Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits (5 page)

That summer, Samson had crushed it. He had done his best rotation in mortgage sales, a top-tier desk with no shortage of competition among interns. He had dedicated himself to the task, printing out pitch books and making Excel models with attention to minute details, and maintaining an upbeat attitude. As a result, he had become beloved by the MDs and partners on his desk, and he had guaranteed himself a full-time position the following year.

Samson also met Jeremy that summer. At first, Jeremy struck him as bristly and unfriendly, but soon the two had warmed to each other, and were sitting together at Open Meetings, Goldman’s weekly Q&A sessions for interns. Both of them had gotten to Goldman more or less accidentally, and neither one had fully bought in to the mystique or the aura of self-importance that surrounded the place. One night, after a taxing day at the firm, Samson pulled out the small Moleskine notebook he used as a diary, and wrote:

Despite his reservations, Samson stuck it out and got rewarded with a job offer on the mortgage sales desk. Now, nine months later, he was back in New York, with a head full of hope and a job at the most prestigious investment bank in the world.

Samson was excited to start work on his new desk, which was on the fifth floor of Goldman’s brand-new building. The building, located at 200 West Street in Battery Park City, was a $2.1 billion monument to Goldman’s financial prowess. The bank had spared no expense, and had outfitted its new headquarters with a gym, a cafeteria, an espresso bar, a state-of-the-art conference center, and hundreds of expensive pieces of art. (The painting in the lobby alone, a 23-by-80-foot mural by the artist Julie Mehretu, had cost $5 million.)

As Samson walked through the trading floor, everything looked vaguely similar to 85 Broad Street, Goldman’s old building, where he’d done his internship the summer before. There were the shoulder-to-shoulder trading desks, connected in rows spanning the room, each with two, four, six, or eight computer monitors in front of it. There were the phones, which never stopped ringing during the trading day, the flat-screen TVs overhead tuned to CNBC, and the digital clocks hung from the ceiling, showing the current time in not just New York but London, Tokyo, Hong Kong, and other global financial hubs. There were the glass-walled offices on the periphery of the floor, where the partners sat. And there was the pantry, a walled-off area where Goldman traders could get coffee and snacks without wandering far from their stations.

But as much as 200 West Street seemed familiar, it also had an odd sterility to it. Samson wasn’t sure how to characterize it, but something about the building felt fortified—as if the entire place had been sanded down to make it a little more secure and a little less welcoming. The new building felt designed to keep employees and information securely inside, while keeping outsiders at a total remove.

Maybe it was in his head. In the nine months since his internship, Goldman had undergone a massive transformation in the public imagination. Once a relatively anonymous investment bank, it had taken on the image of a global financial villain—a firm whose name was shorthand for unrepentant greed and vice.

The popular backlash had started in the summer of 2009 with a
Rolling Stone
story, written by Matt Taibbi, that accused Goldman of being “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Then came a series of stories about Goldman’s crisis-era misdeeds, which centered on the firm’s creation of mortgage-backed collateralized debt obligations (CDOs), some of which Goldman was selling to its clients while simultaneously betting that they would tank. In April 2010, Goldman’s image problems boiled over when the Securities and Exchange Commission sued the firm, along with a midlevel mortgage trader named Fabrice Tourre, for defrauding investors in one such deal—a mortgage-backed CDO called Abacus 2007-AC1. Goldman’s mortgage trading desk, the same one Samson was slated to work on, was at the center of the scandal. It was the desk that had marketed the Abacus deal, and where the firm’s massive bets against the housing sector had originated. And as such, it quickly became the center of attention. Incriminating e-mails from many of the four-hundred-person desk’s executives surfaced in the SEC’s suit, including ones in which a top executive referred to a specific mortgage-backed CDO as a “shitty deal” and others privately gossiped about the fact that the entire housing sector looked ready to collapse. If Goldman was a vampire squid, the mortgage desk appeared to be the part doing the sucking.

