Episode 519: Wall Street's Image Problem

Feb 21, 2014
Originally published on February 24, 2014 12:31 pm

From billion-dollar bailouts to Occupy Wall Street, it's safe to say the financial crisis didn't exactly paint a great picture of the banking industry. It's precisely that stigma that drove Kevin Roose to follow a group of young Wall Street recruits around for three years.

In today's episode, Roose takes us behind the scenes of some of the largest banks, their secret societies and the young people escaping it all.

For more, check out Roose's new book, "Young Money."

Music: Lorde's "Royals." Find us: Twitter/ Facebook/ Spotify/ Tumblr. Download the Planet Money iPhone App.

Copyright 2016 NPR. To see more, visit http://www.npr.org/.

ZOE CHACE, HOST:

OK so, Kevin, where are we?

KEVIN ROOSE: So we are at 277 Park Avenue at the New York headquarters of JPMorgan Chase. It's one of the biggest banks in the world. I would say there's a chance - it's a very small one - but there's a chance that they will let you up.

CHACE: What do you think is going to happen?

ROOSE: I think you will probably be very politely asked to get the heck out of the building.

CHACE: OK. Let's go.

UNIDENTIFIED MAN: Do you have an appointment?

CHACE: No.

UNIDENTIFIED MAN: You're trying to get an appointment.

CHACE: Correct.

UNIDENTIFIED MAN: You just can't show up with this equipment. What are you doing?

CHACE: We're journalists, so I was trying to talk to some of the traders here.

UNIDENTIFIED MAN: You have to leave the facility.

CHACE: You sure we can't just go upstairs?

UNIDENTIFIED MAN: No, you can't.

CHACE: Hello and Welcome to Planet Money. I'm Zoe Chace. Today, we actually do get inside JPMorgan Chase and a bunch of the other big financial giants surrounding it with Kevin Roose. He's a financial writer with New York Magazine. And it's hard to get a sense of what it's like to work on Wall Street, and Roose has this unusually intimate portrait of what it's like inside. Even though, the people in these buildings run an enormous chunk of our economy, they don't really talk to reporters or let reporters inside very often. That's why unless you work there, you're best notion of what the culture is like on Wall Street probably comes from the movies. Kevin Roose spent the last three years with investment bankers, traders on Wall Street to find out what it's like to work at the place that brought down the global economy, when you're just 22 years old. And he discovered among other things a secret society made up of top Wall Street executives in drag. He didn't just discover it. He actually attended a meeting undercover, and we'll take you there on the show.

(SOUNDBITE OF SONG, "ROYAL")

LORDE: (Singing) I've never seen a diamond in the flesh. I cut my teeth on wedding rings in the movies. And I'm not proud...

CHACE: Kevin Roose graduated from Brown University in 2009. 2009 - I don't need to remind you - was not a good looking year for Wall Street. The year before was Bear Stearns, Lehman Brothers, TARP. And Roose remembers the moment that he realized how much things were changing. He was at a dinner party right after he graduated college.

ROOSE: It was a bunch of people in their early 20s and some parents. We were all going around the table talking about our jobs - where we worked what we did - and it got to this one girl, who I didn't know very well. And she - all she would say is I work downtown, and everyone sort of looked at her and said - and one of the parents said, well, where? Where downtown? And said, well, I work in finance, and the parents said, well, where in finance? You know, what company? And she sort of sheepishly - I mean, turned bright red and said Goldman Sachs.

CHACE: Goldman Sachs - what used to be a sign that you were making it as a 22 year old had become something that some of Roose's peers were ashamed of.

ROOSE: I mean, 2009 and 2010 were a moment on Wall Street. It was after the biggest cataclysm in the financial industry since the Great Depression. I was really curious about what it was like to be in this hated, vilified sector as a 22 year old who had no responsibility for what, you know - they were in college when Lehman Brothers was blowing itself up. They had - they didn't do it.

CHACE: But there was a stigma. People back then were angry at the banks, and the new Wall Street recruits - they were bringing some of that shame, resentment, anger with them into these new jobs. And that's what Roose wanted to find out about. He ended up following eight kids through their first two years on Wall Street for his new book out this week called "Young Money." And all of them, it seems, had an experience like this one guy who worked on the commodities desk at Goldman Sachs, a blonde kid from California who road crew in college, a trader whom he calls Jeremy.

ROOSE: You know, one point one of his bosses asks him, you know, so why do you come to Goldman? And he gives this sort of idealistic spiel about how allowing big companies to hedge their fuel costs is like a legitimate function of the capital markets and eventually those savings get passed on to customers. And the guy sort of cut him off and said, dude, if you're not here to make money, like this isn't the place for you. We're not here to save the world. What you're here to do is make a ton of money for yourself in the firm.

