Let Them Eat Cupcakes — Unemployed New York Bankers Change Careers
Kurt Brouwer August 16th, 2008
In an unintentionally funny article, Bloomberg [emphasis added], chronicles the travails of former highly-compensated mortgage bond traders, credit analysts and investment bankers in New York City. These folks have been laid off in the wake of the subprime lending mess.
In one case, a former Bear Stearn’s financier is trying to make a living by selling cupcakes. Another is opening a budget hair salon. Others are trying bartending. People in these types of positions made very high incomes creating mortgage-backed securities, or selling them or supposedly rating them. Now, the party is over and thousands of New York bankers, analysts and traders are scrambling to find a job and a new career.
Wall Street Jobless Try Cupcakes, Cheap Haircuts, Maybe Omaha (Bloomberg, August 15, 2008, Caroline Salas and Pierre Paulden)
Jessica Walter didn’t go to Harvard University to study cupcakes, but they’re what she does since losing her job as a vice president in credit strategy at Bear Stearns Cos.
“I want to teach kids to cook,” said Walter, 27, who founded Cupcake Kids! in New York to provide birthday parties and cooking classes for children. “The goal is to have this be my full-time job and make enough to live.”
Wall Street professionals are trying new careers, and fetching smaller salaries, amid the elimination of 76,670 investment jobs in the Americas following the global credit crunch that started a year ago, according to data compiled by Bloomberg.
…About 33,300 finance jobs in New York City, or 7.1 percent of the 2007 peak, will be cut by June 2009, the Independent Budget Office, a non-partisan monitor of city finances, estimated in a May report.
…Half the people working in debt sales, trading or research in New York at the beginning of 2007 will have been fired by the end of this year or won’t get a bonus, Maloney estimated.
Jeff Salmon said job jitters prompted him to swap investing in asset-backed securities at Bank of New York Mellon Corp. for keeping the books at a hair salon. He and his wife, Olga, opened a Great Clips franchise in Mercerville, New Jersey, that offers $12 haircuts for both men and women.
“The structured finance market is so bleak right now, it makes sense for us to focus our energies on this,” said Salmon, 49. “It’s refreshing to not have to worry about whether I am going to have a job next week.” The couple plans to open another Great Clips in October.
…Traders and bankers who leave finance can expect to earn a fraction of what they used to make. Compensation for employees on Wall Street averaged $399,360 in 2007, compared with $62,390 for New York City jobs outside the securities industry, according to the state comptroller’s office.
Goldman Sachs Group Inc., which has cut 1,500 jobs, paid its employees an average of $661,490 last year, company filings show.
…”The most affected areas are structured finance, CDOs and mortgages,” said Arturo Cifuentes, managing director of New York-based R.W. Pressprich & Co., which trades derivatives. “Over one-third of jobs in this area are gone for the next five or ten years.’‘
…Moody’s, the oldest credit-ratings company, eliminated 275 jobs, or 7.5 percent of its workforce, to cope with a plunge in bond sales that sliced revenue from credit ratings.
..Joshua Perksy took to the streets after being laid off as an investment banker at Los Angeles-based Houlihan Lokey. He strolled New York’s Park Avenue in June wearing a sandwich board reading “Experienced MIT Grad For Hire.”
“It’s been slow and frustrating,” said Persky, 48. “The only places to turn are hedge funds and boutique banks. I’ve never been unemployed this long.”
While his gambit generated some job leads, none has panned out so far, Persky said. He’s considering a move to Omaha, Nebraska.
Not long ago, they were Masters of the Universe making high six figure incomes, now they are unemployed or in a new and much less lucrative career. No doubt many of them will bounce back pretty quickly, but it’s been rather sobering I’m sure.
It’s not the first time this has happened nor will it be the last. The infamous ‘Go - Go’ Years on Wall Street were the first one I remember. In that period, growth stocks were the thing and a number of obscure portfolio managers rode that wave until it crashed for good in the 1973-74 bear market. If you want to read about that time, John Brooks’ book is good.
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