4 Top Headlines for Investors in Goldman Sachs and Morgan Stanley
Here’s your Cheat Sheet to the week’s top business headlines for Goldman Sachs and Morgan Stanley:
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Goldman Sachs Group (NYSE:GS): Current price $144.48
Goldman Sachs and Morgan Stanley have reached agreements in principle with the Federal Reserve Board for them to pay $557 million in cash payments, along with and other assistance to aid mortgage borrowers. These resolutions are not unlike those reported on January 7th between 10 mortgage servicing firms and the Office of the Comptroller of the Currency and the Federal Reserve Board. Goldman Sachs and Morgan Stanley were subject to enforcement actions for their deficient practices in mortgage loan servicing and foreclosure processing, as were other lenders. The amount paid by Goldman Sachs and Morgan Stanley includes $232 million in direct payments to eligible borrowers and $325 million in other sorts of assistance, such as loan modifications and forgiveness of deficiency judgments.
Pressure from investors to reduce costs had gone unattended by the top executives at Goldman until this week. The officers are said by sources to finally have given in to cuts to staffing levels and compensation, although for the past two years they had opposed such measures on the grounds that if they reduced staff too much they would then be unprepared when the economy turns around and business returns, according to Reuters.
Morgan Stanley (NYSE:MS): Current price $22.36
The firm will take three years for the payout of 2012 bonuses to its high-earning employees, which is intended to better align incentives with shareholder interests, and also to make it harder for employees to leave, according to inside sources to Reuters, who explained that bonuses for all employees, with the exception of retail brokers that earn more than $350,000 annually and whose bonuses are a minimum of $50,000. Employees who resign or are laid off prior to the payments stand to lose their deferred compensation unless they negotiate a separate deal. This move on Morgan Stanley’s part is not unique; other lenders are or probably will devise similar plans.
Moreover, MS intends to eliminate 15 percent of its investment banking positions in Asia, according to knowledgeable sources, who identified the Asian Managing Directors Saul Raccah and Leon Guo as among investment bankers who will exit the firm. There was no comment from Xu Li, a Beijing-based spokeswoman, but the sources added that the job cuts in Asia investment banking will be greater than the 6 percent slash to be made across the broader institutional securities group, among which include research and investment banking, and fixed-income and equity sales and trading.