Read Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits Online
Authors: Kevin Roose
Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits (22 page)
EVEN AS I
wrapped up my investigation of post-crash Wall Street, the financial industry kept changing in ways that hinted at just how transformative the crisis had been.
In March 2012, Greg Smith, a vice president at Goldman Sachs, quit his job at the bank with a highly publicized resignation letter printed in the op-ed pages of the
New York Times
, in which he claimed the bank’s culture was “as toxic and destructive as I have ever seen it.” In the months following Smith’s resignation, workers from financial firms continued to depart in droves, in part because the big money simply wasn’t reliably there any longer. The
Wall Street Journal
reported that the wave of departures was baffling to financial executives because, in many cases, the workers were simply “bailing out with no Plan B.”
In their recruiting drives, Wall Street firms still had no trouble finding eager young workers. (Goldman Sachs president Gary Cohn announced in 2013 that the bank received 17,000 applications for 350 summer intern spots—an acceptance rate of 2.1 percent.) But the percentage of Ivy League seniors heading to investment banks remained significantly depressed. At Yale, the career center’s 2013 student survey found that “there is no one industry that attracts Yale graduates as a critical mass.” A
Harvard Crimson
survey found that the percentage of Harvard seniors with jobs at graduation who were headed to Wall Street fell to 9 percent in 2012, then ticked up to 15 percent in 2013.
The crisis had shrunk Wall Street tremendously; as of 2013, only 30 percent of the more than 28,000 New York City financial sector jobs lost during the crisis had come back. Meanwhile, the growing technology industry kept picking off many of Wall Street’s recruits. In early 2013, the
Journal
captured the flood of interest into technology and out of finance, explaining, “Wall Street is no longer the beacon of high pay and innovation it once was.” A 2013 study conducted by a recruiting firm found that 89 percent of financial executives were having problems with recruiting, and 83 percent were worried about losing their employees to other opportunities. Harvard Business School saw the share of its graduates going into the tech sector rise from 8 percent in 2010 to 18 percent in 2013, while the number heading into financial services shrank from 34 percent to 27 percent. And Wharton—that fabled training ground for high finance—revealed that applications to its MBA programs had declined 12 percent since 2010.
As they struggled to keep their workers from jumping ship, Wall Street firms began reconfiguring their young analyst programs to make them more attractive. Goldman Sachs formed a task force to examine the working conditions of young analysts, and announced it was ending its “two and out” analyst programs in the investment banking and investment management divisions, meaning that college seniors would be hired like any other employees, with no end date to their tenure. And in late 2013, the firm shocked the rest of Wall Street by announcing that it was encouraging junior banking analysts to take weekends off from work. “The goal is for our analysts to want to be here for a career,” David Solomon, Goldman’s co-head of investment banking, told Bloomberg News.
As the crisis got smaller in the rearview mirror, corporate profits continued to soar, even though unemployment rates remained high and the average wages earned by workers stagnated. The Dow Jones Industrial Average and the S&P 500 both reached new nominal all-time highs in late 2013, and housing prices across the country continued to rise. Wall Street banks, though smaller, also began to return to their former levels of profitability. U.S. banks made $141.3 billion in net income in 2012, according to the FDIC, their best year since 2006.
Despite efforts to make their lives easier, young financiers continued to struggle with long hours, demanding bosses, and a grueling work environment. In the summer of 2013, a twenty-one-year-old summer intern in Bank of America Merrill Lynch’s London office dropped dead after an epileptic seizure. The intern, Moritz Erhardt, had worked until 6:00 a.m. three days in a row, according to some reports, and his fellow interns described him as an intensely focused workaholic who was focused on getting a full-time offer. Following Erhardt’s death, Bank of America Merrill Lynch launched a task force of its own, in order to “look at all aspects of our working practices, with a particular focus on our junior populations.”
Arjun Khan is an associate at an infrastructure private equity firm in São Paulo, Brazil. He’s made a full recovery from his autoimmune disease, and he reports being thrilled with his decision to leave New York.
Chelsea Ball left Bank of America Merrill Lynch after her second year for a job at a small financial services company that paid her $50,000 a year, roughly 60 percent less than her total compensation as a banker. She moved into a smaller apartment with a lower rent, and has only recently been able to afford boxing lessons again, but she’s happier than ever. Recently, she left her financial services job to launch her own start-up.
