Many ordinary Americans are losing their jobs and savings because of the debacle on Wall Street. This column is not about them.
Instead it is about the financial titans, those “Masters of the Universe” who helped make this mess. It seems some of them are falling on a bit of hard times too.
The big money is disappearing, and with it some status and power. Yes, the highest of high fliers are still rich, some spectacularly so. But their stature seems to sink with every point of the Dow. The whole cult and ethos of Wall Street, which lured so many bright minds, is in retreat.
The wounds were mostly self-inflicted, of course. News last week that John A. Thain, the fallen boss of Merrill Lynch and Co., spent $1.2 million (Rs5.87 crore) redecorating his office as Merrill hurtled towards its end seemed only to confirm people’s worst suspicions about money and the hubris it can breed.
Even Tom Wolfe, who chronicled an earlier era of Wall Street excess in his 1987 best-seller Bonfire of the Vanities, says he is a little shocked. And he knows about the Masters of the Universe: He coined the term, after all. “The idea of ‘Masters of the Universe’ on Wall Street just went kaput,” Wolfe told me the other day. “The whole order of things has changed.”
A generation of would-be financiers thought “you make $50,000 in three minutes just by picking up the phone,” Wolfe said. No more.
The new reality is starting to slowly sink in. And it is not pretty.
Even the Masters of the Universe say the change is palpable.
Not long ago, before the buyout boom went bust, David M. Rubenstein, a co-founder of the private equity firm Carlyle Group, regaled people with forecasts of a $100 billion deal. Now he spends less time on the road talking to prospective investors, and more time with his current investors, worrying about their investments.
“At the height of the buyout market, anyone could raise money and everyone did,” Rubenstein said. “Now it’s hand-to-hand combat for every dollar.”
And in an industry where the goal and scorecard is money, Wall Street’s top brass are making a fraction of what they did a few years ago. And their personal fortunes have sagged along with those of their companies.
At the beginning of 2008, Vikram S. Pandit, head of Citigroup Inc., owned shares in his company that were worth $31 million, according to Equilar. Today, his stake is worth $3.7 million. Thain’s stake in Merrill was worth $28.5 million a year ago; now it is worth $6.5 million.
Those numbers are still big. But the next generation of Wall Streeters, assuming there is a next generation, seem to be scaling back their expectations.
“Two years ago, I’d have students come to me and complain about their $1 million offer,” said Nabil N. El-Hage, a professor of management practice at Harvard Business School who teaches a popular course about private equity. “Today, there is a clear realization that they won’t make the kinds of absurd money at 30 years old or 35 or even 40 that used to be possible.”
“The huge amount of uncertainty about the investment banking business and finance is making people rethink where they want to be,” said Frank Yeary, the longtime head of mergers and acquisitions at Citigroup who departed in the summer to become a professor at the University of California, Berkeley. “Now is a great time to start something new. The opportunity cost is low,” Yeary said.
Maybe all of this is a good thing. We might all be better off if more smart people put their talents to work in government or academia, rather than financial engineering.
© 2009/ The New York Times