Arjun Khan straightened his tie, brushed a lint ball off the charcoal gray suit he'd bought for $179 at Lord and Taylor to wear to his high school graduation, gave his hair a final pat, inspected his teeth for food in the bathroom mirror, and bounded out the door of his apartment and into the elevator of his downtown high-rise.
A confident, bright-eyed twenty-two-year-old with an aquiline nose and a slight belly paunch, Arjun was on his way to his first day of work as a mergers and acquisitions analyst at Citigroup. His neck muscles were tense and his stomach was turning over, but those were just surface nerves. Mostly, he was filled with the flinty resolve of the newly emboldened. After thousands of hours of preparation, dozens of interviews and expertly crafted e-mails, and one extremely lucky break, he had finally become a junior investment banker at a major Wall Street firm — the job he'd been chasing for years.
Nine months earlier, Arjun's plans had been derailed by the financial crisis. The Queens-born son of a data engineer father and a social worker mother who had both emigrated from India to New York as young professionals, he headed into the fall of his senior year with a prestigious job offer at one of the best banks on Wall Street: Lehman Brothers.
Arjun felt lucky to have gotten Lehman's attention in the first place. He attended Fordham University, a Jesuit school in the Bronx that, while strong academically, wasn't among Wall Street's so-called target schools, a group that generally included the Ivies, plus schools like Stanford, New York University, Duke, and the University of Chicago. That meant he had to work harder to get his foot in the door — joining the Finance Society at Fordham, attending lectures at Columbia Business School, spending his free time watching CNBC to pick up the cadence of the investor class. And his strategy worked. He secured a junior-year internship at Lehman, and he did well enough that at the end of the summer, he was offered a fulltime job beginning after his graduation. His recruiter told him, sotto voce, that he had been the only Fordham student to get an offer from Lehman that year.
During Arjun's internship, things began to go south. Ever since the Bear Stearns collapse earlier that year, industry watchers had been speculating that Lehman would be the next bank to fail. The firm's stock price had tumbled, thousands of workers had gotten laid off, and one well-regarded hedge fund manager jolted Wall Street that summer by proclaiming that Lehman wasn't properly accounting for its real estate investments. Still, Arjun assumed that Lehman would be fine.
He was wrong, of course. In September 2008, while Arjun was starting his senior year at Fordham, Lehman filed for bankruptcy. (Most of its U.S. operations were bought several weeks later by Barclays Capital, the investment banking arm of the large British firm.) The same day, Merrill Lynch, which had also been pummeled by the housing collapse, announced it was selling itself to Bank of America for $50 billion. AIG, an insurer weighed down by towering piles of credit default swaps, had to be given a massive $182 billion bailout, and Goldman Sachs and Morgan Stanley, the last freestanding American investment banks, turned themselves into bank holding companies in order to give themselves better access to the Federal Reserve's emergency lending window. Congress passed a $700 billion bailout package that gave a lifeline to banks and kept the markets afloat, and the entire country sunk into a recession that would cost millions of jobs, engulf every sector of the economy, and ... well, you can probably fill in the rest.
From the Fordham campus, Arjun watched reports about Lehman's bankruptcy with a knot in his stomach, knowing that it would probably cost him his job. And several weeks after the bank's sudden death, he was in chemistry class when he got a call from an unfamiliar number with a 212 area code. He let the call go to voice mail, then checked it in the hall after class.
"Hi Arjun, this is John from Barclays Capital," the voice on the message said. "Obviously, you know why I'm calling. I just wanted to let you know that I'm very sorry, but we're not going to have a seat for you next summer."
After the bankruptcy, Barclays Capital's human resources department tried to help Lehman's spurned analysts find new jobs. But that just salted the wound. One human resources staffer pointed Arjun to a job at a small private wealth management firm in Miami — the financial sector equivalent of being cut from the Yankees' starting lineup and offered a benchwarmer spot with the Toledo Mud Hens.
"I'm just interested in investment banking," Arjun told the staffer. "I don't care what city it's in."
Arjun knew that Wall Street operated on a strict power hierarchy. Within every firm, there were so-called back-office workers who cleared trades, maintained the firm's computer systems, and performed all other kinds of technical and administrative work. One step up was the middle office, which comprised lots of disparate jobs that were important to the functioning of the bank but were not revenue-generating in their own right: legal, compliance, internal risk management. And then there was the promised land: the front office. The front office was what everyone pictured when they thought of Wall Street — pinstripe-clad deal makers and red-faced traders, making millions and getting their work on the front page of the Wall Street Journal. And when he decided to pursue a job in finance, Arjun decided he would accept nothing less.
But now, everything had changed. With the failures of Bear Stearns and Lehman Brothers and the sale of Merrill Lynch, the so-called bulge bracket of top-tier American banks was whittled down to just five firms: Goldman Sachs, Morgan Stanley, Citigroup, Bank of America Merrill Lynch, and JPMorgan Chase. And even those firms looked to be in jeopardy. All around the financial sector, the markers of success and failure were shifting. Tiny boutique firms were weathering the changes better than global financial conglomerates. In some cases front office bankers were being laid off while back-office IT workers were being promoted. Up was down. Down was up.
That year, as the crisis unfolded, the message boards at Wall Street Oasis, a popular finance-industry website, filled with posts from confused young finance aspirants, wondering what the industry's changes would mean for them:
Reconsidering Wall Street?
Will banking recover? How long?
Are banks really not hiring for the fall?
In September, one poster summarized many of the fears about what would happen to the financial industry: "I think it'll be a long time, if ever, before the swagger returns to Wall Street. The 'Masters of the Universe' image has been shattered."
Excerpted from the book Young Money by Kevin Roose. Copyright 2014 by Kevin Roose. Reprinted by permission of Grand Central Publishing. All rights reserved.