by Brian DeChesare Comments (48)

Damn, It Does NOT Feel Good To Be A Banker: Investment Banking Apocalypse (The 2008 Financial Crisis)

Damn, It Does NOT Feel Good To Be A Banker: Investment Banking Apocalypse (The 2008 Financial Crisis)For those who weren’t paying attention over the weekend, top government officials in China and the US reached an agreement whereby China has agreed to acquire all outstanding stock of the United States at $1.00 per share, with an implied valuation of $1 trillion.

Although the US GDP is close to $14 trillion on paper, analysts have said that extreme exposure to subprime mortgages and a failing financial system pushed its value down to only $500 billion.  China made a last-minute rescue, acquiring the country at a 100% premium.

(This is a joke, but I wouldn’t be surprised to see a headline like this soon.)

Ok, so in case you were on vacation, Lehman and Merrill both failed over the weekend, and the US financial system continues its descent into bankruptcy as banks and hedge funds spiral into a bottomless abyss.

So what can you do about it?

The Effects Of The Apocalypse

The collapse of 2 bulge bracket banks will have a big effect on you, but probably not in the way you’re thinking.  Most commentary has focused on how the absence of 2 huge banks will reduce job openings and summer internship opportunities.

While this is true, the larger problem is that you’ll now be competing with everyone who will be laid off from Lehman and Merrill (and BoA, of course) – thousands of newly unemployed bankers in the system, also looking for work.

What The Unemployed Will Do

From what we’ve seen earlier this year, my guess is that a good portion of the unemployed – especially at the junior levels – will simply forget about finance altogether and just “move into industry.”

But the truth is a lot of them will also stick around and go for positions at middle-market and boutique firms.

Especially at the VP-level and up, anyone working at one of the failed banks is in a “limbo” where it’s too late to make a career switch altogether, but where it’s tough to find anything within banking – unless they get really lucky.

Bottom-line, though, is that you will be competing with a sizable pool of newly unemployed bankers.

Wait, But Won’t The Boutiques Get Bigger And Take Over?

No, I don’t think so.

I’ve seen some questions around whether the smaller banks will grow and take over the spots once occupied by Merrill, Lehman and Bear.

I think this is unlikely for 2 reasons:

  1. Deal-making is slow.  It’s tough to grow a major business in a terrible market, and investment banking revenue is down over 50% from last year.
  2. This crisis proved that the pure-play investment banking model doesn’t work so well.  So I doubt that these boutiques have any ambition to grow and replace the failed bulge brackets.

What You Should Do

So, what should you do in the face of apocalypse?

Sadly, there’s not a whole lot you can do – a broken financial system in the world’s largest economy is a big problem and one that’s well beyond your control.

Earlier I wrote an article on how to boost your recruiting chances in a tough market, and I would reiterate that advice here.

By now, if you’re seriously looking at bulge bracket banks (well, the ones that are left…) and have no previous finance experience, you’re basically crazy.  Focus all your time and energy on smaller places.

However, even that strategy is problematic because everyone knows about it – so you have to consider some alternatives.

I think one of the best options is going abroad to find work – especially in the Asia Pacific region.

Yeah, everyone says you should start out in New York, but these days you’re more likely to run into laid off bankers jumping out windows than you are to run into a job.

Final Thoughts

One of the questions I’ve been getting lately goes something like this:

“Hi, I want to make a lot of money, not work a lot, have no risk and be able to do whatever I want all the time.  How can I get into investment banking?”

I hate to shatter your dreams, but nothing’s perfect – every profession has a downside.  Just refer to the graph below for the downside of working in finance:

Damn, It Does NOT Feel Good To Be A Banker: Investment Banking Apocalypse (The 2008 Financial Crisis)

Source: Bureau of Labor Statistics

It’s incredibly cyclical – and therefore far riskier than other industries.  Over 100,000 will probably lose their jobs in this downturn.

So if you can’t get exactly what you’re looking for, you have two choices: either wait it out or compromise.

And with the state of the economy and all the news over the weekend, compromise is the better option.

Update: It’s not all doom-and-gloom just yet, guys.  Looks like Credit Suisse and Moelis & Co. are both “on the prowl for bankers” – which just goes to prove what I wrote above about opportunities still existing at smaller firms and outside the US, especially in the AsiaPac region.

