eFinancialCareers

Banking is simply a horrendous place to be right now. Since July 2007, we have at best been moving slightly downhill, to most recently deciding whether we are staring into the abyss or actually already falling helplessly into it. A happy, stress-free banking environment this does not make. I am no psychologist, but it has nonetheless been an interesting experience living through these historical times working in an investment bank. Not just because of the unprecedented events that have been unfolding at an increasingly rapid pace of late, but also because of the human response on the floors of the investment banks (yes, bankers are in fact humans).

There have been three distinct reactions:

"Stuff it" – Limited to those who have secured financial stability, this involves simply calling it a day for an extended period. I don't know the stats, but the number of sabbaticals that have been started over the last year must have seen a sharp increase. For those who had reached senior positions, it used to be the case that their annual pay was such that the opportunity cost of walking away was simply too great. With annual income falling away sharply, that opportunity cost has diminished and the incentive to leave is much greater. Surprisingly, I have not seen or heard of too many lower down the food chain leaving the industry to pursue other career options. Retire they cannot, but work in another job they could. Perhaps leaving in this environment puts a mark on your resume that you were fired. Few will believe otherwise, even if you leave of your own volition.

Depression – Despite what the popular press would have you believe, most who work in the City are not in a position to retire imminently. Most face the same financial burdens as the rest of the country but on a greater scale – yes, they live in a bigger house, but guess what? That bigger house has a bigger mortgage to finance it. People live off their bonuses in the City, and this year, there are not too many people who can be confident of getting even close to the same number as last year. From the second quarter, it became clear that 2008 was not looking good. We are now at a point where people are wondering about 2009 bonuses too, plus whether they’ll have a job in a month’s time. People have had to turn elsewhere for a lift; the ranks of people standing outside for a smoke have swelled noticeably.

Humility – This is not typically a word associated with bankers, but such has been the magnitude of the events we have witnessed and the utter powerlessness of people believed to be among the smartest in business today, that some have been walking around simply looking shell-shocked. Those individuals who fancied themselves as the big earners for their bank, particularly on the trading side, are feeling a lot less sure about their abilities, too. When volatility spikes, and markets gap and correlate as they have been increasingly doing, it is very hard to be anything other than lucky when it comes to risk taking. Many of those individuals who worked at the blue-chip firms (and for whom where they worked was as much a badge of prestige as the job itself) now work for organisations where they could easily be confused with a bank teller.

Particularly interesting for me has been the comparative difference between the fixed income and the equities staff. Fixed income had been on a tear for an extended period of time and were the revenue growth engines of most of the banks. Equities have still not recovered from the overhang of the dot-com bubble burst. Equities are hurting no less than fixed income today – but they have at least been here before and the come-down is nowhere near as great.

George Trower is an equities banker at a major investment bank.