Students stung by Lehman crash

Even 80 miles from New York City’s financial district, dozens of Yalies felt the aftershocks of investment bank Lehman Brothers’ decision to file for Chapter 11 bankruptcy early Monday morning — especially those who received letters of intent from the company after stints as summer analysts.

Students all of a sudden find themselves with fewer career options and more uncertainty as three financial giants — all popular destinations for Wall Street-bound Yalies — faced dire turmoil this year. Lehman’s bankruptcy and Merrill Lynch’s behind-the-scenes sale to Bank of America this weekend, together with the failure of Bear Stearns in March, bring the effects of the ailing economy to Yale.

“The impact on students looking for jobs next year in financial services is quite real,” said a School of Management professor who was granted anonymity so he could analyze the sensitive situation freely. The professor said he has received e-mails from Yale graduates who have lost their jobs during the past two days.

Casey Gerald ’09, who interned for Lehman this summer, said while working at the investment bank for eight weeks, it was clear that employees were on edge.

“Things definitely weren’t good this summer, but I didn’t expect them to get this bad,” he said. But, Gerald said, interns were told they had no reason to worry.

“We were led to believe that by and large, the fundamentals of business were good and things would recover,” he said.

Another senior who worked in sales and trading at the New York office said while he valued the opportunity with Lehman, he saw bankruptcy looming on the horizon as early as this summer. The senior asked to remain anonymous so he could discuss his internship.

“I wasn’t necessarily angry or frustrated because finance is a high risk, high reward job,” he said. “People need to be cognizant of that.”

Still, some Elis who were extended job offers from Lehman — like Jay Pilkerton ’09 — said they simply “did not see this coming.”

Lehman annually extends offers to as many as 80 percent of their summer analysts, he said. But this year, rumors around the office suggested that only about 40 percent of summer analysts received the letters of intent that precede offers. The actual offers including salary, benefits and other packages, usually come in around this time of year, students said.

Retired Managing Director of JP Morgan Chase Tracy Williams ’79 said people had been talking about the precariousness of Lehman’s future as a “bulge bracket” — or top-tier — firm for a long time. There was a general belief on Wall Street, he said, that Lehman could weather the storm through resilient leadership and a pattern of overcoming past difficulties. That belief, though, is now being questions.

“Markets move too fast,” he said. “Faster than [Lehman could] put a plan in place.”

As the future of American markets remains uncertain, many students who had been planning on entering the finance industry are unsure of their next step. Williams said seniors will have to “play it by ear in the next few weeks.” After all, he said, Lehman’s parent company owns operating subsidiaries that did not file for bankruptcy, and while the future of these firms is also tenuous, the offices continue to function on a day-to-day basis. Plus, as the Wall Street Journal reported late Monday night, deals between Lehman and Barclays PLC may still be in the works.

One senior, who received a letter of intent after working as a summer analyst, said she has started looking for other job possibilities, even though she said Lehman may still extend some offers in coming weeks. She asked to remain anonymous because she is in the midst of her job search.

“At this point, given the volatility of the markets, it seems wise to pursue other job opportunities, perhaps even outside of the finance industry,” she said. “It’s a very tumultuous time right now, not just at Lehman but everywhere on Wall Street.”

“I can’t imagine that someone wants to stick around long-term,” Williams said. Still, he suggested that seniors should seek advice from Lehman as to what they should do about their outstanding offers, if those exist.

And with Lehman’s 25,000 current employees questioning their future, recent Yale graduates at Lehman have other worries on their minds.

Matthew Dennett ’08, a current investment banking analyst at the firm, said he has no control over what will happen next.

“I’m disappointed. I’m sad,” he said. “But I’m resigned to whatever my fate will be.”

Comments

  • Hypocrite

    Wow, that is some stunningly unnecessary anonymity.

  • Townie

    Hmm…time to look for a job in which value is actually added to the economy (i.e. making things, growing food, etc.) instead of pushing paper.

  • anonymous

    this was a good piece. and while the current financial situation is incredibly unfortunate, i think it's even sadder that for many yalies finance is the only viable or highest valued job option.

  • Oh em gee

    "Students all of a sudden find themselves with fewer career options and more uncertainty as three financial giants — all popular destinations for Wall Street-bound Yalies — faced dire turmoil this year."

    En, en, en, en-tit-le-ment!

  • alum

    If you think this is bad, wait until you see how things look 9 months from now.

  • Hieronymus

    Yes, I suppose creating securities that facilitate the purchase of a home adds no value to anyone's life.

    Or "pushing papers" in a field that allows most Yalies (and Cantabrigians and Princetonians, etc.) to attend university gratis--what a silly endeavor!

    Yep: creating engines of wealth to support creativity and invention (e.g., through venture capital, private equity, etc.), what a waste of time and talent!

