddling around with a small object in his pocket, perhaps a pill that long-ago fell out of its pil bottle and is now so covered with pocket lint that it is unidentifiable. He gazes out the window but it does no good. He still sees the stories blazing out across the brilliant blue sky above New York this morning. He still here's the voices in the silence. They keep saying, "Goldman Sachs. Goldman Sachs."

He turns suddenly. Where is that spike he used to smash phones with when he was on the trading floor? His eyes dart to his desk drawers. He knows exactly where it is. If he were the kind of person who muttered he would mutter, "We make record numbers, my boys on the trading floors clean-up and all everyone can do is talk about Goldman, Goldman, Goldman!" But John doesn't mutter. Instead he smiles.

He has spent many of the past years being underestimated. This is a form of underestimation, he tells himself. Slowly the chattering voices silence. The comparative headlines fade from the rooftops. He breathes deep and turns to his desk. His feet drag a bit as he walks. He's smiling now.

"I," is the first word that comes to his head. And the second word. "I," he thinks,"I am John Mack."

Morgan Stanley Net Rises to Record on Trading Gains [Bloomberg]

Video of the Morgan Stanley Dodgeball tournament. It's like real life: team building by eliminating the slow and the weak. Especially the girls, apparently. [Via Bankers Ball]

John Mack, like the Tom Arnold of investment banking (take a second on that one), has overcome huge odds to fight his way back to the top of his game.** Last year, the Morgan Stanley chief, who was shown the door in 2001, received a raise of 38% to take home $41.4 million, reports CNN Money. The package was comprised of a base salary of $800,000, $36.2 million in restricted stock, $4 million in other stock options, miscellaneous compensation of $15,447, $67,963 in pension benefits, $6,100 in matching 401(k) money and, perhaps most importantly, in the parlance of our times, use of the company jet valued at $321,848.

Earlier: How Goldman's Managed To Stay Out Of The Backdating Scandal

Morgan's Mack sees hefty pay raise [CNN Money]

**Rocky seemed too easy and we thought it was about time we—Carney—went public with our feelings for Carpool.

So a few years ago, a Morgan Stanley trader placed a $10.5 billion order for shares to cover a short position. The problem is that he was only trying to buy $10.5 million of the stock. You can only imagine what this did to the markets. But, believe it or not, this kind of "rounding error" only costs you $300,000 if you are an investment bank.

Reuters explains how the mistake happened.

According to the NYSE's February report on disciplinary actions, a customer contacted Morgan Stanley on Sept. 1, 2004, to unwind part of a swap.

A Morgan Stanley affiliate was the counterparty to the swap, and had hedged its exposure by maintaining a short position in shares underlying the trade. As a portion of the swap was unwound, a Morgan Stanley trader tried to buy a basket of stocks to cover some of the firm's short position.

At about 9:32 a.m. ET that day, the trader entered an agency order on behalf of the firm to buy 100,000 units of the basket to cover a portion of the short position, the NYSE said.

But the system used to create the basket built in a multiplier of 1,000, so the trader erroneously created a basket with a value of $10.8 billion instead of $10.8 million.

A few of our usual questions: anyone know who this unnamed "trader" is? Where is he working these days? (Presumably not Morgan Stanley.)

NYSE fines Morgan Stanley for trade error that disrupted market [Reuters via CNNMoney.com]

Morgan Stanley may now sport 6% less sexual harassment, but they are allegedly still totally hating on grandpa.

A former regional director in Morgan Stanley's wealth-management business filed an age-discrimination lawsuit against the firm and two of its human resources executives Wednesday.

In a lawsuit filed in federal court in Manhattan, Edward M. Sullivan, 56 years old, alleged that human resources executives Jeffrey Brodsky and Eric Kayne conspired to terminate Sullivan beginning in fall 2005 despite "Sullivan's distinguished, highly acclaimed, twenty-five year career" at the firm.

Sullivan, of Darien, Conn., was terminated in May 2006, according to the lawsuit.

The complaint alleges the executives went so far as to interfere with the annual evaluation process at the firm at the end of 2005 and to substitute "their own made-up poison-pen critique of Sullivan in place of the legitimate evaluations of him."

Ex-exec files age suit vs Morgan Stanley [Business Week]

Peter Cohan today looks at the decision of Morgan Stanley as another step in the exorcism of the ghost of former Morgan Stanley CEO Phil Purcell. And, incidentally, a rebuke to Sandy Weill's vision of the future of banking.

Former Morgan Stanley (NYSE: MS) CEO Phil Purcell started his career as a management consultant who jumped to his client, Sears Holdings Corp. (NYSE: SHLD), which implemented a "stocks and socks" strategy. After dumping Purcell in June 2005, his successor John Mack has finally decided to sell Discover on the heels of a 72% increase in its pretax income.

Sears' idea was that people could buy everything from clothing to financial services in a one-stop-shopping experience. To implement the strategy, Sears acquired stock broker Dean Witter in 1981 and in 1986 started a credit card business called Discover. But the strategy did not work, so in 1993 Purcell helped spin out Dean Witter from Sears. In 1997 Purcell merged Dean Witter with Morgan Stanley. The impetus behind the original merger between Dean Witter, a down-market stock brokerage, and blue chip Morgan Stanley always eluded me. But there was a significant amount of discussion -- led by Sanford Weill of Citigroup (NYSE: C) -- that one-stop shopping for financial services was a great idea.

Purging Purcell as Morgan Stanley spins off Discover [BloggingStocks]

The Discover Card advertisement above encouraged consumers to get rid of their credit cards by asking, “What if you could get rid of the things you don’t like about credit cards? The hype. The confusion. And this time do it right?”

Today Morgan Stanley announced it was doing exactly that, cutting off its troubled Discover credit card business. The card had always had a low rent feel to it, its growth potential was seen as very limited and investors had been calling on the investment bank to jettison the business for some time. Last year the John Mack had frustrated some investors by seeming to close off the possibility of a sale. But this past Spring, the bank eased its stance and said it would explore the possibility of the spin-off. The definitive news of the spin-off will probably reassure investors that the bank is flexible and responsive to shareholders, which is sending stock prices higher today.

