Wall Street’s Slump Deepens, and New York City Reels

NEW YORK â€”  As a budding Wall Street power couple, David Cohen-Mintz and Efrat Yellin had everything going for them but timing.

Last July, they eagerly vacated their cramped Chelsea apartment, bought new furniture and moved into a more spacious place in the West Village. The rent was steeper, but their prospects seemed to be on the rise.

Cohen-Mintz, 31, newly graduated from New York University’s prestigious Stern School of Business, had landed a coveted associate’s position at investment-banking firm Robertson Stephens & Co. Yellin, 28, also an investment banker with an MBA from Stern, was a second-year associate at Merrill Lynch & Co.

Although the prolonged Wall Street slump had cost the jobs of many of their friends and classmates, Yellin had survived several rounds of layoffs and a companywide reorganization at Merrill. Cohen-Mintz had pocketed a $25,000 signing bonus when few applicants were getting any offers at all. And many forecasters were predicting a year-end rebound for both the markets and the economy.

Instead, things only got worse.

Today, Robertson Stephens is out of business. Cohen-Mintz has left the securities business and is working at a pharmaceuticals firm in the suburbs. Yellin, toppled two months ago in the latest round of job cuts, is looking for work.

Like thousands of others, they have been slugged by one of the nastiest downturns in Wall Street history, a securities-industry recession that is being felt nationwide and that is deepening by the day.

This city has lost 25,000 securities and commodities-trading jobs -- a 13% decrease -- since Wall Street’s all-time peak of 191,000 jobs in August 2001. The December head count of 166,000 was a five-year low, and some big firms such as Goldman Sachs & Co. say more job cuts are coming.

The industry has diversified geographically, particularly since the Sept. 11 terror attacks, when many companies moved jobs to New Jersey and elsewhere. But New York still accounts for nearly a quarter of all U.S. securities jobs.

That helps explain why America’s largest city is in far tougher shape economically than the rest of the country, with December’s unemployment rate at a nearly five-year high of 8.4%, compared with the U.S. jobless rate of 5.7%.

Wall Street bonuses, the lifeblood of lower Manhattan, have plummeted since reaching record levels in 2000, when top investment bankers were routinely earning bonuses of $1 million a year and up.

As the devastating bear market approaches its third anniversary next month, the effects can easily be seen in a walk through the financial district. At Ivy’s Bistro, a few blocks from the World Trade Center site, business is off 25% to 30%, said Steve Thanasoulis, who owns the restaurant with his wife, Jackie.

“Every day, one more face is missing,� Jackie Thanasoulis said.

Late-night takeout orders have plunged by two-thirds in 18 months. Not only are there fewer investment bankers around, but there are also fewer deals to keep them late.

Steve Thanasoulis also has seen two of his regular customers get fired, one over lunch and the other on the street outside his restaurant.

The same cloud hangs over Koh’s Kids, a children’s clothing store a block away where financiers who had just closed deals or earned big commissions would often stop on their way home from work.

“After 5, I had many happy fathers picking up something for their kids,� owner Grace Koh said. “Now, no more. No lunch business. No after-5 business.�

Business was good last year because shoppers from other parts of Manhattan thronged to the financial district in the aftermath of the terrorist attacks, Koh said.

But sales are tumbling this year, in part because executives at companies such as American Express Co. and Citigroup Inc.’s Salomon Smith Barney subsidiary -- once regular customers -- are ordering fewer gifts for clients.

Beyond New York

The Wall Street slump is far from a purely New York phenomenon. In Boston, the nation’s money management capital, FMR Corp., parent of mutual fund giant Fidelity Investments, said last week that it would eliminate annual raises this year as fleeing investors and falling stock prices have clipped the firm’s assets. Last year, Fidelity cut nearly 1,700 jobs.

San Francisco’s Silicon Valley-adjacent financial community expanded along with the tech stock bubble -- and has contracted along with the bust. Robertson Stephens is gone, and former rival Hambrecht & Quist is now the troubled stepchild of J.P. Morgan Chase & Co.

Los Angeles lacks the base of Fortune 500 corporations that tends to attract merger-and-acquisition specialists, yet a number of investment banks raised their L.A. profile during the bull market, including Donaldson Lufkin & Jenrette Inc., home-grown Sutro & Co., Credit Suisse First Boston and Banc of America Securities. Friedman Billings Ramsey and Piper Jaffray opened branches in Orange County.

Today, all those firms have either been acquired or have sharply scaled back their Southland operations. Most significant, CSFB bought DLJ and Royal Canadian Bank bought Sutro, shedding many jobs in the process.

Wall Street, of course, is famous for its booms to busts. With salaries and bonuses so high a percentage of operating costs, the industry invariably reacts to sour markets by showing its high-paid deal makers the door.

However, some experts doubt that the current malaise is merely cyclical. Among the things that sets this downturn apart, they say, is that it follows one of the most exuberant expansions in Wall Street history, a decade-long joyride that drew thousands of people into the securities industry.