CHACE: Whereas an earlier generation of Wall Street recruits might have been energized by a comment like that. Jeremy, Roose says, was a little shook. And Roose says that's in line with studies about what millennials want from a job these days, even if the job is really not for a higher purpose. Roose's eight guys want to feel like it is. And Jeremy started fantasizing about a way out of Goldman Sachs. Jeremy was regularly lying to people about where he worked because everyone around him, even like the nurse at the doctor's office, had this crazy reaction when he said the words Goldman Sachs.

ROOSE: He had this this Google doc that he titled escape routes that had all these various things that he was thinking about doing.

CHACE: His friend Sampson, also a first year Goldman, felt the same way. And they talked a lot about leaving, and there was one escape route in particular that looked good to both of them.

ROOSE: The sex appeal is in Silicon Valley now, and that's where you go if you want to strike it rich. And it has this sort of cultural cachet that Wall Street used to have.

CHACE: Kids that graduate from the top-tier schools really can have their choice of any job and what they choose does tell you something about our economy. Our economy is tilting West. The Wall Street Journal put it like this. The movie "The Social Network" is this generation's Wall Street.

ROOSE: I think a lot of the people who came to Wall Street after the crash - they were grunts and being at a Google or a Facebook or even a small startup - this sort of idea that the tech industry is making things. They are bringing new things into existence.

CHACE: This one study surveyed more than 5,000 graduates from top-tier schools back in 2010. The top three companies where young people wanted to work - Google, Apple, Facebook. The big Wall Street banks - they were much further down the list.

ROOSE: The highest ranking bank was JP Morgan, and it came in 41st.

CHACE: The steady flow of fancy college grads to investment banks has slowed somewhat. Take Yale. In 2005, about 25 percent of graduates went to work in finance. In 2010, it was 14 percent. The numbers for Harvard looked similar. Jeremy and Sampson, the Goldman kids they were both approached by Silicon Valley startups, and they left Wall Street about a year and a half in. They weren't the only ones. Out of the eight new recruits that Roose followed five no longer work on Wall Street. And even the three that are left, only one of them seems truly happy at his job. The other two are pretty mixed. Take for example Derek. Derek works in private equity. He comes from the sort of quintessential Main Street.

ROOSE: Oh, yeah. His dad owns a grocery store. I mean, he lives in this town that's, you know, famous for its strawberry festival. I mean, he

ROOSE: really could not be less of a blueblood. And yet, here he is working in Manhattan in private equity, making upwards of $200,000 a year in his 20s, you know, more than either of his parents make, more than probably anyone in his hometown. He's living the dream.

CHACE: Derek took economics in college at the urging of his dad because his dad wanted him to take over the grocery business someday. And private equity is all about how to run a business. But what Derek finds troubling is that he feels like it plays by different rules from a business like his dad's. So, quick reminder, what's private equity? In private equity, a bunch of investors buy up struggling companies and presumably try to turn them around. But because of the way private equity works, even if they fail at doing that, it's still possible for the investors to make a lot of money. That was never the case for Derek's dad, the grocery store owner. If his dad made mistakes, he lost money.

ROOSE: The private equity firms are still standing, but the companies themselves sometimes are not.

CHACE: Right, and that's what started to feel weird to Derek.

ROOSE: I think it was that and I think it was the money culture, taking, you know, limos around and partying at fancy clubs and, you know, flying all over the world. It never quite fit his values.

CHACE: Although he did call you at one point to brag about what?

ROOSE: Well, he...

(LAUGHTER)

ROOSE: ...He was very proud of himself because he had slept with a model. And so this was, I think, maybe on his bucket list for...

(LAUGHTER)

CHACE: New York Finance.

ROOSE: Right.

CHACE: For the young elite who don't want to work on Wall Street, they have other options. For the people like Derek who stick around, it's hard to believe they won't be subsumed by the existing culture of limos and models and parties. That has been around for a long time. And Roose found it went deeper than he'd imagined. So over the course of his reporting, he looked into this rumor that he had heard about a secret society on Wall Street - Kappa Beta Phi. Supposedly, this was a group of the most powerful people on Wall Street and they held a big dinner every year at the St. Regis Hotel in New York City. No reporter had ever been inside - until Roose.

ROOSE: Their motto is what happens in the St. Regis stays in the St. Regis.

CHACE: Members include Michael Bloomberg, former heads of Goldman Sachs, Bear Stearns, Lehman Brothers. Roose rented a tuxedo. He says he thinks people thought he was a waiter. He made these secret recordings on a phone in his pocket. Wilbur Ross, billionaire private equity executive, led the proceedings.

