Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits (3 page)

AFTER MY EXCEL
boot camp was over, I decided to back up a bit and try to answer a more basic question about young financiers: namely, how do they get to Wall Street in the first place? So I booked a ticket to a place where the vast majority of financial careers are born—the campus of an elite university—and went to see the finance recruiting machine in action.

I wound up in Philadelphia, on the campus of the University of Pennsylvania. On the day I arrived, it was raining buckets, but a biblical flood wouldn’t have kept a small army of students from making their way to Houston Hall. There, in their ill-fitting suits, their leather padfolios clutched tightly to their sides, hundreds of eager Penn sophomores, juniors, and seniors filed into a recruiting session for Morgan Stanley, where they would hear a one-hour pitch for the bank’s virtues and, hopefully, score a business card or two.

When most of the seats were filled, the lights inside the room dimmed, and a Morgan Stanley recruiter pressed Play to begin a promotional video. Upbeat pop-rock music played as the screen filled with text banners:

When looking at schools to visit, I singled out Penn for a reason. Like all Ivy League schools, Penn sends a chunk of its graduating class into the financial services industry every year—about 30 percent in 2009. But Penn’s link with Wall Street is particularly tight because its Wharton School, a business program that contains both graduate students and undergrads, is considered America’s primo farm team for budding young financiers—a sort of West Point for Wall Street. More than half of Wharton’s six-hundred-person undergraduate class typically heads to banks, hedge funds, private equity firms, and other financial services companies after graduation. Among the celebrity financiers the school has churned out are SAC Capital billionaire Steven A. Cohen, the junk-bond impresario Michael Milken, and real estate megagoon Donald Trump. Wharton’s list of famous alumni, and the fact that its graduates emerge armed with advanced finance training, has made it a place where recruiters are prone to drooling.

“Penn, and especially Wharton, is in a league of its own,” one hiring manager at a top Wall Street firm told me. “It’s the only place where you go to campus and it’s already done and dusted—it’s a matter of
which
financial services firm students want to go to, not
whether
they want to go into finance.” (Patricia Rose, the head of Penn’s career services department, gave a slightly milder diagnosis: “To come to Penn is to, at some point in your undergraduate years, ask yourself the question, ‘Should I think about investment banking?’”)

These days, financial firms—as well as top-tier management consulting firms like Bain and McKinsey—court Wharton students in a manner reminiscent of very polite stalking. They barrage students with information sessions, interview workshops, lavish restaurant meals, “sell days” in New York City, follow-up calls, and follow-up calls to the follow-up calls. At Wharton, these firms behave less like faceless corporate entities than like insecure middle schoolers, desperately fishing for clues about whether their favorite students like them back.

Getting a job at a top firm on Wall Street, even with a Penn degree in hand, is never easy. But it’s especially hard when the financial industry is in turmoil, since a similar crowd of applicants competes for fewer spots. (In one recent year, Morgan Stanley received 90,000 applications for 1,200 full-time analyst positions—an acceptance rate of 1.3 percent.) And most banks draw between 50 and 90 percent of their full-time hires from the previous year’s pool of summer interns, meaning that competition for the best offers is often all but locked up by junior year.

The race for Wall Street jobs is so cutthroat that an entire cottage industry has sprung up to give aspiring bankers a boost. You can now buy the “Investment Banking Interview Prep Pack” for $79.99 from Wall Street Oasis; the “Ace the Technical Investment Banking Interview” webcast and PDF guide for $99 from Wall Street Prep; or, if you’re really playing catch-up and don’t mind shelling out, a four-day “Intern Core Skills” workshop from Adkins Matchett and Toy for $3,000.

Wharton students generally don’t need these study aids, since they already learn advanced financial skills in their classes. Still, in an attempt to garner offers from their financial firms of choice, they spend months burnishing their résumés, practicing their interview skills and elevator pitches, and poring over the Money and Investing section of the
Wall Street Journal
in order to arm themselves with sufficient knowledge to impress the recruiters. And then, every year, they head off to information sessions to begin closing the deal.

It wasn’t always such an ordeal. For many years, Wall Street banks recruited like any other corporation—hiring a handful of graduates from top colleges to fill their junior ranks and employing them indefinitely. But in the early 1980s, banks began instituting what became the modern Wall Street recruiting program, in which college seniors are hired for two-year stints as analysts. After their two years are up, analysts are expected to find work at a hedge fund or private equity firm, or, in a few cases, get an offer to stay on for a third year of banking. The ones who don’t are gently shown the door.

