Ph.D. Octopus

Politics, media, music, capitalism, scholarship, and ephemera since 2010

Investment Banking Sucks Everywhere, Including Canada

with one comment

by David

In Toronto, Wall Street is called Bay Street. We do some things different in Canada: cheaper, better, affordable healthcare for all, better gun laws, younger drinking age (though who knows how much of that the catastrophic Stephen Harper will change?). But one thing that is apparently pretty similar between Canada in the United States, and probably everywhere in the world, is the culture of greed and douchebaggery that exists in the financial sector. In Canada, various regulations have made our banks more stable. But that doesn’t mean that the culture of investment banking and other financial wizardry isn’t rotten to the core.

A few days ago, we had Greg Smith, a South African Jew who just left Goldman Sachs after working there a dozen years in New York and London, telling us how corrupt that company had become in his time there (though in fact the sleaziness goes back much further). Today, we have Toronto’s Globe and Mail journalist Tim Kiladze telling us  why he left a six-figure salary working on Bay Street for the investing arm of the Royal Bank of Canada to become a journalist for the aforementioned Globe.

Kiladze’s piece is much better than Smith’s. You should really read it. In a much more interesting, and less-resume like fashion, Kiladze shows just how bad things have gotten on Bay Street.  I’ll provide some choice excerpts here to tantalize you:

For as long as I can remember, I wanted to work in finance. Though Gordon Gekko wasn’t exactly my idol, I yearned to be rich like him. The funny thing is, once I got what I thought I wanted, including a robust six-figure salary in my early 20s, I wasn’t nearly as enamoured.

As a junior banker or trader, you may not have much responsibility, but you see everything with fresh eyes. What I saw was an industry unbelievably out of touch with reality. The problems weren’t confined to the places I worked, RBC Dominion Securities and National Bank Financial; they were widespread. Retail investors are routinely gouged for ridiculous fees, and the Street is so clubby that rivals gang up on each other when someone tries to undercut the advisory fee schedule.

The Street’s culture was rotten. I once saw an investment banker become enraged when his plane ticket was booked economy instead of business class. “I’m not sitting in the back with the proletariat!” he declared.

And:

When I left, one typically unemotional 30-something trader e-mailed me privately to say: “Good for you for having the balls to do this.”

Here’s the thing: it’s not so hard. Once you leave the office towers, you quickly realize that there is meaningful work beyond Bay Street.

Kiladze took a massive paycut to become a Globe and Mail journalist, earning less than $60,000 per year. He admits, “I still miss the money.” But, he goes on, “then I remember why I left.” He writes:

No longer do I arrive at my desk at the crack of dawn to mindlessly enter bond yields into a convoluted spreadsheet. No one tells me that my Banana Republic cardigan is too fashion-forward for the office. No longer does a superior tell me that I leave the desk to pee too many times during the day.

When I left Bay Street, I left something else behind: a sense that I was living in denial. Back then, I had to pretend that I didn’t hear or see certain things. While working on the Street, I heard people say that even if clever institutional investors like pension funds realize that a new deal isn’t worth buying, unsophisticated retail investors won’t know any better. I saw investment banks get paid millions of dollars to offer fairness opinions on proposed takeovers, while rarely raising an objection to any deal. And I saw research analysts getting paid enormous money, even though their predictions are so often wrong.

He continues:

Having said goodbye to all that, I now get a certain pleasure out of hearing bankers, traders and corporate lawyers grumble about their bonuses, even though the annual cheques are worth hundreds of thousands of dollars. Unlike them, I no longer have to use that number as my main measure of self-worth.

My friends on the Street know I’ve got it good now, too. Last year I watched the Super Bowl with a few of them, and during our post-game chit-chat one turned to me and said matter-of-factly: “You literally put a price on happiness.”

This doesn’t mean that investment banks or corporate law firms are the root of all evil. A number of my best friends still work on Bay Street, and some people I truly respect have been in the game for 30 years.

Most people in shiny office towers mean well. They really do. They love their kids, and they give loads of money to charity. The way they see it, every now and then they do something that is just a little offside, but it can’t be that bad.

What they don’t realize is that when everybody does just a little something wrong, it creates one hell of a mess. Rating agencies who bear some of the blame for the financial crisis relied on mathematical models that assumed widespread defaults weren’t possible. The analysts who trusted those models didn’t mean to nearly crash capitalism as we know it – they just took a shortcut.

Though I’m not sure how much these people give to charity, and if it’s proportionally more or less than most other professions (I have my guess), he’s right that bankers aren’t all evil, and that all jobs have their bad apples. But as Kiladze writes, “the big difference, though, is that bankers and traders make millions, and their poor due diligence can bring down financial markets.” The piece ends with a powerful message:

Financial professionals who are as fed up as Greg Smith have two choices. They can try to stay the course, or they can opt for a less demanding, more fulfilling life. The latter is a real option: I’m proof of it.

A few weeks ago the Globe sent out a new job posting for our finance department, so I re-posted it on Facebook. Someone from Bay Street inquired about it and I initially laughed it off, telling him we could never match his current salary. But he was serious.

“You starting to feel like your soul is dying?” I texted to him.

“Starting?” he replied. “Dead my friend.”

I think that says it all.
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Written by David Weinfeld

March 17, 2012 at 22:03

One Response

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  1. […] Investment Banking Sucks Everywhere, Including Canada. […]


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