“I’m Trying to Stay Positive”: I-Bankers Speak Out
Though some people think the "fundamentals of our economy are strong," a lot of people recognize the Dow's dizzying 504 point fall yesterday for what it is: the latest development in a giant, evolving problem. In case you don't read newspapers or talk to others: the bulge bracket investment bank Lehman Brothers collapsed over the weekend and is filing for bankruptcy; Merrill Lynch, another bulge bracket i-bank, has been bought by the Bank of America for around half its recent value; and AIG, a big insurance company, might just pull a Lehman.
Where does this leave our i-banking brethern?
Um, it depends on where they work.
One Ivy alum who is/was working as a Lehman analyst had this to say:
I didn't get the official word until Sunday night.
I'm shocked and disappointed. I'm just trying to stay positive.
I'm out of a job at the end of the week but at least I'm young. I can pick up and come back. I feel sorry for the older guys who just lost a fortune.
Lehman analyst on Merrill Lynch:
I have friends over there. They don't really know what's going to happen. They just have to wait and see how and if they're integrated into Bank of America.
Basically, it's like what happens in mixed families, only some of the kids are going to be laid off and go back to grad school.
An Ivy alum working for an unnamed but major investment bank that is still standing had this to say:
Everyone's a little afraid but my Managing Director says we're comfortable. And if the market recovers the people who do survive are going to have a strong advantage.
On the subject of next year's crop of Ivy interns and analysts, this banker says:
They're fucked.
After the jump, this banker explains how bad things are going to get.
We're in the beginning approaching the middle. We're just getting to the juice.
An Ivy alum working at a boutique i-bank offers some insight:
Don't have much time to write this, but basically what's going on is the big independent brokerage firms are going down due to a combination of over-leverage (Lehman was levered up 30 to 1), illiquidity, a shrinking balance sheet, and the lack investor confidence. Banks that got tied up in the securitization of mortgages are getting hit hard as these derivatives are now priced 25 cents on the dollar due to defaults in the housing sector which also drives housing prices down. As we see the big brokerage firms break down these few weeks, the spotlight will be turned on the regional banks in the near future, as they hold lots of bad debt as capital. Also, the second wave of the credit market crash is coming in 2009 with the reset of Option ARMs with negative amortization. The CDS market of $62 trillion is also in dire straits. This crisis is definitely not over, it has just begun.
The recent boom in structured products, especially those backed by residential mortgages, has allowed Wall Street to prosper during the mid 2000s. Although there has been big ups and downs in the housing market in last century, there has never been a swing like this market conditions of over leverage and illiquidity.
It's a scary time to be in right now. People are getting fired left and right. Greenspan has said that this is a once in a century crisis. This is starting to look like the 1929 depression.
And now, enjoy the rest of your day!
18 Comments | 
| 
Print This Post
Read more: credit crisis, i-banking, ivy alums, juice, lehman brothers, merrill lynch
Email – 
Search
About
Follow us on Twitter
Report a bug
Archives
RSS Feed
September 16th, 2008 at 1:01 pm
i think i’m fucked.
September 16th, 2008 at 1:03 pm
Hooray lawyers! It’ll be a banner year for bankruptcy court!
September 16th, 2008 at 2:45 pm
Overall, the econ-pessimists are up against an insurmountable reality:
In the last reported quarter, the U.S. economy grew at an annual rate of 3.3 percent, adjusted for inflation. That’s virtually the same as the 3.4 percent average growth rate since — yes — the Great Depression.
Obama is flat-out wrong when he frets on his campaign Web site that “the personal savings rate is now the lowest it’s been since the Great Depression.” The latest rate, for the second quarter of 2008, is 2.6 percent — higher than the 1.9 percent rate that prevailed in the last quarter of Bill Clinton’s presidency.
According to the MBA, 6.4 percent of mortgages are delinquent to some extent, and 2.75 percent are in foreclosure. During the Great Depression, according to Wheelock’s research, more than 50 percent of home loans were in default.
September 16th, 2008 at 5:18 pm
“Though some people think the ‘fundamentals of our economy are strong,’”
Question: can anyone who actually thinks this truly be said to be “THINKING”?
Also, I see the Washington Post is now even better at lying about statistics than the federal government!
September 16th, 2008 at 9:14 pm
Full quote for the unenlightened Obamamaniacs:
“there’s been tremendous turmoil in our financial markets and Wall Street and it is — people are frightened by these events. Our economy, I think, still the fundamentals of our economy are strong. But these are very, very difficult time. And I promise you, we will never put America in this position again. We will clean up Wall Street. We will reform government.”
September 16th, 2008 at 9:27 pm
@y10
“Our economy, I think, still the fundamentals of our economy are strong.”
Sure, the full text definitely makes it sound so much better.
September 17th, 2008 at 1:05 am
Schadenfreude. I haz it.
