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Morning Coffee: Hope for the 29-year-old trader who compared his job to McDonalds. Barclays' bad news for M&A bankers hoping for a lift

Jesse Palombo as a philosophy student

It would be fair to say that Carlo Palombo’s career in finance peaked before his 30th birthday.  In 2008, at the age of 29, he was making $2m bonuses as a LIBOR trader.  Eleven years later, as a student of philosophy, he was sentenced to four years in jail, mainly for things he did as a twenty something LIBOR trader.  However, now, in his forties, he’s going to get a chance to set the record straight and clear his name

In the wake of the New York courts’ decision to drop criminal charges against Tom Hayes, the British Criminal Cases Review Commission has decided to refer the LIBOR cases to the Court of Appeal, holding out the possibility that Palombo’s conviction will be reversed.  It’s clear that this is important to him; in a statement, he commented that “I went to prison for conduct that nobody at the time thought was prohibited, let alone criminal; which was normal business practice and directed by my bosses and which the people who created Euribor said was permitted”.

Not everyone would necessarily agree with all of those statements about LIBOR manipulation being normal business practice, but it’s certainly true that the UK is the only place in the world where a criminal conviction has been made to stick.  And Palombo has been consistent for the whole time about the key point that he was directed by his bosses.

In fact, at the trial in 2018, he claimed that as a Vice President on the trading floor, despite the $2m bonuses, he was no more senior than “the guy who serves you at McDonalds”.  This was clearly a bit of hyperbole – among other issues, he was clearly important enough to tell the LIBOR submitters what to do – but it probably represented psychological truth for him; he certainly didn’t feel like he was making the decisions.

And now he will get a chance to make the same case again, and if he wins … then what?  Unfortunately, the courts aren’t able to direct you to a government office where they give you your reputation and a decade of your life back.  As well as the jail sentence, Carlo had to give up on the postgraduate philosophy degree he was studying (with an early specialism on human nudity) as he’s no longer allowed to visit the USA, and he missed precious years with his family. 

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In 2018, Palombo posted on Facebook that the “morally worthless corporate lawyers, prosecutors and public officials” on the other side of his court case should “enjoy your successful life and your social status, and be as unhappy as you can possibly be”.  Possibly the Court of Appeal will give him a bit of vindication, but even in victory, it feels like that might be poor compensation for what he’s lost.

Elsewhere, it appears that the light at the end of the tunnel has been turned off again.  After some optimistic comments on the deal pipeline from senior investment bankers at the end of September, Barclays CEO Venkat has suggested that despite his bank having been one of the recent winners in the ARM IPO, people shouldn’t get too excited.

This shouldn’t be surprising.  When the bosses were talking about a recovery in deal volumes, they were talking about “having put the US government shutdown behind us”, “a stabilisation of geopolitical uncertainty”, among other bullish indicators.  Looking around the world four weeks later, that seems like a much less solid thesis. 

Venkat says this is likely to put a damper on front-office hiring.  But there’s possibly some comfort to be taken from the fact that he’s still talking about the timing of the recovery, rather than whether it will happen at all.  It looks like 2023 is going to be a forgettable bonus year, but the mass redundancies that were feared earlier in the year haven’t really showed up either. 

Meanwhile…

The Wall Street Comptroller thinks bonuses could fall 16% this year. (Reuters) 

The Wall Street Comptroller says there are more securities jobs in New York City than at any time for the past 20 years (witness chart) (New York State Comptroller)

Analysts think Goldman Sachs' EPS could decline 36% year-on-year when it reports next quarter. (Reuters) 

Although it’s consolidating its international divisions and so will no longer have a regional head, Citi still wants to show some love to the APAC region, so it will be holding a board meeting in Singapore next week, for the first time since 2011. (Reuters)

Do you want to watch an Amazon series about Bridgewater and Ray Dalio?  What do you mean, “absolutely not”?  Would you be more likely to watch it if I were to tell you it is not an interminable series of lectures about The Principles, but a dramatization of all the conflicts and drama surrounding Ray’s retirement?  Based on a book that he’s already threatened a lawsuit over?  (NY Post)

Every year, fewer undergraduates take accounting degrees, to the extent that there now aren’t enough of them coming through to replace the accountants who are retiring. (WSJ)

One might have thought that the question of whether $250m of assets had been transferred is pretty cut and dried, but there’s apparently sufficient ambiguity over the Goldman Sachs settlement with the Malaysian government to make it to the court of arbitration.  (Financial News)

A widely predicted event has actually happened – a law student at New York University has lost a job offer over a message about the Hamas attacks on Israel, written to an internal group chat. (NYT)

In banking as in Hollywood, “if you want a friend, get a dog”.  If you ignore this advice and become corporate besties with an eccentric billionaire like Bill Hwang, make sure that the risk management is in place.  It’s fair to say Nomura has no sense of humour at all about the $3bn they lost in the Archegos collapse; their spokesperson “disagrees with the narrative portrayed in this article, which is based on anonymous sources and mischaracterization of the facts”, and apparently Hwang’s name is still too painful to utter out loud in the bank.  (Bloomberg)

The Wall Street Journal continues to give us astonishing life-hacks like “if you don’t want people to know you’re pregnant, try wearing a big baggy coat”.  And somewhat less convincingly, “different textured bags or a cool earring that draws attention away from the torso”. (WSJ)

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AUTHORDaniel Davies Insider Comment

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