Update 2: Looks like Barclays is buying Lehman’s investment banking and capital markets divisions, saving between 9,000 and 10,000 jobs – so it’s not the end of the world quite yet.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Avatar

    Hi Brian,

    I’ve seen that you are quite against back office positions. However, say that I want to just coast through life working in financial services at a good company. It seems that back office will let me do that. Do you have any idea what determines promotion within the back office, and what kind of salary I can expect to cap out at? Any idea what lifetime earnings will be in the back office compared to the front office? Just looking for work-life balance, in favor of life.

    Thanks a bunch.

    1. No idea actually, you might be able to earn in the 6 figures in a back office role but I doubt it would go beyond $200K per year.

  2. Shame on the media for supporting this crap – “Hi, I want to make a lot of money, not work a lot, have no risk and be able to do whatever I want all the time. How can I get into investment banking?”

    It would stand to reason that if you have enough information on this industry to write an article instructing people how to obtain a job, than you should know the above-mentioned statement is false.
    As the wife of a former (laid off since March of ’09) investment banker, I would like to set the record straight. My husband worked 60-80 hour workweeks. He traveled 3-5 days a week. We have never had a non-working vacation. Weekends were spent putting “finishing touches” on deals or running interference on deals going south, not playing golf or coaching little league.
    The bonuses could be substantial if most of the year’s deals were brought through to fruition. The money is based on performance and non-hackers don’t last. You will pay a price for the privilege of earning a very good living if you’re good enough to survive the demands of the job. I’m certainly not throwing us a pity party, but people should know the truth. In investment banking as with life, there’s no such thing as a free lunch. Please stop “helping” people with your informative articles if the information you are pandering is false.

    1. That’s exactly what I was saying – that there is no free lunch. Everything has upsides and downsides, and banking is no exception.

      The quote was to illustrate how many people have false views, and the information provided was intended to show exactly how those views are false.

      Furthermore, if you read through other articles on my site you will see that I give a very accurate picture of what the lifestyle is like and don’t sugar-coat anything.

  3. I live in asia and have been in IB for about a year. I have been thinking of going to ivy league b-school specializing in finance. my projected enrolment would be in 2010 with 5 yrs of banking experience(including i banking)

    What do you think of a person like me entering the market in 2012.

    1. Do you mean your chances of getting in at the Associate level? Well, probably good considering 5 years of banking experience… but if 2012 is worse than the market now, who knows.

  4. Agreed- all industries are cyclical, including finance. Since the cyclical nature of businesses is beyond our control, I think that it’s extremely difficult to “position” yourself in a location, industry, and company just as it peaks.

    1. The only way to do this is to stay in it for the long-term and be there when it peaks, rather than trying to get in -as- it peaks.

  5. A site for all ex wallstreet and banking professionals who need help at this time is : xwallstreeters dot com

  6. How will SA prospects be affected in Asia Pacific for IBD and S&T?

    1. They’ll be negatively impacted but not as much as North America/Europe.

  7. This question probably has been asked numerous times but Do you think by 2011 the job market for I-banking will get better? Or will the I-Banking industry go east?

    1. My magic 8-ball points toward improvement but I think the US will lose its dominant position within the world in 5-10 years.

  8. Do NOT pursue stat init…

  9. News flash, corporations generally to do pursue strategic initiatives that are capital intensive and thus do not hire consultants as they downgrade and cut costs…unless they are in a restructuring phase….consulting will not provide a safe haven in the down turn

    Also, the reason these stand-alone ibanks failed is because of leverage (30x) and a reliance on overnight deposits…as soon as confidence dropped and the market realized the toxicity of their balance sheets the banks went under. The stock price has become more important than the actual company in the fin. sector as hedgies have circled the wagon and shorted the shit out of the company creating a self fulfilling prophecy of failure.

    There is no worse time to be a banker as deal flow has been sluggish and bonuses will decrease (except maybe at the top to keep key talent). The entire industry will change as we move toward a consolidated business model and stand alone banks go by the wayside.

    Its not so cozy over here on the buyside either but Ive been spending most of my time working on the management of our portfolio companies, many of which we were hoping to prepare for an exit before the bottom fell out. Good luck to all, stay positive and God bless America

    1. True, consulting will be affected as well but less so than banking simply because there are fewer management consultants to begin with.

