| Amid Economic Crisis, Young Asian-Americans Begin Business Careers |
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| Tuesday, 16 September 2008 | |
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Jonathan Lieu As Wall Street closed its doors on a tumultuous weekend, employees continued to await the fate of their jobs. Banking giants Lehman Brothers and Merrill Lynch collapsed in hasty downfalls over the weekend, in the wake of the American subprime crisis. Sunday afternoon, ailing Merrill Lynch was bought by Bank of America. A few hours later on Monday morning, Lehman Brothers filed for Chapter 11 bankruptcy protection, bringing an end to the fourth largest U.S. investment bank. In response, the Dow Jones fell nearly 500 points on Monday, while the FTSE 100 closed down 212.5 points, a monetary loss of £50 billion (as reported by CNN and the Guardian). Emergency negotiations began Friday night and continued throughout Saturday and Sunday. However, Wall Street failed to find a buyer for the 158-year-old Lehman Brothers (LSE: LEAH). Potential buyers touted in the preceding week had ranged from the state-run Korea Development Bank (KDB) to British bank Barclay’s PLC (LSE: BARC). The former ended talks unsuccessfully with Lehman earlier in the week, catalyzing a week-long plunge in investor confidence, translated to a 77% drop in stock price, while the latter announced on Sunday that it had also failed to reach a buyout deal. What will happen to the employees of both Lehman and Merrill Lynch? The answer is unclear.
Lehman employees sat by their computers and blackberries on Sunday night, awaiting the Monday opening of European markets, at which time Lehman was expected to announce its bankruptcy filing and liquidation of the company. Most Asian markets were closed for public holidays on Monday, including the Chinese Mid-Autumn Festival and Japan’s “Respect for the Aged Day”, thereby briefly extending Lehman’s 11th hour bid for survival. But by late Sunday, hopes of a miracle rescue for Lehman seemed futile as Bank of America (BAC), another weekend buyout contender, had turned its sights on Merrill Lynch, the third largest U.S. investment bank. After talks between Bank of America and Lehman broke down, Merrill Lynch offered itself to Bank of America and a deal was reached at a price of roughly $50 billion. Lehman Brothers was left in the cold, along with its 28,000 employees worldwide (Lehman 2007 Fact Book). Merrill Lynch has approximately 60,000 employees.
Both Merrill and Lehman recruit heavily among college campuses for graduates interested in the world of finance. With this weekend’s collapse of the two companies, many young professionals embarking on banking jobs are being hit by the very harsh realities of business at a very early stage in their careers. As recently as May 2007, Lehman Brothers was the first company featured in Fortune magazine’s “20 Great Employers for New Grads”. Lehman has a history of attracting the brightest graduates, from top universities like the U.K.’s London School of Economics and the U.S.’s Wharton School and Harvard Business School. Promoting its corporate culture and mentorship programs, Lehman recruited students into summer internships designed to funnel into full-time analyst jobs. Such recruitment processes and the overall lure of investment banking is similar for almost all banks, not just Lehman. As Fortune magazine described in its 2007 profile on Lehman, the attractiveness of the industry was hard to deny:
“Lehman Brothers: What makes it so great? Wall Street is rolling in dough, and wherever the cashflow goes, you can expect young hopefuls to follow. Lehman is a popular destination: last year, 530 new college grads were hired for jobs in the company's U.S. offices and analysts received an average starting salary of $60,000. Almost 90% of new hires are mentored. And if you like to travel or want to experience life outside the U.S., you're in luck: the company has offices in a number of cities, including London, Paris, Milan, Frankfurt, Hong Kong, and Tokyo.” (Fortune Magazine, May 2007) Without the wisdom of hindsight in an economic crisis, it is easy to see the appeal of an investment banking career one year ago. But merely a few months into their new careers, young bankers are faced with the potential loss of their hard-earned jobs. Sunday night, on the social networking website, Facebook, Asian-American business students and graduates expressed their reactions through dismal status messages such as: “The sky is falling” and “Rest In Peace: Lehman Brothers”. In one comment referring to the list of failed U.S. banks and mortgage companies in this year alone, one student asks woefully: “Bear, Fanny, Freddie, Lehman, Merrill, who’s next?” Another graduate who started as an analyst at Merrill Lynch earlier this summer ponders her own fate: “Will I have a job in the morning?” Many others are still more reticent about the future of their jobs.
According to the U.S. Equal Employment Opportunity Commission, Asians lead the American investment banking industry’s minority representation, in both current percentages and growth rates. From 1995 to the 2000 Census, Asian representation increased in all four job categories, from 4.1% to 6.1% for managerial positions, 9.4% to 13.2% for professionals, 14.9% to 20.7% for technicians (i.e. computer programmers), and 3.4% to 4.5% for sales workers. Asians are by far the most represented racial minority in banking. However, in an economic period as unpredictable as the present, young adults on the job market are beginning to consider more than just the amount of cashflow in their first paycheck. Job security has become a greater concern than ever. |
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