My friend Brian worked for Credit Suisse back in 2005. I remember meeting up with him on Park Ave to go out for drinks after work one summer night. It was one of those hot-as-hell, grueling NYC afternoons. Brian took the bag slung over his shoulder, opened up the door of one of those Lincoln Towncars that were always idling outside the big bank headquarters, and tossed it into the backseat. He told the driver to bring it home to his house on Long island.
“There’s no way I’m walking around with that stupid thing on my shoulder all night,” he explained. This was a totally normal thing for Wall Streeters back in the day. Expense accounts never ran dry, no one was even counting what you spent because the revenues just never stopped coming.
That was then, this is now.
In my new post at the Wall Street Journal today, I look at the effect deflation is having on Wall Street – especially as it relates to layoffs…
Deflation is everywhere on Wall Street – the meals are less lavish, the limos idling outside Wall Street North buildings on Park Ave are few and far between, and even the things bankers once took for granted – like IPO underwriting fees – are shrinking right before their eyes. It was reported last night that the firms that are bringing Facebook public, a deal they’ve been salivating for like no other, will only be paid a 1.1% underwriting fee for their efforts. It’s a huge offering and they’ll all make out just fine, but understand that the customary IPO underwriting fee is between 6% and 7%.
This is deflation on a massive scale.