The Titans Take It on the Chin
By ANDREW ROSS SORKIN, The New York Times
Many ordinary Americans are losing their jobs and savings because of the
debacle on Wall Street.
This column is not about them.
Instead it is about the financial titans, those Masters of the Universe who
helped make this mess. It seems some of them are falling on a bit of hard times
too, at least by their own gilded standards.
The big money is disappearing, and with it some status and power. Yes, the
highest of high fliers are still rich, some spectacularly so. But their stature
seems to sink with every point of the Dow. The whole cult and ethos of Wall
Street, which lured so many bright minds, is in retreat.
The wounds were mostly self-inflicted, of course. News last week that John A.
Thain, the fallen boss of Merrill Lynch, spent $1.2 million redecorating his
office as Merrill hurtled toward its end seemed only to confirm people's worst
suspicions about money and the hubris it can breed. His $35,000 "commode" might
strike some as a bit over the top.
Even Tom Wolfe, who chronicled an earlier era of Wall Street excess in his 1987
best seller "Bonfire of the Vanities," says he is a little shocked. And he
knows about the Masters of the Universe: He coined the term, after all.
"The idea of 'Masters of the Universe' on Wall Street just went kaput," Mr.
Wolfe told me the other day, as Wall Street was digesting the news of Mr.
Thain's ouster. "The whole order of things has changed."
A generation of would-be financiers thought "you make $50,000 in three minutes
just by picking up the phone," Mr. Wolfe said. No more.
On Monday, Mr. Thain apologized for spending so much to decorate his office and
said he would cover the costs. But the damage was done — and while he should be
applauded for the gesture, the idea that he could try to buy himself some
better P.R. seemed only emblematic of the larger problem. That commode — which,
by the way, is a cabinet, not a toilet — may go down in the annals of executive
gluttony along with L. Dennis Kozlowski's $6,000 shower curtain.
The new reality is starting to slowly sink in. And it is not pretty. The
celebrity financier has become the new celebrity villain. The switch is playing
out on the blogosphere, where people have defaced pictures of Mr. Thain —
adding horns and devilish tail — the way Perez Hilton's celebrity Web site
would mock Britney Spears's body fat.
Even the Masters of the Universe say the change is palpable.
Not long ago, before the buyout boom went bust, David M. Rubenstein, a
co-founder of the private equity firm Carlyle Group, regaled people with
forecasts of a $100 billion deal. Now, he spends less time on the road talking
to prospective investors, and more time with his current investors, worrying
about their investments.
"At the height of the buyout market, anyone could raise money and everyone
did," Mr. Rubenstein said. "Now it's hand-to-hand combat for every dollar."
And in an industry where the goal and scorecard is money, Wall Street's top
brass are making a fraction of what they did a few years ago. And their
personal fortunes have sagged along with those of their companies.
At the beginning of 2008, Vikram S. Pandit, the head of Citigroup, owned shares
in his company that were worth $31 million, according to Equilar. Today, his
stake is worth $3.7 million.
Mr. Thain's stake in Merrill was worth $28.5 million a year ago; now it is
worth $6.5 million. Lloyd C. Blankfein, the chief executive of Goldman Sachs,
owned $465 million of shares in the firm at the beginning of 2008; today his
investment is worth $167 million. Kenneth D. Lewis, the embattled chief
executive of Bank of America, owned $121 million stake in his bank a year ago;
today it's worth $18.5 million.
Those numbers are still big. But the next generation of Wall Streeters,
assuming there is a next generation, seem to be scaling back their
expectations.
"Two years ago, I'd have students come to me and complain about their $1
million offer," said Nabil N. El-Hage, a professor of management practice at
Harvard Business School who teaches a popular course about private equity.
"Today there is a clear realization that they won't make the kinds of absurd
money at 30 years old or 35 or even 40 that used to be possible."
People in search of power often gravitate to money. But maybe that's changing a
little. For instance, Steven Rattner, a financier and consigliere to many of
New York's media moguls, is near an appointment by President Obama to become
the "car czar," a job that is unlikely to pay much and will probably involve
lots of time in the much less glamorous or powerful Detroit. But at a time when
the markets are in turmoil and the future is less clear, it may be a more
attractive option than staying put.
"The huge amount of uncertainty about the investment banking business and
finance is making people rethink where they want to be," Frank Yeary, the
longtime head of mergers and acquisitions at Citigroup who departed in the
summer to become a professor at the University of California, Berkeley. "Now is
a great time to start something new. The opportunity cost is low," Mr. Yeary
said.
Similarly, Gregory J. Fleming, the former president of Merrill Lynch, left the
firm in January to take a teaching post at Yale.
Maybe all of this is a good thing. We might all be better off if more smart
people put their talents to work in government or academia, rather than
financial engineering. Mr. Wolfe said he always felt that all the talent that
went to Wall Street "frankly, always seemed like a terrible waste, but the
money was irresistible. "
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