NEW YORK -- Their classroom was on the top floor of the office tower on East 52nd Street, 44 stories up. It was a fittingly lofty location.

Simply being in that room, when the classmates first gathered that August, was an achievement. Most of them had already conquered the most sought-after graduate schools, further adorning their formidable re'sume's with summer jobs at Salomon or Merrill Lynch, before being deemed promising enough to endure grueling marathons of hiring interviews. Wall Street had its pick of MBAs that year, when the boom was still gathering steam.

But this group of 31 had made the cut. They were the 1985 sales and trading training class at First Boston Corp., young, smart, an elect by definition. "It wasn't like First Boston said, 'We've selected you out of thousands and thousands of people who wanted to be here,' " remembers trainee Howard Hawkins. "They didn't have to. Everybody knew."

By the end of the year, its training completed, the class would join one of Wall Street's most prestigious and profitable investment firms. The work would be challenging and exciting and the rewards very high; that was the scenario. "You'd get an offer from somewhere in the firm and you'd be off; there was no stopping you," as one trainee envisioned it.

That person was laid off a few months after the Crash of October 1987, a fate that has since become so common that it no longer carries much stigma. Having fought its way to prized positions, the Class of '85 encountered a capitalist conundrum against which the best educations and finest-honed aspirations could not always prevail: A business that imposes few ceilings can't provide much of a floor, either.

On the list of unfortunates who win the public's sympathy, recession-battered bond traders do not rank high. They are not typical victims of economic derailment; no one is applying for welfare or driving a cab. They don't expect others to feel sorry for them. They don't feel particularly sorry for themselves. Hadn't their business school professors underscored the nature of this gamble time and again: High Risk, High Reward.

"I sat there every day pinching myself, saying, 'How long can this last?' " says Gene Pretti, who sold equities in First Boston's Chicago office until last November and managed to rack up $400,000 in his best year. "I was aware that I was extremely overcompensated for what I was doing."

But they are, interviews with more than half of the classmates indicate, a sobered group. The consequences of the choices they made in the '80s did not always fit the B-school formula: For some, Wall Street proved both riskier and, in several senses, less rewarding than expected.

Hawkins, for instance, is still at First Boston selling municipal bonds, a department that's shrunk by a third since he joined it, and he still likes his job. But he sounds, at 31, a bit shellshocked. "I've seen the best of times and the worst of times," he reflects, "inside of five years."

Investment banking was a potent magnet for the bright and ambitious in the mid-'80s. "It was a glamour profession," says Amy Neches, hired out of Yale. "There was a real sense that this was where the action was."

The lure spread beyond the business schools. Most of the Class of '85 had fresh MBAs, which had become "almost like a union card," says Ted Walkowicz, who had one from Columbia. But a few trainees were coming from other jobs in sales or commercial banking. Tracey Wilson, for instance, was already selling bonds at a regional brokerage in Denver but decided "to pick myself up and go to New York and play with the big boys. I had some stars in my eyes."

Like the industry it would join, the training class was predominantly white and male, including just five women, one black man and two of Asian descent among its 31 members.

Some had been starry-eyed about Wall Street for much of their young lives -- Karlheinz Muhr, for instance. "It might sound corny, but it's true: Since I was 16 years old, I wanted to work on Wall Street," he says. It was no simple objective for an Austrian. When Muhr came to First Boston via UCLA's business school, his classmates noticed his single-mindedness. "One more day in the training class and he would've gone nuts," a fellow trainee says. "He was dying to get down there on the floor and trade bonds."

But many of the class, less enamored of the business, might have opted for other careers had the financial markets not been bounding upward for much of the previous three years. Their motivation was different: If they got into one of the big "bulge bracket" investment banks and picked up a few choice accounts, they could quickly earn remarkable amounts of money.

The beginning salary for the Class of '85 was $48,000. It was an irrelevant figure.

The widely held expectation was that in 1986, their first full year, the trainees would average about $100,000 in salary and bonus. In years two through four, as they gained experience and connections, they could reasonably expect to move into the $200,000-to-$400,000 range, depending on what department they worked for and whether they were based in New York or in one of First Boston's branch offices around the country. By 1990, they thought, an income of half a million dollars a year would be quite possible.

"I was looking for a million in the bank as my objective when I left," says Charles Heckelman, who was in futures and options. "I thought I'd be able to save a million in five or six years."

