Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits (25 page)

       This chapter is an expansion of a story I wrote for the
New York Times
on January 20, 2012, “A Raucous Hazing at a Wall St. Fraternity.”

206.
“I’d heard lots about the existence of Kappa Beta Phi”:
Matthew Karnitschnig and Susanne Craig, “A Wall Street Frat Parties On, Singing, ‘Bye, Bye to My Piece of the Pie,’”
Wall Street Journal
, January 16, 2009; Max Abelson, “Wall Street Secret Society Kappa Beta Phi Adds Dealmakers With Lehman Rite,” Bloomberg News, January 17, 2011.

211.
“Novogratz, who wrestled at Princeton before going into the military”:
Lynnley Browning, “Wrestling’s Private Equity Champion,”
New York Times
(DealBook), April 5, 2013.

212.
“Alexandra Lebenthal—a bond-investing socialite”:
In addition to her duties with Kappa Beta Phi and her bond firm, Lebenthal is also the author of
The Recessionistas
, a 2010 novel about the post-crash affairs of the financial elite.

212.
“Just leave out the vulgar stuff, please”:
The day after the dinner, Ross defended the group’s activities again. “This is not a political convention,” he told me. “It’s a group of people that are friendly with each other trying to have an enjoyable evening, mostly at each other’s expense.”

215.
“the idea of a reporter making those views public had caused them to throw a mass temper tantrum”:
I had hoped that my reporting on the Kappa Beta Phi induction dinner would give the group some moral pause; instead, I was told by a member of the group that the following year’s dinner went on as scheduled, except with “Fort Knox–like” security at the entrance.

219.
“They pulled this off through the use of leverage, and a financial engineering tactic known as a ‘dividend recap,’ or recapitalization, which involved loading a company with more debt in order to pay out the private equity firm and its investors”:
Dan Primack, “Dividend Recaps Are Fine, But Don’t Pretend They Add Value,”
Fortune
, November 11, 2010.

220.
“private equity—an industry that had been attacked as a form of ‘vulture capitalism’ during Mitt Romney’s 2008 presidential run (and that would soon taint his 2012 run)”:
See, among many other articles assessing Romney’s career at Bain Capital, Mark Maremont’s
Wall Street Journal
story, “Romney at Bain: Big Gains, Some Busts,” January 9, 2012.

221.
“The supremacy of Wall Street’s intellect was, in many ways, the financial sector’s founding myth”:
Ho writes: “The culture of smartness is not simply a quality of Wall Street, but a currency, a driving force productive of both profit accumulation and global prowess” (
Liquidated
, p. 40).

222.
“But, on the whole, they weren’t
brilliant
”:
To be fair to financiers, there aren’t that many brilliant journalists, either.

229.
“he’d spend hours a day reading the
Economist
, the
Atlantic
, and the
New York Times
”:
This is actually a fairly highbrow media diet, by young Wall Street standards. Many of the first- and second-year analysts I interviewed spent their downtime reading sites like Barstool Sports and BroBible, with the occasional glance at ESPN.com.

229.
“the oil market was still fairly active that fall”:
Chris Kahn, “Oil Soars, But Don’t Worry Yet at the Pump,” Associated Press, November 9, 2011.

231.
 
“The policy, known as ‘block leave,’ had been instituted not to give burned-out employees a week away from the grind, but to catch traders who were engaged in irresponsible or illegal activity”:
Heidi N. Moore, “Credit Suisse Makes Life a Little Harder for Aspiring Rogue Traders,” Marketplace, December 15, 2011.

234.
“the firm had been forced to lay off some employees”:
Lauren Tara LaCapra, “Layoffs Sweep Wall Street, Along with Low Morale,” Reuters, August 21, 2011.

239.
“Bank of America Merrill Lynch reduced the size of its cash bonuses by 75 percent”:
Gabriel Sherman, “The End of Wall Street As They Knew It,”
New York
, February 5, 2012.

239.
“Morgan Stanley capped cash bonuses at $125,000 for everyone, even the cigar-chomping executives at the top”:
Kevin Roose, “Morgan Stanley Is Said to Cap Cash Bonuses at $125,000,”
New York Times
(DealBook), January 17, 2012.

