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A By Lisa Kassenaar and Stephanie Baker March 24 (Bloomberg) -- Raj and Nita Godhania are drinking Nescafe in their one-bedroom apartment in Princeton, New Jersey. Valentine cards are taped to otherwise bare walls, and a stack of blue Rubbermaid boxes towers over the TV.
He got a promotion in 2006, sold his house in London, gave away the dog and moved his family to the US Now, he's scrambling to leave before his nine weeks of severance runs out and his L-1 work visa -- his right to be in the country -- is void because he's out of a job. Half a dozen calls to Merrill in three weeks -- some furious, some teary -- have yielded nothing, says Nita on a wintry February Friday. The New York-based firm so far has refused to pay the family's $10,000 moving expense, buy four one-way plane tickets or help figure out how to let the children finish the school year, they say. Nita can't work without a permit, and Raj, 45, has little time to find another company to sponsor him. The two British citizens don't qualify for US unemployment benefits. "Merrill Lynch left us on the streets," says Nita, 39, who now nurses a chronic headache. Quarter-Million Jobs The shakeout in global banking has untethered more than a quarter of a million people, most of them in New York and London, who thought they were in secure, well-paying jobs.
All are now displaced, forced to reflect on their fall and to find their way in a job market where the biggest US and European banks may spill tens of thousands more workers before the carnage is over. By some measures, these folks are lucky: They're well educated and have some money to fall back on. Still, bankers are struggling with a plunge in prestige -- and little sympathy -- after a decade-long orgy of ramping up leverage and flogging subprime debt that has left the world's economy in tatters and taxpayers with the bill. In London in February, demonstrators hanged a mannequin dressed in a tie and bowler hat from Marble Arch.
Morgan Stanley's collateralized-debt-obligation business in Europe, who lost his job in September. Self-Worth Public ire tends to be focused on the perks of those at the top, those who got the biggest bonuses.
Regina Glocker, a partner at Exchange Place Partners, a New York executive-search firm. Mortgage traders or portfolio managers may have made $2 million. Still, legions in the middle ranks aren't immune from criticism. "For most people, losing their job makes them question their self-worth or avoid neighbors, even if they didn't cause the financial meltdown," says Brendan Burchell, a University of Cambridge lecturer in Cambridge, England, who has studied the psychological consequences of unemployment. "These are people who used to enjoy telling everyone how busy they were and how important they were." No Callbacks At job fairs in New York, bankers clutching leather folders filled with resumes wait in line for hours for five-minute interviews with potential employers or headhunters. Three Pink Slip parties at bars in Manhattan have lured more than 1,000 guests looking to connect with recruiters.
Royal Bank of Scotland Group Plc, was fired in December along with seven others on his trading desk, he says. He's painting the inside of his house in Greenwich, Connecticut, saving the $3,000 his wife planned to spend on the job, and is worried about paying for his two teenagers' college education. Migliaccio, 44, has sent out his resume and attended a couple of networking sessions. "With so many people out of work, you don't even get the callbacks," he says. Yet hardly surprising, given the balance-sheet blowups of the past two years.
Charles Geisst, author of "Wall Street: A History" and a finance professor at Manhattan College in New York. Most of the people who have been turned out of the banks are now, en masse, going to have to find something else to do. Transaction Bubble The jobs have disappeared because the "transaction bubble" has burst, Geisst says. From 2003 to 07, banks hustled for short-term profit through transaction-based fee businesses, including packaging mortgages into debt securities and selling them to investors. The banks built up departments such as prime brokerage, which clears trades for hedge funds. They hired thousands of people to work in those units, from bankers to back-office programmers and accountants. In London alone, industry jobs ballooned by almost 50,000 to 353,000 in 2007 from 02, according to the Centre for Economic and Business Research.
Charles Prince were ousted following writedowns on mortgage-backed securities. Since then, financial firms worldwide have shed 282,000 jobs, about 5 percent of the total industry workforce, according to Bloomberg data.
Nobu Matsuhisa shut down Ubon, his restaurant in London's Canary Wharf, where glass skyscrapers house offices of the world's biggest banks. For Sunil Rally, who has been selling newspapers, gum and cigarettes at the corner of Wall and William streets in Lower Manhattan since 1991, sales are down 30 percent this year. "Every day, business is less than the day before," Rally says. He points across the street to where Mangia, a once bustling takeout panini and salad shop, cleared out a few days earlier. Growth Engine The two cities gorged on revenue from rich bankers. In London, 40 apartments overlooking Hyde Park had sold for an average price of 20 million pounds by early 2008, about $40 million at the time.
Peter Hahn, a fellow at London's Cass Business School and a former Citigroup banker. "The wealth from the City of London pumped up real estate prices throughout the country." On Wall Street, where the average pay at the five biggest New York-based securities firms in 2007 was $353,000, a 44 percent plunge in bonuses last year will cost New York State $1 billion in lost tax revenue, according to the Office of the State Comptroller.
Richard Florida, director of the Martin Prosperity Institute at the University of Toronto's Rotman School of Management. Recalibration "The idea that so many people could move money around and make so many millions seemed economically unreasonable," he says. "Moving those people on to other pursuits is going to be much better for our economy." Florida, author of "The Rise of the Creative Class," says the expansion of financial services in the past decade soaked up talent from other industries. It forces people to apply themselves to do more to add to productivity."
The smaller firms are angling for new clients in part by offering advice on making money in distressed markets. Malus Clause Some financial workers who have been fired will be hired back when the economy rebounds. For them, and for those who still have jobs, compensation may never be so grand. Government- imposed taxes and salary caps and bank clawback provisions and deferred pay are the new rules of the game.
Credit Suisse Group AG in Zurich is using about $5 billion of its most illiquid loans and bonds for bonuses to be paid out over five to eight years. Along with rival UBS, it's forcing employees to allow the bank to try to take back cash bonuses if they leave the firm or are fired for cause. UBS calls this a malus clause-after the Latin word for bad. Bankers used to feel like masters of their own destinies, hopping from one job to the next, hooked on their BlackBerries 24 hours a day. The buzz of navigating markets and billion- dollar deals was intoxicating.
Yan Assoun, 38, a Frenchman who headed European equity derivatives trading at Credit Suisse in London. In March, Morgan Stanley ordered London staff to start paying to use the firm's gym and to front corporate expenses, including hotels and meals, out of their own pockets. Bankers and traders compensated in shares have also watched their net worths crumble. "It's scary," says Assoun, who lost his job in December. Over several months, the bank slashed 20 percent of his 40- person team.
Deutsche Bank AG in London for six years before jumping to Credit Suisse in 2007. He's looking for work at a hedge fund, brokerage or asset-management company, where he thinks the pay will be more predictable than at a bank, and he's adjusting to his first break in 15 years. "It's a bit ...
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