Morgan Stanley to spin off Discover, profit falls [Reuters]

Morgan Stanley, the world's second- biggest securities firm, promoted 228 employees to managing director, a day after awarding Chief Executive Officer John Mack a record $40 million bonus.

``Everybody who joins Morgan Stanley right out of business school as an intern or associate aspires to become a managing director,'' Higdon said. ``Those people have a lot to celebrate.''

Managing directors make $1-25 million. New class after the jump.

Morgan Stanley Names 228 to Become `Senior Stewards' [Bloomberg]
Morgan Stanley Names New Managing Directors [DealBook]

Yesterday's DealBreaker of the Year candidate, John Mack, received a year end bonus of $40 million of stock and options.

From MarketWatch:

Morgan Stanley CEO John Mack, who received a standing ovation from staffers on the firm's trading floor when he made a triumphant return to the brokerage last year, got a bonus of almost $40 million this week. A filing with the Securities and Exchange Commission late Thursday showed that the firm awarded Mack 461,821 shares of the firm's common stock this week. At today's share price of roughly $80, that's just shy of $37 million.

The filing also said he was granted options to buy 178,945 Morgan Stanley shares at 78.40 a share, a package worth about $4 million.

Next up: Goldman Sachs honcho Lloyd Blankfein.

Morgan CEO Mack pockets hefty bonus [MarketWatch]

We've been pointing out for a long time that the really (potentially) explosive issue raised by former SEC investigator Gary Aguirre was not the now-officially dismissed suspicions on insider trading by Pequot Capital or illegal tipping by John Mack, but the still largely univestigated charges of favoritism at the SEC. Recall that Aguirre claimed he was fired from the SEC for trying to subpoena John Mack, who was then about to become the top man at Morgan Stanley. Now the mainstream media, for reasons of its own, has enjoyed playing up Mack's connections to the Bush administration but a more relevant fact is probably his status as the head of a major Wall Street bank. This raises the fear that the SEC has been captured by the very industry its supposed to regulate. (By the way, even this might be too optimistic, since the words "been captured" imply that the regulatory agency was not created, owned and operated by the largest investment banks right from the start.)

In today's Wall Street Journal, the Senate's Finance Committee chairman Charles Grassley says that this is precisely the matter on which the committees investigation is focused.

Your Dec. 8 editorial "The Pequot 'Scandal'" leaves the impression that Gary Aguirre and I are the only two people concerned about the way the SEC handled the Pequot investigation. In fact, Mr. Aguirre's concerns have been echoed by both former and current SEC officials, who provided candid testimony to our committees.

The focus of the Senate investigation I'm conducting with Sen. Arlen Specter (R., Pa.) isn't John Mack and Pequot; rather, it is whether the SEC retaliated against one of its lawyers and whether it wields an even hand in looking out for investors big and small. Our review is evidence-based, and so far the evidence suggests the Pequot investigation was fraught with problems, Mr. Aguirre's termination is suspect, and the inspector general failed in his duty to conduct a thorough and independent inquiry.

Sen. Chuck Grassley (R., Iowa)
Chairman
Committee on Finance
Washington

An SEC Investigation Fraught With Problems [Wall Street Journal]

Jack Inglis's main job at Morgan Stanley was ginning up more hedge fund business in Europe. Now he's leaving the bank at the end of the year, according to the Wall Street Journal. We were entirely willing to accept this at face value--not everyone leaves because of scandal, bad blood or thwarted ambition--right up until we got to the claim that Inglis is leaving "to spend more time with his family." Isn't that official code for There's More To This Than Meets The Eye?

Morgan Stanley's co-head of European prime brokerage will leave the bank by the end of the year, a spokesman said.

Jack Inglis, a managing director who has been with Morgan Stanley for 15 years, decided to leave the firm to spend more time with his family and eventually pursue other interests, the spokesman said.

The move comes as Morgan Stanley's new global head of prime brokerage, Stuart Hendel, prepares to take up his post in New York early next year.

Pay attention, people. Even if you are actually leaving to spend more time with your family, don't say that. It sets off everyone's bullshit detector.

Morgan Stanley Executive to Leave Bank's European Prime Brokerage [Wall Street Journal]

Well, we sure went through a lot for this result. Fired SEC investigators, charges of political favoritism, hearing before the Senate. And now this: the SEC has cleared Morgan Stanley bossman John Mack in its (second) investigation into allegations of insider trading at Pequot Capital, according to the official word from Morgan Stanley. This isn't exactly surprising news. Charlie Gasparino reported that the SEC had cleared Mack close to two months ago.

What is surprising is that it took so long for the official word to come down. Pequot itself was cleared a while back. And if Pequot was engaged in insider trading, no amount of tipping from Mack (assuming for the sake of argument there was any) would amount to a crime.

The U.S. Securities and Exchange Commission formally cleared Morgan Stanley (MS.N: Quote, Profile , Research) Chairman and Chief Executive John Mack in the commission's insider trading probe against hedge fund firm Pequot Capital Management, a bank spokeswoman said on Friday.

Morgan Stanley spokeswoman Jeanmarie McFadden said the SEC advised Mack in a letter "a few days ago" that it would not pursue any enforcement action against him. She declined further comment.

Morgan Stanley says SEC clears Mack in Pequot probe [Reuters]

Well that was almost interesting. There was a moment there when we thought the preppy white kid who adores Ayn Rand wasn't going to win the Morgan Stanley internship poll. For much of the week, it was anybody's race to win. In the last day or so, however, Ray Phillips pulled ahead. And now its time to call a spade a spade recognize that we do in fact have a clear winner. So this afternoon we're awarding Ray the laurel crown. Ray Phillips you are totally winning that Morgan Stanley internship.*

[*Note: Of course by "totally winning" we don't mean to imply that we have anything to do with who wins. Actually, we didn't read the rules so we're not even sure how the winner to this contest is selected. But you've won the much, much, much more important contest: the contest for the votes of DealBreaker Readers. So even if you do end up losing, you'll always be a winner to us.]

Earlier today we introduced you to the contestants in Columbia Picture's internship contest. Now it's your turn to vote on a winner. This will have no bearing on the actual winner, of course. But we're wondering who our readers think will win. Or should win. (And if you think these two answer are different, leave a comment and explain yourself.)

