Wall Street Hiring and Bonuses At Risk
I know it is "old" news now but thanks to the credit crisis the Wall Street hiring machine is sputtering; layoffs are mounting and the lavish bonuses are waning and it is likely to get worse before it gets better. Late last year some readers commented that a burst in bonuses granted to investment banker types would likely result in a bump in house buying activity here in Marin and we did see a rise in buying activity in the higher end around the December-January time frame. Will we soon be reading sob stories in the Marin IJ about the poor, innocent, deserving, victim investment bankers who didn't get their expected bonus and/or lost their job and so had to sell their Tiburon trophy house but couldn't find a greater fool, err, of course I mean a willing buyer thanks to the credit crunch that they helped to enable? And what about the trophy wife? Will she still want to continue to hang with a houseless has-been? Inquiring minds want to know.
Hiring has slowed or seized up at many firms including Lehman Brothers Holdings Inc. and Citigroup Inc., where 17,000 job cuts were announced in the spring. And more layoffs loom in many areas in the investment-banking industry in the wake of the August credit crunch, particularly in businesses such as credit trading and structured products, analysts and job recruiters predict. At the very least, bonus season looks a lot tougher this year on Wall Street and in The City in London.
"Substantial losses from this credit debacle are unquestionable," said Sean Springer, chief executive of Napier Scott Executive Search Ltd., a London-based firm that helps banks, hedge funds and law firms track down talent in debt, credit, currency and emerging markets. "If investment banks hire when their profits increase, it's fair to assume the reverse is true when they suffer unforeseen losses."
Areas that could be affected most include credit trading and collateralized debt obligations, recruitment executives said. But hiring freezes have also hit closely related industries such as hedge funds and private equity funds too.
Analysts say big firms will dip into the bonus pool to smooth earnings. Options Group estimates an average 5% decline in bonuses. Traders in the collateralized mortgage securities business may see a 40% drop, maybe more if the conditions worsen.