Too Small to Fail

The experiences of a group of banker friends who found themselves in the thick of the 2009 financial meltdown
Turbulence

Staring wistfully at the swiftly receding view of the motley clutch of buildings that made up the London School of Economics and Political Science, Sellout Dreamer’s heart sank as the black cab sped in the direction of the City (as the commercial district was known to insiders) to the skyscrapers of the law firm Smithson Perry where she would start work in a mere three months. The ultimate sell- out, she chastised herself...

As a lowly trainee at Smithson Perry, Dreamer braced herself for exclusionary cliques, political manoeuvring and a cut- throat world of finance lawyers snapping at each others’ heels—which were conspicuous by their absence, at least in her Structured Finance department.

Instead, Dreamer found herself in a relative meritocracy ruled by partners who pronounced views like law lords to lawyers and clients who hung on to their every word. She was pleasantly surprised at the professionalism and friendliness of her colleagues and to find that there were practically no petty cliques, nor politics unless one was in the ultimate race for partnership. Dreamer struggled with her idealistic ambitions of working in international trade law to assist developing nations with multilateral negotiations, which she had had to abandon for Smithson Perry and eventually derivatives law as a speciality. Her search for a means to channel her idealism led Dreamer to the firm’s pro bono Microfinance group. And later to teach an international trade law course, together with partners from her firm, in her law school in India; giving back to the alma mater even with such a token gesture felt incredibly fulfilling.

Elsewhere in the City, Marathon Shortseller had recently arrived in London, almost immediately after graduating from a premier Indian business school. To say that he warmed to the city from the start would be a lie. Shortseller started work at Banka Europa, an investment bank known for being a market leader. Naturally aggressive and competitive, he had little trouble adapting to the bank’s environment. Under this aggressive exterior lay another idealist with a keen interest in changing the face of Indian politics. In contrast to Dreamer, the idealist Shortseller was carefully and completely concealed from Banka Europa and his colleagues. After an exhausting week of trading credit derivatives, the weekends found him forgoing all his leisure, even sleep, to write a book on his vision for a new Indian polity.

Meanwhile, a group of young Indians (and for diversity, a smattering of non-Indians), united through various strands of friends, came together to play basketball at weekends at a local court. Before long, Dreamer, Shortseller, Nimble Dancer, The Ferrari and Slender Triathlete, who trickled into this group, became fast friends. Like Shortseller, Dancer, Ferrari and Triathlete were also engineers-turned-bankers after their business school rite of passage. Dreamer was attracted and fascinated by these rational pragmatists who were doers more than thinkers, more prone to action than debate or consultation like her kindred lawyers.

Excited at their mutual discovery and their avatars as cogs in the wheel of global finance in cosmopolitan London that opened its arms to embrace skilled immigrants, the coterie optimistically embarked on their new lives. 2006-07 was a year for minting money.

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Lawyers in the finance practices of firms, from trainees to partners, typically found themselves at the beck and call of their banker clients; Dreamer was no different. A steady stream of work flowed into her department inundating the team with more billable hours than there existed in a day. Sumptuous, boozy lunches and dinners marked the end of a deal, often slipping into the timing of the next due to the meticulous planning these meals entailed—the business of pleasure required significant investments of time and money.

To Dreamer’s pleasure and pain, she faced Ferrari, Shortseller and Triathlete as clients on occasional deals. Not without irony, she wore her professional hat to ‘service’ them when they called incessantly to set demanding deadlines during the working week. And yet, on the weekend, they met as friendly adversaries on the basketball court and settled scores from the week with a touch of foul play. Afterwards she listened to stories of decadent champagne parties, Michelin-starred dinners and eye- watering bonuses from Triathlete, Ferrari, Shortseller, Dancer and other bankers.

Inwardly sighing, Dreamer was resigned to the vicarious enjoyment of these over-the-top occasions while consoling herself with an oft-repeated justification: lawyers are drones deriving intellectual satisfaction from the complexity of deals, while they leave the world of more tangible benefits to bankers.

Some tangible (and intangible) benefits came her way when Dreamer, Triathlete and Shortseller were dispatched to the leading business schools and law schools in India to recruit more of their tribe. Returning to their alma maters, now standing on the other side of the podium in auditoriums charged with excitement and anticipation, they sold the promised land of opportunity tantalisingly within reach of a few in each graduating class.

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By mid-2007, the sub-prime mortgage crisis and the credit crunch had disrupted the US economy. Gradually, the slowdown leached into European markets and economies. The banks worked harder but for scarce revenues. At law firms, the inundation of work and revenues continued with refinancings and restructurings dominating the workflow, though headline deals were few and far between. A year passed in these fits and starts, culminating in the September 2008 debacle.