Like the DealBookies said on Friday, in conjunction with Will Smith’s new movie “The Pursuit of Happyness,” [sic] Columbia Pictures is in the midst of holding a contest, for which the winner will be awarded what someone over at Sony decided “eff it, let’s just throw all our chips on the table and call it: 'the ultimate internship'." Applicants were to send in video clips for the company of their choosing, which included PlayStation, Yahoo, The Gap, NBC, People, The Hollywood Reporter, the NFL, and, wait for us to tie it into something a DealBreaker reader might be interested in, Morgan Stanley. Exclusive of PlayStation, which, let’s be honest, would be the coolest place to work, Mo’ Stanley’s obviously the pièce de résistance of this group. Quarrel with that statement if you like but you know it’s true. Think about it—Yahoo: poor man’s Google; NBC: subtract The Office, Conan and Brian Williams and we’re in the toilet; People: just too self-involved for our taste; The Gap: it’s The Gap; the NFL: it would probably help if we had some cursory knowledge of football to come up with a good argument for not wanting to work here…T.O.…Giants Stadium…the Jets…that’s all we’ve got; The Hollywood Reporter: just rubs us the wrong way. Like we were saying—Morgan Stanley: who wouldn’t want to work intern there?

Not Dieu-My Mimi N, Frances Jeffrey-Coker, Cameron D., and Ray Phillips, whose videos have landed them in the semi-finals. We don’t have much sway per who actually gets his/her moment in the sun with Mack the Knife but since we’ll be running a little poll later to see who you think is most deserving of the chance to knock boots with the J man, we’re going to break down the four hopefuls here:

Dieu-My Mimi N.: Scores high marks for the witty repartee she strikes with the camera—“I stumbled upon this internship when I was checking my deleted e-mails. I know, right, who checks their deleted e-mails?” and for knowing at such a young age that the first rule of seduction is ‘treat ‘em like dirt and they’ll stick to you like glue,’ as evidenced with, “The first company that caught my eye was Morgan Stanley. I know right, can you believe it? [rolls eyes] Morgan Stanley.”

Frances Jeffrey-Coker: We feel good about the self-deprecating, “I’m studying mechanical engineering at Columbia University. A lot people think engineers are nerds… [silence]… [knowing glance at camera]…No comment.” We don’t feel good about the fact that Jeffrey-Coker identifies the saying “carpe diem” with The Lion King. You incorporate TLK into your Morgan Stanley video, you talk about “hakuna matata.” What’s unclear about that? Maybe “carpe diem” is a part of the Broadway play (not likely), maybe it’s the opening number in some new version on YouTube, but we’ve only seen the animated version released by Walt Disney circa 1994 and not once is the phrase “carpe diem” mentioned; “hakuna matata,” yes, but “hakuna matata” is not “carpe diem” and we’re sorry we’re about to say “what the fuck” but seriously, what the fuck? You can’t get pull stunts like this and expect to be hired by Morgan Stanley, okay? Good shoes, though.

Cameron D: Uncomfortably charismatic. You know the type—little too smooth for their own good. But the kid quotes Michael Jackson and let’s call a spade a spade—Morgan Stanley could use a little Michael Jackson in its life.

Ray Phillips: Normally people who quote Ayn Rand make us want to choke on the written-in-Latin, sheepskin diploma given to us by our liberal arts bastion-of-people-who-quote Ayn Rand alma mater but here…actually, that’s it. This kid has Stanley written all over him. Phillips also apparently runs “a couple of newspapers,” but that’s pretty much superfluous at this point. He had us at Objectivism.

Mugging for the Camera, and a Bank Job [DealBook]
'Pursue It': The Ultimate Internship Contest [Sony Pictures]

Morgan Stanley’s stock analysts downgraded the stock of the New York Times to the equivalent of a “sell” rating yesterday, the New York Post reports this morning.

Publishing analyst Lisa Monaco cut her rating on the stock from "hold" to "underweight" - the equivalent of "sell" - saying that the Times' revenue is deteriorating and that, contrary to some investor expectations, a sale of part or all of the company is "implausible."

The negative report came only a day after a Morgan Stanley investment fund based in London stepped up a campaign to push the Times to take away either the chairman or publisher posts from scion Arthur "Pinch" Sulzberger, Jr. and the two-tiered stock structure that keeps the family in control of the company.

Although the New York Post is treating this a blow to Pinch (see graphic on left), ironically the downgrade might indicate good news for the chairman/publisher. If the changes demanded by Morgan Stanley’s investment fund were realistically in the pipeline, Morgan Stanely analysts probably wouldn’t have downgraded the stock. The downgrade is a vote of no-confidence in Pinch but its also a sign that he’s probably pretty safe in both his jobs at the Times. That meter is never going to reach KO.

Times Scared [New York Post]

There is a delicious irony that the paper whose Sunday Business Section regularly carries Gretchen Morgenstern’s screeds against the size of executive pay packages is under fire from one of its largest investors for overpaying its top executives. Why do we suspect that the odds of Gretchen writing about this are approaching zero?

One of the New York Times' largest shareholders stepped up an attack on the newspaper giant yesterday in a move some industry observers consider a veiled attempt to dethrone company scion Arthur "Pinch" Sulzberger Jr.

In a shareholder proposal filed yesterday, Morgan Stanley Investment Management, which owns a 7.6 percent stake in the Times, urged the company to split the jobs of chairman and publisher, positions currently held by Sulzberger.

Sulzberger is also trustee for the controlling Sulzberger family, all of which adds up to "inherently conflicted positions that thwart effective board oversight," Hassan Elmasry, head of the London-based Morgan Stanley fund, wrote in the proposal.

"As publisher of the newspaper, he reports to the company CEO whom he himself [as chairman] appoints," Elmasry added. "As chairman, he reports to a board of directors, the majority of whom are elected by the Sulzberger Family Trust on which he himself serves as trustee."

The Morgan Stanley fund, an investor in the Times since 1996, wasn't bothered by this arrangement until a few years ago when the company's strategy took a new turn and access to Sulzberger and other top executives became increasingly constrained, sources close to the fund told The Post.

Among Elmasry's criticisms are the hefty compensation packages awarded to top executives as profits tumbled and the enormous new Midtown Manhattan headquarters built as the size of the company's staff was shrinking, sources said.

