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Aftershocks

The Street Doesn't Look So Shiny Anymore

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By Doug Stumpf
Sunday, September 21, 2008

The title character of my 2007 novel, "Confessions of a Wall Street Shoeshine Boy," was inspired by a real-life shoeshiner who plied his trade among the Guccis and Ferragamos of the financial district. What a view he had! From the very bottom rung of the economic ladder, he watched Wall Street insanity of outlandish proportions: the shady world of unbelievable hedge-fund profits, the supermodel girlfriends, $5,000 bottles of wine, cocaine-fueled trading and partying, the jaw-dropping castles of the new superrich being erected in Greenwich and the Hamptons.

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While writing the book, I cultivated many other sources in the New York financial world -- more people from "downstairs" (sanitation men, janitors and secretaries) and quite a few from "upstairs" (traders, executives and business journalists). In the past few months, as the subprime-credit bubble has burst and Wall Street has gone into meltdown, I've been checking back with them. Suddenly, the tales of excess aren't so funny anymore.

A shoeshine boy who works on the trading floor saw his own, more modest business plummet last week, too. On Monday, as Lehman Brothers expired, he shined only five pairs of shoes instead of the usual 25 to 35. Business didn't get much better as the week wore on.

Few people on the trading floor were inclined to make small talk with menial workers last week, one such worker told me, because 90 percent of the staff had put in full days over the weekend, trying to figure out the latest repercussions for their company. All day, he saw people staring at their monitors in disbelief, pausing only to yell, "What the [expletive]?" or "This is a [expletive]-show." There was none of the usual horseplay or joking around. Instead, people were screaming into their phones and then slamming them down.

Many of the traders who were used to receiving six-figure annual bonuses have started brown-bagging their lunches instead of ordering in sushi or eating out at local restaurants. "Dude, we already passed the recession," one trader explained to the worker. "This is the Depression. Save your money."

The trading floor had always seemed, to one observer, rock-solid Republican -- until recently. One staunch Republican stood up in his trading group's row and announced, to the amazed stares of his colleagues, "I'm voting for Obama. I don't care if I have to pay more taxes. I just want things to be fixed."

Remember the stories of shoeshine boys playing the stock market just before the 1929 crash? Everything old is new again. A doorman at an exclusive Manhattan apartment building told me that he had bought two investment properties when the housing bubble was expanding: an empty lot in Florida and a house in a new development in Virginia, 45 minutes from Washington. The empty lot in Florida is worth $40,000 less than it was at the peak of the bubble. He bought the Virginia house on the advice of his adult children who live in the area. He put only $5,000 down against the purchase price of $420,000 after his kids told him, "Dad, you'll be able to flip this house in a year for $500,000 or more." Now the same models in the development are going for $340,000, and no one's buying. His daughter and son-in-law have taken over the house, but the doorman has to help them pay the mortgage.

A guy at one of the big financial firms told me that many traders had bought swanky houses by pledging the stocks they owned, which are now -- in the cases of Bear Stearns and Lehman -- worth pennies. He is also expecting divorce rates to skyrocket when the trophy wives discover that they can't maintain the lifestyles they thought they'd married into.

And that lifestyle will definitely be changing. All the big firms are downsizing dramatically. One estimate puts the number of jobs lost on Wall Street at 10,000, with at least 10,000 to 20,000 more to come.

One trading-floor denizen described how it happens: Your phone rings, and you're told to report to human resources. You stand up and announce to the people in your row that it's all over. If they like you, they hug you and maybe even applaud. In many cases, they'll be the ones to clean out your desk. Right after you get fired, you're marched out of the building by security. An employee at one of the biggest, best-run firms told a shoeshine boy, "Nobody is safe. I could be out of here tomorrow."

When a financial journalist friend of mine asked a prominent executive how this would all end, he replied, "With riots in the streets."

Either a riot or a bloodbath.

As a trader said when asked to sum up the current situation on Wall Street: "Pigs get fat. Hogs get slaughtered."

Doug Stumpf is a deputy editor at Vanity Fair.


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