The new Trader Monthly is out today and since a lot of it is unavailable online and I've never seen or heard of anyone voluntarily buying the print edition, I decided I would read it for you and say something if anything good happened to come up. I never thought I'd say this, but something did. A profile of Morgan Stanley CEO John Mack, by CNBC reporter Charles Gasparino, which begins with, I shit you not, a quote from Goodfellas. My original intention was to humorously summarize the verbal stylings of this mythical creature, but I ultimately realized that to try and imitate/compress the work contained within is akin to etching a stick-figure rendition of the Sistine Chapel. Thus, I will simply submit this excerpt, and invite all to buy a copy for themselves (or deign to read the free one in the office). Before I do, a couple of words: I get the sneaking suspicion we are seeing the Observer Effect at work here. No Sleeves knows full well we are chronicling his every dagoesque utterance, and we submit he is subconsciously ginning up his I-talian in response to our observations. This sucks for two reasons: First, he is muscling in on my turf: this shit is getting hard to parody. Second, it's a pose: Any pipe-banging paesano would cut this make-up wearing blow dry boy down before breakfast, sleeveless sweatshirt and all. Anyway. I can’t stay mad at him. Let us behold:

“IF YOU’RE PART of a crew, nobody ever tells you that they’re going to kill you — doesn’t happen that way. There weren’t any arguments or curses like in the movies. See, your murderers come with smiles, they come as your friends, the people who’ve cared for you all of your life. And they always seem to come at a time that you’re at your weakest and most in need of their help.” — Henry Hill, Goodfellas

New York’s five major families, despite decades of turf wars and nasty infighting, have coexisted remarkably well in recent times, which isn’t surprising considering how much money they’re raking in — more than enough for everybody.

I’m speaking, of course, about the StreetMob: Goldman Sachs, Morgan Stanley, JPMorgan,Merrill Lynch and Lehman Brothers. I’ve always found the similarities between Wall Street and La Cosa Nostra striking. Bosses. Made guys. Foot soldiers. Tribute. Sitdowns. Cozy ties with politicians. Hits.

Of course, people don’t get “whacked” on Wall Street — not literally, anyway. But they do get shot down execution-style, and such hits are often rather Mob-like. Firings are usually preceded by fake smiles. Demotions often occur with disingenuous gestures of support. Take, for example, the number Morgan Stanley’s CEO, John Mack, recently did on Zoe Cruz.

Out Comes The Knife [Trader Monthly]

So who is on this list of 14 companies under investigation by the FBI for their involvement in the subprime mortgage crisis? The FBI apparently intends to keep us in suspense because they won’t give details. All we know is that they are looking into “allegations of fraud at various stages of the mortgage process, from companies that bundled the loans into securities to the banks that ended up holding them.”

So let’s recklessly speculate. Two companies that are sure to be on the list are Bear Stearns—which is already under investigation by federal prosecutors and the SEC—and Countrywide, which is both the biggest home loan lender and also facing an SEC inquiry. Goldman Sachs is very likely on the list. It was accused on the pages of the Sunday New York Times of misleading clients by packaging CDOs while shorting the mortgage market. We know that at least one Senator read the article and has been making a stink, and we know that federal investigators often get their leads by reading the paper. What’s more, Goldman Sachs has said that it is cooperating with an unnamed government agency.

Morgan Stanley has also admitted to cooperating with unnamed government authorities. At first, everyone assumed this was the SEC. But why wouldn’t they come out and say that? More likely they declined to name the agency out of fear that saying they were cooperating with the FBI would tar them with serious criminality—rather than the everyday Wall Street shenanigans implied by an SEC investigation.

So that gives us four good leads. Who else is a cylon on the list? No doubt some additional mortgage companies and some home builders. Maybe the ratings agencies are also. Leave your guesses in the comments section below.

FBI Launches Subprime Probe [Wall Street Journal]

A (very) recently fired Credit Suisse employee tells us that “Every conference room on the CMBS floor has an HR representative working through people as they show up for work. Analysts and Associates seem to be the first out the door.” We understand that for the victims, this might seem like bad news, and yeah, you’ll probably feel weird about going to Shake Shack for a while, but the flipside is that you won’t have to deal with the embarrassment of being employed by Bear Stearns, when the two banks merge. In related news, Morgan Stanley has announced plans for its own population restructuring, as modeled after the redistribution project in the Sudan. If you have any other info, feel free to share, or not share, otherwise, enjoy this one on me:

Andy Xie. Andy Xie, Andy Xie, Andy Xie. Hast thou learned nothing from Lucy Gao?