Squeezing Pinch [New York Post]

Not even sure if this counts as a slap on the wrist. It's more like a little kiss on the palm.

The New York Stock Exchange on Wednesday said it fined Morgan Stanley (MS.N: Quote, Profile, Research) $500,000 and censured the firm for failing to report short interest positions in hundreds of securities for as long as 20 years.

Morgan Stanley failed to report to the NYSE positions in preferred securities and affiliates' equity securities for an unknown but "significant" number of years, and other equity securities since 2004, the regulator said.

The firm also failed to report similar positions to the American Stock Exchange, and since 1986 failed to report some positions in equity securities to the NASD, the NYSE said.

In addition, Morgan Stanley failed to adequately supervise its process for reporting short positions, the NYSE said.

NYSE fines Morgan Stanley $500,000 [Reuters]

Maybe Bloomberg’s Matthew Lynn has a point about Morgan Stanley not quite jumping into hedge funds with both feet. But we can’t help thinking that this is a super, evil genius business column. A study in how to write a story about a story that never happened—namely, the story of Morgan Stanley buying the Man Group.

Morgan Stanley's move on the hedge-fund industry looks tepid. If the bank viewed hedge funds as so important for its future, it should have made a substantial acquisition and aimed for total control. How about taking over the U.K.'s Man Group Plc? With a market value of 9.35 billion pounds ($17.9 billion), it comes with a hefty price tag. Yet it would instantly establish Morgan Stanley as one of the biggest players in the industry.

Instead, Morgan Stanley has opted for some deals that are too little, too late. They may not lead to disaster, though it is hard to see what good they will do the bank.

Morgan Stanley's Gamble Is Too Little, Too Late [Bloomberg]

Keep in mind that these stories are based on analysts estimates. We’re hoping to see some real (or at least rumored) numbers soon, and we’ll start updating the numbers as soon as possible. (Email your tips to us here with the subject line “Bonus Watch. The identities of all tipsters are kept anonymous, unless you are retiring or something and want some credit for your work.)

The New York Daily News has the short version of the Bloomberg story:

Never in the history of Wall Street have so many earned so much in so little time.

Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Bros. and Bear Stearns are about to reward their 173,000 employees with $36 billion of bonuses.

That's a 30% increase from last year's record, and it doesn't include the billions more that will be paid by Citigroup, Bank of America and J.P. Morgan Chase, the three largest U.S. banks, as well as the hundreds of hedge funds and private-equity firms that constitute the financial industry.

The longer version gives estimates for individual firms.

Average compensation/average bonus (U.S. dollars):

Goldman $658,946 / $397,707

Morgan $257,594 / $154,556

Merrill $291,139 / $174,683

Lehman $351,160 / $210,696

Bear $338,462 / $203,077

And DealBook says that traders will once again reap the largest rewards.

On Wall Street, it will again be the traders, who make investment bets for their firms, and those who operate in the complex world of structured products and derivatives, who take home the biggest checks this year, with top-end estimates in the range of $40 million to $50 million, according to The New York Times.

“Traders are making more than bankers and that will probably continue for one more year,” Alan Johnson, the managing director of Alan Johnson Associates, told the Times. “Then it will be a horse race.”

36B seen in bonuses at top firms [Bloomberg in Daily News]

Wall Streeters to reap record bonuses [Bloomberg in Globe & Mail]

Wall Street Set for Bountiful Bonuses [New York Times]

Just so you know:

The lease of four downtown Chicago parking garages to Morgan Stanley will go forward despite objections raised because of the company's alleged ties to slavery. In a 37-to-8 vote, the Chicago City Council approved the 99-year lease of the garages to the huge banking concern.

Alderman Dorothy Tillman says she will go to court to block the deal.

Under a city ordinance sponsored by Tillman in 2002, a company that falsely claims no past connections to slavery loses its city contracts.

Tillman contends the disclosure requirement applies to Morgan Stanley because it is a successor firm of J-P Morgan and Company.

But Corporation Counsel Mara Georges says there is no direct tie. She says three mortgage bankers who had been employed by J-P Morgan joined mortgage bankers from another firm to form Morgan Stanley.

Okay. So Morgan Stanley’s ties to slavery are pretty tenuous. They allegation stems from the discovery by Tillman’s daughter that Riggs, Peabody and Co., a predecessor of J.P. Morgan Chase, allowed 13,000 slaves to be used as collateral on loans and wound up owning 1,250 slaves when those loans went south. Morgan Stanley split from JP Morgan back in the thirties. So technically there are some ties there.

But then again, Morgan Stanley is going to pay hundreds of millions to Chicago for those leases. And at least 37 Chicago city councilfolks think that’s a whole lot more important than slavery.

Despite alleged ties to slavery, Morgan Stanley gets Chicago contract [Associated Press in WQAD]

[Reporting live from the trenches of Wall Street, we bring you the first dispatch from DealBreaker special correspondent Paul Paftinos.]

In what is expected to become a growing trend, as we see political power shifting from the Anti-Kyoto policy of the Bush/Special-Interest coalition and individual states making efforts to begin adhering to Kyoto-like controls regardless of existing federal standards, Morgan Stanley has followed rivals such as Goldman Sachs and BNP Paribas by throwing its hat in the ring of the burgeoning CO2 Emissions Trading market.

Unlike Goldman though, which simply stuck its toes in the water by lightly trading on the European Trading Scheme, (ETS) which is currently the most advanced platform to trade the new commodity (CO2 Emission Credits), Morgan has instead announced its intention to spend an unparalleled $3 Billion, which "will be used to buy carbon credits in the various emissions trading schemes around the world."

About 90 per cent of the bank's investment will be used to buy carbon credits in the various emissions trading schemes around the world. The European Union has the most advanced carbon emissions trading market, but a global informal carbon emissions market may be developing with schemes in the US, Japan and Australia.

Morgan Stanley will invest the remainder in energy projects that generate lower emissions than conventional energy projects and earn emission credits that can in turn be sold in the various emission schemes.

2.7 Billion is going to buy Morgan a lot of dirty air. And considering there is a fixed amount of credits allocated by member nations, could this be construed as an early attempt to corner the smog market? (cough)

Global push to cut greenhouse emissions [Financial Times]
The Big Money Pouring into Carbon Trading [Financial Times]

The New York Sun thinks that the allegations made against Pequot Capital and Morgan Stanley chief John Mack have been getting a little too much ink from the New York Times. And they think they know why.

