© The Financial Times Ltd 2016 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
February 17, 2012 8:45 pm
When it comes to publicity, investment bankers are a notoriously fickle bunch. When it suits them – for instance, to boast about a game-changing M&A deal or to pump up a hot IPO – bankers are more than happy to be quoted by name, rank and serial number. But when it comes to addressing more difficult topics – the role bankers and traders played in the current financial crisis, why the world needed synthetic collateralised debt obligations in the first place or why they get paid so much – they scurry away faster than a cockroach when the light goes on in a darkened room.
Part of this behaviour is genetic. One of the supposed Wall Street truisms is that the great firms stay out of the limelight and shun press inquiries. They would prefer that their clients get the publicity, not them. This is, of course, a fabulous myth. The mass that has been written about Wall Street over the past decades confirms that the opposite is clearly the case. Still, Wall Street banks do all they can to drum into their employees the importance of not talking to the press – at least if they want to keep their jobs. The dictum of omertà is so powerfully reinforced that even after bankers and traders are no longer employed on Wall Street, many still stick to the party line (often sealed by contractual obligations not to discuss publicly their former employer).
For most of its 143 years, Goldman Sachs didn’t even have anyone on staff to handle its press relations. When the firm eventually hired Ed Novotny, in 1970, he worked from his apartment at Tudor Towers, on the east side of Manhattan. Novotny’s aggressively vacuous public-relations efforts became part of the Goldmans legend. Novotny, explained a former Goldmans executive, had “this incredible paranoia”, where “the firm would never go on the record”. If Novotny told a reporter something, it would always be on “deep, deep, deep, deep, deep – five ‘deeps’ in a row – background”, the former Goldmans executive said. “Every time he would describe a reporter to me it would be he or she ‘is very, very, very dangerous’. Even Bill Cunningham, the society photographer, was ‘very, very, very dangerous. So watch it.’”
My knee-jerk reaction is not to make this any more public than it needs to be
- Former managing director, Citigroup
On the rare occasions when an investment banker mistakes his or her own prowess for that of his or her firm and dares speak of it – as, in The Wall Street Journal, did both Erin Callan, the short-lived chief financial officer of Lehman Brothers, and Mark Maybell, the former head of media and telecoms banking at Merrill Lynch (who had the audacity to trumpet his $5m annual compensation package) – the fallout can be swift and thorough. Not for nothing did Voltaire write, in Candide, of how the British executed one of their own admirals who lost an important battle “pour encourager les autres”. It is a powerful message, especially on Wall Street. Which is why it is difficult to write the very important story of how Wall Street bankers and traders cope with losing their highly paid jobs, after being summarily fired, often with surprisingly little in the way of severance or explanation, other than the perfunctory “reduction-in-force” statement from the HR department. For these and other reasons, former Wall Streeters don’t like much to talk to reporters about how difficult it is for them to be sidelined.
There are no easy ways to extract from them how it feels to go from having a power office in a high-rise corporate tower in New York or London, working on tense but important billion-dollar M&A deals and expecting millions of dollars in a bonus, to being at home in a leafy New Jersey suburb with nothing to do but think about heading to the gym or driving their kids to school along with other dispossessed dads or worse, a bunch of “soccer moms”. What this kind of rejection – often for no reason other than business has turned sour – does to one’s feeling of self-worth, ego and familial relations is not something they are eager to discuss publicly.
I can’t talk about anything on that matter right now
- Former third-year associate, Goldman Sachs
I know these feelings of dislocation, shame and inadequacy intimately. After a 17-year career on Wall Street – where I rose to be head of the highly regarded media and telecoms M&A business at JPMorgan Chase before being slowly stripped of my responsibilities after September 11 – the bank dismissed me in January 2004 as part of an ongoing “reduction in force”. Despite two graduate degrees from an Ivy League university and years of exponentially increasing remuneration, I was left in the unenviable position of caring for a wife and two small children with no hope of finding anything like the work I had been doing at the pay I had been receiving. In the months after my firing, nasty nightmares often startled me awake. Out of desperation and a lingering desire to fulfil my original dream to be a journalist, I began writing my first book – The Last Tycoons: The Secret History of Lazard Frères & Co.