For those not driven primarily by love of markets, a few years on the Street -- five or seven, maybe 10 -- could bankroll the rest of their lives, when they would move into entrepreneurship or onto "the buy side" (handling investment portfolios) or whatever seemed more enjoyable but less remunerative. They had noticed that trading floors are inhabited primarily by the young; like athletes, they figured they had a few years to maximize their earnings before they burned out or got shoved aside.

And First Boston seemed the place to do it. Aggressive and prosperous, it was known as an innovator in creating products, such as mortgage-backed securities. Its mergers-and-acquisitions stars were earning multimillion-dollar fees for arranging the takeovers and leveraged buyouts that were coming to characterize the decade. Yet the firm felt congenial, almost gentlemanly compared with its larger rival Salomon Bros., which for all its success was considered "a snake pit," as one trainee put it. When he got his First Boston offer, remembers Wharton MBA Michael Huebsch, "I felt ecstatic."

The Big FBC Rocket The training program itself seemed almost anticlimactic; the hardest part of a sales and trading job, more than one trainee has observed, was getting it. For weeks the class sat through classroom lectures by members of the firm. Peter Buchanan, then First Boston's president, addressed a breakfast session. "At the time, the firm was hitting on all cylinders, so it was a pretty happy message," remembers trainee Bill Lawrence.

Then there was the famous Rocket Speech, delivered by a bond salesman who commanded serious attention, in part because he was reputed to earn more than a million dollars a year. He sketched a vertical shape on the chalkboard. "This is First Boston, the big FBC {First Boston Corp.} rocket," he said. "We've got a lot of things in this tank ..." He jotted the firm's resources inside the rocket's body: trading, mergers and acquisitions, research, $25 billion in assets. But who steered this well-fueled machine toward the clients it sought? The speaker wrote Y-O-U right up in the nose of the ship. "The whole firm is flown here," he said. "That's why I like what I do."

There were assigned readings and projects, to which a number of trainees paid scant attention. It was more stimulating to compete at the Word Jumble in the Daily News, which someone was dispatched to buy each morning and photocopy. The contestants all put up a buck, or five; the first to complete the game claimed the cash.

After hours the trainees, many housed in First Boston's corporate apartments at 28th and Park Avenue, went out for dinner, mingled at the Surf Club, played basketball in a rented school gym or touch football in Central Park. Having leisure time was one of the reasons they'd chosen sales and trading instead of the training program in corporate finance.

There was a certain mutual disdain between these groups. Though both were employed by an investment banking firm, it was the corporate finance types, the dealmakers, who were more properly known as "investment bankers." They tended to question the intellect of the sales and trading crowd. The sales people derided them in return as number-crunching grinds hunched over computer models at 2 a.m., serving extended 90-hour-per-week apprenticeships before anyone would let them near the action. In sales and trading, the trainees figured, they'd make as good money or better -- and still have time to wager on "Monday Night Football."

The one real source of anxiety was locating a job within the firm. After the classroom sessions, those trainees who hadn't been hired for specific positions rotated through various departments, hoping that the bosses they were interested in working for would be interested in them. Failure to arrange a match might mean assignment to an undesirable desk, or even ouster.

But First Boston's growth was so explosive -- it had barely 1,900 employees at the end of 1982, when the bull market began, and more than 3,400 when the class finished training at the end of 1985 -- that letting a bright MBA go wasn't in anyone's interest. Everyone got placed.

"There was so much money to go around, so much responsibility out there" for the taking, remembers John Hammerschmidt, who was fresh out of Duke. "You felt like Superman, for a while."

' "Volatility" Took On An Entirely New Meaning'

In the financial markets, 1986 and much of 1987 were banner years. Members of the Class of '85 were still too green to exploit the situation fully, the newest salespeople traditionally being assigned the least fruitful customers, but they got a taste of the action.

In the Cleveland branch office one spring day, Doug Wang and a fellow municipal bond salesman unloaded $20 million worth of a Puerto Rican bond to a commercial bank in Detroit. Wang and his colleague each pocketed $25,000. Tracey Wilson had a memorable moment in 1986, consummating a $657 million sale of a 30-year government bond and a $150 million sale of Ginnie Maes back to back, giving him "a good year inside of 10 minutes."