  10. Avatar

    Thank you for your great article,

    upon recommending going abroad, would you happen to have
    any opinions on working in the Middle east? I have been reading about
    the financial job market there, and although I understand it is very small
    and new to the finance game, it seems that they have fared better
    than their European and American counterparts?

    Any opinions?

    thanks for the site

    1. Middle East would be great as well – only issue is it’s newer than Asia so fewer opportunities right now.

  11. Avatar

    What make consulting worse than I-banking? HBS stats show that a much larger % of students came from consulting than banking, and it seems like it would be a much better experience in this market.

    1. I typically don’t like consulting, but these days it may indeed be a less risky option…

  12. Avatar

    So what about those of us that had Lehman IBD offers from the summer?

    Are analysts currently on wall street looking for employment in the same pool as new hires?

    1. Not exactly, but you are indirectly competing with anyone who was unemployed… 1st/2nd year analysts may be different, but ultimately anyone at the Analyst level is in relatively the same pool.

  13. Avatar
    come back to reality

    So now the masters of the universe are busy begging Uncle Sugar for another bailout! Get an honest job, folks, instead of pretending that you are adding value by letting money pass through your hands for a little bit. No, an honest job won’t pay a grossly inflated salary.

  14. Avatar
    Sydney Banker

    I wonder what Merrills is going to do with their Aussie operations… Probably shut it down, if the rumour mill is to be believed, which should make things quite interesting (not that they were doing well here to begin with).

    While your advice to look towards Asia Pac is good, the question is how sustainable the growth is and how long it will take the sub-prime impact to flow through to the Asian markets. I can’t say I am sold on the decoupling theory although Asia will likely be spared the worst of it. Indeed are interesting times we live in…

    1. Yeah hard to say on that operation.

      And Asia certainly will be affected – it’s just that its institutions are less broken than the US ones were.

  15. With the bleeding of most i-banks, do you think investment mangement or M&A advising within consulting firms is a viable option? I was thinking since most of these firms are going to be recovering, you can still get similar experience with due diligence or something similar, and the need for such services will still be there. But like you’ve stated plenty of times before, smaller boutique’s or middle market firms are still there. Would consulting be below those?

    1. Consulting is below doing actual banking anywhere, but it could still be a good option in this market.

      I would look into restructuring consulting in particular – that should be really hot now…

  16. Hey great article. I have just begun reading everything I can to learn about investments and banking. But I still don’t understand why these banks are breaking down. Can you please explain? Is it because of the credit crunch, coupled with inflation, the housing bubble, and oil and food prices? If it is, How did the credit crunch originate?

    1. That would take hours to explain, but basically here’s why:

      After the last recession, banks made lending too easy in an effort to get the economy back on track. As a result, tons of unqualified poor people bought houses, even though they clearly could not afford payments on them.

      Banks created securities that had portions of such mortgages (“subprime” mortgages) in them and some, like Lehman and Merrill, acquired huge amounts of mortgage-backed securities, thinking they were “liquid” since only a “small portion” of them were made to unworthy borrowers.

      As it turns out, everything was toxic and none of these assets was worth very much – so banks instantly lost tens of billions of dollars in value and some went bankrupt.

    2. Avatar
      come back to reality


      In this case it was the interference of Fannie Mae and Freddie Mac in the process of securitizing mortgage loans.

      These government-backed intermediaries transmuted mortgage lead into gold merely by being involved. Because bankers had the government’s implicit blessing for their bad loans, they proceeded to pyramid derivative securities atop the bad loans, and make hugely leveraged bets that few of the loans would go bad.

      The resulting securities- even the derivative securities- got AAA ratings regardless of how questionable the underlying assets were, simply because everyone knew that they would be backstopped by the government if they blew up.

      Add to this the fact that banks, as a result of amendments made to the banking charter by the Community Reinvestment Act (signed by LBJ, renewed by Carter, then Clinton), HAD to make loans to bad-credit borrowers that were buying houses in CRA districts.

      Add to this the fact that owner-occupied houses are given tax preference over every other asset class, and the sentiment among financial advisors and real estate jobbers that houses can only go up in price, and there are all the elements needed for a massive bubble.