I understand well why Mark Barber, a former managing director of the technology banking group at Citigroup, would not want to share with me his feelings after losing his job, just weeks before Christmas, after 14 years at the firm and at its predecessor, Salomon Brothers. Reached on his mobile phone, Barber didn’t feel like talking. “My knee-jerk reaction is not to make this any more public than it needs to be,” he said. “At this juncture, I don’t feel comfortable speaking about it.” Before he hung up the phone, he noted that he is “in the process of considering my options”.
I’m sort of more inclined to have a lower than a higher profile, to be honest
- Former partner, Goldman Sachs
Egan Antill, who was recently promoted to a managing director at Merrill Lynch (in metals and mining banking) after joining from Lazard in 2006, left Merrill (now part of Bank of America) in September. “I’d rather not get into it,” he said when I spoke to him by phone. Sean Murtagh had been a third-year associate at Goldman Sachs, in the firm’s consumer retail group, before leaving his job in October 2011. “I can’t talk about anything on that matter right now,” he explained, graciously. “But I appreciate the call.”
Other former Wall Streeters toyed with the idea of sharing their stories, before confessing that being mentioned in an article about life post-Wall Street was not the kind of publicity they were seeking either.
. . .
While former bankers and traders do not engender much sympathy, their exit from the scene is not a trivial matter. According to Bloomberg data, as many as 200,000 Wall Street employees lost their jobs in 2011. Most of those dismissed, according to Gary Goldstein, the co-founder and president of Whitney Partners, a financial services recruiting firm, were in clerical or back-office positions. But some 40,000 were high-level bankers or traders at the managing director or vice-president level – “transaction oriented”, he said – who “don’t have skill sets that are easily transferable”. They often still believe they are worth the vast sums they had been paid, he said, “and don’t take jobs that are offered because they think are worth more”. For many of them, the denouement can be devastating. The sudden job loss is often the first break in the implied promise of great wealth and security that began years before during the whirlwind romance of on-campus interviews at their prestigious universities and business schools, the prime hunting ground of Wall Street’s recruiters. When the reality hits that there actually was no promise of wealth and security in return for hard work and long hours, only smoke and mirrors – and a meagre severance – the wallop can sting.
Part of what makes the problem so vexing is the way high-powered Wall Street firms are structured. Unlike other publicly traded companies, Wall Street firms pay employees – mostly in the form of whopping year-end bonuses – between 50 and 60 cents of every dollar of revenue generated. Human beings are relatively simple: they do what they are rewarded to do. On Wall Street, bankers and traders are rewarded to generate revenue, whether by selling M&A advice, collateralised debt obligations or derivatives. They have come to expect a meaningful percentage of the revenue they generate, whether in good times or bad.
It’s not a good feeling. But there is nothing against me personally. It’s just part of a business decision
- Former senior banker at Nomura
What campus recruiters fail to mention to young MBAs is that Wall Street is actually a very high-beta profession. You can get paid a lot, yes, in the good times but in a cyclical downturn the consequences for your career can be grave, especially for those near the top of the pyramid without sufficient political support. Reducing pay across the board would be an obvious solution to grappling with a lower-revenue environment. But that’s not the Wall Street way: Wall Street would rather fire a bunch of people – and keep the pay obscenely high for those who remain – than reduce the pay for everyone and minimise firing. Indeed, in 2011, while Wall Street layoffs were rife, the pay for the top executives remained robust. For instance, Jamie Dimon, the CEO of JPMorgan Chase, received compensation of $24m while James Gorman, the CEO of Morgan Stanley received $10.5m.
