Magazine article Management Today

State of the Union

Magazine article Management Today

State of the Union

Article excerpt

The focus of blame has moved on from corrupt executives to the Wall Street system, of which the investment bankers are emblematic.

Dot.commers roam the coffee shops in daylight, retirees worry how they'll make the payments on their Florida condos, refugees from Enron and Worldcom tell sceptical employers that they were only following orders ... but spare a thought for the investment bankers who helped get us into this mess.

Pity for investment bankers? Bear with me. The brokers and bankers of Wall Street and the City, who did so well out of the boom, will find the correction particularly painful. For them, the adjustment is as much psychological as financial.

That investment bankers are being laid off in droves is not surprising, given the collapse in financial markets. JP Morgan recently laid off 2,000, including mergers and acquisitions bankers rather than just support staff and expendable brokers whom securities houses cull in bad times. It was as if, wrote Nicholas von Hoffman, the Mafia was laying off capos after six straight quarters in which earnings had not lived up to the dons' expectations.

Average Americans have lost more, as a proportion of their net wealth, and certainly more innocently. And the focus of blame has moved on from corrupt corporate executives - there just aren't enough of them - to the Wall Street system, of which the investment bankers are emblematic. Redundancy is their just dessert.

Personally, I take less pleasure in the humbling of investment bankers - I have friends among them. But it was always a mystery to me why they were paid quite so much more than people of equal ability, if not the appetite for such a soul-destroying environment.

I know all the arguments. The securities industry is a winner-takes-all market, like the movie industry, in which companies reward their best talent lavishly because the best talent wins all the business. And there are the crumbs - an explanation borrowed from Bonfire of the Vanities, in which the hero explains to his daughter how brokers take discreet crumbs, but of gargantuan loaves.

Neither makes much sense, so there is a curious efficient-market satisfaction in seeing bonuses fall for those still in work. Financial historians remind us that, until the 1980s, the brokerage industry was no more glitzy than accounting. Believing that the capitalist system should reward real economic activity, you cannot help but rejoice that investment banking is returning to earth.

On a less elevated level, no-one is shedding tears, because investment bankers can still be insufferable. …

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