Careers in finance?

With Emma going back to college earlier than expected, we were not able to have a father-daughter book buying trip to Oxford as we have so often done in the past. But one of the books she wanted was an "insider" account of the collapse of Lehman Brother. This arrived in the post a few days ago and I have been skimming through it as some of my non-academic reading. I think Emma will find it useful, if only for the very accurate presentation of the day-to-day life of the trader - the long hours, intense intellectual effort, etc.

Current rhetoric about the causes of the credit crunch have focused on a homogenous class called "bankers" and their greed and short-term reckless risk taking. But securitized sub-prime is not a short-term speculation, it purports to be a long term investment. Moreover the single-classification of "bankers" is such a gross oversimplification. One good way this comes through has been in the discussion of various mechanisms to convert bonuses into something long-term with various claw back arrangements. However much banking activity is very short term. This can range from FX dealers who trade and make gains and losses in a few minutes to bond-issuance in which a fee is paid out of the bond proceeds, and so on. None of these types of activities are particularly risky and none of them have long-term time scales attached to them. Hence they were not issues in the banking crisis.

One argument being made is that bonuses should be mainly in the form of shares with long-term vesting rights. That way, the staff of banks have a strong incentive to not risk the bank. Ironically, the best example of a bank with this feature was Lehmans, where the staff owed over 30% of the firms equity as a result of such bonus arrangements. One "revelation" of the book is that the boss of Lehman's truned down a $23 a share offer just months before the firm went bankrupt. No doubt there are a considerable number of staff (perhaps all of them) who are not happy with that particular trade!

Emma's plans meanwhile are developing slowly. She has applied for some jobs in fund management and is researching management consultancy. I have mixed feelings about her going into these areas. On the one hand, I think she would do very well in these jobs. On the other hand, I don't really rate these types of work very highly. They do not seem to be the type of work that would would look back on with any sort of pride. Still I suspect that is a view that can only come with age. In one's early 20s, it all looks so exciting

Reading the Lehman's book inspired me to watch a little Bloomberg TV. Back in my days of fund management, myself and the other trader were big fans of Dierdre Bolton. I don't think she is on Bloomberg anymore but I'm not certain. I remember she gave a sterling performance on Sept 11th appearing on Wall Street with dust in her hair - what a trouper. The picture below purports to be her, but doesn't look exactly how I remember her.