As Lehman Brothers employees clean out their desks and Merrill Lynch’s cohort of brokers wonder if tomorrow will greet them with unemployment, Goizueta Business School students are also looking to build contingency plans in the wake of Wall Street’s weekend chaos.
“It’s a tough economy, so this is the time for students to continue on their current paths or start considering Plan Bs,” said Andy Rabitoy, director of the BBA Career Management Center (CMC). “Our students are very talented, so I think there are still opportunities for them. But it will have to be a proactive search.”
Early Monday morning, Lehman filed for bankruptcy, a move that the financial world had been priming itself for since the troubled bank’s last interested buyer, Barclays, withdrew on Sunday from talks to acquire Lehman. Under Chapter 11 bankruptcy, financial services institutions are subject to harsher rules that will require Lehman to liquidate its assets without hope of reorganizing. Though protected from immediate liquidation, Lehman will have to work to turn its assets into cash.
Bain Capital, Kohlberg Kravis and Roberts, Clayton Dubilier & Rice and Hellman & Friedman had initially placed bids to tap into Lehman’s money management business, but as of Monday night, Lehman is in negotiations to sell the entire unit to one of these four private equity firms.
Bank of America, which also abandoned talks to acquire Lehman after the government refused to guarantee the bank’s sour real estate investments, acquired Merrill for $50 million the same morning. The two former bulge bracket banks — banks considered to be the largest and most profitable in the nation — are the latest of a handful of major financial institutions to suffer from the credit and real estate crisis.
With rating agencies threatening to downgrade American Insurance Group’s credit ratings, the insurance titan is also teetering as it scrambles to bolster capital. New York Gov. David A. Paterson said the state would permit the firm to raise $20 million from its subsidiaries. According to The New York Times, the Federal Reserve has also asked Goldman Sachs and J.P. Morgan Chase to pool together $70 billion for a loan to aid AIG. Nevertheless, A.M. Best and Fitch both downgraded AIG’s credit ratings on Monday night.
In the steepest drop since the Sept. 11 terrorist attacks, the Dow Jones average fell 504.48 points yesterday.
“The events that transpired with Lehman [are] almost unprecedented in modern finance,” said Gordon McKemie (’07BBA), who has worked for Lehman this past year. “It really amazes almost everyone on Wall Street that a firm so highly regarded by its peers can be eviscerated so fast because of these toxic assets.”
McKemie said that though some people began collecting their belongings on Sunday, most Lehman employees will still be coming into the office for the next few weeks to work through selling off the firm’s remaining viable assets. After that process, the futures of former employees are uncertain, he said.
“I think that when you have many thousands of people in the same industry suddenly looking for jobs, there is a supply and demand effect that makes it a challenging search,” McKemie said. He said that because Lehman is “regarded as such a strong franchise,” other firms will likely be looking to hire from their ranks.
With newly unemployed investment bankers and prospective bankers all waiting to see how the financial landscape will pan out, the already tenuous job market will now be characterized by extreme selectivity by the still-standing big banks, McKemie said.
He said that though “it’s a jungle out there,” he hopes to work at another bulge bracket bank but will also consider working at a bank outside of New York City. Despite the unfortunate finale, his experience at Lehman surpassed his expectations and gave him the opportunity to work with many intelligent people, he said.
“The thing that’s really heartbreaking about it is the guys who have mortgages and families. All the uncertainty is difficult for someone in that situation,” McKemie said.
Business school senior Tyler Garell, who received a full-time job offer from Lehman at the end of his internship last summer, said that with an even larger number of people vying for increasingly scarce jobs, investment banks are in a prime position to be even more selective in an already highly competitive market.
Garell said Lehman’s demise was surprising because most people were expecting a buyout deal with Barcays or Bank of America. Though Lehman’s shares have been spiraling downward since last summer, he said, the urgency of the situation did not hit him until about two weeks ago. But even throughout a good portion of the weekend, most people were not expecting Lehman to end up in the predicament it is in now, he said.
“Sometimes you get dealt bad cards, but I’m not panicking,” Garell said. “There are still a lot of jobs out there. It’s tough in the Wall Street firms, but Atlanta’s still great, and there are still a lot of jobs around here.”
Garell said he is still looking at bulge bracket banks but is also open to positions at middle-market firms.
Rabitoy said that though more seasoned employees are now in the market for a job as well, undergraduate students are typically seeking entry-level analyst positions that differ from the posts that more senior employees are searching for.
Rabitoy said that networking and reaching out to alumni, friends, family members and organizations are now more important than ever. BBA students should still embrace the career fairs and recruitment opportunities that the school offers, he said.
He said the campus recruitment activities for the year will continue as before for the most part. Whether firms will curb the number of recruiters they send out remains to be seen, he said, but there has been no indication of cancellations thus far.
With Bank of America emerging as a top-flight financial destination, the CMC will work to make sure the bank keeps Emory students in sight, Rabitoy said. Bank of America does not currently come to Emory’s campus for recruitment.
“Regardless of what it’s going to look like in the upcoming year, students should still be doing their preparation now — doing their research, identifying what companies they’d be interested in working for and making those connections,” Rabitoy said. Whether students seeking summer internships will be as heavily affected, he said, is uncertain at this point.
—Contact Tiffany Han