I participated in the panels on commodity and China-India and in some obligatory dinner parties. On Friday night, the Singapore PM invited the speakers at the meetings that Singapore government organized. Trichet, Larry Summers, Paul Volker, Chuck Price, the finance ministers of ASEAN countries were there. No government official from China was there. I guess I was there to make it look like China was represented. The dinner was turned into an Oprah with PM Lee Hsein Long at the center. The topic was on the future of globalization. People fawned him like a prince. Of course, he is. There are two reigning royalties in the world that the Davos crowd kiss up to, Jordan and Singapore. The Davos crowd are Republican on economic issues and Democratic on social issues. Somehow, they mange to put aside their moral misgivings and kiss up to Lee Hsein and Abdullah.

Birthday party invite email continues after the jump.

Morgan Stanley Star Exits After an Email Leak [WSJ]

Morgan Stanley is saying that chief executive John Mack has also been cleared by the SEC of the insider trading allegations raised by a former SEC investigation, CNBC's Charlie Gasparino reported a few moments ago.

Former SEC investigator Gary Aguirre has said that he was investigating insider trading at Pequot Capital when he was abruptly fired after he sought to depose a top Wall Streeter. The SEC launched an inquiry after Aguirre went public with his charges, testifying before a Senate committee looking into hedge funds.

We should note that clearing Pequot and Mack of insider trading doesn't make the allegations of political interference with Aguirre's initial allegations go away. Those allegations were made under oath and penalty of perjury, and so far we haven't seen any evidence that they've been seriously investigated.

Just because John Mack wasn't engaged in insider trading doesn't mean someone in the Bush administration didn't try to protect him from an investigation.

The Score: Pequot and Mack: in the clear. The Sec: still an open question.

Morgan Stanley is joining the inter-brokerage pact set up by Merrill, Smith Barney and UBS Wealth Management USA two years ago in an effort to set out some rules for what client information brokers were and were not entitled to take with them when they left the firm. Before the pact, brokers frequently found themselves threatened with litigation from their former employers when they recruited old clients to their new firm. Now the brokerages who have signed on have agreed that brokers can take client names and contact information and solicit business from them, but are not permitted to take account details. It seems to be working-the sue-your-ex-broker litigation is down-which is sort of a shame. We kind of miss the days of brokers having to smuggle client information out in the dark of night. The new way seems so civilized.

Morgan Stanley to Sign Hiring Pact [Dow Jones Newswire in Houston Chronicle]

The John Mack led rebuilding of Morgan Stanley continues. Last week it made significant moves to rebuild its financial institutions group, hiring a pair of bankers away from Credit Suisse and one from Merrill. Today comes the announcement that it has hired two asset managers from New York Life-Kathy O'Connor and Jeff Sanders-to bolster its asset management business. The pair managed around $3 billion in assets for New York Life, and previously worked together at Towneley Capital Management.

John Mack's still shoring up the ruins of his Morgan Stanley kingdom. Today news broke that the firm had picked four new managing directors to rebuild its financial institutions group-the folks who do investment banking work for banks and insurance companies. The group had reportedly suffered serious personnel losses in the rebellion against Mack's predecessor, Phil Purcel.

The new folks include Mike McMahon and Mike Ostow, both of whom are coming from Credit Suisse. The two Mikes have been working under Morgan Stanley defector Vikram Gandhi. Mahmoud Mamdani was brought in with hopes that his relationships can help grow Morgan's FIG group, which currently ranks fifth on the league tables. From Merrill, the firm has picked up Maurice Marchesini-a Los Angeles guy who will concentrate on the "three hours behind New York" business.

No doubt behind these fellas will be a bunch of junior folks who will telepathically show up at Morgan Stanley reporting for duty, with no solicitation or violations of non-compete agreements from their former (and to be) bosses whatsoever.

Morgan Stanley Replenishes FIG Unit [Dow Jones Newswire in EasyBourse]

Back in the late nineties we briefly considered becoming derivatives traders just to work with one guy-Ralph Reynolds. He had recently been hired away from Morgan Stanley by NatWest to develop a U.S. equities derivatives business for them. Word was that Ralph was the real deal, hardcore, that he "got it."

That move didn't last long. Soon NatWest itself was on the block-it would eventually wind up with the Royal Bank of Scotland-and Ralph's team wound up with Deutsche Bank, running their proprietary trading desk. (It was right around this time, by the way, that the NatWest 3 were allegedly doing whatever it is they allegedly did.) Someone else gave us a different job and our dreams of trading for Ralph slipped away.

Over the years we kept hearing about Ralph. When Morgan Stanley seemed to be melting down in 2005, for instance, he hired a bunch of lads from Morgan to work for him at Deutsche. Someone once wondered aloud if Ralph's success at Deutsche was turning the entire bank into one big hedge fund.

