Bank of America touted two victories today in its war to retain the talent it has left following its acquisition of Merrill Lynch. It named Merrill veteran Steven Baronoff as chairman of global mergers and acquisitions and Stefan Selig as executive vice chairman of its global corporate and investment bank, according to a company memo circulated Monday.

Both will now report directly to Brian Moynihan, president of global banking and wealth management.

Associated Press

The men are among several high-ranking bankers to be elevated by Bank of America in recent months as the Charlotte, N.C. lender tries to win over key deal makers in the wake of multiple Merrill departures in early 2009. In June the bank was able to announce the retention of Fares Noujaim, who had been president of Merrill’s Middle East and North Africa operations and now is vice chairman of Bank of America’s global corporate and investment banking. Longtime Merrill executive Harry McMahon, who had been a senior vice president and vice chairman at Merrill, also decided to stay in early June as an executive vice chairman.

Compensation packages have been on the rise as Wall Street firms compete for the best talent. A spokeswoman declined comment on whether Mr. Baronoff or Mr. Selig received anything extra to take their new posts.

Mr. Baronoff, who joined Merrill in 1986 and has been in charge of its global M&A business since 2000, will serve in his new post as senior adviser to client and deal teams while also pursuing new deals on his own. Mr. Baronoff currently is advising PepsiCo on its offer for bottlers Pepsi Bottling Group and Pepsi Americas and also provided advice to Proctor & Gamble on its acquisition of Gillette, Sara Lee on its spinoff of Hanesbrands and Simon Property Group on its acquisition of Mills Corp.

In the memo, Mr. Moynihan calls Mr. Baronoff “an extremely seasoned deal maker and leader with tremendous client relationships.”

Mr. Selig is a veteran of the Bank of America side, having joined Banc of America Securities in 1999. Before the Merrill merger, he was vice chairman of global investment banking and global head of M&A. He currently is advising Broadcom on its hostile bid for Emulex, consulting firm Watson Wyatt in its merger with Towers Perrin and Time Warner on its spinoff of AOL. In his new role, he will focus on building relationships with CEOs and board members, according to the memo.

There is no better reminder than the former Soviet Union for how the fantasies of a few collectivist zealots can turn into unending nightmares for its people — and for how a state-run economy ends up with no economy at all.

If we’re lucky, a little Russian history on this trip will turn into a welcome wake-up call for Mr. Obama.

It’s not that Mr. Obama is some radical who carries a warm nostalgia for the Soviet Union from his university days. He’s way too young and too smart for that.

But the president believes in the state, certainly more than any other recent American president. He believes the state must actively intervene in the economy and that the state can bring about a better future. And it seems he believes it is his destiny to lead the state to that future.

In that way — and others — Obama reminds me of Vladimir Lenin, the founder of the Soviet state.

CNBC’s Jim Cramer made the Obama-Lenin comparison back in February. And the more I’ve thought about it, the more it holds.

Associated Press

A painting made during the Russian Revolution, showing Vladimir Lenin surrounded by revolutionaries, date unknown.

Of course, Obama is a reformer, not a revolutionary. And he’s certainly no communist.

But just like Lenin, Obama is a supremely self-confident leader — an intellectual heavyweight and a clever political tactician — an elitist moralizer and a populist champion. And just like Lenin, Obama carries the true-believers’ righteous fervor for “change.”

I was thinking of Lenin as I watched the president’s Rose Garden remarks on energy and innovation last Thursday.

After his eight minutes in front of the teleprompter, the president turned to walk away, and a reporter blurted out a question, “Mr. President, do you have a message for the small businesses on health and economy?”

The president should have just walked away. But it was as if he couldn’t stop himself as he launched into a rambling, haughty answer that I found…well, a bit scary.

It was scary because it demonstrated that Mr. Obama — almost half a year in office — still has no grasp of the everyday realities faced by America’s small businessmen. They can’t make payroll, but the president is directing them to buy LED lightbulbs and urging them to contact “clean energy” CEOs.

And it was scary because it showed that the president is still possessed by an unshakable conviction in the power of the state over the individual and of the future over the past.

