Turmoil on Wall Street

CAS senior John Thatcher had a plan.

“I was counting on my internship at Lehman Bros. to lead to something after graduation,” he said. “That is gone now.”

As the week began with Lehman Bros. declaring bankruptcy, Merrill Lynch’s sale to Bank of America and American International Group, Inc. taking out a loan to stay afloat, Stern students, alumni and faculty alike expressed fear about the crisis confronting New York’s financial sector.

While Thatcher is still working for Lehman Bros., he is unsure of his future there.

“The company is going under and I don’t know if I am getting paid,” Thatcher said.

NYU professors who specialize in business say he has good reason to worry.

Economics professor Nicholas Economides said dramatic changes such as Lehman’s failure add “new intensity to a major crisis of the global financial system.”

“Wall Street will bounce back from the Lehman crisis,” said Paul Watchel, another economics professor. “However, the bounce could take a few years.”

In response to the financial crisis, Wall Street is in the process of reorganizing.

“The stand-alone investment bank model is being challenged,” economics professor Richard Sylla said. “It’s possible that Morgan Stanley and Goldman Sachs will go the way of Merrill Lynch by being absorbed into larger, more stable banks.”

Many professors fear the chaos on Wall Street will challenge New York City’s preeminence in global financial markets.

“We may soon stop referring to New York City as ‘the financial capital of the world,’ ” Sylla said.

The job market, especially in finance, will be difficult for the next few years.

According to Trudy Steinfeld, the executive director at NYU’s Wasserman Center for Career Development, financial services provided the largest percentage of jobs for NYU graduates from the class of 2007.

Vice President for Student Affairs Marc Wais said graduating seniors can’t expect Wall Street to offer the great jobs with record signing bonuses that had been common just a few years ago, when the economy was booming.

Wais said students must adjust their expectations for their first jobs, as their dream jobs may not exist right now.

Economics professor George Smith agreed.

“Those graduating in the near-term and those who already have employment on Wall Street will have to rethink where, geographically and institutionally, they can find employment,” he said.

But though the crisis is not good for graduating business students, the professors said they’re in better positions than those already employed.

“When we turn the corner and the crisis goes away, the leaner firms will be looking for more entry-level and early-career employees,” Sylla said.

And even in the difficult market, NYU students will remain competitive, Economides said.

“I believe that when things are tight, quality counts even more, and the high quality of our MBA and undergraduates will put them in the front of the pack,” Economides said.

Many graduating business students are opting to go to graduate school instead of entering the challenging labor force.

“We’ve had a 20 percent jump in MBA applicants,” Stern economics professor Ingo Walter said. “Students figure that’s a good way to wait out the storm for two years.”

Wais said Lehman’s bankruptcy and Merrill Lynch’s sale may affect students planning to work at these firms in the future.

“A lot of our students have already received offers based on their experience and some of these positions may now be in jeopardy,” Wais said.

Stern sophomore Fred Akansu, an intern at Merrill Lynch, said his future with the company is uncertain.

“I don’t know if tomorrow will be any different,” Akansu said. “But I still have my internship today.”

Logan Whiteside is deputy city/state editor. E-mail her at lwhiteside@nyunews.com.