Mystified New Yorkers were left wondering what could possibly explain the Times's fascination with this story. Some might say it's Mr. Mack's connection to Mr. Bush, but it could just as easily be Mr. Mack's connection to Morgan Stanley. That is the bank that, earlier this year, withheld its proxy votes for members of the board of the New York Times Co. to protest the Sulzberger family's preferential voting status. A Morgan Stanley analyst complained at the time that the Times was underperforming as a business in large part because of the ossified management perpetuated by the ruling family's use of super-voting shares to control the Times despite a relatively puny stake in the Times company.

It's a scandal about the scandal! And just insanely paranoid enough to possibly be true!

‘A Full Airing' [New York Sun]

[Disclaimer: John Carney has written for the New York Sun and the Times, and he's friendly with a couple of the girls at both papers. Morgan Stanley was a client on several deals he worked on. He's never met John Mack or anyone named Sulzberger. George Bush won't return his phone calls.]

We’ve never been entirely clear about why financial institutions employ people with the title “chief economist.” It’s not as if the analysts looking at individual stocks or market segments are really influenced by these people. We’ve heard that its mostly “for marketing” purposes—the idea would be that if the bank could show it had some bright academic-type making big prognostications about the macro-economy it would project the image of omniscience, reassuring clients about its micro-analysis.

A story in the New York Post suggests another possibility—they are political players who help their institutions land deals with governments.

A Morgan Stanley economist bragged to his bosses about playing a "key role" in getting the U.S. Treasury to change a key position in its dealings with China, and paved the way for the firm to do more deals in the booming economy, a document obtained by The Post indicates.

An e-mail from Morgan Stanley's veteran chief economist, Stephen Roach, to senior executives in September 2003 boasts of Morgan Stanley's role in getting Treasury Secretary John Snow to back off the Bush administration's vow to pressure China over the value of its currency.

In the e-mail, Roach told Stephan Newhouse and Vikram Pandit, the then bosses of Morgan Stanley's international and institutional securities units, that "I helped him script rather carefully" key lines of a policy announcement in Beijing.

Roach wrote to Newhouse and Pandit that the Chinese might be very appreciative for the help Morgan Stanley provided in changing Secretary Snow's mind.

"I do believe we should make every effort to let the Chinese know that we played a decisive role in shaping the outcome on a key issue of great strategic importance for them," Roach wrote.

Although the SEC has subsequently reinvestigated and cleared Pequot Capital and Morgan Stanley chief John Mack in connection with Pequot’s acquisition of a large state in Heller Financial in the weeks leading up its acquisition by GE, questions still linger over allegations that the initial investigation was quashed when the lead investigator sought to subpoena Mack. Now two Senate investigations are underway to determine whether the SEC failed to thoroughly conduct the initial investigation and whether politics played a role in that failure.

On Sunday the New York Times ran a story based on files the canned SEC investigator, Gary Aguirre, had turned over to Senate investigators. The evidence seems pretty damning.

The file shows that after Mr. Aguirre was blocked from questioning Mr. Mack about the Heller deal, Mr. Hanson, the S.E.C. branch chief, acknowledged in e-mail messages that he had discussed Mr. Mack’s “political clout” and the “juice” of his lawyers with officials at the commission.

In an exchange of e-mails in the summer of 2005, Mr. Hanson said that he had merely been trying to “alert folks above me,” and that politics did not influence S.E.C. decisions. Mr. Aguirre replied: “Bob, this is spin. You told me it would be tough to take Mack’s testimony because he has political clout.”

Ironically, these allegations of political corruption at the SEC are being substantiated at the same time lawmakers are considering giving the SEC more clout over hedge funds. This summer a federal court struck down regulations requiring hedge fund managers to register with the SEC and permit investigators to examine their books.

But if the SEC has trouble engaging in its core functions—investigating things like insider trading—does it really make sense to give the agency an even broader scope of authority?

S.E.C. Inquiry on Hedge Fund Draws Scrutiny

I'm sorry, but it's a fact that there's such a thing as manners. A way of treating people. These fish have manners. In fact, I'm starting a new company and the fish will come with me. Call me sentimental, but the fish are coming with me.

Morgan Stanley Fallout From Andy Xie E-Mail Costs Two More Jobs [Bloomberg]

Andy Xie. Andy Xie, Andy Xie, Andy Xie. Hast thou learned nothing from Lucy Gao?

I participated in the panels on commodity and China-India and in some obligatory dinner parties. On Friday night, the Singapore PM invited the speakers at the meetings that Singapore government organized. Trichet, Larry Summers, Paul Volker, Chuck Price, the finance ministers of ASEAN countries were there. No government official from China was there. I guess I was there to make it look like China was represented. The dinner was turned into an Oprah with PM Lee Hsein Long at the center. The topic was on the future of globalization. People fawned him like a prince. Of course, he is. There are two reigning royalties in the world that the Davos crowd kiss up to, Jordan and Singapore. The Davos crowd are Republican on economic issues and Democratic on social issues. Somehow, they mange to put aside their moral misgivings and kiss up to Lee Hsein and Abdullah.

Birthday party invite email continues after the jump.

Morgan Stanley Star Exits After an Email Leak [WSJ]

Morgan Stanley is saying that chief executive John Mack has also been cleared by the SEC of the insider trading allegations raised by a former SEC investigation, CNBC’s Charlie Gasparino reported a few moments ago.

Former SEC investigator Gary Aguirre has said that he was investigating insider trading at Pequot Capital when he was abruptly fired after he sought to depose a top Wall Streeter. The SEC launched an inquiry after Aguirre went public with his charges, testifying before a Senate committee looking into hedge funds.

We should note that clearing Pequot and Mack of insider trading doesn’t make the allegations of political interference with Aguirre’s initial allegations go away. Those allegations were made under oath and penalty of perjury, and so far we haven’t seen any evidence that they’ve been seriously investigated.

Just because John Mack wasn’t engaged in insider trading doesn’t mean someone in the Bush administration didn’t try to protect him from an investigation.

The Score: Pequot and Mack: in the clear. The Sec: still an open question.