As he put it in the Rose Garden, we have to change the health-care system. We have to change how we use energy. We have to change how we “train our young people.” “We are not folks who are scared of the future or look backwards. We always meet the challenges by moving forward.”

Political clichés? Of course.

But the president seems to actually believe his clichés. And some of his Rose Garden remarks could have been lifted from Lenin’s speeches circa 1918 - the same hectoring tone and the same mockery of opponents who long for the “status quo”.

Even Mr. Obama’s call to move “forward.” “Forward!” in fact was one of the Soviets’ favorite slogans.

The good news for those of us who are a little freaked out by Mr. Obama is that even Lenin did an about-face after the utter failure of his initial hard-left economic policies.

By early 1921, faced with the ruin and famine wrought by nationalization of the economy, the Bolsheviks re-instituted a quasi-capitalist economy with its New Economic Policy. Ironically, the NEP was aimed to help small businessmen — the very same people that the Obama economy so desperately needs nowadays.

Lenin called the NEP taking “one step backward to take two steps forward.” While he’s in Moscow, President Obama may want to ask someone at the Kremlin, just what Lenin meant by that.

Editor’s Note: Mr. Newmark was a student in Moscow in 1984, worked with George Soros on Russian economic reform in 1988-89 and ran the Goldman Sachs Moscow office from 1992-1994.

Mergers & Acquisitions

Rio Tinto: Bemis has agreed to acquire the U.S. packaging business of mining company Rio Tinto for $1.2 billion in cash and stock. [WSJ]

Data Domain: EMC increased its all-cash offer to acquire Data Domain to $33.50 a share, in a deal it said was valued at approximately $2.1 billion, up from its previous offer of $1.9 billion. EMC and NetApp are pushing competing bids for the computer-storage supplier. NetApp has submitted a $1.5 billion cash-and-stock bid. [WSJ]

Today in the Auto Rescue

GM’s asset sale may proceed: A federal judge approved the sale of GM’s assets to a new government-run company, removing a key hurdle to the auto maker’s plan to exit bankruptcy. [WSJ]
Related: The federal government’s role in GM’s recovery has raised concerns about the automaker’s choice of Orion, Mich. as the site for a new factory. [WSJ]

Today in the Financial Rescue

The U.K. rescue: Six months after the U.K. government scrambled to launch new bailout measures for Britain’s foundering banks and economy, several of those efforts are languishing with few takers. [WSJ]

Financial Institutions

Wells Fargo: The bank is expanding the securities business it inherited from Wachovia. [WSJ]

Trading Secrets: A Russian immigrant living in New Jersey was being held on federal charges of stealing secret computer trading codes from a major New York-based financial institution. Sources say the firm is Goldman Sachs. [Reuters]

Bank of America: The beleaguered U.S. bank ousted UBS as the world’s biggest wealth manager last year after buying Merrill Lynch. [Bloomberg]

UBS: The CEO of the Swiss banks wants to shake up the management ranks of its U.S. brokerage business after deciding against a sale. [FT.com]

Bonus culture: British banks should be forced to clamp down on pay, according to the head of Société Générale. [Times of London]

Nomura: The Japanese firm is in talks to move its U.K. business, including that which it acquired from Lehman, into an office development in the City of London. [FT.com]

Buyside

VC industry: Venture capitalists are turning to stimulus funding to aid or prop up start-ups. [WSJ]

VNU Business Media Europe: 3i has secured a rescue refinancing deal for the struggling Dutch media business that it bought in 2006. [Times of London]

China Investment Corp.: CIC appointed an international advisory board of economic and investment experts. [WSJ]

For whom the bell tolls: A total of 30 SPACs holding $6.2 billion in cash need to make an acquisition or liquidate by the close of 2009, according to a report. [WSJ]

Law Firms

Wachtell, Lipton, Rosen & Katz: The most-profitable U.S. law firm ranked No. 1 among legal adviser on mergers and acquisitions for the first half of 2009. [Bloomberg]

In China, investment bankers are the “elephant hunters” –- zeroing in on a select group of huge state-owned firms that are looking to do multibillion dollar IPOs or cross-border M&A deals.