On Monday, 15 September 2008, when the world awoke to the news of the collapse of US banking behemoth Lehman Brothers, not even the most pessimistic doomsday prophets would have foreseen the extent of the market turmoil in its aftermath. Dreamer remembered the day vividly. Even as news reports announcing the US bankruptcy filing of parent company Lehman Brothers Holdings Inc (LBHI) rolled into London, English subsidiary Lehman Brothers International (Europe) (LBIE) and other global subsidiaries fell over like dominos in queue. Sitting in her eyrie on the twenty-fifth floor of her office building, Dreamer, who was now a newly qualified associate, saw her boss’ phone ringing off the hook. At the other end of the line were panicky clients apoplectic about their gigantic exposures to various Lehman entities. Even as she calmed her clients down with promises of strategic settlements and advice from her firm’s world-class insolvency legal team, partner Velvet Iron herself was very concerned about the quarter of a million legal fees owed to her on account of her work for LBIE and LBHI in their more solvent times.

Across a city street was a namesake park beyond which stood the LBIE tower, deceptively sturdy and placid while chaos ruled inside. Men and women, clutching cardboard cartons that held their paltry possessions, rushed in and out of LBIE in an endless stream; those who left the building were intercepted by hyperactive television crew spilling out of dozens of vans parked outside. In between being quizzed by the media about the inside story of the LBIE collapse, they made frantic phone calls to friends and family unable to believe the unemployment staring them in the face.

Meanwhile, the various finance and insolvency departments of Smithson Perry were beehives of activity, as was the case in law firms across London, New York and Hong Kong. Armies of lawyers and paralegals pored over legal documents to terminate loans, derivative trades, structured note issuances and other financial dealings with the tainted Lehman Brothers. Among the foot soldiers in this army were Dreamer and her colleagues, who deciphered termination processes from deal documentation and sent troops of trainees to serve notices on LBIE.

Dreamer’s meetings with Ferrari, Triathlete, Shortseller and Dancer over the next few days were spiked with equal measures of anxiety and nervous excitement. She heard stories of chaos at other banks like Banka Europa, Rosenthal Green and the rest due to their large exposures to Lehman entities arising from the interdependence of financial institutions. Ferrari reminded them that they were living at the epicentre of the worst financial storm in at least fifty years and should take careful note for posterity.

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Soon, the first casualties appeared. Ferrari, a star trader, was axed after his boss was asked to leave Rosenthal Green. Everyone was shocked since he had been a consistent high-performer ever since he joined. Those who were still employed felt growing knots of fear in their gut. Walking to their workstations in the morning, they would often find another colleague gone, with a pen or stick of gum the only souvenir left behind by the vanished team member.

Next was Dancer, whose boss had an unfounded dislike of her and was routinely imposing 18-20 hour days. It reached a point where Dancer often fainted with exhaustion on her tube commute. Among thousands of others, Dancer and Ferrari became victims of the largescale layoffs by banks, corporates and law firms. For the most part, the layoff exercise was conducted within a statutory framework that required employee consultation, specific timelines and minimum compensation proportionate to the number of years the employee had served. Not surprisingly, they attracted a lot of media attention.

In those turbulent times, law firms were better places than banks and Dreamer felt relatively secure, particularly when the first round of layoffs in her firm left her Structured Finance group unscathed. Her team was deemed indispensable to tackle the volumes of derivatives bankruptcy work that had come pouring in. Law firms have generally had more meritocratic, humane work environments, but Dreamer noticed the beginning of a shortsighted, lean-mean approach taking hold at her firm. Banks, on the other hand, made no secret of valuing employees solely in proportion to the revenues they brought in or in the case of support functions (such as legal, risk management, operations or technology), their usefulness to the main revenue-generating business.

Ferrari and Dancer found themselves in a distressed job market along with many others.

Ferrari took a break from the paranoia with a stint of motorcycling in mainland Europe with his pet Ducati Diavel. The Diavel was acquired with Ferrari’s first bonus and was the mistress of his passion. He frequently waxed eloquent about “its furious bellow of intent when (he) fired up her engine, while the blast that accompanies sends chills down (my) spine. The soundtrack is just the beginning, guys, the acceleration is ferocious...” at which point Triathlete and Dreamer always cut his monologue short. The motorbike was the perfect distraction that made him put off his job applications.

Dancer diligently joined the fray of jobseekers without losing as much as a day.

Gloom descended in earnest eclipsing the new year of 2009. With their clients, the banks, in disarray and struggling to stay afloat, law firms now required even longer working hours to keep their profits from falling. Revenues in law firms depend on the billable hours charged to clients and recovered— so, increased work hours lead to higher billable hours and a proportionate rise in revenues when clients pay their bills in full without haggling.

The coterie continued to meet, particularly to bolster Ferrari’s and Dancer’s morale, but more and more infrequently, as Dreamer, Triathlete and Shortseller tried to hold on to their jobs.