September 17th, 2008 at 8:48 am
and what am i going to do after graduation now? shit.
i guess, law school here i come!!
September 17th, 2008 at 9:25 am
Business School is the best option for us.
Just looked into the law school application time table and LSATs are coming up way too soon to prep.
But GMATs are basic math/reading. Any associate/analyst should be able to crush this test and enter in Spring 09, Summer 09, or Fall 09 without much problem.
I for one don’t want to wait a year for law school (or spend 3 years in school, or entirely switch careers)
IMHO- Duck into the nearest B-school for 2 years, reemerge w/ some new flashy skills and sheepskin, and try to avoid this mess all over again.
September 17th, 2008 at 11:22 am
I disagree. Anyone who has ever taken a logic course could destroy the LSATs this afternoon. Computer Science and Math majors tend to be especially good at them. Then again, if conversion to symbolic logic isn’t really your thing, LSATs will need a little more practice.
GMATs are pretty simple as well. Not terribly different than the GREs, although with less vocab, which in turn are pretty much the SATs but grown up a little.
September 17th, 2008 at 11:25 am
Very true, from my view point the logical reasoning sections are similar. But I think way more time would be needed on the logic games- those things are weird.
Basically though, I went into banking to stay in finance- I’m not going to run to law school just b/c the market is sour.
I was going to go to b-school eventually, so now I will take the GMAT, try to find another job, if unsuccessful, I’ll enter B-school in the spring.
Law school is too much money and time if you don’t know for CERTAIN that you want to be a lawyer.
September 17th, 2008 at 2:50 pm
oh noes! now how will Wharton grads make money to skeeve out privileged private school girls of NYC at shady Meatpacking District bars?
September 17th, 2008 at 8:22 pm
Getting into business school is twice as hard as getting into law school, with the same percentile scores if you’re straight out of undergrad. B-schools put a much higher emphasis on work experience… which I’m guessing you don’t have much of right now. Good luck competing with the hordes of newly unemployed IBanking analysts who decided to take a nice little vacation and wait out this recession and its job market.
September 18th, 2008 at 1:08 am
This will not stop until the CDS market is regulated. For every $1 of risk only about a nickle to a dime shows up on the balance sheet. It is the ultimate form of leverage that is not really discussed in the media.
Its not about selling short stocks. Its about the CDS market, which dwarfs the underlying cash market.
Here is the play book for this market:
Buy $500mm of CDS in a bank from every dealer in succession
Sell short the stock
The dealers will be caught offsides and will widen their markets to get out of their trade
The stock traders will see a wider credit spread and short stock
Repeat until the bank is driven into the ground. Get too big to fail so if your bank gets in trouble, it has to get either bailed out or acquired.
September 18th, 2008 at 8:55 am
@ Really?
Yea, I was speaking on behalf of those currently(formerly?? crosses fingers) employed. The experience factor in b-school apps of course is key.
For Ivy undergrads who haven’t had offers- go do teach for america or something else for a little while. Something respectable yet impermanent that will tide you over while the market recorrects.
September 18th, 2008 at 10:39 am
The world have investment banking will change permanently. I never thought I’d say this, but the best place to be right now (and in the coming years) will be the boutique banks. Greater job security, better hours, and equal if not better compensation (at least for associates, VP’s, and Principals; analysts and MD’s still are underpaid comparatively to bulge bracket firms).
For those looking for jobs, a lot of boutiques are hiring right now.
September 18th, 2008 at 4:38 pm
Very true. Also, look at different locations:
Foreign banks would love to bring some American talent overseas- Ireland, Japan, etc.
Also, look towards firms in risk management- surely to be a hot topic.
Bermuda, Caymans, Guernsey look like interesting locales if you can find openings.
October 5th, 2008 at 4:39 am
A lot of Wall Street professionals are exiting the Investment Banking career. They know that the lifestyle and the jobs with fat bonuses they had come to expect, albeit with hard work is no longer going to be the same. They will be forced to take jobs with mid-market and boutique banks. These banks will not offer them the heights of anything in terms of bonuses and perks that they were used to at the bulge bracket firms. For those who had been lucky enough to hang on to their jobs or get re-absorbed at JP Morgan & Goldman Sachs will also see much lower bonus amounts and silent attrition. Only the best will probably retain similar status as they had prior to when all this crisis started.
The Ivy League institutions which graduate the brightest and smartest of those seeking a career in Investment Banking are also forced to quickly adapt to the changing circumstances. Their career offices are scrambling to put forth guidance and counseling for those final year students whose offers have suddenly been rescinded and having to face off questions from incumbent graduates of the next year’s graduating class.
All ex Wall Street professionals are strongly encouraged to brainstorm career strategies and options at xwallstreeters.com. Feel free to contribute your advice and suggestion for this new future in Investment Banking.
- by Blogger at
xwallstreeters.com