Private equity firms have taken a different tack in China. They prefer to fund more nimble “mice” -– small, fast growing private companies with huge growth potential. To do so, they are willing to write checks as small as $25 million in hopes of big returns (see the $1 billion growth fund Carlyle just raised). Big buyout funds have struggled to land megadeals in China because the government has frowned on selling control of local firms to foreigners.

Along come Fang and his former Goldman colleague Richard Ong, who are taking an investment banking approach to private equity deals. They spotted an opportunity to buy into two of China’s biggest state banks, Bank of China and China Construction Bank, as their foreign strategic investors, Royal Bank of Scotland and Bank of America, sold chunks of shares to raise capital.

Most private equity funds would have frowned on such deals because they offer little influence and are already publicly traded. But Hopu’s team dug in, using their investment banking ties and skills to put together a consortium of Chinese state firms and Singapore’s Temasek Holdings to snatch up Bank of America’s $7.3 billion block. Neither side employed advisers in the deal as Hopu’s Richard Ong, who was previously co-head of Goldman’s investment banking team in Asia, played the middleman. Those deals both look very smart so far as global banking stocks have recovered from lows earlier this year.

In the latest deal, Fang’s long-time investment-banking relationship with one elephant, state-owned Cofco (its full name is China National Cereals, Oils & Foodstuffs Import & Export Corp.), meant he could get in on taking a stake in publicly traded China Mengniu Dairy, a firm hard-hit by last year’s milk scandal. China Mengniu was once a mouse: Morgan Stanley and two other investors paid just $26 million for a 32% stake in Mengniu in 2002. But now, it’s become an elephant with a market cap of nearly $4 billion.

All of this means that Hopu Fund, which counts Temasek and Goldman as limited partners, is putting capital to use faster than almost any other private equity fund in China. Those bets look good now, but obviously the proof will be in the pudding of returns over the life of the fund. Still, so far Hopu is having considerable success in hunting elephants.

Here are three likely sticking points for the private-equity investors that the FDIC ultimately hopes will buy some of the failed banks the agency has seized:

1) The FDIC would require a bank bought by private-equity investors to maintain a 15% Tier One leverage ratio, a measure of a bank’s ability to withstand loan losses, for three years. That seems high considering that a newly constituted bank is required to keep a ratio of just 8%, according Chip MacDonald, a partner at Jones Day. The FDIC wants to ensure that a recapitalized bank has adequate capital in case it runs into problems, but private investors might find that the 15% ratio would cut too deeply into their expected returns.

2) A private-equity owner cannot sell a bank for at least three years after the purchase. By comparison, the holding period for the investment team that recently bought BankUnited was 18 months, said Jeff Berman, a partner in the M&A practice at Clifford Chance. Private investors are likely to chafe at this requirement because it would prevent them from “flipping” their stake in the bank were the market to recover before the three years were up.

3) A so-called Cross Guarantee requirement will be another likely source of tension, though banking lawyers say it isn’t entirely clear how the proposed rule will be applied. It appears that if a recapitalized bank should fail, a private investor would be required to backstop the losses at one bank with his investments in another bank (that is the cross in the cross guarantee). Bank-holding companies are required to provide cross guarantees between different banks owned by the holding company. Private-equity investors are likely to balk if the FDIC rule requires them to put up their individual stakes in one bank as a guarantee for another bank.

It is possible the FDIC is merely testing the waters and will dial back the guidelines somewhat after the public has had time to comment on the proposal. “We are trying to find the best way to have a balanced approach, and we look forward to comments that can help us accomplish that,” FDIC Chairman Sheila Bair said in a statement.

Her inbox is probably going to get very full in the next few weeks.

Based on analysts’ earnings forecasts for 2009, Goldman Sachs Group Inc. is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm’s $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007, according to analyst estimates reviewed by The Wall Street Journal.

Morgan Stanley, the only other huge U.S. securities firm left as an independent company, will likely pay out $11 billion to $14 billion in compensation and benefits this year, analysts predict. On a per-employee basis, payouts are expected to exceed last year’s average of $262,000.