Derrick Havens is still employed at his private equity firm. He remains conflicted about his job and the private equity industry overall, but he loves living in New York City and has not yet seriously considered moving back home to Wisconsin. Despite repeated attempts, he hasn’t slept with any more fashion models.
Jeremy Miller-Reed’s start-up raised millions of dollars of funding from major venture capital firms shortly after he left Goldman, making his stock extremely valuable. Although his hours are still long, he is excelling at his job and loves the people he works with, even if he no longer gets to yell out trading orders.
Samson White’s mobile ticketing start-up secured a sizable round of funding from a group of investors in 2012, and is currently working on raising more money. He and Jeremy still talk frequently, and friends who still work in finance often ask him about when they should leave for another industry. His advice to them is always the same: “The sooner, the better.”
Ricardo Hernandez is an investment banking associate at J.P. Morgan. He works just seventy or eighty hours a week in the bank’s Latin American division, and he uses his newfound free time to volunteer with a youth mentoring organization, play more basketball, and drink with his college friends. Recently, while on vacation with his girlfriend, he was able to check his BlackBerry only a few times a day.
Soo-jin Park left her job in Deutsche Bank’s risk management division and is now a front-office worker at a commercial bank in New York. She loves her new job, which affords her the chance to deal with actual clients and do business development. And although she’s working longer hours than she did at Deutsche Bank, she’s enjoying bringing in new clients, keeping existing ones happy, and getting to know the players in her industry. She is strongly considering going to business school or working abroad as her next move.
After being laid off from Credit Suisse’s health-care group, J. P. Murray got a job doing corporate finance for a large hospital chain. He still hopes to make it back to New York someday, but he is enjoying his job for what it is, and he has joined the boards of several nonprofit organizations in an attempt to keep himself busy. “It’s weird—everyone here is happy,” he said of his slower-paced corporate finance job. “My work life is exponentially better. That said, I could stand to make a little more money.”
Marina Keegan, the Yale senior who provided me with a glimpse into the campus recruiting culture after Occupy Wall Street, was killed in a car crash in May 2012, a week after her college graduation. This book, which would have been one of the duller cameos in her long and luminous literary career, is dedicated to her memory.
While I was writing this book, people would occasionally ask me, “Why
on earth
did these bankers agree to talk to you?” It’s a great question—and one for which I still don’t have a satisfactory answer. The eight financiers I shadowed from 2010 until 2013 had no particular reason to spend three years taking my calls, responding to my e-mails, and meeting me in out-of-the-way locations to give me the dirt on their industry, during some of the most demanding and time-crunched years of their lives. And yet, out of the goodness of their hearts and at great personal risk, they kept on talking.
For that, I am grateful beyond measure. This book would not exist without the generosity and patience of the real people behind Arjun, Chelsea, Derrick, Jeremy, Samson, Ricardo, Soo-jin, and J. P. Their names may never be known, but their contributions won’t be forgotten. To them, and the dozens of other financiers who spoke to me for this book: Thank you all, sincerely, for entrusting me with your stories. (And may you never treat your financial transactions half as recklessly.)
Thanks are due, as always, to Ben Greenberg, my star editor, and the rest of the Grand Central Publishing crew: Jamie Raab, Deb Futter, Brian McLendon, Pippa White, Amanda Pritzker, Tracy Brickman, Andrew Duncan, and Kristin Vorce.
Thanks to Kate Lee, my literary agent turned online-publishing mogul, who saw potential in this book from the start, and Sloan Harris and Kari Stuart at ICM, who guided it to completion with steady hands. Also at ICM, I’m grateful to the tenacious Josie Freedman and Liz Farrell.
Many thanks to my colleagues at
New York
and Daily Intelligencer, who inspire me every day: Adam Moss, Ben Williams, Jeb Reed, Genevieve Smith, Jessica Pressler, Dan Amira, Joe Coscarelli, Jonathan Chait, Stefan Becket, and Margaret Hartmann, among many others.
I’m indebted to my ex-colleagues at the
New York Times
, in particular DealBookers Andrew Ross Sorkin, Peter Lattman, Susanne Craig, Jeff Cane, Adrienne Carter, Ben Protess, Azam Ahmed, Evelyn Rusli, and Michael de la Merced, all of whom taught me the ins and outs of high finance. A special debt is owed to Floyd Norris, who kindly wrote to me about my first book, and ignited my interest in Wall Street’s inner workings.
