Hey. Just trying to get some perspective on this issue because I've heard conflicting reports. A lot of people say nothing like this has ever happened before and banking will never see another 2006. Others say this is nothing compared to tech bubble, savings and loans, etc... I've had senior level bankers weigh in on both sides.
I realize the overall economic impact of the current situation is relatively shallow, but I don't have the numbers/knowledge to put the impact on financial services into perspective.
Just how bad is this ****? Will banking do a full recovery? Half recovery? Any recovery? How long will it take? Which sectors are probably gone forever?
What really worries me is not even the credit crisis itself, but the increase in government regulation that will result from it. That's where the long term clamp on our industry will come down from.
yea interested in hearing what the older ppl on wso have to say
It depends how you define "recover". Will securitization recover? Will the debt markets unfreeze and liquidity be restored? Yes, undoubtedly. Even the worst segments, like mortgage securitizations, will come back. At their core, these were/are good ideas that increase access to capital and are a net positive for the economy.
There are two issues that are still uncertain, though, and I suspect this is what you are really trying to ask. First, when will this happen? Nobody can answer this, because nobody knows. Best case scenario, liquidity continues to improve over the summer and the capital markets will be restored to a "normal" functioning level later this year. Worst case, it could take years and years. There are smart people on both sides of the issue and the answer is probably somewhere inbetween.
The second issue is whether the banks will be able to profit the way they have in the past (pre-credit crisis), even when the markets open up again. And again, the best answer is that nobody knows. A lot depends on the feds and what kind of regulations will be enacted over the next year or so. Right now it's popular politically to bash the banks and talk about tough reforms, but will this continue after elections in November? My guess is that there won't be serious reforms, but I'm cynical by nature, and this is just my guess. Regardless, it will take some time for banking profits to return to pre-crisis levels, and it's mostly dependent on how long the crisis continues.
Is the economy recovering? (Originally Posted: 07/27/2009)
What do you guys think? Will IBs recruit more this yr for FT and SA?
I jolly well hope so.
As much as I hope so, I think the job market won't fully recover till at least the class of 2012.
There's bearish .... and then there's ridiculous. The next bubble would've formed and burst by then.
Fact.
The financial industry will never be as robust as it was, hence hiring will never be where it was. The crux of this crisis is that the financial industry composes too large a part of our economy - we cannot simultaneously expect markets to self govern and the financial industry to continue its boom because as capital flows more freely, it lessens the need for banks.
Many prominent economists deplore how significant the finance sector is because it's a hallmarkt of how disfunctional and stagnant are our conduits for distributing capital. The world is deleveraging, and that can only mean a smaller role for banks and less hiring.
@ Brown_bateman and Gorilla Whale:
That's what I want to hear!
this is dumb:
The financial industry will never be as robust as it was, hence hiring will never be where it was. The crux of this crisis is that the financial industry composes too large a part of our economy - we cannot simultaneously expect markets to self govern and the financial industry to continue its boom because as capital flows more freely, it lessens the need for banks. Many prominent economists deplore how significant the finance sector is because it's a hallmarkt of how disfunctional and stagnant are our conduits for distributing capital. The world is deleveraging, and that can only mean a smaller role for banks and less hiring.
Your comment is immature and inane - "this is dumb". At least have the sense to make a semi-intelligent rebuttal. You are probably just some high school student or undergrad who took econ 101 and believes in efficient markets. And you probably harbor a naive dream that you'll have job security on Wall St. I took plenty of econ history courses, and if you read history, you'll see that before the late 70s, the financial industry was bland and more akin to law or Big 4 accounting.
If you read anything by good economists from across the political spectrum, you'll see pretty universal appeal that the finance industry is inflated. From Joseph Stiglitz to Martin Feldstein to the late Milton Fridman the consensus is that since the financial industry doesn't 'create' anything - it allocates capital - it shouldn't contribute such a large portion to GDP.
It is ironic that you ridicule me and tell me to read history, when my point is that we're reverting to the historical norm that hasn't been experienced in ~30 years.
...the economy recovering and analyst hiring returning to normal are two entirely separate questions and they should be discussed as such. I agree with those above who think that hiring on Wall St. will lag a recovery by a good deal. In my experience, the street is still way over-staffed due to consolidation and due to the reduced leverage and risk-taking in the system. I believe the "animal spirits" of leverage and risk are coming back faster then I would have thought, but the slack in the lower tiers of the financial labor market is still a problem in my opinion. For established producers, the job market already has come back quite a bit (at least in the fields I am exposed to) but in the commoditized world of analysts I believe the supply outweighs the improving demand and will weigh on a hiring recovery for awhile.
How about this:
When and, more importantly, WILL I get paid come bonus season next year? I could care less about the general market recovering (though there is direct correlation) - I just want to get a bonus that is equal or greater than my paltry salary ($60k just doesn't cut it).
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