Dismissed bankers or traders are often forced to relinquish unvested options, and can be cut loose without any severance pay at all, unless they sign a “release” by which they agree not to pursue any claims through arbitration. If they do sign a release, according to Gary Goldstein, they will sometimes get unvested stock and options, plus maybe a month’s base pay for each year they were employed and some flexibility on the length of gardening leave. “The strategy now is to pay as little severance as possible,” says Goldstein. If they refuse to sign, they have no choice but to go through the arbitration process administered by the Financial Industry Regulatory Authority (Finra). They may not have even realised it, but as a condition of their initial employment, they relinquished the right to pursue a monetary claim against their firm through the court system (collectively one of the largest abdications of legal rights ever). If you want to work on Wall Street, your employment agreement always stipulates deep in the boiler plate that you eschew your right to a trial in a court of law (except on matters relating to discrimination).
In 2011, only a small percentage of the 4,359 cases brought before Finra arbitrators involved former employees. (Most cases involve broker malfeasance.) According to Jeffrey Liddle, a lawyer who represents plaintiffs in their battles against Wall Street, the success rate for former Wall Street employees in arbitration against their firms has been declining in recent years, with arbitrators now awarding a recovery in only about 37 per cent of cases. Of those who win, says Liddle, arbitrators only award about 13 per cent of the damages sought. Most cases, he said, end in no recovery whatsoever for the plaintiff. And the system is not open to challenge.
Besides the intellectual satisfaction, the ego gratification was to the point of absurdity
- Tod Jacobs, a former telecoms and media analyst at JPMorgan Chase and Sanford Bernstein & Co
To make matters worse, the disgraced CEOs of the Wall Street firms that almost plunged world economies into the financial abyss not only escaped liability for their actions but also walked away with a bundle. Jimmy Cayne, the former CEO of Bear Stearns, left with about a $400m fortune. Dick Fuld, the former CEO of Lehman Brothers, pocketed about $500m, although he tried to convince Congress it was closer to merely $300m. Meanwhile, Stan O’Neal, the former CEO of Merrill Lynch who oversaw the firm’s huge buildup of toxic collateralised-debt-obligations, left Merrill at the end of 2007 with $140m. Indeed, only in recent weeks have prosecutors won the first fraud conviction against Wall Street traders for their role in fomenting the financial crisis when two traders at Credit Suisse pleaded guilty to conspiracy and wire fraud for intentionally inflating the value of mortgage securities in order to get higher bonuses. (A third trader who lives in London has been indicted but has not pleaded guilty.)
In truth, for the first time in history, Wall Street has created a cohort of highly educated, relatively young ex-bankers and traders who can never hope to make again what they were once making – but are not considered wealthy – and who are now wondering what to do with their lives.
. . .
For one former managing director at JPMorgan Chase, who lost his job during the financial crisis – and, like many of the people I contacted, would only share his story if his name was not used – the immediate challenge was dealing with the unexpected news of the firing. “It’s a bit shocking,” he said, “I had always been doing very well there and was highly well liked and producing. So first there’s just the shock of ‘Really, like, me?’” There was an element of relief, though. “It was almost like resigned acceptance of ‘So what? I’m not going to miss anything. It hasn’t been that much fun. It’s been unpleasant being around people that are not happy and looking to who they should fire.’” Perhaps unsurprisingly, neither he nor any of the other bankers I talked with believed they had any substantive role in causing the financial crisis that cost them their jobs.
It’s not as sad as it sounds. This is not some forsaken village in the middle of nowhere ... This is New York
- Former senior banker at Nomura
At first, he relished his free time. He went skiing in Europe. He played a bunch of golf. His teenage son, though, was worried. Was his father OK? What about the family? “I told him we are OK. That it’s something to learn from and move forward.” On one of his first days after “the event”, as he dubbed his firing, he went with his wife to the gym. “Saw all the housewives there and decided I wouldn’t ever go back at 9am,” he said. During the first few months, he started to become increasingly enraged that he had been fired, especially after the Fed, the Treasury and Congress flooded the surviving Wall Street firms with capital, helping them to get back on their feet, and reaffirming the status quo. “Clients of mine were still transacting with the bank and those that were left behind took my clients – that became something that bothered me,” he said.
