How Wall Street turns its pups into wolves

Barclays, the British banking giant, is simultaneously boosting bonuses and laying off 12,000 employees. If you're struggling to understand the logic behind the move, you might want to pick up a copy of New York magazine reporter Kevin Roose's new book, Young Money. A chronicle of the experiences of eight twenty-somethings who began their careers on Wall Street in the wake of the 2008 financial crisis, Roose's book (due out next week from Grand Central Publishing) offers some timely insights for those trying to follow the fortunes of the big investment banking franchises themselves.

As Roose wryly notes early in the book, "In 2009, a bit of stability was all a twenty-two-year old on Wall Street could reasonably ask for." A bit of stability was pretty much all that Washington, Main Street, and Wall Street itself were hoping for, too, in the months that followed the bankruptcy of Lehman Brothers, the forced sales of Bear Stearns, and the near-collapse of Merrill Lynch and other major institutions.

While profitability at the likes of Goldman Sachs and JPMorgan Chase bounced back sharply in 2009 and 2010, it came with extra-intensive regulatory scrutiny. Two of the young bankers that Roose follows are employed at Goldman Sachs and seem to struggle with the gap between the bank's rhetoric and the reality they encounter, even before accusations surface that Goldman and its employees had defrauded their clients. (Goldman Sachs eventually reached a settlement with regulators on the allegations; former trader Fabrice "Fabulous Fab" Tourre was found liable by a jury last summer and currently is lobbying for his fine to be set at around $65,000.)

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In the midst of all the hullabaloo, Roose recounts the experience of Jeremy, who unexpectedly finds himself wrestling with ethical conflicts. He "wanted to believe that a bank didn't have to exist solely for its own preservation and enrichment — that all that stuff he'd heard in recruiting about being a 'trusted advisor' to clients wasn't just marketing fluff. But now, he was starting to wonder whether he'd been fooled."

Having spent about as many years watching the financial world as "Jeremy" has spent on earth, I found myself chuckling slightly at his naiveté. But then I stopped myself short. Shouldn't people like Jeremy — and those higher up — be pushing for Wall Street institutions to live up to some of that "marketing fluff?" Or if not, to at least explain why the disconnect exists, and offer their youngest employees — the people they'd like to entrust the bank's future to — some reason to believe that they aren't just there to line their own pockets at the expense of what Wall Street folks casually refer to as the "dumb money?"

Most young professionals undergo a baptism by fire, so Roose's chronicle of late hours, strained relationships, and exhaustion came as no surprise. Ask any young doctor or lawyer about their first years on the job and you'll hear similar tales. In the case of medicine and law, however, the hapless victims of this rite of passage can at least console themselves that they're actually toiling away in pursuit of some loftier goal, such as the rule of law or helping suffering humanity.

Bankers? Not so much, despite Goldman CEO Lloyd Blankfein's best efforts to convince the rest of us that he and his colleagues are "doing God's work" by helping companies raise capital. Clearly, that claim rings as hollow in the ears of the young men and women Roose follows over the course of the book as it did to the rest of us at the time.

And yet, these same twenty-somethings should have been true believers. Roose — who made a name for himself by publishing The Unlikely Disciple, his account of a semester at Liberty University, founded by fundamentalist Christian preacher Jerry Falwell — compared Wall Street to a religion. Like any faith, Wall Street has its rules, regulations, and norms; it "converts new employees over the course of a two-year cultural baptism that encompasses every aspect of their lives," Roose writes. In the case of most of those profiled in the pages of Young Money, Blankfein, Jamie Dimon, et al. seem to make singularly ineffective proselytizers, however.

Here is where Roose and I part company (reluctantly, for my part, as I find his observations sharp and witty, while his prose is crisp and colorful). Roose predicts that Wall Street will never again be as indiscriminate in its hiring as it was in the glory days before 2008. The best and the brightest are looking elsewhere, too. In 2006 alone, Roose notes, nearly half of Princeton's graduating seniors who had a job were bound for the financial sector. The data suggests that he's right: Only 11.5 percent of Princeton's graduating seniors were bound for Wall Street in 2012.

In part, that's self-selection; in part, it's due to the buzz and energy surrounding the technology arena. It's also partly due to lackluster hiring efforts on the part of big Wall Street firms, who are busily downsizing. Like Barclays, they want to hang on to their proven rainmakers — the bankers, traders, and others who have proved invaluable in generating revenue and profits — while cutting back overall.

If, as Roose predicts, the reduced pace of hiring by Wall Street leads to fewer "dilettantes" being scooped up by big banks, I, at least, think that could end up having some unfortunate side effects. I'll agree with Roose that toiling away in the bowels of a Citigroup or Morgan Stanley for two impressionable years isn't always pleasant. It may even, as he argues, produce young people who "were slower to smile and quicker to criticize," and more prone "to talk about the world in a transactional, economized way."

There's a downside to only recruiting die-hard finance geeks, however. First, even if the banks don't end up employing many of these twenty-somethings long-term, there's a whole coterie of entrepreneurs and business people — or even non-profit administrators — with insight into the world of finance, for whom "Wall Street" no longer holds any mystique. That's a loss, and it means that the kind of "young money" that Roose chronicles won't have the chance to experience the good, the bad and the ugly of Wall Street before moving on to whatever other businesses — technology startups, regional retailers — they prefer.

But Wall Street banks have already squandered an even bigger opportunity. When they hired this group of twenty-somethings profiled by Roose, they had the chance to shape the next generation of Wall Street leaders in a different way, in light of whatever lessons they learned from the events of 2007 and 2008. His book suggests that little or nothing has changed, and that recent attempts to dial back hours and improve working conditions at Citigroup and a handful of other firms are just modifications to the existing regime.

The harsh truth remains that "Jeremy" and his fellow Wall Street newbies gave their employers a kind of free pass: Despite the headlines, they were willing to be convinced that Wall Street could serve a bigger, broader social good. By restricting their hiring to finance club members and other fans, the big banks will face no pressure from within to change and will also ensure that there are fewer Americans out there who real understand how the Wall Street machine works. That's a pity.

While some of Roose's subjects may have cause to regret their years on the Street, readers of his new book aren't likely to bemoan the loss of a few hours spent reading it. Recommended.

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