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by Derek Loosvelt | June 28, 2010


That didn't take long. As Bloomberg points out today in anarticle full of quantitative data, investmentbanks have been hiring bankers by the hundreds and offering bonuses by themillions (so much for that G20agreement last year). Much of this hiring is a result of the return of theequity and deal markets: now that there's billions to be made again, financialservices firms have begun to replace the 345,000 jobs that were cut in thefallout after the financial crisis hit.

A lot of the hiring and guaranteed bonus paying are being done by the largestbanks on the Street (such as Citi and Goldman) but some are also being done byrelatively smaller, lesser-known banks (such as Nomura and Jefferies, which hasrecently increased headcount by 25 percent, taking advantage of all the bulgebracket talent that had been laid off in '08 and '09). The hiring trend isexpected to continue during the rest of '10, albeit likely at a slower pacethan it did during the first six months of the year (typically banks hire more inthe first half of the year than the second).

And now that it's become clear how the financialregulation overhaul will shake out (this past Friday, terms were agreedupon by legislators from the U.S. Congress and Senate; terms will be voted uponearly this week and likely signed into law at the end of the week) firms willbe able to step up their hiring in hedge funds, private equity,derivatives and prop trading, areas which were limited by new regulations butnot restricted altogether.

Indeed, banks, it appears, will still be able to invest their own capital invarious derivatives, hedge funds and private equity funds, although they willonly be allowed to put 3 percent of their Tier 1 capital to use. What wasagreed upon was a serious relaxing of the so-called Volcker Rule, which would'veprevented banks from investing any of their own capital in these instruments.

Despite banks getting off easy, some large firms such as JPMorganChase will be monetarily affected, perhaps to the tune of a 14 percent hit to itsbottom line. Still, this would be but a minor setback and seen as a win and not a loss, given that theentire industry had been brought to its knees less than two years ago.


Filed Under: Finance
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