Anxious to get back to work, he took a job at a well-established regional boutique, but quickly found himself regretting the move. Soon, he was unemployed again, this time for a year. He played more golf. He coached his son’s soccer team. He did some carpooling. “It’s a thankless job,” he said. “I used to say to my wife, in a joking way, ‘I don’t know where the day went. I got up. I worked out. I took the kids to school. I had lunch, then the kids were back from school. And all of the sudden the day is over.’” Throughout, his wife remained supportive and staying upbeat sustained him. In 2011, he joined a small advisory boutique as a partner and said he is happy to be back working, although nothing comes easily any more without the prestige to dangle before clients. “I used to carry a nuclear bomb when I went around seeing clients,” he said. “Now I carry a pistol that is strapped to my ankle. I’m more focused, more strategic.” Where he once counted his annual pre-tax compensation in the millions of dollars, now he gets by with hundreds of thousands of dollars in annual income.
. . .
A senior banker at Nomura in New York, who was fired from the firm in November, would also only tell his story anonymously. He says he had been looking around for a new job anyway, but was nonetheless dismayed to be let go before he could secure a new opportunity. He had been at Nomura for about 18 months, since joining from Bank of America Merrill Lynch. “It’s not a good feeling,” he said, “but there is nothing against me personally. It’s just part of a business decision. You’ve got to move on. ”
He thinks he will soon be back working on Wall Street. In the meantime, as a divorced father, he was looking forward to being with his children during the holidays. “We’re going skiing up in Colorado and then I’m going to go to New Zealand for a couple of weeks to have some fun,” he said.
Another ex-Nomura banker, who had joined in May 2010, told me he had left a year later as a result of an internal change of direction at the bank. He received minimal severance – he would not disclose the amount. “The promise that I joined Nomura with disappeared within the year, and it was bad timing from my perspective. But this is Wall Street. Anything can happen.” He is 35 years old and married but is now reluctant to start a family, given his uncertain job situation. His wife, who works, continues to be supportive and prefers to think of her husband’s layoff as a holiday break, rather than a permanent condition. He was of course “a little bit sad” to live through “one of the worst financial crises ever” when he was in the process of building his career. Still, he was sanguine about the future. “It’s not as sad as it sounds,” he said. “This is not some forsaken village in the middle of nowhere, where there’s only one plant that operates. This is New York. There are a lot of opportunities.”
. . .
For many former bankers and traders that “something” could very well be something completely different. Greg Zehner was a pre-IPO partner of Goldman Sachs. He had grown up in a small town on the eastern edge of Long Island, and was one of the only people in his high school to attend Massachusetts Institute of Technology. He worked in Goldmans’ mortgage-backed securities business. In 1987, he joined the two-year analyst programme and then, unusually for the time, was asked to stay full-time on the trading desk. Eventually, he ran the emerging-markets desk until he left Goldmans – with a very full bank account – in May 2000, a year after the firm went public.
His wife, Jackie, was also a Goldmans partner – the first woman to be named a partner on the trading desk – and when the Zehners’ second child was born, Greg resolved to stay at home in Connecticut. “I left in May and changed diapers,” he said. At first, he was nervous about life after Goldmans. “I mean you’re incredibly blessed when you’re a partner at Goldmans,” he said, “so there wasn’t a huge financial fear – right? – which a lot of people face when they’re leaving their career.” The question for Zehner was “how much of my self-worth and my self-image was tied up in being a partner at Goldman Sachs?”
