In 2007, Morgan Stanley lost $9 billion on disastrous mortgage-related bets and then saw its business shrivel during the Great Recession and again in the face of new regulations. In response, it has been slashing costs, like its Wall Street rivals.
Last week, reports emerged suggesting that those cuts still have room to run, with another 1,600 people, including many from its blue-chip investment banking division, to be laid off in coming months. And the shrinkage could get worse. According to The New York Times, the firm may exit the high-stakes bond trading business, much as Swiss bank UBS did last year in the wake of its own massive losses.
Although Chief Executive James Gorman deserves credit for trying to make the firm less reliant on risky trades and generate more revenue in the steadier business of managing people’s money, the company’s stock price has languished and its outlook remains bleak. Barclays Capital, for example, estimates the bank’s return on equity—a key measure of success—will be 5.7% this year, well below Goldman Sachs’ 9.5%. Closing that gap may require Mr. Gorman to part with more of his 58,000 employees.
Meanwhile, even mighty Goldman, after cutting more than 1,000 jobs beginning in 2011, has more recently turned to thinning the vaunted ranks of its partners, in another sign of Wall Street’s ongoing retreat.
RETHINKING STOP-AND-FRISK. Police officers in the Bronx are going to have to think twice before stopping people on the street. A federal judge has ruled against the NYPD’s controversial stop-and-frisk practice, stating that it “systematically” violated the constitutional rights of residents. The judge said cops can use the tactic only if they have “reasonable suspicion of trespass.”
… SIGNS OF THE TIMES. The forest of parking-regulation signs in parts of Manhattan will get a much-needed $180,000 makeover, designed to make them easier to decipher. The 6,300 new signs will max out at 140 characters each, down from 250 now. Meanwhile, cyclists will get more parking spots. The Department of Transportation is spending $2 million to turn 12,000 old parking-meter poles into bike racks.
… SANDY KO’S MANDEE. The superstorm has claimed another victim—Big M. The retailer, which owns discount chain stores Mandee, Annie Sez and Afaze, filed for Chapter 11 bankruptcy protection, blaming the bad news on guess what? Totowa, N.J.-based Big M said it hopes only a handful of its 129 stores will shutter because of the bankruptcy. Several of its Mandee stores are on hard-hit Staten Island.
… CRASH LANDINGS. First thing on Wednesday morning, a ferry shuttling more than 300 passengers from New Jersey crashed into a pier in lower Manhattan, injuring 74. A few hours later, on the other side of the East River, a 300-foot crane toppled on the site of an apartment building that was under construction in Long Island City, Queens, injuring seven workers. Both incidents are under investigation. Early reports on the ferry laid the blame on a mechanical malfunction.
… BANKS PAY UP. A group of major banks agreed to pay $20 billion to settle mortgage-related abuses dating to the boom years. Additionally, Bank of America agreed to pay $8.5 billion over its “robo-signing” practices. Whew! Now that the banks have cleaned up their affairs, experts say, they may start lending again. New rules last week from the fledgling Consumer Financial Protection Bureau are designed to encourage more lending—while ensuring borrowers don’t get bilked.
… LIPA, R.I.P. Having failed customers miserably during Sandy, the state-run Long Island Power Authority should be sold off to someone who knows what they’re doing, said Gov. Andrew Cuomo. But who wants it? A panel ID’d two potential buyers, including Con Edison, but experts said neither has the cash nor the appetite.
… RENTS DO IT AGAIN. It’s official: Average rents in Manhattan rose yet again last year, finishing 2012 up 5%, according to a report by Citi Habitats. Luxury apartment rents in the borough soared 22%, driven up by folks who could afford to buy but simply couldn’t find the perfect pad, said Douglas Elliman and Miller Samuel Inc.