High-risk, big-bucks era wanes on Wall Street
As once-freewheeling firms lie dead or damaged, the industry may change how it thinks and does business.
NEW YORK — Ever since corporate raiders, multibillion-dollar buyouts and the catchphrase "Greed is good" burst into the national consciousness in the 1980s, Wall Street has been a larger-than-life economic and cultural force in America, with its top professionals both exalted and condemned as "masters of the universe" who orchestrated mega-mergers and led opulent lives.
But the financial upheaval that has been shaking the country and capsizing century-old investment banks is likely to fundamentally alter the fabric of Wall Street, changing the way it does business, its role in the economy and the lifestyles of its famously well-paid practitioners.
"Conditions are more severe than anything I've seen in my 35 years on the Street," said Michael Madden, managing partner at BlackEagle Partners, a New York-based private-equity firm. "Almost all of my Wall Street compatriots think this marks a sea change in the fortunes of the financial community and especially of Wall Street."
The industry has been remarkably resilient over the last 25 years, overcoming any number of scandals and market downturns. Each time a boom era seemed to be ending -- the 1987 stock crash, for instance, or the collapse of the dot-com bubble early in this decade -- Wall Street came back stronger than ever.
It has been the heart of a financial industry that employs about 7% of U.S. workers and accounts for one-fifth of the country's economic output, according to research firm Moody's Economy.com.
But last week's bankruptcy filing of Lehman Bros. Holdings Inc. and shotgun engagement of Merrill Lynch & Co. to Bank of America Corp. -- after the demise of Bear Stearns Cos. in March -- signal the most dramatic reordering of Wall Street since the Great Depression.
Even if the huge government intervention announced late last week succeeds in stemming the current crisis, Wall Street's basic business model will be revamped, many in the business say, with its earnings, workforce and appetite for risk greatly reduced and its swashbuckling ethos ratcheted back.
The new era of subdued expectations is likely to affect not only traditional investment banks but also hedge funds and private equity firms, which gained high profiles in recent years.
"The Wall Street of 2009 will not resemble the Wall Street of 2007," said Ari Bergmann, managing principal at hedge fund Penso Capital Markets in Cedarhurst, N.Y.