That April, when the Senate Permanent Subcommittee on Investigations called on a number of Goldman executives to testify about their bad behavior, Samson and his friends gathered to watch the hearings on C-SPAN in his Princeton dorm room. It was the day of his eating club’s annual spring party, and the group was pregaming with cups of orange rum punch. They were already a little tipsy when Samson saw a few familiar faces cross the TV screen.

“Holy shit!” he said. “I’ve had dinner with that guy!”

Samson had never met Fabrice Tourre, the baby-faced trader at the center of the Abacus scandal. But he had spent time with Michael Swenson and David Lehman, two of the executives who ran the structured-products group, and both of whom had shown up to testify that day. He recognized their looks of discontent from bad days on the floor, and wondered how annoyed they were to have to explain themselves to a bunch of underinformed elected officials.

Despite all the fraud and villainy Goldman had been accused of, Samson was still proud to be working on the Goldman mortgage desk, which he thought was filled with upstanding and ethical people who were being wrongly treated as scapegoats. He had spent weeks after the Abacus story came out defending Goldman’s behavior to anyone who would listen, using talking points he’d cribbed from friends at the firm.

“Mom, don’t worry,” Samson had told his mother, when she asked him if Goldman’s mortgage traders had acted unethically in the run-up to the crisis. “Obviously it’s bad that people lost money, but they were sophisticated investors who should have known about the risks. There’s nothing unethical about what we did.”

In April, as he watched the firm’s executives getting yelled at by red-faced senators, Samson felt a different worry grow in the pit of his stomach—namely, that Goldman would bow to public pressure and shrink its mortgage division or shut it entirely, putting him out of a job. It was a natural worry. Even if the firm had done nothing wrong, would anyone want to buy complex mortgage products from Goldman after the Abacus deal?

“You’re not going to be fucking trading any mortgages anytime soon,” one of Samson’s friends said, chuckling, while they watched the C-SPAN proceedings.

But the friend was wrong. A handful of Goldman traders left the bank in the wake of the Abacus scandal, but the group was still standing in May, when Samson graduated from Princeton with honors. And now, he would be there, as its newest member, when it licked its wounds and tried to move on.

After graduation, Samson moved into an apartment in TriBeCa with two of his college friends, pulled his suit out of storage, and prepared for the massive amounts of work that lay ahead of him. Oddly, the troubles of the past months hadn’t dented his eagerness to start his job. In fact, they had made it stronger. If the mortgage desk could survive the Abacus scandal, he told himself, it could survive anything. Since his internship, he had become a true believer in the integrity of Goldman Sachs, and now he was ready to go to war for the firm as a full-time employee.

Over the summer, Samson sat down again and distilled his thoughts in his journal:

Several weeks later, he continued:

Those had been more sober thoughts. Now, as he sidled up to the bar at the Frying Pan for another beer, Samson had the same thought that had been running through his mind since the first day of his internship:

SEVERAL MONTHS INTO
my finance industry immersion, I began noticing signs of change in the young financiers I was getting to know.

Some of the changes were minor and cosmetic. A few started showing up in expensive suits and using finance jargon like “delta” and “top-tick” in casual conversation—the marks of Wall Street culture on their impressionable psyches. Others insisted on drinking during our interviews, no matter where or when we held them. And several began using the communal “we” to refer to their firms—“we closed a deal on Monday,” “we’re bullish on housing,” and so on.

But others seemed to have undergone complete, 180-degree personality shifts in a matter of months. One of the most profound changes I saw was in a guy named Ricardo Hernandez.

I’d met Ricardo shortly after his graduation from Cornell, where he studied biology in the hopes of becoming a doctor. Ricardo—a first-generation Mexican-American who grew up in San Antonio—was diligent and bright, but not overly self-serious or haughty. He was just as happy playing basketball in the park with off-duty cops as he was going to expensive clubs with velvet ropes and bottle service.

