Bateman, Citigroup, and the Waning Allure of Investment Banking

by / 1 Comment / 315 View / August 2, 2014

NEW YORK, New York – “That’s bone. And the lettering is something called Silian Rail,” Bateman boasts. Slowly, the camera pans along the crisp white edges of the business card, curbing any doubt the audience has about his prestige. Pierce & Pierce. Mergers and Acquisitions, the watermark reads.

This scene, arguably the most iconic one in the 2000 film American Psycho that stars Christian Bale as investment banker Patrick Bateman, highlights a longstanding societal perception of our time: investment banking ensures respect.

Beneath the ivory-laden towers of America’s finest and most privileged institutions lie irrefutable pipelines to Wall Street and its array of opportunities. Stemming from these pipelines are the newly minted bachelor’s degree holding individuals who are o’ so eager to tackle their first site along the line. For many of these aspiring yuppies, who don uniforms of orange and/or crimson red and often pretentiously proudly announce that they “went to school in New Haven,” the first site happens to be in investment banking departments – departments composed of society’s “traveling money sales [men].”

These investment bankers, who assist with the underwriting and issuance of bonds and securities to various types of clients, represent the beginnings of an age-old Wall-Street step-by-step life cycle: two years at a bulge bracket/boutique investment bank, experience at a private-equity firm, graduate business school, maybe hedge fund, etc.

This process stood the tests of time because, simply put, life was good.  Bonuses were plentiful, compounding debt was ignored, and Bush was in office.  Of course, everything changed when the ‘08/’09 Recession attacked.

Just this past month, Bank of America and Citigroup were ordered to pay $1.27 and $7 billion, respectively, for their destructive behaviors in the mortgage industry – a small representation of the turmoil that banks have experienced recently.

True, the U.S. economy grew 4% this second quarter, pleasantly surprising economists; yet, volatility – a critical component of the banking industry – within the markets remains at an all-time low.  Financial giants like Goldman Sachs and Morgan Stanley are desperately reorganizing their investment banking (IB) groups; Barclays even announced in May that the company would make huge cuts in its IB division.

Meanwhile, it seems as though Silicon Valley’s and the rest of the Havaiana flip-flop wearing tech crew’s spirits are at an all time high. Service companies like Uber, seemingly obscure a few years ago, are getting valued at a staggering $18.2 billion, while a record-high $11 billion were used to fund software-based start-ups alone in 2013, according to the National Venture Capital Association.

Indeed, a growing, dangerous tech bubble is upon us. Yet, there is no denying the fact that more diverse options are expanding for the latest graduates of our nation’s elite universities.   The Hugo Boss suit and Hermès tie don’t appear as sleek as before.

Yes, it will take a few many, many years for the Mark Zuckerberg-esque Gap hoodie to be perceived as prestigious and respectable (attractive even), but it is clear the allure investment banking has had on many in the past has been noticeably waning.

John Byrne of the financial blog and social network, Poets and Quants, reports that only 5% of Harvard’s Class of 2013 went into investment banking, half of what it was for the Class of 2011. Additionally, Byrne writes that only 27% of Harvard’s Class of 2013 went into the financial services industry – “the lowest percentage of grads in memory.” Meanwhile, only one-fourth of the 2013 undergraduate class of UPenn’s Wharton School took jobs in IB departments; yet in 2007, half the class went that route.

Although America’s favorite, unnaturally toned, facemask-wearing psychopath will always have a place in our hearts (in a weird, sadistic way), Patrick Bateman and Co. reminds us of changing times.

The IB pipelines, like our nation’s infrastructure, still exist. But…

They are nowhere near as robust as before.

 

References:

Alden, William. “A Mad Scramble for Young Bankers: Wall Street Banks and Private Equity Firms Compete for Young Talent.” The New York Times 5 July 2014, sec. Business Day: n. pag. Print.

Byrne, John A.. “Harvard & Wall St.: A Love Affair Ended.” Poets & Quants 31 July 2013: n. pag. Web.

Ember, Sydney. “Goldman Sachs Reorganizes Investment Banking Division.” The New York Times 25 June 2014, sec. DealBook: n. pag. Print.

Levine, Matt. “Ask A Banker: What Do Investment Bankers Actually Do?.” . National Public Radio, 9 Oct. 2012. Web. 29 July 2014. <http://www.npr.org/blogs/money/2012/10/08/162518147/ask-a-banker-what-do-investment-bankers-actually-do>.

Mosendz, Polly. “Citibank Will Pay $7 Billion for Their Role in the Mortgage Crisis.” The Wire 9 July 2014, sec. Business: n. pag. Print.

Rusli, Evelyn M., and Douglas Macmillan. “Uber Gets an Uber-Valuation.” The Wall Street Journal 6 June 2014, sec. Technology: n. pag. Print.

Searcey, Dionne. “Bouncing Back, Economy Grew 4% for Quarter.” The New York Times 30 July 2014, sec. Economy: n. pag. Print.

Solomon, Steven Davidoff. “In Tough Market, Investment Banks Seek Shelter or Get Out.” The New York Times 10 June 2014, sec. DealBook: n. pag. Print.

Stempel, Jonathan. ” Bank of America ordered to pay $1.27 billion for ‘Hustle’ fraud.” Reuters 30 July 2014: n. pag. Print.

Image Credit: “Wall Street Station.” Flickr: Creative Commons. Flickr, n.d. Web. 2 Aug. 2014. <https://flic.kr/p/76vkzm>. 

  • sharif jamaldin

    We’re in this crazy new world where classic models of achieving success are crumpling. Careers such as investment banking are slowly losing their status as easy paths to success, and people are starting to learn that creativity and originality mixed with a little bit of savvy takes you much further. I’m excited. Our generation either gets to mold a new set societal/business paradigms, or these things continue to be dynamic far into the future. World keeps getting more interesting every day.