Morgan Stanley is joining the inter-brokerage pact set up by Merrill, Smith Barney and UBS Wealth Management USA two years ago in an effort to set out some rules for what client information brokers were and were not entitled to take with them when they left the firm. Before the pact, brokers frequently found themselves threatened with litigation from their former employers when they recruited old clients to their new firm. Now the brokerages who have signed on have agreed that brokers can take client names and contact information and solicit business from them, but are not permitted to take account details. It seems to be working—the sue-your-ex-broker litigation is down—which is sort of a shame. We kind of miss the days of brokers having to smuggle client information out in the dark of night. The new way seems so civilized.

Morgan Stanley to Sign Hiring Pact [Dow Jones Newswire in Houston Chronicle]

The John Mack led rebuilding of Morgan Stanley continues. Last week it made significant moves to rebuild its financial institutions group, hiring a pair of bankers away from Credit Suisse and one from Merrill. Today comes the announcement that it has hired two asset managers from New York Life—Kathy O'Connor and Jeff Sanders—to bolster its asset management business. The pair managed around $3 billion in assets for New York Life, and previously worked together at Towneley Capital Management.

John Mack’s still shoring up the ruins of his Morgan Stanley kingdom. Today news broke that the firm had picked four new managing directors to rebuild its financial institutions group—the folks who do investment banking work for banks and insurance companies. The group had reportedly suffered serious personnel losses in the rebellion against Mack’s predecessor, Phil Purcel.

The new folks include Mike McMahon and Mike Ostow, both of whom are coming from Credit Suisse. The two Mikes have been working under Morgan Stanley defector Vikram Gandhi. Mahmoud Mamdani was brought in with hopes that his relationships can help grow Morgan’s FIG group, which currently ranks fifth on the league tables. From Merrill, the firm has picked up Maurice Marchesini—a Los Angeles guy who will concentrate on the “three hours behind New York” business.

No doubt behind these fellas will be a bunch of junior folks who will telepathically show up at Morgan Stanley reporting for duty, with no solicitation or violations of non-compete agreements from their former (and to be) bosses whatsoever.

Morgan Stanley Replenishes FIG Unit [Dow Jones Newswire in EasyBourse]

Back in the late nineties we briefly considered becoming derivatives traders just to work with one guy—Ralph Reynolds. He had recently been hired away from Morgan Stanley by NatWest to develop a U.S. equities derivatives business for them. Word was that Ralph was the real deal, hardcore, that he "got it.”

That move didn’t last long. Soon NatWest itself was on the block—it would eventually wind up with the Royal Bank of Scotland—and Ralph’s team wound up with Deutsche Bank, running their proprietary trading desk. (It was right around this time, by the way, that the NatWest 3 were allegedly doing whatever it is they allegedly did.) Someone else gave us a different job and our dreams of trading for Ralph slipped away.

Over the years we kept hearing about Ralph. When Morgan Stanley seemed to be melting down in 2005, for instance, he hired a bunch of lads from Morgan to work for him at Deutsche. Someone once wondered aloud if Ralph’s success at Deutsche was turning the entire bank into one big hedge fund.

Well, Ralph’s still with us. But he won’t be with Deutsche Bank for long. This morning Reuters is reporting that Ralph is moving over to Carlyle to run a hedge fund.

Carlyle to hire chief for new hedge fund-sources [Reuters]

We’ve been spending some time trying to clear away the murk and shine some light into the shadows of Jeffrey Epstein’s financial dealings in an effort to provide some, uhm, actual financial reporting related to the sex candal encircling the mysterious money manager. There’s not much that is publicly available but we’re still digging.

What we have discovered, however, is a brief document amending a credit agreement for RELIANT PHARMACEUTICALS, INC. The amendment replaces the administrative agent for the credit. But what caught our eye was the confluence of three DealBreaker subjects all in the same documents.

The signature pages include lines for Morgan Stanley CEO John Mack, who is scheduled to appear before the SEC in connection with allegations of insider trading at Pequot Capital, as well at Jeffrey Epstein, who signs as trustee of the Wexner Children’s Trust II, part of the financial empire of The Limited founding family. And the agent who is being replaced? Goldman Sachs, where alleged insider trading crooks Eugene Plotkin and David Pajcin worked (not to mention the alma mater of that other DealBreaker obsession, Hank Paulson).

Now this is no doubt just a coincidence, and not really a conspiracy to make our heads explode. We should probably just take a deep breath and then post a Venn Diagram illustrating the connections but our diagramist is in meetings off-site.

One additional thought: this is probably the last time you’ll see Epstein’s name coupled with the words “trust” and “children” any time in the near future.

Reliant Consent, waiver and amendment [SEC]

The Street.Com's Matthew Goldstein and Lauren Rae Silva report that Ira Chilowitz, the former Morgan Stanley consultant charged with stealing confidential information from Morgan Stanley's prime brokerage group is said to have passed information on to a former director of S3, a three year old hedge fund consulting firm founded by former Credit Suisse prime brokerage head Robert Sloan. The co-conspirator has not been charged.

Here's the nut graph from TheStreet.Com:

Prosecutors in Manhattan did not identify either the co-conspirator or the firm. But people familiar with the investigation confirmed that the firm is S3 and that the unidentified co-conspirator is a former director. These same people say the former S3 director, who previously worked in Morgan Stanley's prime brokerage group, was recently fired.

We should note that prosecutors have not alleged wrong doing on behalf of founder Bob Sloan, pictured above left, or S3 Partners itself. An earlier version of this item claimed that Chilowitz had also been an employee of S3. We're told by S3 that this was wrong, and Chilowitz never worked for the firm. We apologize to our readers and S3 for the error.

We still don't know the identity of the former S3 director alleged to have conspired with Chilowitz.

Adviser Eyed in Morgan Stanley Theft Probe [TheStreet.Com]

Our People [S3 Partners]

Paul Schapira, a long time Goldman Sachs veteran who took over the firm’s natural resources group in 2002, is going to Morgan Stanley where his responsibilities will include relations with Italian clients and the European energy sector.

Schapira gained a good bit of notoriety when he worked on the initial public offering of PetroChina, the oil-and-gas behemoth spun off of China National Petroleum Corp. The deal became controversial when a coalition of pro-tibet tree-hugging hippies, Lutherans concerned over the company’s investments in Sudan, and unions seeking to keep China out of the World Trade Organization, sought to scuttle the deal. Several U.S. institutional investors declined to participate in the IPO, although Goldman succeeded in selling the shares to overseas investors.

