Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits (2 page)

ARJUN KHAN STRAIGHTENED
his tie, brushed a lint ball off the charcoal gray suit he’d bought for $179 at Lord and Taylor to wear to his high school graduation, gave his hair a final pat, inspected his teeth for food in the bathroom mirror, and bounded out the door of his apartment and into the elevator of his downtown high-rise.

A confident, bright-eyed twenty-two-year-old with an aquiline nose and a slight belly paunch, Arjun was on his way to his first day of work as a mergers and acquisitions analyst at Citigroup. His neck muscles were tense and his stomach was turning over, but those were just surface nerves. Mostly, he was filled with the flinty resolve of the newly emboldened. After thousands of hours of preparation, dozens of interviews and expertly crafted e-mails, and one extremely lucky break, he had finally become a junior investment banker at a major Wall Street firm—the job he’d been chasing for years.

Nine months earlier, Arjun’s plans had been derailed by the financial crisis. The Queens-born son of a data engineer father and a social worker mother who had both emigrated from India to New York as young professionals, he headed into the fall of his senior year with a prestigious job offer at one of the best banks on Wall Street: Lehman Brothers.

Arjun felt lucky to have gotten Lehman’s attention in the first place. He attended Fordham University, a Jesuit school in the Bronx that, while strong academically, wasn’t among Wall Street’s so-called target schools, a group that generally included the Ivies, plus schools like Stanford, New York University, Duke, and the University of Chicago. That meant he had to work harder to get his foot in the door—joining the Finance Society at Fordham, attending lectures at Columbia Business School, spending his free time watching CNBC to pick up the cadence of the investor class. And his strategy worked. He secured a junior-year internship at Lehman, and he did well enough that at the end of the summer, he was offered a full-time job beginning after his graduation. His recruiter told him, sotto voce, that he had been the only Fordham student to get an offer from Lehman that year.

During Arjun’s internship, things began to go south. Ever since the Bear Stearns collapse earlier that year, industry watchers had been speculating that Lehman would be the next bank to fail. The firm’s stock price had tumbled, thousands of workers had gotten laid off, and one well-regarded hedge fund manager jolted Wall Street that summer by proclaiming that Lehman wasn’t properly accounting for its real estate investments. Still, Arjun assumed that Lehman would be fine.

He was wrong, of course. In September 2008, while Arjun was starting his senior year at Fordham, Lehman filed for bankruptcy. (Most of its U.S. operations were bought several weeks later by Barclays Capital, the investment banking arm of the large British firm.) The same day, Merrill Lynch, which had also been pummeled by the housing collapse, announced it was selling itself to Bank of America for $50 billion. AIG, an insurer weighed down by towering piles of credit default swaps, had to be given a massive $182 billion bailout, and Goldman Sachs and Morgan Stanley, the last freestanding American investment banks, turned themselves into bank holding companies in order to give themselves better access to the Federal Reserve’s emergency lending window. Congress passed a $700 billion bailout package that gave a lifeline to banks and kept the markets afloat, and the entire country sunk into a recession that would cost millions of jobs, engulf every sector of the economy, and…well, you can probably fill in the rest.

From the Fordham campus, Arjun watched reports about Lehman’s bankruptcy with a knot in his stomach, knowing that it would probably cost him his job. And several weeks after the bank’s sudden death, he was in chemistry class when he got a call from an unfamiliar number with a 212 area code. He let the call go to voice mail, then checked it in the hall after class.

“Hi Arjun, this is John from Barclays Capital,” the voice on the message said. “Obviously, you know why I’m calling. I just wanted to let you know that I’m very sorry, but we’re not going to have a seat for you next summer.”

After the bankruptcy, Barclays Capital’s human resources department tried to help Lehman’s spurned analysts find new jobs. But that just salted the wound. One human resources staffer pointed Arjun to a job at a small private wealth management firm in Miami—the financial sector equivalent of being cut from the Yankees’ starting lineup and offered a benchwarmer spot with the Toledo Mud Hens.

“I’m just interested in investment banking,” Arjun told the staffer. “I don’t care what city it’s in.”