(SOUNDBITE OF ARCHIVED RECORDING)

WILBUR ROSS: Good evening, exalted high council, former grand swipes, grand swipes-in-waiting, fellow Wall Street Kappas, Kappas from the Spring Street and Montgomery Street chapters...

CHACE: One of the main things that happens at this dinner is new members are inducted into the society. Hedge fund managers, bank CEOs - they're called neophytes.

(SOUNDBITE OF ARCHIVED RECORDING)

ROSS: Hereafter you will speak when spoken to, not (unintelligible).

ROOSE: So I'm sitting there, like, you know, I see them come out. And the way this dinner works is that it's like a hazing ritual. They have new people that they bring in, they call them neophytes every year. And these neophytes have to dress up in drag and do comedy skits.

(SOUNDBITE OF ARCHIVED RECORDING)

PAUL QUEALLY: Ted, what's the biggest difference between Hillary Clinton and a catfish?

TED VIRTUE: Hillary Clinton and a catfish? I think one's feared in the water, and one's feared on land.

QUEALLY: Oh, Ted, no way. Nope, nope, nope.

CHACE: This exchange is between two private equity managers on stage.

(SOUNDBITE OF ARCHIVED RECORDING)

QUEALLY: One has whiskers and stinks. And the other is a fish.

(LAUGHTER)

CHACE: This next one really is for adults only. If you've got kids listening, skip ahead.

(SOUNDBITE OF ARCHIVED RECORDING)

QUEALLY: What's the biggest difference between Barney Frank and a Fenway Frank?

VIRTUE: Barney Frank and a Fenway Frank? I have no idea, Paul.

QUEALLY: Oh, Teddy (ph). Barney Frank comes in different size buns.

(LAUGHTER)

CHACE: It's, like, not subtle.

ROOSE: Not subtle at all. And there were others that were even worse. There are, also - you know, there are songs that are sort of making light of the bailouts. Someone did a cover of ABBA's "Dancing Queen" called "Bailout King." And then at the end of it, they all got up. All the neophytes put on, like, Mormon missionary outfits, and they sang the song from called "I Believe."

(SOUNDBITE OF SONG, "I BELIEVE")

UNIDENTIFIED PEOPLE: (Singing) I believe that God has a plan for all of us. I believe that plan involves a seven-figure bonus. I believe...

ROOSE: I believe that God has a plan for all of us and that my plan is a seven-figure bonus. I work on Wall Street, and Wall Street just believes.

UNIDENTIFIED PEOPLE: (Singing) Wall Street - and, dang it, Wall Street just believes. Wall Street just believes.

(APPLAUSE)

ROOSE: And meanwhile, the people in the audience are throwing things at them - pieces of bread, you know, rolled up napkins dipped in wine. I mean, it really - it's like - it's like the sort of "Wolf Of Wall Street" meets, like, the Elk Club or something like that.

CHACE: When Kevin Roose told the eight new recruits he was following for his book about this dinner, about Kappa Beta Fi, they were incredulous. They'd never heard of it, and they said this is exactly the kind of thing that Occupy Wall Street would make up. That's like their fever dream fantasy of what evil bankers are cooking up in Manhattan.

That's not the Wall Street that Roose's new recruits are looking forward to. They would actually be horrified to be seen as a part of that culture. They really seem to care about how they're seen. That's the old Wall Street. They want to be seen as part of the new Wall Street. You can really see, Roose says, this evolution in how bankers want to be seen in the world through the evolution of the two Wall Street movies.

ROOSE: So in the first "Wall Street," everyone's just out to make as much money as possible.

CHACE: Greed is good.

ROOSE: Greed is good. The second movie - Shia LaBeouf's character is a green energy investor. So he wants to make a ton of money, too. but he wants to do it in a way that's sort of socially responsible.

CHACE: This generation of young bankers kind of wants to be loved. The latest version of that study about where young people from the top schools in the country want to work came out for 2013, and Google is still at the top. But JP Morgan and Goldman Sachs - they are back in the top 10.

(SOUNDBITE OF SONG, "ROYALS")

LORDE: (Singing) My friends and I - we've cracked the code. We count our dollars on the train to the party. And everyone..

CHACE: As always, you can let us know what you thought of the show today. You can email us at planetmoney@npr.org. You can find us on Facebook and Twitter. I am Zoe Chace. Thanks for listening.

LORDE: (Singing) Like, gold teeth, Gray Goose, tripping in the bathroom, blood stains, ball gowns, trashing the hotel room. We don't care. We're driving Cadillacs in our dreams. But everybody's like - crystal, Maybach, diamonds on your timepiece, jet planes, islands, tigers on a gold leash. We don't care. We aren't caught up in your love affair. And we'll never be royals - royals. Transcript provided by NPR, Copyright NPR.