We’re trying to find out how recently Schapira left Goldman. The newswire stories are a bit ambiguous about this, and we neither Goldman nor Morgan Stanley have gotten back to us. The reason it matters is that we’re trying to determine if this can reasonably be called a defection and whether it is fair to infer that Schapira’s move may be related to the “fighting like ferrets” that allegedly went on among the Goldman bigs following the decision of Hank Paulson to take the position of Treasury Secretary. If you know anything send it to Tips(at)DealBreaker(dot)com or drop them below in the comments.

Morgan Stanley hires energy banker from Goldman [Reuters]

Ira Chilowitz allegedly tried to make off with Morgan Stanley's list of hedge fund clients and the rates they get charged but got caught. Now he’s in jail. So now it's official. There is at at least one person who worked for Morgan Stanley who won’t be starting his own hedge fund or boutique investment bank.

According to court documents, Mr. Chilowitz is accused of sending a copy of the firm's administrative client list and its client rate list for the prime brokerage business in February from Morgan Stanley's offices in New York City to his personal E-mail account at his home in Virginia.

Mr. Chilowitz also is accused of engaging in a conspiracy with an unnamed co-conspirator to steal the client list and rate list, according to court documents. The unnamed conspirator isn't a Morgan Stanley employee.

After one year under CEO John Mack, Morgan Stanley has more than doubled it's net income, according to today's earnings report. Trading did very well, the mergers and acquisition advisory business was less damaged by the defections under Phil Purcell, Mack's predecessor at tha bank, than some had suspected and even the brokerage business did better. The DIscover credit card division, which Purcell had planned to sell, saw its revenues rise 34%.

Morgan Stanley Net Doubles on Trading, Underwriting [Bloomberg]

Ahead of tomorrow's expected Morgan Stanley earnings announcement, Bloomberg has a long profile of CEO John Mack's career and recent changes he’s made at the firm. Among the things we didn’t know until we read the article, Morgan Stanley hired almost twice as many managing directors and executive directors in the first half of 2006 as it did in the first half of 2005. Among the things we did: everything there is to know about those 1,000 under-performing brokers he let go. It's still hard to pass through Murray Hill without hearing someone muttering about being let go from Morgan Stanley.

Mack's Talent Rebound at Morgan Stanley Fails to Propel Shares[Bloomberg]

Last year Morgan Stanley went through a high-level meltdown, losing dozens of bankers and traders to rivals. The subsequent shareholder revolt forced out the sitting CEO, whose internal reforms were blamed for triggering the defections, and left current CEO John Mack to oversee the ruins.

Word comes in over the wires today that Morgan Stanley has won back Jon Anda (pictured above and left, in yellow), who was co-head of Morgan Stanley's Global Capital Markets group before departing in January. He had been set to join the still-unnamed Joseph Perella M&A boutique. None of the published accounts indicate why Anda flipped back to Morgan Stanley.

Anda Leaves Perella's Firm to Rejoin Morgan Stanley [Bloomberg]

When we were in college we used to have dreams like this. Big cats, typing on keyboards, usually typing out our overdue term papers for us. But they were always written in catish, and that really wasn't going to work.

Not sure what that was all about. Maybe it was the specific cocktail of chemicals we employed to fight off boredom in those days. But its nice to see that some people are still caught in the land of typing cats. And by some people we mean Morgan Stanley, which recently won a victory in arbitration against Baroness Penelope Cat of Nash DCB, Ashbed Barn, Boraston Track, Tenbury Wells, Worcestershire WR15 8LQ, GB..

For reals.

Morgan Stanley Fought Feline — and Won [DealBook}

Morgan Stanley bought Boston hedge fun Oxhead Capital, according to published reports. Reuters reports that Morgan Stanley said the hedge fund oversees about $100 million of assets. This is significantly less than the $168 million disclosed in its registration statement. So what gives? Possibilities include Oxhead losing lots of money on bad investments, losing investors, paying its managers huges fees or paying out a good chunk of its total investment capital to investors. Either that or Morgan Stanley just low-balled the number. Or maybe something else entirely.

There’s more good information in the registration statement, including a guess at where the $68 million went. Details after the jump.

It seems to be open season on Morgan Stanley's Stephen Roach, the banks London-based chief international economist. Two weeks ago the National Post's David Berman laid into him, and today Rich Karlgaard labels him "Wall Street's Worst Economist."

Who else but Morgan Stanley’s Stephen Roach? In November 2004, he said the U.S. had “no better than a 10% chance of avoiding economic Armageddon.” Since then the economy grew about 4% annually. This kind of shocking error has been, alas, typical of Roach. Since the recession of 2001-2002, Roach has been unremittingly bearish. He was last bullish in, no kidding,1999. Don’t bet on Roach, in other words.

We're not ready to jump on the anti-Roach bandwagon, even after a former collegue told us that "Roach is more of a marketing thing these days. No one invests on his advice." Whenever we're tempted to dismiss Roach we remember his article arguing that Tom Friedman's 'The World Is Flat" thesis was just plain wrong. Check it out. Roach comes off like a Matt Taibbi you could invite to dinner with your mother.

Wall Street's Worst Economist [Digital Rules at Forbes.com]

From today's announcements in Reuter's "Move" column.

Goldman Sachs said on Monday that Yoel Zaoui is to become sole head of investment banking in Europe, in a reshuffle of the U.S. investment bank's top European management.

Zaoui, who has played a key role in building up the firm's European M&A business, was previously co-head of investment banking in Europe alongside Chris French and Matthew Westerman.

French is to become chairman of European investment banking, while keeping his job as head of investment banking services.

Westerman will continue as sole head of the bank's European financing group, within the investment banking division.

The Zaoui (which we really hope is pronounced "Zowy!") family is really something to behold. Yoel's brother Michae holds the equivalent position at Morgan Stanley. So, basically, if you're doing a big M&A deal in Europe, the odds are pretty good one of the Zaoui brothers has a hand in it.

