It’s hard to see the forrest from the trees — especially when living within extraordinary times. Such was the case in 2008 when the economy seized up like the most dehydrated muscle in the world.
At the time, one of my favorite authors Michael Lewis penned a popular article, “The End” [of an era on Wall Street]. Lewis hypothesized:
I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?
At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system. Then came Meredith Whitney with news …
Almost 2 years later, the only era that ended was the one on Main Street. Wall Street is still living in a Golden Age:
- 2008 Bonuses: $18.4 Billion.
- 2009 Bonuses: $20.3 billion.
- 2010 Bonuses: “Incentives at financial firms should rise from 2009 levels but remain below the record payouts of 2007, according to compensation consultant Johnson Associates.”
The operative word is “sector rotation”. Mortgage-backed securities (MBS) and real estate are down? Head over to fixed-income. Fixed-income is down? Trade currencies.
If you want to compare record bonuses from 2007 to now, you will definitely notice tighter purses. But to say we won’t see those payouts again is to deny the animal spirits of greed.
Although Lewis is correct that a short term era ended in 2008, the long term era of finding opportunities in financial services is far from over. In fact, based on our recruiting over the past year, we still see the “best and brightest” clamoring for spots in investment banking. Here is one such person begging for iBanking work via Craigslist (Hat Tip: Deal Breaker).
So, I wouldn’t say an era on Wall Street ended. I’d simply say there was a brief palpitation in the life of a vampire. And we all know vampires live forever unless extreme action is taken. Last I checked, I didn’t see any vampire hunters south of Canal Street in Manhattan.