    Ah, me: if only we could all return to the hard-scrabble, agrarian lifestyle we all know and love and so dearly miss. You remember, don't you? When life was "nasty, brutish, and short?" It makes me go all misty-eyed…

    To #3: some Yalies do lots of things at different times in there lives. Perhaps some (Swensen?) wish to make money early in order to deliver a life of service early?

    Or perhaps some served early and now wish that to provide the best life possible for their offspring?

    Yes, it can happen.

  • Vlad

    If you are confused by the current economic down turn and find the phrase "subprime crises" mysterious, check out CBS News' "60 Minutes" report "The U.S. Mortgage Meltdown" by Steve Kroft.

    You can find the video at

    http://www.cbsnews.com/video/watch/?id=4126094n%3fsource=search_video

    and alternatively read a modified transcript of the video (entitled "House of Cards") at

    http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml

    Should be required viewing by anybody who wants to buy a house…

  • Yale 08

    Townie,

    Are you retarded?

    Investment banks provide nearly incalculable value to the economy.

    Mergers, acquisitions, divestitures, just to name a few. Should I slow down so your brain can understand these?

    How about the trading of derivatives, fixed incomes, or equities?

    President Levin talks about globalization, but it is not in stupid provincial notions like "sustainability" that one finds true global approaches- but rather in the financial sector.

    Goods and services travel at the speed of the internet in that part of the economy, unlike the hippies up at the Yale farm who can barely get their produce down the hill.

  • Frederich Hayek

    Overall, the econ-pessimists are up against an insurmountable reality:

    In the last reported quarter, the U.S. economy grew at an annual rate of 3.3 percent, adjusted for inflation. That's virtually the same as the 3.4 percent average growth rate since -- yes -- the Great Depression.

    Obama is flat-out wrong when he frets on his campaign Web site that "the personal savings rate is now the lowest it's been since the Great Depression." The latest rate, for the second quarter of 2008, is 2.6 percent -- higher than the 1.9 percent rate that prevailed in the last quarter of Bill Clinton's presidency.

    According to the MBA, 6.4 percent of mortgages are delinquent to some extent, and 2.75 percent are in foreclosure. During the Great Depression, according to Wheelock's research, more than 50 percent of home loans were in default.

  • to andrew m.

    what is YDN policy on granting anonymity?

  • anonymous

    Recent national commentary has stated that one of the unintended benefits of this fallout might be that the nations best and brightest minds might instead choose jobs which are more focused on solving our nation's problems, imagine that. It's more likely we'll get some of that brain power working for the common good if people aren't so doggedly focused on the big paychecks on Wall Street. If that's what someone is after, there's an undergraduate program at Wharton.

  • Townie II

    Wow, so things are slow enough at your bank that you can take time off from providing that nearly incalculable value to the economy to read the YDN and respond to comments? Oh, that's right, you Lehman people don't have much to do since the filing….

  • Yale 08

    Ahhh yes, the "common good." Thank you Comrade anonymous.

    "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

    The nearly magical interplay of goods, services and labor are brought together for the common good by the market.

    Now- if only the government would let these firms fail and be salavaged by their creditors- then the negative feedback loops would take over and people would actually learn from their mistakes.

    You see it as greed, I see it as poor risk management.

  • Anonymous

    Jesus, "Hayek," are you really trying to use the Lehman crash story as evidence that the economy is in great shape?

  • s

    i went to yale so i could make myself a lot of money

  • alum

    "During the Great Depression, according to Wheelock's research, more than 50 percent of home loans were in default."

    How are you so sure we won't be at that point in 2-3 years? Some are predicting that 75% of home loans will go bad.

  • James

    @ Yale 08,

    I think what Townie meant was that every Wannabe-Investment Banker who drops out of Econ and goes into like… something else that doesn't involve the extortion of Global Citizens as walking wallets and purses may actually be beneficial for like, you know… their souls. Or something.

    Regardless, I think it's amazing:

    U.S.A. Today cited an obliteration of "$700 Billion" and as you just said, an investment banker provides "incalculable value" to our economy and, i'll assume, society. But what's really silly is that most of these things… are electronic… 01s configured and translated onto LCD Monitors, circuits flipped up and down in servers all around the world.

    It's likely that $700 Bill. in Paper went no where. Rather, a bunch of numbers changed on someone's computer screen somewhere. That money doesn't exist, and it's amazing to think the "crisis" that has ensued when nothing quite physical has been lost.

  • Ugh

    The current academic milieu pushes the idea that one's Yale experience is best spent picking up trash in Nepal!

    Yah, being a FARMER (no offense to farmers, really) is the BEST USE of a Yale education, oh yah!

    Frickin Libruls: didn't y'all just chastise those PRINCETON WOMEN who chose to STAY HOME and RAISE THEIR BABIES as WASTING a slot that could have been better used by a REAL (i.e., FEMINIST) woman?

    Situational hypocrites.