It took me six months before I could say ‘Oh, I just stay at home with my kids’
- Greg Zehner, former partner, Goldman Sachs
That took time to resolve, as he realised when he went with his three-year-old on play dates and was the only father. “People would ask me what I did, and I would say, ‘Oh, I used to be a partner at Goldman Sachs but I left,’” he recalled. “And it took me six months before I could say, ‘Oh, I just stay at home with my kids.’ Why did I need to tell people what I had done at Goldmans? That made me realise that it was my own lack of self-confidence that I had to say that I had been a partner at Goldmans to justify my existence.” When his wife also left Goldmans at the end of 2002, Zehner decided to pursue his religious faith: he is an evangelical Christian. “I credit my faith with me being a successful trader,” he said. “It’s been important to me my whole life.” He also enjoyed coaching his son’s soccer team and teaching and he wanted to figure out a way to combine teaching with faith. He has since graduated from Yale Divinity School, in New Haven, and become a pastor. In 2010, the family moved to Utah, and Greg is considering writing a book about new interpretations of the Bible. He has no second thoughts about leaving Wall Street. “No regrets whatsoever,” he said. “I feel blessed to be able to do what I’m doing, and there’s not a day that I go, ‘I wish I was back there.’”
Like Zehner, Tod Jacobs, a former top-ranked telecoms and media analyst at both JPMorgan Chase and Sanford Bernstein & Co who worked on Comcast’s $72bn takeover of AT&T Broadband in 2001, followed his religious calling after he left Wall Street around 2003, and moved to Israel with his family. Jacobs became a rabbi and started a yeshiva in Jerusalem, where he teaches Torah and the Talmud to aspiring young Jewish leaders. “The initial year or so of transition was very difficult for the kids and therefore for my wife and me,” he explained. “But once they all got into their grooves, it became a lot easier and less tense.” There are now 30 students enrolled in Machon Yaakov. He runs the school, teaches Torah and is chief fundraiser.
He, too, has no regrets. “In all that time – more than eight years – I’ve never looked back for a second,” he said. “I look back on my career with a lot of gratitude; it really enabled everything else that happened, not only financially, but also with respect to having the stature and managerial and presentation skills to pull off my new role. I very much miss many of the people that I worked with and, of course, besides the intellectual satisfaction, the ego gratification was to the point of absurdity. But I love what I’m doing and believe it has brought a lot of inspiration to me and my family, and that is priceless.”
That Zehner and Jacobs have found great happiness in their religious faith after long careers on Wall Street makes one think about how best to get into the kingdom of heaven after an unabashed pursuit of riches. Of course, Zehner and Jacobs are far from the typical ex-Wall Street bankers and traders. More are probably like Joe Nelson, who found his entrepreneurial spirit kindled when he left Goldman Sachs, in London, after nine years as an algorithmic sales trader. In December last year, Nelson, now 30, started Theyfit, a company that sells 95 different custom-fitted condoms. He describes himself as a “condom revolutionary”. Nelson figured that men have different shirt and shoe sizes, so why not condom sizes? After one week, Nelson reported on his website that every one of Theyfit’s styles had been ordered online.
Being a banker used to be sexy ... It was cool. [But] it quickly changed from something you’d be proud to tell people to something you were reluctant to reveal
- Joe Nelson, former algorithmic sales trader, Goldman Sachs
He conceded that leaving Goldmans was “absolutely terrifying” because he could no longer depend on the paycheck and the safety net, but he, too, has no regrets. “Being a banker used to be sexy, for want of a better word. It was cool, ” he said. Then came the financial crisis. “It quickly changed from something you’d be proud to tell people – ‘I work for Goldmans – to something you were reluctant to reveal. You’d be more vague, ‘Oh I work in finance.’ That’s fine with acquaintances. But when it’s with your family…” His family no longer seemed quite so proud of him.
He left the bank without his 2011 bonus. On his own now, he gets no salary and relies on the state for his healthcare, like millions of other British citizens. He explained: “One of my ex-clients described it thus: ‘Yours is the finest denouement I have witnessed in 30 years of being in the City,’ while another expressed it somewhat differently: ‘You’ve gone from working for a bunch of knobs to working with a bunch of dicks!’ Viva la revolution.”
