According to the Office of the Comptroller, 35,000 bankers and brokers may be laid off in New York City in the next two years, far more than initially forecast, with investment-banking fees falling 23 percent globally. (As of now, employment has remained relatively steady, for a total of 345,000 finance and insurance jobs in the city.) The Bear guys watched their company die. The Lehman troops are still in shock. The Merrill folks still have their jobs, but they’re angry because they’re at the mercy of Bank of America, and in the Wall Street hierarchy commercial bankers had always been the losers and investment bankers the kings. At least, that’s the way it used to be, until all the pure investment banks vanished. JPMorgan even saw fit to organize a retreat to ease tensions between their employees and Bear traders, according to one ex-Bear employee, with trust-falls and motivational games. Mostly, they’re angry about money. “No one is getting paid this year,” says a mid-level Goldman guy. I point out that he does indeed get a base salary. “A hundred-and-fifty grand is irrelevant,” he says.
As the ship sinks, the scramble to get into the lifeboats has been heated. But only the most illustrious travelers are assured of a place—and if you’re in steerage, forget it. At Lehman eight key employees may have gotten as much as $25 million a year (25 sticks) when Barclay’s bought their stock at $25, and the secretaries got nothing. For the rank and file, getting fired early turns out to have been a good thing. Early in the crisis, traders at Goldman were expelled from the mother ship with a full year bonus, but now that banks are cut to the bone, all that’s available is token severance. The irony is that the longer the bosses kept you around, the more likely you were to be essential, but the less likely you are to get a good package when you leave. As Lehman plummeted, some of their traders, having nothing to lose, went long, in a kind of financial Hail Mary. If Lehman got bailed out and the market rebounded, maybe they’d get rich. If not? Hey, it wasn’t their money. And meanwhile, the guys like the subprime head in Jersey have landed just fine, for the most part (except almost everyone else on the mortgage desks are gone). At Bear alone, a firm considered to be the expert in securitization, five top managers in nontraditional mortgages blew out of JPMorgan within a matter of months—off to Goldman, RBS Greenwich Capital, UBS, and Cerberus. While CEOs get held accountable and paraded before Congress, banks are paying these guys fat guarantees, on the order of 10 to 20 sticks over two or three years. Here’s the logic: If they lost so much money, they must know something. “The heads of banks are so predictable,” says a trader. “They only care about winning against their peers. Ultimately, it’s all about them.”
“In the midst of the crisis, what we’re all really trying to do is kill each other,” says a trader.
On one of the many days when the Dow dropped a gazillion points, I’m at the most glamorous office I’ve ever seen, at a friend’s hedge fund. There’s pain across a broad spectrum of financial jobs, and hedge funds risk extinction once redemptions start rolling in at the end of the year. This office seems to be set in a cloud overlooking the puffy tree canopies of Central Park, the desks and monitors floating on perfect, white chocolate–colored carpet, which doesn’t make a sound as one crosses the room. Everyone’s skin is smooth and clear, like they’ve just popped out for a facial. They wear well-cut tan slacks that definitely aren’t Dockers, crisp shirts from Thomas Pink’s winter-fall collection, and hefty watches. They live in Tribeca and summer in the Hamptons. They look like they would be a really good time, if they weren’t terrified about the potential decimation of their culture.
“This is a shit show,” my friend keeps saying. “An absolute shit show!”
The last fourteen months have been brutal, but they didn’t see this coming. Ten percent down for the year … 15 percent down … 20 percent, oy gevalt … Their fund would be finished, this magical money machine that moves billions to the Netherlands and India and other far corners of the world. Two billion dollars is usually what the fund is worth, so if hedgies made a 20 percent return, say, and 20 percent of $2 billion is $400 million, and they took 20 percent of that profit, that would be $80 million, plus another $40 million management fee—that’s what they could take home this year if they hit their numbers. They’re all staring at computer screens that are a sea of red. Everyone is puking up stocks, and they’re no different. “Things are becoming increasingly unmanageable from a co-specific standpoint,” is the way my friend puts it. “No matter what style, position, or investment you’re in, basically everybody has been taken out back and shot.” Not only do they have their own skin in the fund, but they might not get paid for a couple of years—if they have a business.