This new plan, nicknamed “two and out,” was a brilliant tactical move. Selling Wall Street jobs to undergraduates as a temporary commitment rather than a lifelong career enabled banks to attract a whole different breed of recruit—smart, ambitious college seniors who weren’t sure they wanted to be bankers but could be convinced to spend two years at a bank, gaining general business skills and adding a prestigious name to their résumés in preparation for their next moves. The strategy also created a generation of accidental financiers—people who had graduated from elite colleges with philosophy or history degrees, had no specific interest in or talent for high finance, yet found themselves still collecting paychecks from a big bank three decades later.

At Penn, though, most of the enthusiasm was genuine.

“Finance is a great industry filled with great people,” one revved-up student told me.

“Traders are probably the coolest people you’ll ever meet!” raved another.

Morgan Stanley’s actual recruiting pitch was a fairly unremarkable collection of corporate banalities (“culture of excellence,” “world-class mentoring opportunities”) and promises of prestigious “exit opps” once the analyst years were over. But few words were given to describing the actual, day-to-day work of being a first-year analyst. And nobody from the bank mentioned the biggest reason a college senior might be attracted to Wall Street—namely, the fact that first-year analyst jobs pay a starting salary of around $70,000, with a year-end bonus that can be upwards of $50,000.

The lack of overt focus on money surprised me, though perhaps it shouldn’t have. As strange as it sounds, a big paycheck may not in fact be central to Wall Street’s allure for a certain cohort of young people. This possibility was explained to me several weeks before my Penn trip by a second-year Goldman Sachs analyst, who stopped me short when I posited that college students flock to Wall Street in order to cash in.

“Money is part of it,” he said. “But mostly, they do it because it’s easy.”

He proceeded to explain that by coming onto campus to recruit, by blitzing students with information and making the application process as simple as dropping a résumé into a box, by following up relentlessly and promising to inform applicants about job offers in the fall of their senior year—months before firms in most other industries—Wall Street banks had made themselves the obvious destinations for students at top-tier colleges who are confused about their careers, don’t want to lock themselves in to a narrow preprofessional track by going to law or medical school, and are looking to put off the big decisions for two years while they figure things out. Banks, in other words, have become extremely skilled at appealing to the anxieties of overachieving young people and inserting themselves as the solution to those worries. And the irony is that although we think of Wall Street as a risk-loving business, the recruiting process often appeals most to the terrified and insecure.

“It’s incredibly risk averse,” the Goldman analyst told me. “Think about it: if you go to a bank, you make as much money as anything except hedge funds, private equity, or possibly a tech startup. Those things are wildly more risky and a lot harder to do. So if a bank comes to me with an opportunity to lock down a good, high-paying job in September of my senior year without working too hard for it, I’m going to privilege that over anything else I might be thinking about doing.”

After watching Penn students line up to nab precious seconds of face time with Morgan Stanley recruiters that night, I couldn’t help feeling like not much had changed since the financial crisis. Whether because of the structured, well-timed nature of recruiting or simply Penn’s finance-centric campus culture, the fact remained that these jobs were still objects of intense desire. Even a financial near-Armageddon, it seemed, hadn’t been able to dislodge Wall Street from its pedestal. And I wondered: if students at Penn couldn’t be swayed from their synchronized march to big banks by the worst economic crisis since the Great Depression, was the financial sector’s allure simply irresistible?

DERRICK HAVENS LOOKED
down at his cell phone, suspecting and fearing what was coming. “I can’t do this anymore,” the text message read. “You have to choose what’s more important to you—this job or me.”

Derrick winced—not only was he still at work after midnight on a Sunday, but he had just been given an ultimatum by Erica, his girlfriend of four years, in a text message. “
Fuuuuuuuuck
,” he groaned, rubbing his forehead and leaning his desk chair as far back as it went.

Erica had spent that weekend in Chicago, where Derrick lived and worked as a first-year analyst at Wells Fargo. She was a senior at the University of Wisconsin—Madison, where they’d met and started dating, and it took her two and a half hours to get from Madison to Chicago, driving along the cold, desolate stretches of Interstate 90.

In the beginning, going long-distance had been a no-brainer. Derrick and Erica had similar values, similar left-of-center politics, a similar sarcastic sense of humor. They even looked good together. Erica, a shapely brunette with a toothpaste-commercial smile and the innocent look of a teen catalog model, was exactly the kind of girl you’d expect to fall for Derrick, a tall, lean high school basketball player with a tousled head of dark brown hair and the cocksure charisma of a onetime homecoming king. They’d fallen deeply in love, and they had been talking about getting married after Derrick’s two-year stint at the bank was up.

