The Wall Street Journal reports that Morgan Stanley CEO John Mack told his shareholders at the firm's annual meeting Wednesday that key employees would need to be paid the going rate if they were to remain with the company and help preserve its future.

Mack told how one hedge fund manager said to him recently: 'I can hire anyone I want from you and Goldman (now)', and revealed that some of Morgan Stanley's units had lost at least a dozen people. Bank of America CEO Ken Lewis also echoed these sentiments at his annual meeting, also on Wednesday: 'We have lost strong revenue generators over the past 3 months to competitors that are not facing the same compensation restrictions that we are'.

In the meantime, Bloomberg reports that, according to three unnamed people 'with knowledge of the decision', Deutsche Bank's board decided to ask CEO Josef Ackermann to stay on another 3 years, mainly because they couldn't agree about who should be his successor.

And Reuters reports that AIG is 'inching' towards more asset sales, and is planning a trio of  IPOs to float off divisions. The news agency quotes CEO Edward Liddy, who said: 'AIG will never again be the world's largest insurer. Pretty soon, you will have a much smaller AIG. And what's left will look a whole lot different than it does today'.

The Guardian reports that fears are growing that there is likely to be a mass exodus of hedge funds and private equity firms from London should tough regulations proposed by the European Commission become law. The newspaper quotes Florence Lombard, the head of hedge fund association AIMA, who said: 'The unintended consequences of these measures may put thousands of jobs in several major European industries under threat, and slow down any economic recovery. Many of the provisions will disadvantage European hedge fund managers against those outside of Europe, which could prove an incentive for them to move business elsewhere - negatively impacting badly-needed tax revenues for member states'.

Finally, The New York Post reports that Howard Kagan, the former chief investment officer over at hedge fund Harbinger Capital Partners, has slapped a $63m lawsuit on firm founder Phil Falcone, claiming that the funds are owed him as part of his separation agreement. Falcone is thought to have offered $32m to settle the matter out of court.

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