      All it took to pop the bubble was a little slowdown in the housing market.

    3. Avatar
      Sydney Banker

      Luke, have a read of this – It explains things quite nicely whitout delving on the details too much.

  17. What do you think people with full-time offers at European banks (UBS, Credit Suisse, Deutsche etc) should do?

    1. you should be glad that you have a full-time offer and pray that your bank doesn’t fail in the near future.

    2. Agreed. Hold onto it and hope for the best, and don’t do anything stupid.

  18. At least in the Midwest it appears that Big Four firms hire very few from schools that would have been considered target schools for the bulge bracket banks. Do you foresee increased competition for graduates from these schools at Big Four firms? If so, in what divisions?

    1. Too early to tell, but I think in general what you’ll see is hard-core finance people will at least try to stick with the field and others who were tangentially interested will go back to whatever they were planning on doing first. I doubt many will go into accounting.

  19. Analysts have predicted the economy will only be back on top in 2010. Some have compared this to the Great Depression, the whole financial landscape has been altered, there are only 2 more bulge bracket American investment banks left on Wall Street (excluding Credit Suisse, UBS and Deutsche and other european banks).

  20. […] & Inquisitions provides some advice for those suddenly trying to find work. Permalink | Trackback URL: […]

  21. When do you believe the market will eventually pick up and become somewhat stable? When it does, do you think the salaries are going to be fairly close to what they use to be 1-2 years ago for investment bankers and would investment banking still be opening various doors/exit opportunities?

    1. Hard to say, but probably until late next year or 2010 at the earliest. Not sure if pay will return to 2006-2007 levels, but banking will still lead to various opportunities down the road.

  22. Needless to say, this was a great weekend for someone desperate for a job in investment banking who is graduating from a non-target school (read: ME). This event pretty much ruins any chance I had at getting into a middle-market or boutique bank.

    I am graduating next May. My college has just agreed to a partnership with the Simon School of Business (Rochester), which sends students from my school straight there to earn an MBA after graduation. I would not need to gain any prior work experience to get into their MBA program – I would graduate in May and begin my MBA next September. Simon is not a top 10 b-school, but it has been gradually improving and is currently ranked in the top 25 in the U.S. by nearly all publications, ahead of places like Georgetown, Emory, Boston College, etc. I would also concentrate in finance, and it is ranked #13 with a finance concentration by the U.S. News Report. What is your opinion on this opportunity, and would you suggest this as an alternative if I really see myself in banking/PE? My other option would be to head to my job in public accounting at a Big 4.

    1. Not necessarily, as I said I think it will be more of an issue at the top levels… a lot of the junior people will drop out of the process.

      I would strongly recommend against an MBA with no work experience, as banks do not view that favorably. I would keep looking throughout this year and if nothing turns up, go to a Big 4.

  23. CNBC’s analyst were commenting that it may take till 2010 for the economy to get back on its feet. I’m glad I’m graduating then… it must be really tough for the aspiring I-bankers.

    I worked at Merrill during summer, can’t imagine it’s gone just like that. But great calamities mean great opportunities. Maybe it’s a good time to go business school and come out 2 years later when the market is up and find a better paying job :)

    Best wishes to all
    May the Force be with You

    1. You have to be careful, though, because you need a certain level of experience before going to business school – going right out of school with no experience is NOT recommended.

  24. Thanks for the article. In terms of looking abroad, the Asia Pacific region does sound like a good future but how are things looking in London? I ask because I am a duel citizen of the US and the UK and am considering spots across the pond. Hopefully, my citizenship will give me a leg up on the 100,000 more experienced candidates that are thinking about jumping ship here in the US…

    1. London is definitely better than the US, but Europe’s economy is suffering as well… so I think AsiaPac is still the best out of the 3.

  25. So basically there are 1000’s of over qualified, do-not-need-to-be-trained bankers searching for jobs.
    Funny thins is that my university(west coast) has program where students do internahips at Washington DC and live in common dorms. I wanted to do it just because one of Merrill.

    1. Well, keep in mind something else: summer interns will not be nearly as affected as those looking for FT spots because banks will still recruit interns and they won’t compete with the out-of-work bankers.

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