. . .
For others, the transition away from Wall Street has been more dramatic, and in some cases even tragic. The story of Brad Jack is a fall from grace worthy of a modern morality tale. Jack was formerly co-chief operating officer of Lehman Brothers, who lost a power struggle with Joe Gregory in 2005 over who would become Lehmans’ president and the effective second-in-command to Dick Fuld, Lehmans’ imperious CEO. Jack had joined Lehmans in 1984 and ran the firm’s investment banking business from 1996 to 2002, when he was appointed co-COO with Gregory. In the process, he became wealthy – once owning the most expensive home in Fairfield, Connecticut. At the time of his departure from Lehmans, Fuld described Jack’s leave as a “retirement” to spend more time with his family and on his philanthropy. “His ability to pull our people together, to the benefit of our clients, highlights the spirit he brought to everything he’s done for the firm,” Fuld said cheerfully at the time.
But, according to Vicky Ward, the author of The Devil’s Casino, a 2010 book about the collapse of Lehmans, Jack’s departure was anything but voluntary. According to Ward, some people at Lehmans suspected he was abusing prescription drugs. Gregory apparently reported to Fuld that Jack was “not sufficiently focused on his work”, a jab that perhaps Jack’s health issues were more important to him than Lehmans. Jack told Ward that he had had a cancer scare and felt pressure from Gregory to return to work at Lehmans before he had fully recovered. Jack “had a scar right across his torso”, Ward wrote, adding that Jack felt Gregory was “unsympathetic” about his recovery.
After Lehman Brothers imploded in September 2008, Jack was much sought after by journalists who hoped he could shed some light on how Lehmans’ management team, led by Fuld and Gregory, could have led the firm so far astray. Sometimes, as he did with Ward, Jack went on-the-record with his thoughts about Lehmans’ demise and the roles played by Fuld, Gregory and others. Mostly, though, he was an off-the-record source about Lehmans’ mismanagement over the years.
Then, in June 2011, Jack himself became the story. On June 27, Jack, 53, was arrested and charged with second-degree forgery and forgery of a prescription drug. According to Fairfield police, Jack had gone into a pharmacy with a forged prescription for 12 Oxycontin pills, a painkiller, and nine Ritalin pills, for attention deficit disorder. The pharmacist was suspicious and called the police. Jack drove away but was tracked down. At the court hearing that followed, Jack asked the judge to allow him to enter a one-year rehabilitation programme. The judge acceded to the request. If he completes the programme successfully, commits no other crimes and sticks to only prescription drugs, Jack will not have to admit guilt or have a criminal record. “Mr Jack is relieved to have put this regrettable incident behind him and is looking forward to returning his energy toward the many charitable and non-profit organisations which he holds so dear,” his lawyer reportedly said after the hearing. Jack’s next scheduled court appearance is August 17, a year after starting his rehab programme. Neither Jack, nor his lawyer, returned my phone calls or emails seeking a comment about Jack’s life after Wall Street.
. . .
For the past generation, Wall Street has been a black hole that sucked in the world’s best and brightest minds, lured by the irresistible prospect of obscene wealth without the risk to any personal capital. But now the first flicker of serious prosecutions against the abominable behaviour that led up to the financial crisis combined with materially smaller bonuses has cast a pall over the attractiveness of a Wall Street career. A former Goldmans banker said that for the first time in decades, a number of recent college graduates have actually turned down offers from the bank, opting instead for the much more altruistic Teach for America.
If we could only break down the seemingly impenetrable wall of silence that surrounds former Masters of the Universe, we might – finally – begin to understand better the system and culture which they created and perpetuated, and which has failed us so miserably.
William D. Cohan is the author of ‘Money & Power: How Goldman Sachs Came to Rule the World’ and two other books about Wall Street. His first book, ‘The Last Tycoons’, won the 2007 FT/Goldman Sachs Business Book of the Year award. To comment on this article please email firstname.lastname@example.org
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.