Ricardo had been pulled onto Wall Street during his junior year, when he came back from a summer internship at J.P. Morgan with stars in his eyes. He put his dreams of practicing medicine on hold and started working in the bank’s mergers and acquisitions group after graduation.

The pay for first-years at J.P. Morgan, a $70,000 starting base salary with a bonus of about the same amount, had been a draw. But more than that, Ricardo liked the idea of spending two years after college
doing
something, not just learning about neural pathways and antigens. He saw himself spending two years doing M&A at J.P. Morgan, then changing careers entirely.

“This is not my be-all end-all, but I am looking forward to the intellectual stimulation,” he said of his banking gig.

But five months into his first year, the culture of finance was clearly making an impression. He’d gained fifteen pounds, owing to a sedentary lifestyle and seven days a week of restaurant meals eaten at his desk. (On Wall Street, this is called the “Seamless Belly,” after the website that is used to order restaurant meals on the company dime.) His eyes were tired, his skin was sallow and pale, and his calm, nonchalant manner had been overtaken by the machismo of the finance industry.

“Last year, some first-year bonuses were about twenty after tax,” he complained to me one night, sipping a beer at a bar in the Meatpacking District. “That’s an insulting number. A guy busts his balls all year, works his ass off, and gets a $20,000 bonus? You’ve got to be kidding me!”

It didn’t help that Ricardo couldn’t get away from Wall Street, even at home. He lived in Windsor Court, a massive apartment complex in Murray Hill that took up an entire city block and was known as the banker dorm, owing to the huge number of young Wall Street types who lived there. The building had a gym, laundry rooms on each floor, and a roof deck where, in summer, you could find analysts from every bank in Manhattan smoking hookahs and drinking Bud Lights.

Ricardo missed a lot of things about his prefinance life—going to dinners and movies with his girlfriend, reading books, getting out on the basketball court without checking his BlackBerry at every time-out. He cherished his autonomy, and he hated the way a managing director could ruin his weekend with a project.

But he liked the prestige associated with J.P. Morgan, and he liked being part of an analyst class that was made up of like-minded twentysomethings. Ricardo had become part of a group of first-year guys that went out for drinks after work, sent around blog links and funny videos on the firm’s instant message system, and played pranks on each other. That summer, they had started “icing” each other—a game in which one analyst hides a bottle of Smirnoff Ice somewhere in the office that, when discovered, must be chugged immediately by the person who finds it, while kneeling on one knee.

Those new friends allowed Ricardo to feel at home at J.P. Morgan, even though the substance of the work was still not all that captivating.

“Here’s the thing,” he told me one night over drinks. “The vast majority of people at the bank are great, hardworking, nice people. There are some psychopaths, but most people are just trying to keep their heads down and avoid messing up.”

In some ways, Ricardo’s Wall Street education reminded me of the kinds of transitions I’d seen while writing about evangelical Christianity. Wall Street, like a religion, had its own rules, regulations, and enforced cultural norms. And being new, you were expected to blend in as quickly as possible.

One difference between religious conversion and college-student-to-banker transformation is that religious conversion, in Christianity at least, happens in a single, swift step. Wall Street, on the other hand, converts new employees over the course of a two-year cultural baptism that encompasses every aspect of their lives.

The first part of blending in on Wall Street is learning a slightly different language. On Wall Street, analysts are quickly taught to say “equities” instead of “stocks,” use “leverage” as both noun and verb, and speak in long strings of insider acronyms and abbreviations: DCF, CIM, LBO, VIX, and hundreds more.

Incoming analysts are expected to adopt the mannerisms and behavior of financiers, including the proper dress. For men, navy suits and white dress shirts with dark, plain ties are considered standard issue. For women, conservative is the watchword—no low-cut tops, skirts well above the knee, or dresses that show too much skin. For both genders, it is important to avoid two pitfalls: outdressing the boss (no Patek Philippe watches, Gucci loafers, Hermès bags, or other too-big-for-britches signifiers) and trying to appear overly fashionable with bright colors or offbeat patterns. One analyst at a major bank told me that a male classmate of his had shown up for the first day of training in a tan hound’s-tooth coat with a black turtleneck underneath, and was humiliated by the snickers and shaming glares of his peers.

