It is a truism of recessions that the people who don’t need new jobs are the most likely to find them. As predicted, Wall Street firms that either gratefully accepted or were forced to accept government money are now seeing their top talent leave. It’s easy to wonder if the so-called Wall Street brain drain is the punchline to some kind of joke (Brains? What brains?). After all, aren’t these they guys who got us into all this trouble? But that view is simplistic. Many of the people who made the worst decisions are gone (except for the credit rating agency analysts, Congressmen and lobbyists). Someone needs to clean up the mess.
The New York Times published a round-up of the great Wall Street brain drain, a story that has been seeping out in little drips and drops with announcements about this banker or that financial advisory team jumping from a TARP firm to a non-TARP firm. What would be really new is if these great brains applied themselves to solving some of the thornier problems left behind by their colleagues. That doesn’t look as if it is going to happen, which is probably not great news for taxpayers. However, some believe that risk will now be spread more prudently across Wall Street; the risk concentration was part of the problem of this Great Recession. Here’s how the Times sees it:
There is an air of exodus on Wall Street — and not just among those being fired. As Washington cracks down on compensation and tightens regulation of banks, a brain drain is occurring at some of the biggest ones. They are some of the same banks blamed for setting off the worst downturn since the Depression.
Top bankers have been leaving Goldman Sachs, Morgan Stanley, Citigroup and others in rising numbers to join banks that do not face tighter regulation, including foreign banks, or start-up companies eager to build themselves into tomorrow’s financial powerhouses. Others are leaving because of culture clashes at merging companies, like Bank of America and Merrill Lynch, and still others are simply retiring early.
This is certainly a concern for the banks losing top talent. But other financial experts believe it is the beginning of a broader and necessary reshaping of Wall Street, too long dominated by a handful of major players that helped to fuel the financial crisis. The country may be better off if the banking industry is less concentrated, they say.
As sentiment changes on economy, so do views on Wall Street talent. Suddenly, these guys might be missed.