Like Ferrari, Triathlete had a consistent track as a star trader. She was also the only woman in her team. But some others had brought down the team’s collective profits, which led the bank management to scrutinise it for profitability. Triathlete’s edginess showed on the basketball court and in her long periods of reclusiveness as she isolated herself to deal with the anxiety. Every Sunday evening and Monday morning brought the dread of an abrupt but pleasant phone call from HR inviting her to a private meeting on the ‘client floor’.

Just when the culling appeared to have stopped, Shortseller became the next casualty. Having been accustomed to an uninterrupted path of success and privilege right from being schooled at one of India’s best boarding schools and later engineering school and business school, he took it the worst of all. Shortseller was his own severest critic and his tendency to judge himself very harshly caused him more despair than Ferrari and Dancer had suffered. Dreamer, who was closest to Shortseller, was consoling and supportive. Shortseller’s redundancy was couched in that conveniently opaque term ‘business reasons’ which, by definition excluded ‘personal reasons’ (such as your boss’ dislike) or ‘performance reasons’ (a more transparent reason which usually translated into ‘you haven’t brought in enough money to merit keeping your job’).

Dreamer intuitively knew that once Shortseller set himself on the path of interviewing and applying, he would secure a position sooner than Ferrari and Dancer. In less than two months, Shortseller had three banks wooing him.

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Both Europe and the US were firmly in the throes of economic recession by mid-2009. The interminable bleakness of the financial landscape had crushed the morale of the City of London. Financial institutions that were conspicuous chief patrons of the arts cut their funding of pro bono projects and arts and cultural initiatives, which were usually the first to suffer in times of economic distress.

Meanwhile, Ferrari, refreshed after a series of mini-vacations with the Diavel found a place in another London bank, indistinguishable from Rosenthal Green, and applied himself to the business of making money with his trademark gusto. Dancer’s new employer, however, shipped her off to the sunny shores of Singapore. Dejected at the prospect of leaving London and her friends, Dancer was unable to feel any joy at being part of the workforce again. Dreamer and Ferrari shook her out of her dejection by reminding her that swapping grey, bleak London for the warmth and relatively more stable economic conditions in Asia was a blessing in disguise. In the end, Triathlete was the only one who emerged unscathed from the harrowing months.

In the latter half of the year, banks, law firms and corporates found revenues still hard to come by, inevitably reflected in their treatment of employees. Driving staff to work longer hours and culling numbers from teams that produced lower revenues was the only way to maintain profitability. Since most banks and law firms had completed a round or two of largescale redundancies, they progressed to discretionary redundancies at a smaller scale, which triggered neither the statutory requirements of employee consultation, other due process and minimum compensation nor damaging media attention. More professionals were released into the saturated marketplace of the unemployed.

Those lawyers who remained in law firms turned into billing machines working even longer hours, leaving a mere three or four hours to sleep and recover, while producing the same high quality of work. There was little certainty of career progression given the precarious economic climate and the growing resignations led to a veritable exodus. Dreamer’s months in Smithson Perry were no different as restructurings and almost- bankrupt banks or hedge funds in near and far-flung parts of the world kept her awake at night. For about two months, her days merged into nights unnoticed—especially with the onset of dusk by early afternoon in the English winter. Caffeine and an hour on the gym treadmill were the most effective substitutes for sleep. The glass-half-full club in her group trotted out the oft-repeated clichés “better to be busy than bored” and “there’s more work than we can handle even in these dreadfully lean times—certainly keeps the wolves away from the door”. These were useful to get from one 24-hour cycle to the next.

During a brief reprieve, Dreamer realised she was fortunate enough to be far from breaking point in her firm. Yet, she resented the finance industry volte-face and disliked the direction in which it was headed. After a few weeks of soul-searching, she quelled the rising anxiety in her stomach and with fingernails bitten down to the quick, typed a five-line resignation letter to Velvet Iron. There was surprise all around and Dreamer was nearly convinced of retracting her resignation in the onslaught of emotions and attachment that she felt. But finally she chose to join the departing exodus to reflect on a career change. Pleased at leaving on a high note, with emotional farewell speeches and a beautiful present, Dreamer considered it a fitting end to this chapter in her life.

Walking out of the revolving doors of Smithson Perry for the last time, she dialled Dancer’s Singapore number on a whim: “Hey babe, can I hang out at your penthouse to clear my mind?” Her vacation was planned in less than five minutes.

Basking in the Southeast Asian sun, a pawn that climbed out of the finance chessboard, Dreamer realised that she and the others had given themselves far too much importance and agency in a game in which they were mere foot soldiers. They were young, free of domestic encumbrances such as mortgages and school fees, and the turbulence had girded them with abundant resilience. They were too small to fail. Rather, when they fell, they would tumble with the knocks and while one door slammed shut in their faces, others would open. Some might open welcomingly and others might have to be prised open.

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Views expressed in the story are the author’s own; they do not represent the views of any organisation or institution