I’m thankful for Alex Yablon, who provided invaluable research help and fact-checking; Cynthia Colonna, who turned my garbled tapes into transcripts; Paul Roose and Anne Lawrence, who lent me their home to finish this book and provided crucial feedback when I needed it most; Scott Rostan, Trevor Nelson, and the rest of the Training the Street team for letting me crash their classes; the members of Kappa Beta Phi for not killing me on the spot; Patrick Colangelo and the rest of the Black Diamond hedge fund members for their hospitality; and Rachel Gogel, who designed this book’s gorgeous cover (literally) overnight.
I’m also grateful to all those who aided this book in ways big and small: Andrew Marantz, Nick Montoya, Lucas van Praag, Dayna Tortorici, Ariel Werner, Dan MacCombie (whose Runa tea kept me awake for many late nights of writing), Caroline Landau, Matthew Zeitlin, Carolyn Roose, and Janine Cheng.
Special thanks go to A. J. Jacobs, author extraordinaire, who gave me a job when I was far too young and has been a tremendous mentor ever since; and to my entire family, including my parents, Kirk and Diana Roose, who remain the best pro bono publicists in the world.
And most of all, to Tovah Ackerman, who makes everything possible.
I gathered the personal stories contained in this book during hundreds of interviews with people working in and around the financial sector. Where possible, I have tried to fact-check their anecdotes without compromising a source’s anonymity. In some cases, I’ve relied on the interview subject’s account of an incident, and my account is only as good as his or her memory.
For general research into Wall Street’s culture and history, I enjoyed and learned from the following books:
Anderson, Geraint.
Cityboy: Beer and Loathing in the Square Mile.
London: Headline, 2008.
Bruck, Connie.
The Predators’ Ball: The Junk Bond Raiders and the Man who Staked Them.
New York: American Lawyer, 1988.
Burrough, Bryan, and John Helyar.
Barbarians at the Gate: The Fall of RJR Nabisco.
New York: Harper & Row, 1990.
Cohan, William D.
House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.
New York: Doubleday, 2009.
Damn, It Feels Good to Be a Banker: And Other Baller Things You Only Get to Say If You Work on Wall Street.
New York: Hyperion, 2008.
Dillian, Jared.
Street Freak: Money and Madness at Lehman Brothers: A Memoir.
New York: Simon & Schuster, 2011.
Fisher, Melissa S.
Wall Street Women.
Durham, NC: Duke University Press, 2012.
Greif, Mark, Dayna Tortorici, Kathleen French, Emma Janaskie, and Nick Werle.
The Trouble is the Banks: Letters to Wall Street.
Brooklyn, N.Y.: n+1, 2012.
Ho, Karen Zouwen.
Liquidated: An Ethnography of Wall Street.
Durham: Duke University Press, 2009.
Lane, Randall.
The Zeroes: My Misadventures in the Decade Wall Street Went Insane.
New York: Portfolio, 2010.
Lewis, Michael.
Liar’s Poker: Rising through the Wreckage on Wall Street.
New York: W. W. Norton & Company, 1989.
Lewis, Michael.
The Big Short: Inside the Doomsday Machine.
New York: W. W. Norton & Company, 2010.
Little, Jeffrey B., and Lucien Rhodes.
Understanding Wall Street.
4th ed. New York: McGraw-Hill, 2004.
Lowenstein, Roger.
The End of Wall Street.
New York: Penguin Press, 2010.
Rolfe, John, and Peter Troob.
Monkey Business: Swinging through the Wall Street Jungle.
New York: Warner Books, 2000.
Smith, Greg.
Why I Left Goldman Sachs: A Wall Street Story.
New York: Grand Central, 2012.
Sorkin, Andrew Ross.
Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—And Themselves.
New York: Viking, 2009.
Stewart, James B.
Den of Thieves.
New York: Simon & Schuster, 1991.
Stiles, Paul.
Riding the Bull: My Year inside the Madness at Merrill Lynch.
New York: Times Business, 1998.
Introduction
ix.
“You must be an Excel wizard—a grandmaster of the XLS file format”:
I took Training the Street’s five-day “Financial Modeling & Corporate Valuation” course, which is open to the public and is held several dozen times a year at various locations around the world. For more information on these courses, visit trainingthestreet.com.
x.
“The all-time record for total beautification was thirty-five seconds, set by a freakish junior analyst from an investment bank called Moelis and Company”:
I have since been informed that as of 2013, the new record is twenty-three seconds, set by an analyst from Wells Fargo. I have no idea how this is humanly possible.
x.