That weekend, Derrick knew he would have to work. He always did. Life was brutal as a first-year analyst at an investment bank. He knew that the same qualities that make first- and second-year analysts successful at their jobs—willingness to work long hours, obsess over small details, and be constantly on call—also make them bad romantic partners. And he’d heard other analysts refer to the “seven-week itch,” since seven weeks of interrupted dinners and last-minute cancellations was about all most bankers’ significant others could handle before threatening to break up with them. But Derrick had counted on making his relationship work.

On Erica and Derrick’s weekends together, they typically spent late Friday night and early Saturday morning together, and played Sunday by ear. Erica usually spent the rest of the time doing homework or watching DVDs in Derrick’s empty apartment.

Derrick could tell that Erica was getting impatient with the routine, and so on this visit, he had floated the idea of a Sunday night dinner. One dinner, with no interruptions, and no emergency trips back to work. That much, he said, he could promise.

His plans were stymied on Sunday morning, when he arrived for what he thought would be a quick check-in at work. He had planned to meet an intern at the office to work on a “buyer ID,” a memorandum that was used to pitch a company on several other companies that might be interested in an acquisition. Derrick had offered to help with the project, but when he got to the office, the intern was nowhere to be found. Eventually, the intern e-mailed Derrick apologetically, claiming that he had food poisoning and wouldn’t be able to make it into the office. (Derrick knew that “food poisoning” was code for a hangover.) So Derrick e-mailed his associate—the slightly older, business-school-educated banker who was his direct supervisor—and told him that without the intern, he wouldn’t be able to finish the project. The associate called back immediately.

“Listen,” he said. “I’ve been pretty amenable to your schedule, and I’ve been flexible with all the things you wanted to do this weekend. But we have a client needing this information, and I’m sorry he didn’t show up, but this is your responsibility.”

Derrick sighed. “Got it. I’ll get it done.”

Then, with a heavy heart, he called Erica. “Hey, I’ve got to deal with something. I should be done in an hour or two. I love you.”

Erica had heard this tune before, and she offered to leave.

“No, no, this should be quick,” he said. “Just hang out, and I’ll be there as soon as I can.”

But Derrick had overpromised, and the buyer ID quickly got entangled with problems. After two hours, he called Erica again to ask for another hour. Two hours after that, at around 10:00 p.m., he called to deliver the news she had been fearing.

“Look,” he said. “I’m so, so sorry, but I’m going to be here for a while. I don’t think I can do dinner.”

Erica burst out crying. She knew that bankers worked hard, and she’d done her best to accept that for the next two years, Derrick would only be partially hers. She’d shrugged off God knows how many interruptions in the middle of movies, weekend brunches, football games. But the grace period had elapsed. After months of playing second fiddle to Derrick’s job, she couldn’t take it anymore.

“This always happens to me,” she said through her tears. “And it hurts.”

She drove home from Chicago in a rage, and stopped midway through to text him with the ultimatum. After receiving it, Derrick sat at his desk, head throbbing. This wasn’t how things were supposed to go. Investment banking was supposed to be tough, but it wasn’t supposed to jeopardize the things that mattered most to him.

Derrick knew that if aired anywhere outside the banking world, his complaints would set off a symphony of the world’s most minuscule violins. He understood that, objectively speaking, he was no pity case; that he was
insanely
lucky to have such a stable, high-paying job in a time when many people he knew were struggling to pay the bills. Still, it felt at times like he was being tugged in two irreconcilable directions—between the girl he loved and the career he wanted to build.

Derrick didn’t consider himself a banker at heart. He was born and raised in Waupaca, Wisconsin, a town of six thousand that was famous mostly for its annual strawberry festival. His father, who owned a small grocery store chain, had convinced Derrick to study economics in the hopes of someday recruiting him to take over the business. While in college, Derrick had been inspired by watching Barack Obama run for president. He had always believed in free markets, but he also believed that the government should help lift up the least privileged. Obama’s pragmatic progressivism struck a chord with Derrick, and so, as a sophomore, he’d decided to follow in the president’s footsteps and go to law school.

