Feature

Down and Out on Wall Street

Connecticut, a weekday morning in late June. The kids are off to summer school. Arthur turns to his wife and says, “Okay, let’s have some coffee and hang out.”

But she’s gathering her briefcase. “I’ll see you tonight,” she says. And he’s left holding the coffee.

Arthur spent his summer coaching soccer, football, hockey, baseball, and softball. “I spent some time with my wife—catching up from twenty years of ignoring her,” he says. “But I realized she wasn’t just willing to drop everything for me now that I’m home. She’s got her foundation work, and the work she does with the public schools, and she had her friend network that she’s not willing to give up.”

Arthur’s monthly expenses amount to about $25,000, including $12,000 for the mortgage, insurance, taxes, and general maintenance and $5,000 or $6,000 a month in household expenses. The country club? “For me, it’s nothing. Like $1,000 a month.” Vacations cost about $10,000 a week if they skimp, sticking to the Caribbean or skiing in Vermont. “We don’t go on any exotic European trips,” he says. “We’re watching our expenses now. But don’t get me wrong. Most people would be very envious. But we’re being careful.”

His wife? “I think I feel the pressure more than she does, because I’m paying the bills.”

He was going to spend $60,000 on painting the house. That’s out for now. He was going to sink $50,000 into redecorating a few rooms. That’s out, too. But his street is filled with others who reached higher and have more to worry about now. “People were knocking houses down and doing multi-million-dollar renovations, buying three new cars a year, spending the summer in Europe,” he says. “People rode the equity market all the way up and all the way down.”

With investment banking no longer an option, people like Arthur have decided to hang their own shingle. “Most people who were in investment banking and got laid off—at least three quarters—are doing something else,” says Richard, a 32-year-old investment banker who has started his own private equity company, a pot of investors’ money he’ll use to buy and sell companies. His new life is more demanding than the old one ever was. “I start my computer at 7:30 or 8, send out 20 or 30 e-mails, then I’m on the phone or handling e-mail until dinner. I answer 200 or so e-mails during the day. Then after dinner I work for a couple hours, sometimes until midnight.”

“‘I canceled countless vacations, was on planes for bullshit two-hour meetings on the West Coast. And at the end of the day, there’s no consideration,’ says one banker of his firing.”

He’s working on his first major transaction—the purchase of a $20 million company. But the payoff won’t come until he sells that company, and that still isn’t enough to match his old salary. Let’s say $10 million of the $20 million is equity and the rest debt. If he sells the company in three years for three times his money, or $30 million, that’s $20 million net—20 percent to his firm, 80 percent to the investors. So that’s $4 million, or a million and a quarter a year spread out over three years, minus expenses. Multiply that by two for two deals, then subtract shares for two partners and salaries for an associate or researcher, and he’s left with a couple hundred grand a year.

“If I do two of those deals a year, that would be sustainable,” Richard says. “Three would be respectable. More and I’d be a rock star. But these things take four to eight months to do from scratch. It’s not the Holy Grail until you do more deals or increase your size.”

Richard took severance at the beginning of 2002. He turned to his wife and talked about starting his own business. They talked about having one or two nice dinners a month instead of once a week. They talked about less-lavish gift-giving, limited clothes shopping, limited travel. They’re keeping the $30,000 Hamptons rental, though, and they actually bought a half-million-dollar one-bedroom-plus-den on the East Side. Then, over the summer, his wife got pregnant.

“We laughed a lot,” he says. “You leave a firm, no cash flow, buy an apartment, then have a baby? We’ve learned we can’t control a lot of factors in life. We’ve got to go with the flow.”

After six months out, will landed a job with another investment bank. “I got very, very lucky,” he tells me. Now, in a different economy, he’s a different man. “I try to do the least amount I can to stay busy enough that people don’t think I’m not doing anything—and still be able to do yoga every day, and spend an hour or two with my daughter before she goes to bed. I delegate.”

How much is he getting paid? “My base is $125,000. I don’t know the bonus. Yesterday, the guy who runs my group said, ‘We’re gonna give people their bonus numbers this week, and they’re gonna be terrible. And it’s for two reasons. One, business is down. And two, because we can.’ I’ll probably make $350,000, maybe less. I probably need to make at least $300,000 in total, pretax, to break even.”

A few days later, I catch up with Will on the phone. He’s seething.

“I totally got fucked,” he says. “I got $100,000, and I was expecting more than double that. It’s bullshit. It’s basically a quarter of what I got last year. I’m only making $200,000 a year. It’s the same as I got my first year out of business school. I’m paying to work here now.”

And Arthur? he’s punching in and out, easy hours, at a small “alternative-asset-management company” that he’s trying on for size. He calls it an apprenticeship. His base pay is $50,000, one twentieth of what he was paid the previous year—“not enough to live.”

He’s home by 6:30 p.m. now. He helps his kids with homework, takes them to the Cub Scouts. “Eating dinner with them,” he says, “is something I’ve never done. I’ve learned how fast they were growing up. But to be honest—and I’m shocked to say this—I don’t think they treat me at all different now.”

His day is calmer—and lonelier. “I spend all day on the phone talking,” he says. “But it isn’t like a trading floor. It’s the same way the rest of the country works, only I’m not used to it. The bond with your co-workers isn’t there. That’s why so many people start hedge funds. They miss the trading floor.” He has nothing to sell now except himself.

Looking at Arthur in the Top-Down Recession is like looking at Ray Liotta at the end of GoodFellas. He’s safe now, financially secure. But he’s an average nobody. He gets to live the rest of his life like a schnook.

“I was just a salesman,” he says. “But we loved it. It’s like being on a professional sports team. You get to know these people better than you know your spouses. I hate to say it, but it’s true. And you’re not prepared for it to stop. Now suddenly you’re sitting there, a sports star bass-fishing on his 100-acre ranch, wondering how it ended.”