Wall Street Brain Drain: A punchline to a joke?

Two employees of Lehman Brothers depart the company's London offices in September 2008 (Cate Gillon/Getty )

Two employees of Lehman Brothers depart the company's London offices in September 2008 (Cate Gillon/Getty )

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.

via Crisis Reshaping Wall St. as Stars Begin to Scatter – NYTimes.com.

As sentiment changes on economy, so do views on Wall Street talent. Suddenly, these guys might be missed.

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5 thoughts on “Wall Street Brain Drain: A punchline to a joke?

  1. Good points. Also, how much of people leaving is the specter of maybe a prolonged bear or range-bound market and pay caps (like UBS’ plan to compensate event he heavy hitting traders on par with low-revenue generating consultants)? If the promise of quick big bucks is gone, seems like it’s harder to motivate oneself to put up with the stress and long hours of Wall Street.

  2. That’s an interesting point — is the talent exodus a signal that many expect a prolonged bear market? I thinnk it could point to something even more fundamental: Those leaving now don’t think the big money will ever return to the traditional “white shoe” firms that once ruled. The power is shifting; where and how it will ultimately be distributed is unclear. But what remains unchanged is that money is the prime motivator on Wall Street. There are many other professions where people work equally hard but find their rewards in other ways — teachers, high-level public servants, etc. But on Wall Street money is the measure of success and the next wave of talent is likely to look for what it expects to be the profit centers. There is no sentimentality on a street that starts at the foot of a graveyard and ends in a river.

  3. What would be really new is if these great brains applied themselves to solving some of the thornier problems left behind by their colleagues.

    What would be really wonderful is if these great brains applied themselves to solving some of the thornier problems facing society today.

    What about encouraging all that “talent” to put aside their pursuit of lucre, and applying their prodigious mathematical and organizational skills to more productive ends?

  4. Wall St will continue to evolve away from the public gorilla like firms and move toward a landscape of small, startup, PRIVATE firms where $$$ will be a motivator along with an entrepenurial spirit that hopefully the government will not be involved.

  5. … a lot of young people on Wall Street have no desire to work in an industry where the majority of the population thinks you are a crook. In the long run, this will be good as the financial sector did get too large as a percentage of total GDP (based on historic norms, which maybe is not normal) and may I add, I think the sector got too many very talented undergraduate and graduate students. I am amazed at how talented the young people (those on Wall Street for less than five years) are, and often think how the world would be a better place if they would pursue careers that might be considered more beneficial to the world, like journalism or becoming a Congressman. Think about that!

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