His plans changed during senior year, when he was invited to interview for an investment banking job at the Chicago office of Wells Fargo, the giant San Francisco–based bank. Derrick knew a few things about entry-level banking jobs. One, they paid well. Two, they were good preparation for law or business school. Three, the jobs were highly desired by the BBAs, students who were getting their bachelor of business administration degrees at Wisconsin’s undergraduate business program, many of whom were self-serious protofinanciers who walked around campus in bad suits and patent leather shoes, hauling copies of the
Financial Times
and holding investor committee meetings. And lastly, if he got one of these jobs and the BBAs didn’t, it would absolutely kill them. He cherished the thought of waving an offer letter in front of them, watching their faces redden as they veered into apoplexy.

Derrick had always been tempted by money. His family was either middle- or upper-middle-class, depending on how his dad’s grocery business was doing. His mom was a nurse, and he’d been raised with the values of Waupaca, a town where people prized hard work and thumbed their noses at big-city millionaires. But, for some reason, he still dreamed of being rich, of owning a sports car and a summer home, and never having to look at price tags when he went shopping for clothes.

When he was fifteen, Derrick watched
John Q.
, a Denzel Washington movie about a father whose son is diagnosed with a fatal heart disease. In the movie, the father goes postal when he finds out his insurance won’t cover a transplant, and he takes the entire hospital hostage in a last-ditch attempt to save the son from certain death. The movie is supposed to be a sort of liberal caricature about the moral turpitude of insurance companies, but it hit another note with Derrick. At the dinner table the next night, he shared with his parents the lesson he’d learned: “It just, like, makes it pretty obvious how important money is.”

At this, Derrick’s mom stopped chewing and narrowed her eyes.

“Listen to me, Derrick, this is important,” she said. “Money shouldn’t define who you are. It just makes certain things easier.”

Her lesson stuck with him. And it kept him grounded even during his senior year—when he applied to Wells Fargo on a whim, got a second-round interview, then went to Chicago for a SuperDay (the all-day sessions at which banks grill their final-round recruits) that culminated in a job offer, and decided on taking it. Along the way, Derrick had convinced himself that making money wasn’t the goal of going into finance. The goal was to build the skills he’d need to take over and expand his dad’s grocery business someday, and to send a message to the people who had doubted his ability to make it in a prestigious, high-pressure industry.

“I want to make my dad proud,” he told me. “And I want all those people in high school who thought I was stupid to fucking suck it.”

Derrick moved to Chicago and started at Wells Fargo a month after his college graduation. He had now been working for several months, and he had built a reliable if unexciting routine. Most days, he’d wake up at 7:30, be in his cubicle by 8:30, spend the next sixteen or seventeen hours hard at work, then head home for a beer and an episode of
The Wire
before bed. It was a lonely life, but Derrick liked being productive. And he was getting real experience. He’d already earned several “deal toys”—clear Lucite hunks, roughly the size of a tea saucer, that were given to the entire team that worked on any major transaction, as recognition of their work. He kept his deal toys lined up on the desk in his bedroom, and he liked looking at them before bed. There was always a little line on them, set in etched type, that made him smile: “Advised by Wells Fargo,” it read.

In the regional offices of Wells Fargo, the work was largely the same as it was in New York or San Francisco. But the environment felt different. The young bankers in Chicago weren’t blue bloods with Ivy League degrees. They were kids who had gone to Indiana, Michigan, Notre Dame. And while most of them were highly accomplished, they didn’t flaunt it. They drank domestic beer, talked about cars and girls, and spent late nights tossing a football around in the “bullpen,” as their cubicle farm was called.

Derrick had been to New York once before for a trip during college, and he’d fallen in love with the city. He had flirted with good-looking girls at the W hotel bar, looked over the water in Battery Park, seen the giant bull statue on Wall Street, and gone dancing at a club on the Lower East Side. Manhattan, he saw, had an energetic hum to it that Chicago could never match. It was the city where power was forged, where social and economic capital accumulated, and where, in the course of an average day, you could see dozens of cross-sections of humanity.

But he knew Erica would never agree to move to the East Coast. She was planted in Wisconsin, with friends and family and ambitions all centered within a fifty-mile radius of her hometown. Aside from good food and shopping, the big city had little to offer her.

“Why do you need to go to New York?” she said, when he’d brought up the possibility. “I’m here. Our families are here.”

At the time, Derrick had consoled himself with the fact that being with Erica was more important than living in New York. But part of him had been disappointed. He didn’t know quite what could happen to him in the big city, but he dreamed of throwing himself in and finding out.

Maybe, he thought, a breakup could be the spur he needed.