239.
“And at Goldman Sachs, the amount set aside to pay compensation and benefits was $12.22 billion, or $367,000 per employee, down 21 percent from the year before”:
Peter Eavis and Susanne Craig, “New Normal on Wall Street: Smaller and Restrained,”
New York Times
, January 19, 2012.

240.
“Dodd-Frank, which was signed into law by President Obama in July 2010, was the most sweeping piece of new regulation on the financial industry since the Great Depression”:
For more on the intended (and actual) effects of Dodd-Frank, I recommend Jesse Eisinger and Jake Bernstein’s “From Dodd-Frank to Dud: How Financial Reform May Be Going Wrong,” published by ProPublica on June 3, 2011.

241.
“Next came Basel III”:
For the backstory on Basel III and what it was meant to accomplish, I recommend Jack Ewing’s “A Fight to Make Banks More Prudent,” published in the
New York Times
, December 20, 2011.

241.
“That winter, JPMorgan Chase reported fourth-quarter profits that were 23 percent lower than the previous year’s”:
Ben Protess, “Weak Quarter Weighs on JPMorgan’s 2011 Profit,”
New York Times
(DealBook), January 13, 2012.

241.
“Goldman Sachs’s profits for all of 2011 fell more than 50 percent from the previous year’s levels. The net income earned by Bank of America’s investment banking division, which includes Merrill Lynch, dropped by 53 percent, and Morgan Stanley’s earnings fell by 42 percent for the year”:
Peter Eavis and Susanne Craig, “New Normal on Wall Street: Smaller and Restrained,”
New York Times
, January 19, 2012.

241.
“The new regulatory framework will undoubtedly make Wall Street less valuable than it was before”:
Kevin Roose, “A Blow to Pinstripe Aspirations,”
New York Times
,
November 21, 2011.

242.
“the number of employees in the securities industry in New York City between ages twenty and thirty-four fell by 25 percent from the third quarter of 2008 to the third quarter of 2011, whereas the overall decline in workers of all ages was only 17 percent”:
Ibid.

245.
“In an economic climate where nearly 20 percent of people under twenty-five were unemployed”:
“Employment Status of the Civilian Noninstitutional Population 16 to 24 Years of Age,” Bureau of Labor Statistics, July 2010–2013.

245.
“The British economist Roger Bootle has written about the difference between creative and distributive work”:
Roger Bootle,
The Trouble with Markets
, Nicholas Brealey Publishing, 2009, p. 86. Bootle’s chapter also touches on the special problems with the financial sector, which he says are not only the propensity for distributive work, but for their “natural tendency to take up too many resources” and for being “prone to bubbles that, when they burst, can endanger the stability of the whole financial system.”

261.
“a waitress carried out a wooden alpine ski with five shot glasses built into it”:
Shot-ski.com claims to be “North America’s leading supplier of liquid courage,” and sells shot-skis for $69.95 and up, if you’re curious.

262.
“Associate jobs weren’t laid-back by any stretch of the imagination”:
The pseudonymous author of
Damn, It Feels Good to Be a Banker
says: “Associates are technically one rung above Analysts, but in general, they’re less intelligent and worse off” (p. 21).

265.
“Even the lowliest back-office manager at a major investment bank earns more than the
leading practitioners in many other industries”:
Salary information from Glassdoor.com suggests that banking compliance officers, who sit pretty low on the totem pole, can expect to command salaries well into the six figures. (http://www.glassdoor.com/Salaries/compliance-officer-salary-SRCH_KO0,18.htm.)

273.
“In
Liar’s Poker,
Michael Lewis wrote”:
Michael Lewis,
Liar’s Poker
, W. W. Norton & Company, 1989.

276.
“One out of every six Ivy League seniors now applies to Teach for America”:
“Teach for America Fields Largest Teacher Corps in Its 20-Year History,” May 24, 2010, via teachforamerica.org.

276.
“in 2011, the program recruited more seniors than Goldman Sachs at schools like Brown and Columbia”:
John Gower, “A Closer Look at Top Employers of College Graduates,” Nerdwallet.com, June 20, 2012.