Unwinding that growth could take years. And it will occur as the industry grapples with terrorism fears -- many Wall Streeters believe their industry was singled out by the World Trade Center attackers and remains a preferred target -- and with the growing sense that much of what was taken as gospel just a few years ago turned out to be terribly wrong.

“This is more than a downturn. It’s a repudiation of the whole business model,� said Peter Gonye, a Wall Street specialist at executive search firm Spencer Stuart.

The “financial supermarket� idea that enticed commercial banks to snap up securities firms in the mid-1990s has largely been a failure, he said. The banks paid top dollar for the acquisitions and laid out millions more in bonuses to keep talent in place, only to incur huge losses when the stock market fizzled and the merger and underwriting deals dried up.

FleetBoston Financial Corp., for example, shuttered Robertson Stephens in July when it couldn’t find a buyer for the once-hot technology investment bank. And just Wednesday, U.S. Bancorp said it would divest its Piper Jaffray regional brokerage in a spinoff to shareholders.

In the Cross Hairs

At the same time, well-publicized abuses by Wall Street research analysts who touted stocks to the public while privately disparaging them landed Wall Street’s biggest firms in the cross hairs of a nationwide investigation that was spearheaded by New York Atty. Gen. Eliot Spitzer.

The resulting $1.4-billion settlement announced in December was a financial blow, but the damage to the industry’s reputation was even more devastating, not to mention the increased regulatory scrutiny at all levels.

The regulatory and public relations backlash is another element that makes the current climate different -- and perhaps tougher -- than previous downturns, experts said.

“The whole industry is really running scared now,� said Joseph Lukacs, a Melbourne, Fla., career coach who works with financial-services professionals.

Given this backdrop, it’s no surprise that Wall Street’s woes aren’t a top-level concern outside Manhattan. After all, these are the same folks who convinced many ordinary Americans that Internet stocks were a sensible long-term investment or that Enron Corp. was a solid, well-run company.

“I’m sure there are a lot of investors who are removed from the financial centers of New York and Boston who probably figure that Wall Street professionals were out to do nothing but make a buck and probably feel little sympathy for them,� said Chuck Hill, research director of Thomson First Call, a financial data firm.

Indeed, the 1990s hubris of many former Wall Street highfliers remains intact. Even when they can’t get a Wall Street job and must go to another industry, many will settle for nothing less than the top job.

“The only interest they have is to be CEO,� said one executive recruiter. “But many of the companies they financed bombed, so what makes them think they’re CEO material?�

Further down the corporate ladder, however, unemployed workers such as Gibbs Moody are much less choosy.

During the tech stock heyday, Moody was a San Francisco-based technology analyst for H&Q;, Robertson Stephens and UBS Warburg. He left the business in 2001, planning to manage investments for himself and get back in the game when the market improved.

Moody is looking for work now, but he has no interest in returning as a “sell-side� analyst, or one who advises the public on stocks to buy.

“As an analyst, it’s kind of like being the Maytag repairman right now,� he said. “When there’s no appetite for stocks, you’re not a popular guy.�

Still Hopeful

Back in Manhattan, Efrat Yellin still has not abandoned her hope for an investment-banking career. Despite the layoffs occurring all around her, it was something of a shock when the ax finally fell on her group at Merrill.

“It was in the back of my mind, but I didn’t really have a contingency plan,� she said. “I didn’t do the ‘what if.’ �

Cohen-Mintz, meanwhile, is happy to be away from Wall Street, in an executive-training program at a fast-growing generic-drug manufacturer, Taro Pharmaceutical Industries Ltd.

The energy and glamour of Wall Street were attractive, but the downside was a lack of job security and “the complete surrender of your personal schedule,� he said.

“I have a friend who hasn’t had a day off since August -- weekends included -- and he just found out his bonus will be minimal,� Cohen-Mintz said. “He has no life, and it’s not glamorous anymore.

“He asked if there’s anything available at my company.�

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Wall Street: Just How Bad Is It?

* The benchmark Standard & Poor’s 500 stock index has fallen 45% from its March 24, 2000, peak.

* The technology-stock-laden Nasdaq composite index is down 73% since March 2000.

* Domestic after-tax profits for the U.S. securities industry were an estimated $7.9 billion last year, down from a record $21 billion in 2000.

* There were 97 U.S. initial public stock offerings last year. There were 520 in 1999. U.S. merger activity is off almost 40% during the same period.

* Wall Street bonuses sank 37% last year to $7.9 billion from $12.6 billion a year earlier. The average bonus dropped to $48,500 last year from a record $104,600 in 2000.

Consumer confidence in New York City hit a new low in December. Despite a rebound in January, the confidence index still trails the nation’s by more than 10 percentage points.

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Sources: N.Y. state comptroller, Thomson Financial, Siena Research Institute, Securities Industry Assn., Bloomberg News