WEEK IN REVIEW: MORGAN ISN’T GUARANTEEING INDEPENDENCE; RUNNING FAR IN FRONT

How the mighty have fallen. J.P. Morgan & Co., the country’s fourth-biggest bank and the one named for the man who single-handedly stopped panics and made markets, is willing to consider a merger, although it isn’t looking for one. That’s what its chairman and chief executive, Douglas Warner, told its employees in a memo. They were especially interested, since the memo also announced that 5% of them were being made redundant, as the British so delicately put it. In fact, 100 were redundantized in the London office, some of them getting the hint when they couldn’t log on to the office computer, and another 100 in Asia. That leaves 500 still to be offed.

Morgan took quite a hit, hiring high-priced Wall Street help in an effort to do IPOs with the big boys. What happened was that while revenues last year climbed 5.2%, to $7.22 billion, expenses grew even faster, 12% to $5.07 billion. Sometimes even bankers have to pay.

Things aren’t all that cheery at another investment bank with Morgan in its name, Deutsche Morgan Grenfell. You already know that parent Deutsche Bank AG has given up on it, and further confirmation came with the news that Maurice Thompson, a high-priced import three years ago, is leaving as co-head of global investment banking. Kassy Kebede is dropping out as head of global structured equity derivatives, but the Frankfurters will keep him around until they find something for him to do. Edson Mitchell, the other head of global operations, says, “I’m not going anywhere,” but Deutsche Bank’s North American CEO, W. Carter McClelland, is expected to seek greener pastures. This week saw 110 leave; no word on the 8,890 other Deutsche Bankers soon to be on the dole.

Think borrowing

Things seem a little brighter on the commercial banking side. The Supreme Court ruled that credit unions can’t expand indefinitely, for one thing, and for another, Chase Manhattan Bank Corp.’s Donald Boudreau, vice chairman for retail banking, sees a bright future in debt-heavy consumers. “We will i
nvest in businesses we think have potential: credit cards and mortgages” he says.

The next day, Freddie Mac reported that the average interest rate for a 30-year fixed-rate mortgage had risen to 7.09%, up from 6.99% the previous week and from a four-year low of 6.98 in the middle of January.

Maybe Chase knows something.

Don’t let the stars get in your eyes

Good news too, for Bankers Trust New York Corp. Its BT Investment Equity Fund topped a field of 117 foreign stock funds for the five years ended Dec. 31. Morningstar Mutual funds conducted the survey. BT was the hands-down winner: No other fund got the service’s five-star rating for every month measured.

Now a stock fund gets life insurance

SunAmerica Inc. is such a believer in variable annuities that it has introduced something like them for its mutual funds. They call it the Asset Protection Plan, and it will pay your heirs your initial investment plus 4% a year to a maximum of 200%. Cost to the insured? Twenty basis points a year, paid quarterly.

Predator’s fall

Michael Milken, 51, the man who made junk respectable before he went to jail, agreed to pay $47 million to settle charges that he acted as a broker in violation of a Securities and Exchange Commission order.

The commission charged that Mr. Milken helped to arrange an investment of as much as $2 billion by MCI Communications Corp. in Rupert Murdoch’s News Corp. A second charge involved being a middleman in a News Corp. investment of a half billion in New World Communications Group Inc.

Mike, who is still on parole for insider trading convictions, made $42 million on the deal; the other $5 million he paid is interest. He neither admitted nor denied the charges.

Spoiled system?

Merrill Lynch & Co. seems to have gotten itself into a fine mess when it fired star Cape Coral, Fla., broker Alex Lambros Jr. The company says it was because he destroyed an envelope; he says it was because he raised ethical questions and so his boss could divvy up his $88 million worth of accoun
ts and keep the good ones for himself.

Brokers think more and more top producers are being fired so the house can get their books, keeping more of the commissions for itself and passing out accounts as rewards.

A Big Board arbitration panel ordered negative remarks expunged from Mr. Lambros’s firing notice, but it awarded him no damages. Now he is suing in federal court, and new evidence has mysteriously appeared.

Merrill, in a separate action, agreed to change how it passes out accounts of departed brokers. It’s promising to do it in a non-discriminatory fashion. Women had charged in a sex-discrimination suit that a secret system gave the spoils to men.

Fox for President

Aetna Retirement Services named Mary Fox president of its financial services unit. She comes from Aetna Life Insurance and Annuity Co., where she headed sponsored life insurance strategy and operations. Both are subsidiaries of Aetna Inc. in Hartford, Conn.

Ladies, please

You know those sweet grandmothers in Beardstown, Ill., whose investment club made more money than Mr. Standard and Mr. Poor put together? And then wrote five best-selling books about how they did it? Well, it turns out that maybe they included the $4,800 annual club dues in calculating their rate of return, which would lower it considerably. Or maybe they didn’t. Their records are unclear. Hope they don’t have to face the IRS.

Bloomberg News

contributed to this report

closing Quote

“You don’t have to be alive too long in this business to be watching reruns.”

Michael Stolper, president of Stolper & Co. in San Diego, speaking of the decision by Scudder Kemper

Investments Inc. to reemphasize

high net-worth clients. Page 3

Running far in front

Somewhat dampening another record week on the New York Stock Exchange was an SEC investigation of brokers trading for themselves rather than for the customers. Eight floor brokers, a small non-member firm and two of its owners were charged with illegally profiting – by almost $11 million – from inf
o picked up on the floor.

Henry Klehm, the SEC director of compliance for the Northeast region, says his probe is widening to include large Big Board member firms as well. The independent floor brokers hear all the good stuff but aren’t supposed to use it to trade on their own account.