Arjun knew that Wall Street operated on a strict power hierarchy. Within every firm, there were so-called back-office workers who cleared trades, maintained the firm’s computer systems, and performed all other kinds of technical and administrative work. One step up was the middle office, which comprised lots of disparate jobs that were important to the functioning of the bank but were not revenue-generating in their own right: legal, compliance, internal risk management. And then there was the promised land: the front office. The front office was what everyone pictured when they thought of Wall Street—pinstripe-clad deal makers and red-faced traders, making millions and getting their work on the front page of the
Wall Street Journal
. And when he decided to pursue a job in finance, Arjun decided he would accept nothing less.

But now, everything had changed. With the failures of Bear Stearns and Lehman Brothers and the sale of Merrill Lynch, the so-called bulge bracket of top-tier American banks was whittled down to just five firms: Goldman Sachs, Morgan Stanley, Citigroup, Bank of America Merrill Lynch, and JPMorgan Chase. And even those firms looked to be in jeopardy. All around the financial sector, the markers of success and failure were shifting. Tiny boutique firms were weathering the changes better than global financial conglomerates. In some cases front-office bankers were being laid off while back-office IT workers were being promoted. Up was down. Down was up.

That year, as the crisis unfolded, the message boards at Wall Street Oasis, a popular finance-industry website, filled with posts from confused young finance aspirants, wondering what the industry’s changes would mean for them:

Reconsidering Wall Street?

Will banking recover? How long?

Are banks really not hiring for the fall?

In September, one poster summarized many of the fears about what would happen to the financial industry: “I think it’ll be a long time, if ever, before the swagger returns to Wall Street. The ‘Masters of the Universe’ image has been shattered.”

Newly jobless, Arjun spent the rest of his senior year looking for work. He applied to financial internships on Craigslist, sent out dozens of résumés and cover letters, and pressed on every finance-industry connection he had. But nothing materialized—nobody was hiring. Finally, in late spring of his senior year, Citigroup contacted him about a last-minute opening in the bank’s mergers and acquisitions division, where they needed another analyst to help with a bigger-than-expected workload going into the summer. Citigroup, like most banks, had been battered by the financial crisis, losing billions of dollars and being saved only by a massive government bailout. But the bank was alive, and it was doing deals again. Arjun knew that with the year’s recruiting cycle already over, it was likely to be the only front-office offer he would get. So a few weeks before his college graduation, he accepted.

Throughout college, Arjun had drawn inspiration from the lives of people who had made it big on Wall Street despite not having the advantages of privilege or pedigree. The most famous example was Sidney Weinberg, a working-class Jewish kid from the slums of Brooklyn who started as a janitor’s assistant at Goldman Sachs in 1907 and eventually worked his way up to become the senior partner of the firm. But there were more recent role models, too. Arjun knew, for instance, that there had been a Lebanese-American executive who had gone to Pace University—not exactly a finance feeder school—yet had become the vice chairman of Bear Stearns and one of the most powerful deal makers on Wall Street. Even Citigroup’s CEO, Vikram Pandit, was an Indian-born outsider who had trained as an electrical engineer before breaking into finance. On Wall Street, he thought, it didn’t matter whether you were a blue-blooded WASP with degrees from Exeter and Harvard or, like him, an Indian kid from Queens with no family connections. If you were talented, if you could make money, and if you were willing to kick down every obstacle in your path, you could qualify as what is known in certain parts of the financial world as a “PHD”—a “poor, hungry, and driven” worker—and, eventually, you could make it to the inner circle.

But now, as he surveyed the wreckage of the crisis, Arjun felt even less sure than ever that the old social compact still held. After all, who knew what would happen to Wall Street in a year? More banks could go under. Entire lines of business could be wiped out by new regulations. There was no telling whether New Wall Street would look anything like Old Wall Street, or whether the traits that had mattered in American finance for the better part of three hundred years—hard work, hustle, and commercial instinct—would still be rewarded in the future.

As he got ready for work on his first day, though, Arjun’s anxiety was trumped by excitement. In the worst Wall Street hiring climate in a generation, he’d finally gotten a seat at the table. He was proud of how far he’d come. He knew he’d made his parents proud, too, by getting a job at a prestigious bank they recognized by name and reputation. And he was determined to prove to his new colleagues that he could work every bit as hard as they did, even if he didn’t have an Ivy League degree behind him or a trust fund lying in wait.