Well, Ralph's still with us. But he won't be with Deutsche Bank for long. This morning Reuters is reporting that Ralph is moving over to Carlyle to run a hedge fund.

Carlyle to hire chief for new hedge fund-sources [Reuters]

We've been spending some time trying to clear away the murk and shine some light into the shadows of Jeffrey Epstein's financial dealings in an effort to provide some, uhm, actual financial reporting related to the sex candal encircling the mysterious money manager. There's not much that is publicly available but we're still digging.

What we have discovered, however, is a brief document amending a credit agreement for RELIANT PHARMACEUTICALS, INC. The amendment replaces the administrative agent for the credit. But what caught our eye was the confluence of three DealBreaker subjects all in the same documents.

The signature pages include lines for Morgan Stanley CEO John Mack, who is scheduled to appear before the SEC in connection with allegations of insider trading at Pequot Capital, as well at Jeffrey Epstein, who signs as trustee of the Wexner Children's Trust II, part of the financial empire of The Limited founding family. And the agent who is being replaced? Goldman Sachs, where alleged insider trading crooks Eugene Plotkin and David Pajcin worked (not to mention the alma mater of that other DealBreaker obsession, Hank Paulson).

Now this is no doubt just a coincidence, and not really a conspiracy to make our heads explode. We should probably just take a deep breath and then post a Venn Diagram illustrating the connections but our diagramist is in meetings off-site.

One additional thought: this is probably the last time you'll see Epstein's name coupled with the words "trust" and "children" any time in the near future.

Reliant Consent, waiver and amendment [SEC]

The Street.Com's Matthew Goldstein and Lauren Rae Silva report that Ira Chilowitz, the former Morgan Stanley consultant charged with stealing confidential information from Morgan Stanley's prime brokerage group is said to have passed information on to a former director of S3, a three year old hedge fund consulting firm founded by former Credit Suisse prime brokerage head Robert Sloan. The co-conspirator has not been charged.

Here's the nut graph from TheStreet.Com:

Prosecutors in Manhattan did not identify either the co-conspirator or the firm. But people familiar with the investigation confirmed that the firm is S3 and that the unidentified co-conspirator is a former director. These same people say the former S3 director, who previously worked in Morgan Stanley's prime brokerage group, was recently fired.

We should note that prosecutors have not alleged wrong doing on behalf of founder Bob Sloan, pictured above left, or S3 Partners itself. An earlier version of this item claimed that Chilowitz had also been an employee of S3. We're told by S3 that this was wrong, and Chilowitz never worked for the firm. We apologize to our readers and S3 for the error.

We still don't know the identity of the former S3 director alleged to have conspired with Chilowitz.

Adviser Eyed in Morgan Stanley Theft Probe [TheStreet.Com]

Our People [S3 Partners]

Paul Schapira, a long time Goldman Sachs veteran who took over the firm's natural resources group in 2002, is going to Morgan Stanley where his responsibilities will include relations with Italian clients and the European energy sector.

Schapira gained a good bit of notoriety when he worked on the initial public offering of PetroChina, the oil-and-gas behemoth spun off of China National Petroleum Corp. The deal became controversial when a coalition of pro-tibet tree-hugging hippies, Lutherans concerned over the company's investments in Sudan, and unions seeking to keep China out of the World Trade Organization, sought to scuttle the deal. Several U.S. institutional investors declined to participate in the IPO, although Goldman succeeded in selling the shares to overseas investors.

We're trying to find out how recently Schapira left Goldman. The newswire stories are a bit ambiguous about this, and we neither Goldman nor Morgan Stanley have gotten back to us. The reason it matters is that we're trying to determine if this can reasonably be called a defection and whether it is fair to infer that Schapira's move may be related to the "fighting like ferrets" that allegedly went on among the Goldman bigs following the decision of Hank Paulson to take the position of Treasury Secretary. If you know anything send it to Tips(at)DealBreaker(dot)com or drop them below in the comments.

Morgan Stanley hires energy banker from Goldman [Reuters]

Ira Chilowitz allegedly tried to make off with Morgan Stanley's list of hedge fund clients and the rates they get charged but got caught. Now he's in jail. So now it's official. There is at at least one person who worked for Morgan Stanley who won't be starting his own hedge fund or boutique investment bank.

According to court documents, Mr. Chilowitz is accused of sending a copy of the firm's administrative client list and its client rate list for the prime brokerage business in February from Morgan Stanley's offices in New York City to his personal E-mail account at his home in Virginia.

Mr. Chilowitz also is accused of engaging in a conspiracy with an unnamed co-conspirator to steal the client list and rate list, according to court documents. The unnamed conspirator isn't a Morgan Stanley employee.