This news is hardly a surprise. Citigroup and Bank of America have been signaling that they are planning to raise salaries to retain top talent, trying to skirt the backlash against large bonuses.

All this highlights that as business returns and competition for top talent ratchets up, the “new” Wall Street is returning to its old ways.

Click here for a closer look at the WSJ’s graphic comparing the compensation and benefits per employee at Goldman Sachs and Morgan Stanley since 2006.

Equity underwriting surged. High-yield bond issuance jumped. Even the IPO market showed signs of life after months of being on life support. But the mergers-and-acquisitions advisory business? Not so much. And few deal makers are ready to say the cycle has bottomed out.

Here is a look at the first half of the year in M&A by the numbers ():

$144 billion
U.S. deal volume in the second quarter. Excluding 2008’s fourth quarter, the worst quarter since the third quarter of 2003.

Bloomberg News

Sheila Bair, speaking at the Operation Hope Global Financial Literacy Summit in Washington on June 17.

Then there is the FDIC. Chairman Sheila Bair has positioned the bank regulator as one of the more open agencies in the government, quickly populating the agency’s Web site with all sorts of information on, say, the failed banks it has seized and later sold off. Today’s meeting of the agency’s board of directors, at which new guidelines for private-equity investments in failed banks were to be announced, was to be a prime example, streamed live over the Web here.

So Deal Journal was disappointed when its attempts to live blog the meeting hit a technical snafu. The streaming video didn’t work. At first, there was heavy audio feedback. An FDIC lawyer could be heard presenting the guidelines over and over again. Currently, the video can’t be accessed at all. Clicking on the link for the video resulted in a page that said: Thank you for your interest in this live webcast: Please check back shortly to view the archive.

It turns out that sometimes the intersection of transparency and technology is a blinking red light.

“We certainly wanted the webcast to work,” said the FDIC’s director of public affairs, Andrew Gray. He said the agency has had many successful live streams of meetings before and that it was working to have an archived version of the meeting up on the FDIC’s Web site soon. He pointed out that the meeting still was open to the public and that reporters from several news organizations, including from Dow Jones, which publishes this blog, attended.

Deal Journal will have to report on this the old-fashioned way: by reading through the proposed guidelines and transcripts of the meeting. Stay tuned for more on the guidelines.

UPDATE: This post has been updated to reflect additional comment from the FDIC.

Associated Press

The drag on Morgan Stanley’s earnings, according to the article, is largely the result of the Wall Street firm’s decision to take fewer trading risks than its peers, as well as higher charges related to credit spreads.

But as its revenue retrenches in some areas, one bright spot has been in the largely gloomy world of M&A. In the first half of 2009, Morgan Stanley moved to No. 1 in Dealogic’s league table that ranks investment banks by the volume of U.S. mergers and acquisitions advised on. That is up from 10th at this time last year. In fact, Morgan Stanley is beating out Goldman and J.P. Morgan, which rank No. 2 and No. 3, respectively.

Globally, Morgan Stanley ranks third in Dealogic’s league tables, behind No, 1 Goldman ad No. 2 JP Morgan. Last year, Morgan Stanley was ranked 8th.

Morgan Stanley owes its U.S. bragging rights in part to the year’s bonanza of pharmaceutical deals, as it is advising Pfizer on its $68 billion deal to acquire Wyeth and is advising Merck on its $45 billion to buy Schering Plough.

As impressive is that Morgan is one of only two investment banks in the top 10 rankings to post an increase in the volume of deals worked on. (The other is Lazard.) This as the flow of deals from the M&A pipeline has slowed to a drip. World-wide, deal volume fell 28% in the second quarter to $1.12 trillion from a year earlier, according to Dealogic.

The result is that Morgan Stanley’s advisory business is becoming a larger revenue contributor. In the first quarter, Morgan’s M&A fees totaled about $411 million, compared with about $3 billion of total net revenue. A year earlier, advisory revenue totaled $401 million, compared with $7.9 billion in total net revenue.

Morgan Stanley’s second-quarter earnings may disappoint, but its M&A team is giving the venerable securities firm something to brag about.