“Armed with Bloomberg terminals and can-do attitudes”:
The Bloomberg terminal is one of the most important tools on Wall Street. Every major investment bank uses them for data analysis, news gathering, and trading, and most analysts are assigned a license to the software—which costs roughly $20,000 a year per user—on their first day on the job.
xi.
“HBO talk show host Bill Maher quipped about executing Wall Street higher-ups”:
From the February 20, 2009, episode of HBO’s
Real Time with Bill Maher
. Maher’s actual words were: “I don’t think we should put all the bankers to death. Just two. I mean, maybe it’s not technically legal, but, let’s look at the upside. If we killed two random, rich, greedy pigs. I mean, killed. Like, blew them up at halftime at next year’s Super Bowl. Or left them hanging on the big board at the New York Stock Exchange. You know, as a warning, with their balls in their mouth. I think it would really make everyone else sit up and take notice.”
xi.
“one online clothing vendor sold ‘I Hate Investment Banking’ T-shirts for $18.99 apiece”:
Prices have since been raised slightly, but you can still find these T-shirts at http://www.cafepress.com/ramit/807964.
xi.
“a new arcade game called ‘Whack-a-Banker’ was introduced in the United Kingdom”:
“Bankers ‘Whacked’ in Arcade Game,” BBC News, December 13, 2009.
xii.
“You earn significantly more than your peers in other industries”:
Catherine Rampell, “Outlook Is Bleak Even for Recent College Graduates,”
New York Times
, May 18, 2011. Rampell reports that the average income for graduates of four-year schools in 2009 and 2010 was $27,000, less than half the base salary of those first-year analysts profiled in the book.
xiii.
“At Harvard in 2008, 28 percent of seniors who had jobs at graduation were headed into the financial services sector. At Princeton in 2006, it was a staggering 46 percent”:
Catherine Rampell, “Out of Harvard, and Into Finance,”
New York Times
(Economix), December 21, 2011. Note that Rampell’s statistics include only students who had jobs as of graduation. If you count all students, the percentage of graduates working in finance is considerably lower (about 14 percent at Harvard in 2008 and about 16 percent at Princeton in 2006, according to data provided to me by those schools’ career centers).
2.
“wasn’t among Wall Street’s so-called target schools”
For a more entertaining, less politically correct look at which schools Wall Street considers target and nontarget, see the relevant discussion in
Damn, It Feels Good to Be a Banker
, a book written by a pseudonymous blogger named Leveraged Sell-Out. (Sample passage: “Duke is prime evidence to the fact that merely being affluent and white in America can no longer thrust one into the upper echelons of the finance industry.”)
2.
“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”:
The hedge fund manager, David Einhorn, was profiled by Hugo Lindgren in “The Confidence Man,”
New York
, June 15, 2008.
2.
“In September 2008, while Arjun was starting his senior year at Fordham, Lehman filed for bankruptcy”:
The nitty-gritty details of the financial crisis are available in thousands of books, websites, and articles. I found Andrew Ross Sorkin’s
Too Big to Fail
the most comprehensive guide to the events of 2008, but others, including Roger Lowenstein’s
The
End of Wall Street
and Bethany McLean and Joe Nocera’s
All the Devils Are Here,
were indispensable as well.
4.
“Arjun knew that Wall Street operated on a strict power hierarchy”:
For more on the employee hierarchy at investment banks, see chapter 2 of Ho’s
Liquidated
, in which she discusses the stratification within firms, and writes that “the boundaries between front, middle, and back offices reinscribe social hierarchies.”
4.
“Tiny boutique firms were weathering the changes better than global financial conglomerates”:
Theresa Agovino, “Cleaning Up After Real Estate Debacle,”
Crain’s New York Business
, December 13, 2009.
5.
“Reconsidering Wall Street?”
:
http://www.wallstreetoasis.com/forums/reconsidering-wall-street.
5.
“Will banking recover? How long?”
:
http://www.wallstreetoasis.com/forums/will-banking-recover-how-long.
5.
“Are banks really not hiring for the fall?”
:
http://www.wallstreetoasis.com/forums/are-banks-really-not-hiring-for-the-fall.
5.
“The most famous example was Sidney Weinberg”:
More on Weinberg’s rise to the top of Goldman Sachs can be found in Malcolm Gladwell’s
New Yorker
article, “The Uses of Adversity,” published November 10, 2008.
6.