John Hammerschmidt, for one, found the big First Boston rocket taking off with intoxicating speed. He'd begun by trading government bonds but soon switched to the mortgage desk. "They were saying, 'Come on over. We looove you and we're making so much money,' " he remembers.

When E.F. Hutton made overtures in 1987, Hammerschmidt was interested. It was the peak of the Wall Street frenzy, when competing firms were dangling big contracts with guaranteed bonuses; lots of people were taking the bait. "Here you are getting your $350,000 or $400,000 and your boss in front of you didn't get ... $650,000 or $700,000 and he says, 'That's it, I'm leaving; I can get more down at the Pru,' " Hammerschmidt says. "I got caught up in that, that it's not where you work, it's what you get paid."

Hutton was promising a minimum of 30 percent more money, guaranteed, plus a higher position in the pecking order. "They were telling me that I could get 10 percent of whatever I sold and I thought I could do $10 million, so I could make The Unit" -- meaning a million dollars. "That's how wide my eyes were; that's how naive I was." Certain First Boston managers cautioned that leaving would be a mistake, but a number of colleagues advised him to grab the offer. "Everyone said, 'Go for the money, kid, 'cause these firms will cut you loose.' So I did it, I jumped ship."

For most of the Class of '85, though, the first year and most of the second proceeded in more orderly fashion. Then came 1987. As First Boston's own annual report grimly described it, that was "a year when the word 'volatility' took on an entirely new meaning."

After racing up early in the year amid a spree of corporate takeovers and wild speculation, the Dow Jones Industrial Average began an alarming descent between August and early October. The bond market had also been encountering turbulence. Then came Oct. 19, dubbed Black Monday, when the Class of '85 had the historic experience of watching the inflated stock market fall 500 points in a single day.

"The numbers were tumbling so fast you couldn't make sense of them," says Gene Pretti, who was in the Chicago branch gaping at the prices. Always a stock market player himself (even as a trainee, he'd put together a little $10,000 portfolio and raced to the classroom Quotron each morning to see how he stood), he estimates his own losses at $30,000 to $50,000.

But you didn't have to be a stockholder to feel the fallout. Wall Street's fat years had led to an unprecedented hiring binge; the securities industry had nearly doubled its national workforce in the seven years from Ronald Reagan's election to the crash. Virtually every bank and investment firm on Wall Street now began to deflate.

First Boston had been expanding by 20 to 30 percent annually, adding 2,200 people since the Class of '85 had gone to work. But in 1987, for the first time in four years, the volume of securities it underwrote declined. It had also lost $100 million trading in options on Treasury bonds that summer. Its net income dropped almost 40 percent.

The firm began laying off employees, a downsizing that continues and has claimed several members of the '85 training class. By early this fall, First Boston had eliminated 1,700 employees -- more than 30 percent of its workforce -- from its 1987 peak.

The first couple of classmates to get the ax were surprised. "I thought my production was high enough that I didn't have to worry," says Marcus Lane, who was selling mortgage securities and was let go early in 1988. A classmate laid off at the same time could remember being told, when he joined the firm, that "it was like a family; no one was ever fired. And no one was ever fired at First Boston in 1985." But the business climate changed, "and the culture of First Boston changed with it."

Indeed, like other big investment firms, First Boston was developing the institutional willies. By the time the Cleveland office was closed early in 1988, "the rumors were around for so long, it got so depressing that everyone felt like, 'Just do it, close the office, put us out of our misery,' " says Doug Wang. He declined the firm's offer to move to the Chicago branch (subsequent layoffs there confirm his judgment) and took a job at a small money management firm in Cleveland. "I'm glad I left when I did, because now we get tons of re'sume's from people in New York, people from everywhere, looking for jobs," he says.

By the time Cleveland was shut down (causing waves of anxiety in Dallas and Philadelphia and other branches), Hammerschmidt was also in transition, as they say. Less than six months after he jumped to E.F. Hutton, it was acquired by Shearson Lehman Bros. and virtually liquidated. The entire trading floor was called into a room for the announcement everyone knew was coming. When a phone rang unexpectedly, one trader yelped, "It's the governor! We've been saved!" But they hadn't been; an estimated 5,000 people were out of work.

People left in less dramatic ways too -- because they felt they didn't fit in at First Boston, or because they'd always intended to move to "the buy side" and a tempting opportunity opened, or because, as Charles Heckelman put it, "the Reaper was going to come for me; I would've been laid off." But the firings continued as well.

