Opinion

Felix Salmon

Counterparties: Grimes and misdemeanors

December 21, 2012

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When Morgan Stanley won the lead role in Facebook’s IPO in February, its lead technology banker Michael Grimes insisted that he be the “single driver” of the deal. In exchange, he acknowledged that it would be “his throat to choke” if anything went wrong.

In the wake of Facebook’s botched IPO, however, it looks like Grimes doesn’t have to be worried about any retribution from his employer. Fortune’s Stephen Gandel reports that Morgan Stanley won’t use its stringent clawback rules “to take any disciplinary action against Grimes or any of the bankers involved in the Facebook IPO”. This despite the fact that Morgan Stanley has been fined $5 million by Massachusetts’s securities regulator for selectively disclosing financial information to research analysts, a tactic Grimes did “everything but make the phone calls himself” to execute.

Perhaps Grimes is keeping his pay because he did nothing wrong. Jonathan Weil says the settlement is “farcical”, and that Morgan Stanley should have let the case go to a jury: “even viewed in the worst possible light,” he writes, “none of the conduct described by Galvin was an obvious breach of anything.” Weil suspects that “the real crime here seems to be that Facebook’s stock price fell a lot after the company went public in May, which of course isn’t a crime at all.”

Grimes is also keeping his pay because even after the Facebook fiasco, he’s still the biggest rainmaker on the Street. Gandel reports that in the seven months since the Facebook IPO, Morgan Stanley has generated $32 million in fees from 14 technology IPOs; JP Morgan is a distant second, with just 5 deals to its name in the same period. Grimes’s throat was safe all along, it seems. Just so long as he kept on bringing in the deals. — Ben Walsh

And on to today’s links:

Charts
The best 34 charts of 2012, as chosen by economists and business journalists – Matthew O’Brien

Oxpeckers
The NYT paywall is working much better than anyone expected – Edmund Lee

Modest Proposals
It’s time to sell Alaska – WaPo

Even More TBTF
The new threat to the financial system: derivatives clearinghouses – Bloomberg

Housing
Household formation and why it’s crucial for the US economy next year – Cardiff Garcia

Taxmageddon
Former Speaker of the House? – Ezra Klein
GOP revolts against fiscal cliff Plan B – NYT

Popular Myths
Structural changes do not explain high unemployment – NBER

Strange Bloomberg Headlines
“Carney Not Yet With Pink Set Sharing Policies Beyond BOE Circle” – Bloomberg

EU Mess
Southern European unemployment: The “largest policy failure in the developed world since the second World War” – Stuart Staniford

Wonks
Debt is “one of America’s greatest exports” – Neil Irwin

Ugh
The unemployed will be remotely monitored in the UK to ensure they’re looking for work – Telegraph

Financial Arcana
The tri-party repo market is improving by getting smaller – WSJ

Euphemisms
Slideshows: a “wonderful, native storytelling tool” – Digiday

Crime and Punishment
Peter Madoff is $143 billion dollars in debt – Reuters

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