As he walked out into the brightly lit Manhattan streets that morning, Arjun gave his building’s front desk attendant a smile and a wave. Then, he walked through the open door, pointed his cap-toe shoes toward the bank, and started to strut.

AS THE SUN
shone down on her, Chelsea Ball lifted her red Solo cup, chugged the six or seven ounces of beer inside, then placed it on the picnic table, with the bottom hanging an inch off the edge. She hit the cup from below, flipped it so it landed upside down on the table on the first try, and shouted “Go!” to the next teammate in line, who also happened to be the oldest managing director in her group.

Chelsea, a freckle-faced redhead who grew up in a middle-class Connecticut suburb, was intimately familiar with this game—“flip cup,” it was called—from the dozens of nights she’d spent playing it in college, mostly with the other members of the Georgetown women’s soccer team. Flip cup was a favored pastime in her group of friends, and over time she’d developed the light touch required to land the cup properly on the first or second try. But she’d never imagined playing it in a setting like this—at the annual field day of the public finance division of Bank of America Merrill Lynch.

The field day, which was held at a posh New Jersey country club, was a corporate outing the likes of which Chelsea had never seen. There was tennis, softball, volleyball, and a giant tug-of-war pit. A cornucopia of food—burgers, wings, hot dogs, chips—and a keg of beer at each activity station rounded out the scene.

Chelsea drank it all in, more figuratively than literally. It was her first week as a full-time analyst, and she was still stepping cautiously to maintain peace with her new colleagues. She’d spent her summer internship the previous year in Bank of America’s structured credit department, and she had barely understood any of what was going on. She was determined to get her mind around this new assignment.

A lot had changed since Chelsea’s internship. The previous fall, while she was starting her senior year at Georgetown, Bank of America had acquired Merrill Lynch as Merrill—one of the oldest and most venerated banks on Wall Street—flirted with death. The government had stepped in with $45 billion in bailout money, but even that hadn’t been able to keep the new Bank of America Merrill Lynch’s stock price from sliding to historic lows. There were shareholder lawsuits, congressional hearings, and unexpected losses. To make matters worse, Merrill CEO John Thain was revealed to have spent a Croesus-like $1.2 million renovating his office while his firm was dying, buying antique items including an area rug costing $87,783 and a “commode on legs” costing $35,115. All told, the plots and subplots surrounding the merger looked bad enough that the
Wall Street Journal
had christened it “a $50 billion deal from hell.”

Chelsea had felt sure that she would get screwed out of a job. She’d accepted Bank of America’s offer in early September, just a few days before the Merrill acquisition, and she and her fellow interns had been e-mailing each other with panicked queries about whether their offers were still valid in the wake of the news. Luckily for Chelsea, Bank of America and Merrill Lynch eventually agreed on a deal that would allow all the new hires from the class of 2009 at both firms to keep their jobs. The combined firm would have more first-year analysts than it needed, but it would save the bank from having to rescind offers.

Chelsea arrived at the Crowne Plaza in Manhattan in June for her first day of training. There, for the first time, she saw how slapdash and hastily assembled the new Bank of America Merrill Lynch really was. There were hundreds of analysts, startlingly few managers, and an obvious shortage of supervision. There was also a culture clash that was unmistakable. Bank of America, the country’s largest commercial bank, employed more than two hundred thousand people, and had retail branches and ATMs spread out across the country. Merrill Lynch, on the other hand, was a white-shoe firm with a proud history of elitism. Its investment bank was blue-blooded in temperament and composition, recruited primarily from Ivy League schools, and did only the more lucrative work of advising corporations, issuing securities, and managing money for ultra-wealthy individuals. In fact, many at Merrill Lynch considered commercial banking—the business of taking deposits, issuing mortgages, and giving loans to regular people—a lower form of commerce.

Chelsea quickly found she could scan the room and pick out the Merrill kids. They had expensive ties, jutting jaws, and looks of mild disgust on their faces. They had been recruited to work for one of the most prestigious firms on Wall Street, but now found themselves working for what they considered a lesser enterprise. To them, it was as if Tiffany had merged with Costco, and now they were stuck selling pristine jewels next to freezers of chicken cutlets.

The new analysts spent four weeks in the ballroom of the Crowne Plaza, being put through their paces in a Finance 101 course that taught them the basics of equities, fixed income, corporate valuation, and other skills they would need for their jobs. Most of the job openings in the highly sought-after groups had been filled by Merrill kids. For the people who had originally been hired by Bank of America there were a few positions open in mortgage sales, a rate sales job or two, and a handful of openings in something called public finance.