In all, according to classmates' reports, six of the 31 trainees who convened in August of 1985 have been laid off to date in First Boston's extended restructuring. Two more -- Hammerschmidt and Christopher Lenzo (feeling hemmed in as an equity salesman in San Francisco, he was lured to Drexel Burnham, which declared bankruptcy nine months later) -- lost their jobs when the firms for which they'd left subsequently collapsed.

Only 11 of the 31 class members remain employed by First Boston, a statistic that would have startled the enthusiastic trainees.

Should they have seen it coming? They did, in a way; any of them can recite truisms about booms and busts in the financial industry. But they were in their mid-twenties and had known mostly roaring, Reagan-era markets. "At the time, I had nothing to compare it to; I thought it was normal," says Bill Lawrence.

Nor were their superiors, also mostly young, inclined to emphasize the darker prospects. Heckelman remembers telling his boss at First Boston, "It's very important to me to make money because I don't think this is going to last very long." His boss replied, "I was saying that seven years ago and it's been better every year."

In fact, the firm's training classes of 1986 and '87 were larger than '85's. Wall Street firms have a reputation -- the merits of which can be argued -- for staffing up furiously when times are good and slashing indiscriminately when profits erode. Just as the markets of the '80s climbed higher than in past booms, the industry retrenchment that has followed has been more severe and longer-lasting than any in recent memory. The Class of '85 knew very well that it was entering a cyclical business -- but this has been no normal cycle.

Chris Lenzo, whose final Drexel bonus included $40,000 in now-presumed-worthless stock, calls the downturn "a contraction you should expect, but no one does."

Coming Down to Earth

Caught in the vortex of their industry's recession before they really hit their stride, few members of the Class of '85 got the chance to become properly acquisitive yuppies. Most are driving Hondas, not Jaguars. None of those interviewed has the proverbial house in the Hamptons; some never bought a home at all.

At one end of the spectrum a few, in Wall Street parlance, are Doing Very Well. Marcus Lane, for instance.

As with several others fired by First Boston, getting back on the horse is such a reflexive response to adversity that Lane scarcely acknowledges his dismissal as a painful episode. He was surprised, yes, but angry? "To be angry about something is counterproductive," Lane lectures. "Why don't you strategize about where you want to be?"

He's launched his own 10-person firm, Credit Research and Trading, in Greenwich, Conn. A shirt-sleeves kind of company, it focuses on the high-yield (a k a junk) bond market.

For competitive reasons, Lane doesn't want to reveal his income. But after several years spent bumping along, making between $100,000 and $200,000 and feeling seriously underpaid, he is now much more prosperous. He paid cash for his firm's $50,000 in computers and office equipment, cash for his sailboat, cash for his Bronco and his Mercedes 450. As soon as he unloads the condo he bought at auction as an investment (everyone occasionally miscalculates), he'll be house-hunting in Greenwich, where a pleasant family home costs $400,000 to $600,000, even in a depressed market. He's 32 and "right where I thought I'd be five years ago," Lane says, sounding only mildly inconvenienced by the intervening upheaval.

Others are still dealing with its aftershocks. Hammerschmidt, for example, now regrets that he didn't stay at First Boston. "A lot of us had too myopic a view: We just wanted to go where the money was," he says. He didn't lose out on all that money; the first year of his E.F. Hutton contract was paid off by Shearson and a settlement for the second year was negotiated, allowing him to buy and keep a rambling riverfront house on Maryland's Eastern Shore and to take his time looking for work.

But he did not, in this unpromising job market, find a position that suited him. He spent a year at a smaller and more cautious investment firm, which proved a poor fit. After he left in late 1988, he interviewed at eight firms. Four ended up hiring no one. When he lost out on a trading job with Japanese hours -- 4 p.m. to 2 a.m. -- he thought, "Omigod, I can't even get a night job." Just this month, after two years without working, he and another trader established Chesapeake Capital, an arbitrage firm that will trade Treasury bills. "At least my destiny's in my own hands now," he says.

Most members of the Class of '85, born slightly too late to fully cash in on the boom but with a long way to fall, still work in the financial industry in some capacity. The industry's recession, expected to claim more Wall Street victims before it bottoms, may do further damage. This is not the best climate in which to buy and expand a small money management firm, as Gene Pretti and a partner have just done in Chicago. The two former trainees who've left the business altogether are both selling commercial real estate, another battered industry. Those hunkered down at First Boston and other major firms cannot feel secure; more layoffs are announced weekly.

