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America's 'Brain Drain': Best And Brightest College Grads Head For Wall Street

First Posted: 11/16/11 11:11 AM ET Updated: 11/16/11 11:11 AM ET

WASHINGTON -- For employers in need of fresh talent, there are few better places to go than the Stanford University career center, where intelligent, over-achieving, creative and ambitious students stop by on their way toward picking up a degree or three.

Access to these top recruits is extremely valuable, and Stanford, like many other top-tier colleges, sells it to the highest bidder.

The Career Development Center (CDC) is quite explicit about the process. Its website advertises an "Employer Partner Program" that gives participating companies "a premier position in regard to on-campus recruiting."

There are three levels of giving, each with various degrees of perks, such as use of conference rooms and prime spots at career fairs. There are two companies at the Silver level, 17 at the Gold level, and five at the Platinum level, according to a list the CDC provided to The Huffington Post.

All of the organizations at the top level, Platinum, are financial and consulting firms. Of the 19 other sponsors, more than half also fall into those categories.

Lance Choy, director of Stanford's CDC, insisted that the Employer Partner Program wasn't meant to give certain groups special access to Stanford's students. Rather, it was designed to provide order to a recruiting process that was already dominated by the financial sector.

"Through the partnership program, we are able to control the recruiting activities of some of these more aggressive companies," said Choy. "Before, without the partnership program, the banks were going to student clubs, they were getting students to email things out to them. It was quite chaotic. ... By controlling the number of [interview] rooms [companies are] able to have, we're able to limit their recruiting activities and provide some space for other folks."

The list is a snapshot of where America's best and brightest are going to work after graduation. Instead of enrolling in medical school or putting their engineering degrees to work designing or building things, these bright minds are headed for Wall Street -- and, like the MIT students who took Las Vegas, figuring out ways to bring down the house.

In 2007, an astonishing 47 percent of Harvard University seniors said they planned to go into finance or consulting, according to a survey by The Crimson. In 2009, after the financial crisis, that number fell to 20 percent, but it could just as easily go back up when the economy recovers and jobs are being created in that sector once again.

There hasn't always been a "brain drain" of America's best and brightest to Wall Street.

In 2009, Calvin Trillin wrote an op-ed in The New York Times about a conversation he had had with a man in a Manhattan bar, who pinpointed the reason for the economic recession.

"The financial system nearly collapsed," he said, "because smart guys had started working on Wall Street."

"Did you ever hear the word 'derivatives'? Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn't have done the math," continued the man, speaking about the intellectually middling types of people who used to go into finance.

Trillin's conversation, though anecdotal, plays out in data that shows the type of people becoming Wall Street bankers has indeed changed over the last decade or so -- and it doesn't appear that society is better off for it.

But what if top students didn't go to Wall Street? What if, rather than creating complex financial products that collapsed the global economy, they were building bridges and creating new technologies instead?

As America struggles to create jobs and get back on its feet after the recession -- caused largely by the financial industry's recklessness -- the country is in desperate need of more entrepreneurs, inventors, scientists and other professionals, a complaint regularly made by non-Wall Street business leaders and members of both major political parties.

Lee Jackson is a senior economics major at Stanford who edits a financial newsletter called The Opportune Time. He has interned on Wall Street and plans to work in finance after graduation, but admits the profession needs reform.

"I think the emphasis is more on making money and making a profit, and there's been less emphasis ... on what the greater societal implications of that are," he said, pointing to fields like law and medicine that focus on the needs of the client or patient and have outreach programs to help low-income individuals. During the debate over Wall Street reform, meanwhile, bank lobbyists fought a provision in the Dodd-Frank legislation that would require financial companies to operate in the best interests of their clients.

"Over the past few years in the mainstream American culture, the bad side of American finance has come out time and time again," he added. "But my fear is that the good side of finance and the side that can help people save for retirement, build their own wealth and be able to support themselves [will be lost]."

Yet without a cultural shift and reforms that rein in the financial industry's sky-high profits and salaries, a disproportionate number of the best and the brightest will continue to head to Wall Street.

"Our financial system remains out of whack in terms of regulation, compensation, and until our economy is stronger, it's not surprising that young people will be attracted to the place where the money and jobs are," Elizabeth Warren, U.S. Senate candidate and creator of the Consumer Financial Protection Bureau, told The Huffington Post. "In a sense … it's a demand problem, [as well as] the fact there is not enough demand in the rest of the economy. It's both problems."

* * * * *

Neil Shenai is working toward his Ph.D at the Johns Hopkins University School of Advanced International Studies. But before heading to graduate school, he worked on Wall Street, doing stints at Morgan Stanley and Citigroup after completing his undergraduate studies at Hopkins.

"I didn't particularly enjoy it," Shenai said. "I just felt like my skills were being put to poor use, basically trading in these financial weapons of mass destruction. Obviously the day-to-day stunk, but then there was also this weird sinking feeling that I was somehow involved in something that was detracting from the society in which I lived, and I hated that aspect of it even more than the hours."

Like so many other young people who end up on Wall Street, Shenai didn't go to college expecting to go into finance. He dreamt of becoming an academic, going to medical school or entering public service.

But two forces were working against him: peer pressure and aggressive recruiting by the financial industry, aided by his university.

"Everyone treated finance as this elite profession that smart people did after they graduated, especially people who aren't on another more structured path like medical school or law," he said. "It seemed like anybody who's just generically intelligent, skilled in the social sciences … the best of the best would go to Wall Street."

