Update 04 Mar 2009: Marshall Auerback sent me a story about Dresdner bankers suing to get tens of millons in bonuses. Obviously the house in Kent and the private clubs and schools have to be paid for. His story here reminded me of this article which I am re-posting.
The headline of an article in the Times of London caught my eye this morning. It read: After Lehman Brothers: desperate City wives. The article makes for interesting reading. People who used to live in the lap of luxury go from gazillionaire to being penniless overnight as their entire net worth is wiped out.
Love them or hate them, investment bankers are taking a shock to the system. Below is a snippet from the article.
My nine-year-old asked me at breakfast on Monday morning: “What is the economy?” What a day to find out. I struggled to describe a kind of weaved knot in which every thread is connected to another thread, establishing clearly that we are all in this together. If you made a lot of money in the City, did you sew it up in a mattress? Buy a farm where you could live, grow your own food and educate your children yourself? Or did you invest it – in the City?
The size of a banker’s pile of money is like the size of anything else in a macho environment: you need the biggest one to show that you are good at what you do. The pile does not necessarily reflect personal greed, it reflects the need to be the best banker. It reflects how long and hard you have worked. One man I know who worked at Lehman Brothers accumulated stock in the company for decades and never got around to diversifying his portfolio. This week he saw his net worth drop from a paper high of about $100 million (£56 million) some months ago to virtually nothing.
Nobody at Lehman Brothers will be making a pile of money any more, real or virtual. Nor do they have an income. Or an office, a BlackBerry, a plane ticket to an important meeting out of town, a driver waiting downstairs. In Chelsea there were anguished shouts heard on the pavements at 6.30am on Monday, and people were breaking down in tears in Starbucks. A few Lehman employees heard the news over the weekend and collected their belongings on Sunday night so they wouldn’t have to face the press.
Many of them are workaholics, accustomed to being under pressure for 18 hours a day. We hear that they are frantically looking for work, and that a lucky few are being recruited by former competitors. But how many jobs can there be in this environment? Adjusting to being out of work will be hard for the rest of them, adjusting to being out of luck even harder. Their self-esteem may now be lower than their net worth. They have no place to go but home, to tell the family.
And when they do get home, how long can they afford to stay if the rent is high or a mortgage outstanding? What about the builders remodelling the kitchen? The nanny and the cleaner? How will they pay for the private school? The private health insurance? The car, the clubs, the tennis lessons? Dining out, theatre, opera? Christmas presents, holidays, charities? The accumulating pile, which to a banker serves as a report card, means many different things to those who help to spend it and to those on whom it is spent.
For every vanished pile there will be crying children, an angry spouse, unemployed builders and domestic help, goods left on shop shelves, flats and houses available to rent or buy, empty restaurants, and villages in Africa that don’t get their new water pump after all. Some Lehman wives feel that their husbands were lied to by the firm; they were encouraged to stay, to reinvest, to “engage their passion”, as the Lehman Brothers careers website still forlornly urges. Those wives are wondering how their husbands could stay loyal for so long despite all the warning signals. Why didn’t they devise a Plan B?
There may also be divorces, serious depressions, alcoholism, suicide, a rise in crime, and a great deal of crushing boredom. That thing called the future, which we all hold in the back of our mind as a time to which we can look forward when our efforts finally come to fruition, when we will get what we hope and work for, our prayers answered, our dreams fulfilled – that future is no longer a shining promise pulling Lehman employees through a hard day. It’s just a bleak, endlessly rainy summer. Some will grieve over lost possibilities for a long time.
On the whole there aren’t going to be a lot of tears for the investment banking community. These people have been making millions while others have been struggling to make ends meet. And one must question the fairness of that. Nonetheless, bankers are pople too and this article brings that point home.
Read the whole article at the link below.