Moves [Reuters]

Zaoui takes helm for Goldman in Europe [Financial Times at MSNBC]

Yesterday it was announced that M&A big John "Studs" Studzinski is leaving the HSBC Group for the Blackstone Group. Studs made his reputation as the top dog for Morgan Stanley's M&A business in Europe during the 1990s. Originally from Boston--he graduated from St Paul's and Bowdoin College-- Studs moved to London a few years after getting his MBA from Chicago. While working at Morgan Stanley, he gained a reputation as a master dealmaker and networker, as well as a philanthropist and patron of the arts. A few years back the Pope even knighted him for his good deeds. Three years ago he left Morgan Stanley for HSBC, where he was charged with ramping up the banks M&A business.

We'd write more but the sources below pretty much cover the story. Also, writing about wealthy, successful people who are also so ridiculously...uhm...we guess the work is "good"...well, it makes us uncomfortable. We can already feel the brimstone scorching our souls without having to be reminded of it by guys like Studs.

HSBC Banker Jumps to Blackstone [NY Times]

Studzinski leaving raises doubts about HSBC's commitment [Financial Times]

HSBC's Top Global Banker Quits [WSJ]

Registered Rep mag profiles Mark Theirman, a class action lawyer (it's Class Action Day at DealBreaker) and ginormous Star Wars fan who is bringing suit against several large financial services firms for failing to compensate brokers for overtime work:

Thierman is now bringing his legal campaign east, with about 35 more class-action lawsuits, including some in New York, New Jersey and Pennsylvania. The list includes nearly every firm you'd expect, and then some: A.G. Edwards, Bear Stearns, Merrill Lynch, Morgan Stanley, Smith Barney, Edward Jones, Wachovia Securities and Raymond James & Associates. Thierman estimates that the suits represent about 100,000 brokers, past and present.

Wall Street Wage Fight [RegisteredRep.com]

James Gorman, head of Global Wealth Management retail at Morgan Stanley, has decided to give the ol' heave-ho to 500 of its 1,000 broker trainees. Gorman's explanation:

He described those being dismissed as "not tracking toward success" as financial advisers.

Morgan Stanley to Fire 500 Broker Trainees [CNNMoney via DealBook]
Morgan Breaks Broker Trainee Program; 500 Axed [NYPost]

Related:
The First Step in Merrill-izing Retail is De-Morganing It
Blue Horseshoe Loves a New Job at Morgan Stanley

The Westchester Journal News covers the Morgan Stanley "turnaround"**, and the significance of the Westchester office (besides its convenient geographic proximity to John Mack's house in Rye):

As the company looks to gain ground, Morgan Stanley's 725,000-square-foot complex in Harrison will play an important role. One function for the site is to serve as a backup facility in the event of a blackout, terrorist attack or other emergency affecting the company's Manhattan operations. Morgan Stanley's move into the building fit the pattern of financial services firms that fine-tuned emergency planning after the attacks on Sept. 11, 2001.

The site, which employs about 1,500 people, also is the headquarters for the company's global wealth management division, which oversees retail brokerage and private wealth management for individual investors. The 107-acre site, once the corporate headquarters of Texaco, also includes a conference center and trading floor for commodities and fixed-income products.

** It's like watching paint dry.

John Mack Is Hoping to Turn Around Morgan Stanley [JournalNews]

The revolving door at Morgan Stanley is spinning so quickly we're having trouble keeping track of who's coming and going. So starting today, we're going to keep a running tally. Today's additions (or subtractions, as it were:

At yesterday's Morgan Stanley shareholder meeting, activist Harry Korba took the opportunity to grill John Mack (who is apparently "sexy" according to at least one of you) about the details of the business:

There were 270 lawyers employed by the company in 2001, Korba said, how many are there now?
"About 328 full time," said Mack. "Not including compliance."
How much did it cost per copy to print this proxy, Korba asked.
"Eighty-five cents," Mack said, not missing a beat.

We generally like shareholder activists because they make the conference calls more interesting. (While we were working for one, he once showed up for a 9AM investor conference completely stoned, and asked questions accordingly.) So we're of the opinion that people like Harry Korba should be encouraged.

We were already looking forward to Overstock's April 25th meeting, but even more so since the activists will be out in full force. Questions for OSTK, anyone?

Score One for the Kooks [MarketWatch]

Former Morgan Stanley tech exec Arthur Reil is claiming that his discovery of what the Post calls "x-rated" emails between two of his overlords led to his firing. How x-rated?:

In a twist of fate, out of millions of e-mails, Riel said he found some of the terms in a thread between Kilcoyne and Tanaka. In one e-mail obtained by The Post, dated July 7, 2004, Tanaka describes her admiration for the prowess of Italian men, whom she called "Italian Stallions." She also graphically described her boyfriend's physical attributes as "The Italian Sausage." An earlier thread discussed the possibility of Tanaka and her boyfriend joining Kilcoyne and her husband, who also works in Morgan's IT department, to attend the Adult Video News porn movie awards in Las Vegas. Several weeks after he came across the e-mails, Riel said the firm accused him of violating the privacy of his colleagues.

Please. Our dry cleaner talks dirtier to us than that. (No pun intended.) But there's an easy way around email filtering for this sort of thing, as demonstrated by our own Muffie Benson-Perella, after the jump...

E-mail Troubles [NY Post]

James Gorman, in an effort to clean up Global Wealth Management (screw that; we're still calling it "retail") is axing 20 - 25 senior executives in the New York and Westchester offices. Who's coming and who's going? Send reckless speculation to tips AT dealbreaker DOT com...

Morgan Stanley fires 20 Plus Execs in Retail [Marketwatch]

And previously:
Blue Horseshoe Loves a New Job at Morgan Stanley

John Mack's hiring problems just got worse, but this time not on the advisory side. James Gorman, the new head of Global Wealth Management (or as we prefer to call it, "retail") has been barred from hiring away his former underlings at Merrill. The case seems to hinge on who called who and in which direction the soliciting occurred. Did Gorman call them or did they call Gorman and beg him to take them with him? Regardless, it begs the question:

Whatever happened to old-fashioned subtle obfuscation? In the good ol' days, there would have been no formal soliciting whatsoever. The Merrill employees would just telepathically show up one day at MS ready for work and there would be no paper trail, no phone logs, no nothing. Has Wall Street lost its touch?