“there had been a Lebanese-American executive who had gone to Pace University”:
After Bear Stearns crumbled, this executive, Fares D. Noujaim, landed at Bank of America Merrill Lynch, where he became executive vice chairman of Global Corporate & Investment Banking. See: Landon Thomas, Jr., “A Bear Stearns Refugee Gets a New Start at Merrill,”
New York Times
, June 2, 2008.
6.
“Even Citigroup’s CEO, Vikram Pandit, was an Indian-born outsider”:
For more on Pandit’s rise at the bank (which was later interrupted by a management coup in October 2012), see Joe Hagan’s “The Most Powerless Powerful Man on Wall Street,”
New York
, March 1, 2009.
9.
“Bank of America had acquired Merrill Lynch”:
Again, Sorkin, Lowenstein, and McLean/Nocera provide good background on the Bank of America Merrill Lynch merger, including all that went wrong.
9.
“John Thain was revealed to have spent a Croesus-like $1.2 million renovating his office”:
Peter S. Green, “Merrill’s Thain Said to Pay $1.2 Million to Decorator,” Bloomberg News, January 23, 2009.
9.
“$50 billion deal from hell”:
Heidi N. Moore, “Bank of America–Merrill Lynch: A $50 Billion Deal from Hell,”
Wall Street Journal
(Deal Journal), January 22, 2009.
10.
“the country’s largest commercial bank”:
As of September 30, 2009, Bank of America had the most domestic assets and local branches of any American bank, according to the Federal Reserve, though JPMorgan Chase had more consolidated assets.
10.
“Chelsea quickly found she could scan the room and pick out the Merrill kids”:
More on the elite culture of Merrill Lynch before the crash can be found in Paul Stiles’s
Riding the Bull
, in which he says that the firm “dominates almost all major areas of the securities industry.” (Bear in mind, his book was published in 1998.)
15.
“a Morgan Stanley recruiter pressed Play to begin a promotional video”:
This video, called “Futures and Options,” can be found online on various video sites, and is really worth the four minutes and forty-three seconds.
16.
“Penn sends a chunk of its graduating class into the financial services industry every year”:
For more information about Penn and Wharton’s extremely close ties with Wall Street, I recommend Nicole Ridgway’s
The Running of the Bulls
, a 2005 book that traces seven students through Wharton’s on-campus recruiting process for finance jobs.
16.
“Wharton School, a business program that contains both graduate students and undergrads, is considered America’s primo farm team for budding young financiers”:
Ridgway’s book contains an amazing anecdote about the hypercompetitive nature of finance recruiting at Wharton. At the beginning of the 2000 school year, she writes, Wharton gave its students 1,000 “points” each, which could be used to bid on interview slots for companies they wanted to work for. The idea was that students would spread their points out among several firms, but “several students who had hoped to get their foot in the door at Goldman bid all 1,000 of their points to meet with the firm’s recruiters.”
18.
“in the early 1980s, banks began instituting what became the modern Wall Street
recruiting program”:
In
Liquidated
, Ho writes: “In the 1980s, [banks] began to recruit at elite universities on a grand scale, creating the two-year analyst programs for the express purpose of targeting undergraduates directly out of college. This new cadre of workers, no longer handpicked through small-scale networks of family, friends, and close business associates, was legitimated by placing even greater cachet on the universities where they were recruited.”
19.
“first-year analyst jobs pay a starting salary of around $70,000, with a year-end bonus that can be upwards of $50,000”:
According to Mergers & Inquisitions, first-year analysts in 2007 could make up to $150,000 in total compensation. After the crash, I never heard of a first-year investment banker pulling in more than $130,000, though it’s certainly possible that some standouts were making 2007-style money.
20.
“Wall Street banks had made themselves the obvious destinations for students at top-tier colleges who are confused about their careers”:
The
Washington Post
’s Ezra Klein interviewed one anonymous Harvard graduate, who explained the appeal of Wall Street jobs thusly: “In the midst of anxiety and trying to find a job at the end of college, the recruiters are really in your face, and they make it very easy. One thing is the internship program. It’s your junior year, it’s January or February, and you interview for internships. If all goes well, it’s sort of a summer-long interview. And if that goes well, you have an offer by September of your senior year, and that’s very appealing. It makes your senior year more relaxed, you can focus on your thesis, you can drink more. You just don’t have to worry about getting a job.” (“Why Do Harvard Kids Head to Wall Street? An Interview with an Ex–Wall Street Recruit,” April 23, 2010.)