281.
“In March 2012, Greg Smith, a vice president at Goldman Sachs, quit his job at the bank with a highly publicized resignation letter”:
Greg Smith, “Why I Am Leaving Goldman Sachs,”
New York Times
, March 14, 2012. Later, Smith would tell me, in an interview for
New York
, that the ensuing media frenzy caught him off guard: “I had no idea what to expect,” he said. “Part of me worried it would be ignored. But literally, both my British and my American phones rang constantly for five hours.”

281.
“the workers were simply ‘bailing out with no Plan B’”:
Leslie Kwoh, “Taking Early Exits Off Wall Street,”
Wall Street Journal,
October 26, 2012.

281.
“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”:
Liz Moyer, “At Goldman, You Start Among the 2%,”
Wall Street Journal
(MoneyBeat), May 30, 2013.

282.
“At Yale, the career center’s 2013 student survey found that ‘there is no one industry that attracts Yale graduates as a critical mass’”:
“First Destination Report: Class of 2013,” Yale College, Undergraduate Career Services.

282.
“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”:
  Julie M. Zauzmer, “Where We Stand: The Class of 2013 Senior Survey,”
Harvard Crimson
, May 28, 2013. Harvard’s career services center also conducts an annual survey, which shows a flatter trend of graduates going into finance: 12 percent in 2011, 11 percent in 2012, and 12 percent in 2013.

282.
“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”:
Susanne Craig, “Wall Street Pay Rises, for Those Who Still Have a Job,”
New York Times
(DealBook), February 26, 2013.

282.
“Meanwhile, the growing technology industry kept picking off many of Wall Street’s
recruits”:
Terry Duffy, “Wall Street Is Losing the Best and Brightest,”
Wall Street Journal
, September 29, 2013.

282.
“no longer the beacon of high pay and innovation it once was”:
Suzanne Kapner, “Late Shift: Foosball Over Finance,”
Wall Street Journal
, April 28, 2013.

282.
“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”:
“Robert Half Global Survey Reports on Financial Services Hiring Environment,” April 30, 2013.

282.
“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”:
John Carney, “The Best and Brightest Are Turning Away from Wall Street,” CNBC.com, October 31, 2013.

282.
“Wharton—that fabled training ground for high finance—revealed that applications to its MBA programs had declined 12 percent since 2010”:
Melissa Korn, “What’s Wrong With Wharton?,”
Wall Street Journal
, September 27, 2013.

282.
“Goldman Sachs formed a task force”:
Michael J. Moore, “Goldman Pushes Junior Investment Bankers to Take Weekends Off,” Bloomberg News, October 28, 2013.

282.
“announced it was ending its “two and out” analyst programs in the investment banking and investment management divisions”:
Liz Rappaport and Julie Steinberg, “A Bump in Path to Wall Street,”
Wall Street Journal
, September 14, 2012.

283.
“average wages earned by workers stagnated”:
Robert Pear, “Median Income Rises, but Is Still 6% Below Level at Start of Recession in ’07,”
New York Times
, August 21, 2013.

283.
“The Dow Jones Industrial Average and the S&P 500 both reached new nominal all-time highs in late 2013”:
JeeYeon Park, “Dow, S&P 500 Post All-Time Highs as Fed Maintains Stimulus,” CNBC.com, September 18, 2013.

283.
“housing prices across the country continued to rise”:
Anya Martin, “Real-Estate Rebound Buoys Borrowers,” MarketWatch, July 5, 2013.

283.
“U.S. banks made $141.3 billion in net income in 2012, according to the FDIC, their best year since 2006”:
Jesse Hamilton, “U.S. Banks Had Second-Best Earnings Ever in 2012, FDIC Says,” Bloomberg News, February 26, 2013.

283.
“In the summer of 2013, a twenty-one-year-old summer intern in Bank of America Merrill Lynch’s London office dropped dead”:
Shiv Malik and Ben Quinn, “Bank of America Intern’s Death Puts Banks’ Working Culture in Spotlight,”
The Guardian
, August 20, 2013.

285.
“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”:
Marina’s obituary was written by William Alden and published in the
New York Times
on May 29, 2012.