Mortgage “Spiral” Has Effect on Wall Street Hiring
By: Matt, March 30th, 2007
Many are talking about the subprime “lending spiral” that’s going to ruin the residential mortgage lending business, cause home prices to plummet and, in general, destroy the world. OK, I’m exaggerating of course, but the mainstream media have taken this story and run with it, so chances are that you’re tuned into the issue even if you don’t invest in real estate or own a home. Long story short, there are a large number of Adjustable Rate Mortgages out there that are ready to reset, i.e. - have their rates go up, and there are a lot of people out there that attained loans over the past 4-5 years that probably shouldn’t have qualified in the first place. So, there are more defaults than usual, more foreclosures and, in general a “tightening” in both commercial and consumer mortgage lending. Ben Bernanke, the Fed Chief, felt that it was necessary to weigh in on the issue, noting that the subprime lending issue is a problem, but one that is unlikely to affect the overall economy to seriously.
On Wall Street, however, there is an upside to the story, as traders and managers working in “leveraged debt” are in high demand and moving around from one job to another in search of the biggest payday. According to Career Journal:
Recruiters describe what feels like a perfect storm of demand and cash. A record $26 billion in bonuses was handed out at year-end and in the first quarter. That’s in New York alone. And the growth of the $1.4 trillion hedge-fund business continues to challenge banks on the Street in their hunt for talented traders and managers.
Among the most sought-after positions are in capital markets. Bankers and traders who have experience structuring collateralized debt obligations, or CDOs, are in high demand to feed departments handling securities backed by mortgages, assets, corporate debt and other loans.
“People who do equity trading and fixed-income trading — the traditional products — aren’t getting that much money anymore,” Dolfino said. “The money has moved into the structured-products arena, especially on the fixed-income side.”
Wall Street is that way of course. Back in the early 1980s, nobody even wanted to touch bonds, instead focusing on equities trading as a career path. Then the mid-eighties came along and bonds were where the stars went to play. This, of course, eventually spawned the junk bond craze and, while there was nothing wrong with junk bonds in particular, their use (or overuse) in leveraged buyouts (LBOs) turned ugly pretty quickly. But nothing like that could ever happen again, right? Brings to mind a wise saying - “Those unfamiliar with history are doomed to repeat it”. OK, so junk bonds funding LBOs isn’t the same thing as shaky mortgages, but doesn’t anyone else smell “government bailout” in the future?
Tags: career journal, mortgage jobs, subprime lending, wall street jobs
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