"There's subtle peer pressure that existed on campus. It definitely motivated me. I was a top student at Hopkins, and I expected to get financially rewarded for that," he added. "Wall Street recruited and played into the sense of, this is what the cool, smart kids are doing."

None of three of the largest recruiters agreed to speak for this piece. Goldman Sachs declined to comment, and inquiries to Morgan Stanley and JPMorgan Chase were not returned.

No one is arguing that all students should swear off going into finance or that Wall Street firms should be banned from recruiting on campuses. But too many students enter the financial sector not because it will allow them to make the most measurable contribution to society, but because they see the opportunity of a prestigious, disproportionately well-compensated job that will, in some cases, help them pay off a daunting pile of student loans.

That was certainly the motivation for a 2008 graduate from New York University who is now working in the marketing department of a financial services company in New York City.

The young man, who requested anonymity in order to speak openly, graduated with more than $100,000 in debt. He has now whittled that amount down to $80,000.

He does not particularly enjoy his job and he's actively searching for other opportunities. He says the management team at his company isn't helping him grow, and many of his daily tasks are "monotonous" and focused on "damage control."

He wants to make sure his next step is the right one before leaving. But part of the reason he's stayed for three years is because the job compensates well. Between his salary and annual bonus, he's making about $85,000 a year.

"Had I not had the same financial situation, I may have left earlier or sought other opportunities earlier, or even potentially taken jobs that weren't quite as well-compensated, just to have a better happiness factor and work-life balance," he said. "But unfortunately, I do have to keep the job because I have to pay these bills."

Members of the class of 2010 who took out student loans owed an average of $25,250 when they graduated, 5 percent more than the class before them. Approximately two-thirds of the class of 2010 borrowed for college. The amount continues to climb if students take out loans for graduate school.

Students without loans to pay back, meanwhile, can feel the "golden handcuffs" of a lucrative job. Living in New York City is expensive. There is the high price of rent, private school for the kids, parking for the new car, eating out at nice restaurants. Even people in their early 20s quickly begin to acclimate to their new lifestyle and find it difficult to revert back to a more modest one.

It can therefore be difficult to resist the high salaries of Wall Street. The average salary of a Goldman Sachs employee is $430,700. At Morgan Stanley, it's $256,596.

Last year, the Haas School of Business at the University of California, Berkeley put out a press release boasting that a group of its students working toward graduate degrees in financial engineering were interning at places such as JPMorgan Chase, Goldman Sachs and BNP Paribas. Their starting salaries were, on average, $7,839 a month. That works out to roughly $94,000 per year. And they were just interns.

"The real reason why people work on Wall Street -- it's not rocket science -- is because people follow incentives," said Shenai. "The main incentive is just huge compensation."

Jane Ammons is the chair of the School of Industrial and Systems Engineering at the Georgia Institute of Technology. She told The Huffington Post that the majority of their 1,300 undergraduate students go to work for consulting or financial firms when they graduate.

She admitted that students are attracted to these fields because they pay well, but she pointed to a supply-and-demand situation.

"Twenty years ago, I think if you asked that question about what is the most popular direction for students to head, you would hear answers like manufacturing, logistics and those kinds of things," she said. "As manufacturing jobs have headed offshore, students have taken some of those same quantitative skills and headed other directions and are doing well with it."

* * * * *

The 32 U.S. college students who win Rhodes Scholarships to Oxford University each year arguably represent America's best and brightest. They have gone on to excel in nearly every field, becoming presidents, scientists, senators, lawyers, actors and scholars.

But in recent years, they, like many other young people, have been heading to Wall Street.

"Only three American Rhodes scholars in the 1970s (out of 320) went directly into business from Oxford; by the late 1980s the number grew to that many in a year. Recently, more than twice as many went into business in just one year than did in the entire 1970s," wrote Elliot Gerson, American secretary of the Rhodes Trust, in a 2009 Washington Post op-ed, pointing out that the trend coincided with "great increases in occupational earnings differentials, which have continued to grow, seemingly exponentially."

Cornell University sends 18 percent of its engineering graduates into financial services, according to data provided by the school's Engineering Co-op and Career Services. JPMorgan is the largest employer of engineering graduates, coming in 10th place out of all employers.

Beverly Hamilton-Chandler, director of Princeton's Office of Career Services, told The Huffington Post that over the past three years, "the top industries for full-time employment" for Princeton graduates have been finance, services/consulting and the nonprofit sector.

"The financial industry has had a long-established history of recruiting at Princeton and other Ivies, and because firms in this industry generally have larger recruiting budgets at their disposal, their recruitment efforts tend to be more visible to students," she said, stressing that their office strives to maintain relationships with a wide range of employers from all fields.

During a Sept. 21 Senate Judiciary subcommittee hearing about Google's competition policy, Sen. Charles Schumer (D-N.Y.) said, "JPMorgan, I've been told, has more computer programmers than companies like Google or Microsoft."

Expect those numbers to go up. On Aug. 31, JPMorgan announced that it was committed to doubling the number of engineering interns it hires in 2012 and would be joining the President's Council on Jobs and Competitiveness Initiative, which aims to add 10,000 engineering graduates each year.

"JPMorgan Chase has been committed to hiring engineering majors into its technology and operations programs in the U.S., steadily increasing the number of engineering interns it hires each year since 2009," boasted the firm.

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