But as a whole, the Class of '85 has yet to lose its grip on, at the least, the upper middle class. The former trainees' incomes remain enviable by most Americans' standards. It is their expectations, more than their lifestyles, that have required readjustment.

Doug Wang, whose $95,000 first year at First Boston was his best, has a roomy house in Shaker Heights, three kids and a job he likes that will probably earn him about $100,000 this year. It's not half of what he anticipated, but he feels lucky.

Amy Neches, now in investment banking at Smith Barney, still rents a fifth-floor walk-up on the Upper West Side; she planned to buy a co-op last year but felt "I couldn't be sure enough of my own future earnings."

David Girling, laid off from First Boston's Los Angeles office and sounding determinedly unshaken about it ("I didn't take it personally"), may prove the best '80s symbol: The former bond salesman has taken a temporary job with the government-created Resolution Trust Corp., established to liquidate the nation's bankrupt savings and loans. Meanwhile, he's considering his options.

Karlheinz Muhr, still at First Boston, was promoted to director -- higher than a vice president, lower than a managing director -- at the end of last year. He and his wife have three children and a house (just one) in Rye. His department, mortgage securities, has shriveled from 328 people at its 1986 peak to fewer than 70.

One classmate who works at another New York investment firm and earned $130,000 last year reflects a common viewpoint: "Would I like to be paid more? Yes. Am I glad I have a job? Very."

The combination of enduring tough times, of seeing their industry tarnished by insider trading scandals and of simply growing older has made some of these people more introspective. They talk about their families more, about having enough even if they don't have what they expected. "The mowing-the-lawn-isn't-so-bad kind of thing," says Keith Laycock, who left First Boston the day after he was vested in its pension plan.

With the bloom off the economic forecasts, selling stocks and bonds now strikes some of them as less satisfying than they'd hoped. "It's not fun in many respects," says Heckelman,who never earned more than $150,000 at First Boston and was angry about it. "You get beaten up by traders, you get beaten up by customers, you beat yourself up. Your self-esteem takes a bath." He says he's "coming down to earth with regard to what's possible."

On the other hand, he's doing so much better at Donaldson Lufkin & Jenrette, the firm he joined last year, that he still thinks he can put a million dollars in the bank and go run a little business in Colorado within five years. He'll be 37.

Talking to the Class of '85 does produce this paradoxical kind of response: For every person who feels buffeted and glad to be off the trading floor, there's another who wants to play out his hand. Wall Street has become a jittery place, and some of the bright MBAs drawn to it in the mid-'80s should probably never have been there; others can't see themselves anywhere else.

They've witnessed an extraordinary five years, during which the securities industry first added close to 50,000 workers, then swiftly unloaded nearly as many. They may never quite recapture the exhilaration they felt as trainees, when everyone was bright and promising and Manhattan lay, literally, at their feet. Some have made their peace with disappointment and have come to value other aspects of their lives. And others hang in there, waiting for the inevitable next swing of the cycle.

Hammerschmidt, for instance, still yearns to be on the Street despite the dust-ups. It was a kick to work on First Boston's vast trading floor, with miles of cable and wire pulsing beneath the floor and the phones lighted up and colleagues shouting. He misses it, "sitting in that chair, having the power of First Boston's sales force behind you, saying, 'Here we go. We're open. Let's have some fun.' "

Postscript In 1988, First Boston merged with a European affiliate of Credit Suisse to become CS First Boston Inc., intended to be the first "truly global" investment bank, and became a privately held company. Struggling to repair the damage to its balance sheet wrought by the collapse of the junk bond market, it has undergone near-continuous managerial shakeups since.

Its transfiguration continued this week as Credit Suisse's parent pumped $300 million in equity into CS First Boston, a bailout that makes it the first major American investment bank to be controlled by foreign interests. First Boston, whose 1989 profits lagged far behind those of its Wall Street rivals, is expected to show major losses this year.

Meanwhile, the exodus of senior managers continues and another round of layoffs of First Boston's 3,900 U.S. employees has begun. The first 45 people were fired last week; at least 200 more will lose their jobs in the next six weeks.