Across campus yesterday, many aspiring investment bankers lost their dream jobs before they even began. The prospect of post-graduation employment with financial giant Lehman Brothers dissolved for them when the investment bank filed for bankruptcy early Monday.
Lehman’s collapse is only the latest addition to the turmoil that has gripped the American financial industry over the past year, leaving many business-minded students worried about their futures.
Merrill Lynch announced yesterday it would sell itself to Bank of America for $50 billion, effectively spelling the end of the venerable brokerage. And in March, Bear Stearns, another Wall Street mainstay, accepted an offer from JPMorgan Chase to be sold for $10 a share — about a tenth of what it once was worth less than a year ago. The Dow Jones Industrial Average yesterday posted its sharpest decline since the aftermath of the Sept. 11, 2001 terrorist attacks.
For some business-bound University students, including at least four undergraduates and four graduate students who interned at Lehman this summer, the nosedive in the American financial markets means they’re plunging into one of the worst Wall Street job markets in recent history.
It also means that those former Lehman interns can’t return to the Manhattan-based bank where they often put in upwards of 90 hours a week, all in hopes of securing a coveted job offer.
Lehman was hit hard by the aftershocks of a decline in U.S. home prices that started last year. That led to defaults on loans and caused the value of assets backed by mortgages to plummet. Those woes spread throughout the global financial system, causing firms like Lehman to post massive losses and writedowns on assets.
Yesterday morning, the firm filed for Chapter 11 bankruptcy protection. Though It’s in talks to sell parts of its business and most employees haven’t officially been laid off, one thing is clear: Lehman Brothers will soon cease to exist in any recognizable form.
Along with the thousands of former Lehman employees now looking for work are the firm’s former interns, like one senior in the Ross School of Business who asked to remain anonymous because she wasn’t authorized to talk to the media about Lehman.
A year ago she received internship offers from Lehman, Deutsche Bank and Citigroup. She said she chose Lehman for the internship because it was “one of the more prestigious banks on the Street,” but she ultimately rejected its full-time job offer.
Now, she’s left looking for investment banking jobs in a radically refigured market.
“Coming in, I had a lot of options and now it’s very, very limited,” she said. “No banks are hiring, and it’s not as easy as it was in the summer.”
No longer courted by the major banks, she’s using her own connections to compensate for stalled recruitment.
“Now I have to call people I’ve met myself through the recruiting process, and push my resume through, and explain my situation,” she said.
She said she sent about 15 e-mails to Wall Street contacts yesterday alone.
An LSA senior and former Lehman intern who also asked to remain anonymous, said she had already accepted a full-time position with the bank for next year. She knew her future job was lost when the firm filed for Chapter 11.
“We all knew that the situation was pretty bad working throughout the summer,” she said. “But there was always kind of a confidence that we would work it out and things would end up being OK.”
She said the risk of collapse is simply part of the job — and it’s a risk that helped draw her to investment banking.
Business senior Justin Killion said the looming banking crisis was already evident this summer when he worked as an intern for JPMorgan in New York.
“The feeling that I felt, and that my friends at a lot of other firms felt, was there was still more to come,” he said. “There was really no telling what was going to happen because we haven’t seen any crash like this in history, basically since the Depression.”
Al Cotrone, director of career development at the Business School, said the dire financial markets have some business students rethinking which field to pursue, but it hasn’t swayed most away from high-paying, high-power internships in financial epicenters.
“I think every student who’s interested in banking will take a real serious look at the career they want and the life they want and the risks they take with that choice,” he said. “But at the same time, I know that there’s always going to be an investment banking industry and so that’s a decision that students will have to make based on their own risk investment.”
With $12,500 the standard pay for an eight-to-ten-week internship at companies like Lehman, Merrill Lynch and Citigroup — often capped off with a post-graduation job offer — the competition for these positions can best be described as fierce.
Until yesterday, Lehman, the 158-year-old bank with a reputation as one of Wall Street’s small but elite power players, was one of the most sought-after employers among students, according to Business senior Neal Bhagat.
“I know when I was interviewing, everybody wanted to work for Lehman’s,” he said. “They’re a very prestigious bank and so it was definitely one that was highest on everyone’s list.”
Bhagat spent the summer interning as a financial analyst for Citigroup, while some of his Business School counterparts opted for the now bankrupt Lehman located further down Wall Street.
“I know a few people who took Lehman offers over other banks because of its reputation,” he said. “Nobody saw this coming.”
According to Cotrone, Lehman’s demise was unexpected for both Ross students and for financial analysts closely following the stock market.
“Given that shareholders didn’t know about it until late, I’m pretty certain that students didn’t know either,” Cotrone said. “People interview for internships in January and February, so nine months ago, I don’t think that this was on anybody’s radar screen.”