After one year under CEO John Mack, Morgan Stanley has more than doubled it's net income, according to today's earnings report. Trading did very well, the mergers and acquisition advisory business was less damaged by the defections under Phil Purcell, Mack's predecessor at tha bank, than some had suspected and even the brokerage business did better. The DIscover credit card division, which Purcell had planned to sell, saw its revenues rise 34%.

Morgan Stanley Net Doubles on Trading, Underwriting [Bloomberg]

Ahead of tomorrow's expected Morgan Stanley earnings announcement, Bloomberg has a long profile of CEO John Mack's career and recent changes he's made at the firm. Among the things we didn't know until we read the article, Morgan Stanley hired almost twice as many managing directors and executive directors in the first half of 2006 as it did in the first half of 2005. Among the things we did: everything there is to know about those 1,000 under-performing brokers he let go. It's still hard to pass through Murray Hill without hearing someone muttering about being let go from Morgan Stanley.

Mack's Talent Rebound at Morgan Stanley Fails to Propel Shares[Bloomberg]

Last year Morgan Stanley went through a high-level meltdown, losing dozens of bankers and traders to rivals. The subsequent shareholder revolt forced out the sitting CEO, whose internal reforms were blamed for triggering the defections, and left current CEO John Mack to oversee the ruins.

Word comes in over the wires today that Morgan Stanley has won back Jon Anda (pictured above and left, in yellow), who was co-head of Morgan Stanley's Global Capital Markets group before departing in January. He had been set to join the still-unnamed Joseph Perella M&A boutique. None of the published accounts indicate why Anda flipped back to Morgan Stanley.

Anda Leaves Perella's Firm to Rejoin Morgan Stanley [Bloomberg]

When we were in college we used to have dreams like this. Big cats, typing on keyboards, usually typing out our overdue term papers for us. But they were always written in catish, and that really wasn't going to work.

Not sure what that was all about. Maybe it was the specific cocktail of chemicals we employed to fight off boredom in those days. But its nice to see that some people are still caught in the land of typing cats. And by some people we mean Morgan Stanley, which recently won a victory in arbitration against Baroness Penelope Cat of Nash DCB, Ashbed Barn, Boraston Track, Tenbury Wells, Worcestershire WR15 8LQ, GB..

For reals.

Morgan Stanley Fought Feline - and Won [DealBook}

Morgan Stanley bought Boston hedge fun Oxhead Capital, according to published reports. Reuters reports that Morgan Stanley said the hedge fund oversees about $100 million of assets. This is significantly less than the $168 million disclosed in its registration statement. So what gives? Possibilities include Oxhead losing lots of money on bad investments, losing investors, paying its managers huges fees or paying out a good chunk of its total investment capital to investors. Either that or Morgan Stanley just low-balled the number. Or maybe something else entirely.

There's more good information in the registration statement, including a guess at where the $68 million went. Details after the jump.

It seems to be open season on Morgan Stanley's Stephen Roach, the banks London-based chief international economist. Two weeks ago the National Post's David Berman laid into him, and today Rich Karlgaard labels him "Wall Street's Worst Economist."

Who else but Morgan Stanley's Stephen Roach? In November 2004, he said the U.S. had "no better than a 10% chance of avoiding economic Armageddon." Since then the economy grew about 4% annually. This kind of shocking error has been, alas, typical of Roach. Since the recession of 2001-2002, Roach has been unremittingly bearish. He was last bullish in, no kidding,1999. Don't bet on Roach, in other words.

We're not ready to jump on the anti-Roach bandwagon, even after a former collegue told us that "Roach is more of a marketing thing these days. No one invests on his advice." Whenever we're tempted to dismiss Roach we remember his article arguing that Tom Friedman's 'The World Is Flat" thesis was just plain wrong. Check it out. Roach comes off like a Matt Taibbi you could invite to dinner with your mother.

Wall Street's Worst Economist [Digital Rules at Forbes.com]

From today's announcements in Reuter's "Move" column.

Goldman Sachs said on Monday that Yoel Zaoui is to become sole head of investment banking in Europe, in a reshuffle of the U.S. investment bank's top European management.

Zaoui, who has played a key role in building up the firm's European M&A business, was previously co-head of investment banking in Europe alongside Chris French and Matthew Westerman.

French is to become chairman of European investment banking, while keeping his job as head of investment banking services.

Westerman will continue as sole head of the bank's European financing group, within the investment banking division.

The Zaoui (which we really hope is pronounced "Zowy!") family is really something to behold. Yoel's brother Michae holds the equivalent position at Morgan Stanley. So, basically, if you're doing a big M&A deal in Europe, the odds are pretty good one of the Zaoui brothers has a hand in it.

Moves [Reuters]

Zaoui takes helm for Goldman in Europe [Financial Times at MSNBC]