    Yale is NOT Cornell: it does note even PREPARE one to "grow food." It DOES, however, prepare you to be the entrepreneur and CEO of the firm that coopts OTHERS into raising food in a sustainable, enviro-friendly manner, and endeavor that requires, um, what's the term? Oh, yeah: FINANCIAL BACKERS!

    Twerps.

  • Anonymous

    To 3:04 p.m. — The Yale Daily News' policy on anonymous sources is, in one sense, simple: We avoid them at all costs, unless we find that we cannot report the story without granting anonymity. The story in question includes such sources because some students and professors we interviewed argued that without anonymity, their words would have to be guarded so as to not adversely impact their job prospects or current business affiliations. For more detail, I would refer you to The New York Times' policy on confidential sources, which we try our best to follow: http://www.nytco.com/company/business_units/sources.html. To guard against made-up quotes, identities of every anonymous source must be known by the reporter and at least one desk editor; the managing editors and editor in chief may also ask. Feel free to e-mail me for more: editor@yaledailynews.com.

    Sincerely,
    Andrew Mangino
    Editor in Chief

  • Ivygate should still do this stuff

    With respect, Andrew, the information gleaned from the anonymous sources is so generic and unhelpful that it makes a mockery of your stated policy as applied in this case.

    - Why did the SOM prof require anonymity to acknowledge that the job market is more difficult than it was before Lehman's collapse, or that some unnamed Yale graduates have lost their jobs?

    - The second intern seems to have been granted anonymity for reasons to do with his NDA, but he didn't say anything remotely related to specific confidential information. And Casey Gerald's quotes are just as damning, if not more so. If we didn't need to know where in Lehman Casey worked, the second guy didn't need anonymity just so we could know he interned in "sales and trading."

    - Finally, the job-seeking senior girl. She gives you the biggest "no-duh" quote in the story, and she's in the absolute same position as Jay Pilkerton. So what?

    I understand and appreciate your confidentiality policy, but it's absurd to pretend that this story couldn't have run without those three sources.

    Besides, you weren't breaking a Woodbridge Hall scandal here; it was a straight reaction piece to national business news. Obviously some businessmen don't like to be Googled, but you could have written around them or simply had the two(!) reporters working on this piece try calling other people.

  • Don't Panic

    Business School is the best option for us.

    Just looked into the law school application time table and LSATs are coming up way too soon to prep.

    But GMATs are basic math/reading. Any associate/analyst should be able to crush this test and enter in Spring 09, Summer 09, or Fall 09 without much problem.

    I for one don’t want to wait a year for law school (or spend 3 years in school, or entirely switch careers)

    IMHO- Duck into the nearest B-school for 2 years, reemerge w/ some new flashy skills and sheepskin, and try to avoid this mess all over again.

    Best of luck to everyone! We can get through this!

  • Oh well…

    Great analysis No. 20. The only odd note is that it sounds as if you expect the YDN to be any better than the sloppy pandering journalism (see, e.g. the Times atrocious real estate "reporting" shamelessly supporting their ad base) to the NY Times is prone to delivering -- at least the YDN does a better job at avoiding typos.

  • leon

    IT JUST SEEMS TO ME THAT investment bankers made too much damn money. Are these guys really this smart. I heard about how their salaries and bonues = 350K +…wtf??? And now it just makes sense that they're going to lose some of it…with the rest of the nation in economic struggle (yes I am in science and funding has gotten drier even for beneficial research) I feel for the young mba's out there….

    I have been working in r&d at a top institution w/ a ms degree and still after all this mess am interested in goiong for an mba…I do extrememely well on gre, standardized tests…this can't last forever…any words of advice? perhaps all this is over the IBankers once back on their feet will make just 70-82% of their old salaary..as will trickle down the ladder

  • LeonSchmeon

    A bit…confused, are we Leon?

    On the one hand you decry the salaries of investment bankers (as if IB is the only financial game in town--if you even know what IB does).

    Then you go on with a little "me too, me too" whine about how now YOU want an MBA.

    So… if financial types make "too much damn money," are you saying that you would ask for…less?

    Before pursuing your MBA, I recommend reading some Adam Smith, researching "survivorship bias" (as it relates to "too much damn money," i.e., salaries), and focusing on biotechnology (where VC and PE remain interested).

    Lastly, I recommend you have yourself checked out for mild schizophrenia.

  • Puff daddy

    I hope you worthless bums have to get day laborer jobs. See what it is to actually work one real day in your miserable pampered lives.

  • Oi

    So, Mr. Daddy, if I "work one real day" as, e.g., a "day laborer," all is forgiven? Thanks!

    One stint as a "day laborer" among the fisheries of Alaska (where I learned "I do not want to be a day laborer"), 4 years as a grunt with two tours in Iraq, and now banking on close to 300Gs despite the current turmoil at some of my sister firms; all guilt free(er), thanks to you!

    You're the best; couldinnadunnitwidoutcha.

    America: the country where everyone roots for you to succeed, until you do.