Of the open groups, Chelsea decided she liked mortgage sales the best. She’d worked in marketing before, and she figured that once she learned about mortgage derivatives, selling them would be like selling anything else. She listed the group first on her preference card, and waited until the last day of training, when an HR representative gathered the thirty-odd first-years in sales and trading in a conference room and gave out assignments.

“Chelsea, you’ll be in public finance,” the HR woman said.

Chelsea blinked back tears. She had wanted to find an assignment she could sink her teeth into, in a division where she might eventually prove her worth. And now, in a matter of days, she would be doing something she barely understood yet again. That night, she went out to a bar with friends and drank until the world blurred.

“They made a mistake hiring me,” she told me a few days later. “I’m the dumbest person here, I don’t understand any of this, and I’m just so overwhelmed by the lingo and everything else.”

Now, three days later, things were looking a little brighter. A boozy corporate field day was hardly the worst way to start a job, and as Chelsea looked around the country club grounds at the men in her group—and they were mostly men, with a sprinkling of female analysts and support staff—she found her mind opening. They looked happy enough. A little worn out, maybe, and way too excited to be outdoors during the daytime, but at least they weren’t moping.

When she returned from field day, Chelsea settled into her cubicle on the ninth floor of the World Financial Center, in a windowless bullpen with ugly neon lighting, and went to work. She quickly learned that her new group paid much more attention to detail than the group she’d interned in the previous summer. Her first few projects came back marked up with changes from her boss, who would do things like cross off her
2
s and write in the word
two
, and realign her cells so that all the first digits lined up instead of the last digits. For Chelsea, who had always gotten by on her charisma, the new detail orientation required of her was maddening. But she’d devoted herself to being a good student, and she’d told her boss early on: “I just want to work hard and learn.” True to form, she rarely left the office before midnight.

Chelsea was still dating her college boyfriend, a Georgetown sophomore named Anton. They’d met the previous year, when Chelsea was a senior and Anton was a freshman. And even though the three-year age gap had seemed crazy at the outset, it worked. Anton was kind, thoughtful, and mature, and he didn’t seem to mind her long hours at the bank. He was still in school, so the actual contact he and Chelsea had was limited. They Skyped late at night, and every third or fourth weekend, she would board a Megabus for the four-hour trip to Washington, D.C. There, she would work remotely and, once in a while, pry herself away from her BlackBerry in order to spend time with him.

As summer turned into fall, though, Chelsea became deeply lonely. Her roommate was an accountant and worked the same long hours she did. Their schedules meant that they rarely saw each other, and even more rarely saw their other friends. Her relationship with Anton was becoming more distant and detached, and her long hours made it hard to keep up her normal gym routine. She’d started out with a half-hour morning commute, but eventually, Bank of America Merrill Lynch moved her group to the giant office tower it had purchased at One Bryant Park. Soon, the extent of her daily exercise was walking the three avenues and six blocks from her Forty-Eighth Street high-rise to the tower and back.

Chelsea didn’t mind working hard. She had come to Wall Street for the money, and she knew that long weeks and grueling projects were part of the deal. College had left her with more than $100,000 in student loans, and she hoped to save most of her $70,000 base salary and all of her bonus in order to begin paying them down as quickly as possible. Still, she missed the intellectual stimulation of college, when she’d taken quirky classes, read stacks of good books, and written long papers on topics that actually interested her.

During the darkest moments, when Chelsea felt herself spiraling into work-fueled depression, she thought about her older brother, Josh. He had graduated from Tufts in 2008, with a degree in economics and a cushy job offer at a boutique investment bank. Just as he was scheduled to begin, the financial crisis struck and the bank rescinded its offer. He’d spent the next six months jobless and depressed before getting an equity research job at a second-tier firm that paid him a fraction of what he’d expected to make.

At least she had avoided Josh’s fate, Chelsea thought. She had a prestigious, high-paying front-office job in an industry that was shedding them left and right. And even though the job wasn’t the perfect fit for her, she felt comforted by the fact that it existed at all. In 2009, a bit of stability was all a twenty-two-year-old on Wall Street could reasonably ask for.