Wall Street also imbues its new analysts with a sense of where they are supposed to live, eat, and spend time outside of work. These rules are less hard and fast, but generally, neighborhoods like Murray Hill and Hell’s Kitchen are considered the terrain of the first-year analyst, and bars like Joshua Tree (nicknamed “J-Tree” by a generation’s worth of analysts) and the Patriot Saloon are considered first-year watering holes. A second-year analyst might live in the East Village or Chelsea, and hang out at slightly better bars like Brass Monkey and Penny Farthing. Not until he or she reached the associate level, and began making $200,000 or more a year, was a Wall Street worker expected to shack up in a chic neighborhood like the West Village or SoHo, and age out of dive bars altogether in favor of finer establishments.

At the same time the analyst is being educated in the ways of Wall Street, he or she is also being slowly separated from the outside world. Most large investment banks block Facebook, Twitter, Gmail, and other social media services in their offices, meaning that other than using a personal cell phone, an analyst has no easy way to keep in touch with nonfinance friends and family members. Meals, gym workouts, haircuts, dry cleaning—many of these things now take place inside the building, lessening the need for outside contact. Corporate perks become subtle narcotics, and the result is more time spent at work, and less desire to leave the finance bubble.

“I basically didn’t have time to talk to people for two years,” one young banker told me. “I felt antsy or guilty whenever I took any time off. And frankly, some of my friends were making the same exact amount of money I was in other industries. So a lot of nights, I sat there in the office trying to rationalize why I possibly decided to subject myself to this.”

Eventually, the changes to a first-year analyst start taking place deep in his psyche. Strange nomenclature starts becoming normalized. The id-driven, testosterone-filled culture of the bank makes him a little sharper and more direct when he’s talking to his parents, roommates, and friends. Money goes from being something that is infrequently discussed to being the primary subtext to everyday life. Social relationships start to feel transactional. And the world inside the capital markets starts to appear bigger and bigger, while the world outside it shrinks to a distraction.

One Goldman Sachs analyst told me about the change that had befallen him during his first year on the job. “You sort of lose your nonfinance friends,” he said. “My friend might be in Teach for America, and they can’t afford to go out to the places I go out. It’s shitty, because for the first time, it’s almost like money matters. In college, you’re all living in that dorm. Here, there’s hierarchy. And that level of spending, all the time, means that you just naturally grow away from people who don’t work in the industry.”

A recent academic study of young bankers by a University of Southern California business school professor named Alexandra Michel underscored the vital, even bodily, nature of the transformation that is taking place during a banker’s first years. Michel wrote:

Over and over again, as I spoke to Wall Street veterans and newcomers alike, I heard that the financial crisis had fundamentally reshaped the industry. Bonuses were smaller. Jobs were less secure. The culture of Old Wall Street had disappeared. (“The bosses who do lines of coke off a stripper’s ass don’t exist anymore,” is how one banker put it to me.) And banks themselves were still struggling to recover from the upheaval the crisis had caused.

But although banking had certainly changed in the post-crash age, the process of
becoming
a banker seemed to have changed very little. Cultural norms and institutional knowledge were still transmitted from old to young, and the list of expectations of a first-year analyst was largely a carbon copy of an earlier era’s list. The post-crash generation of analysts was expected to work hard, drink liberally, dress like Brooks Brothers mannequins, and put the concerns of their firms above all else, just like the pre-crash generation had.

Near the end of one of our interviews, Ricardo Hernandez gave a time-honored response to a question I asked about his months on Wall Street so far, one that would have been just as at home in 1987 as in 2010.

He said, simply: “Banking is the best thing you never want to do again.”