I recently spoke off-the-record with one of Wall Street's chief economists. "It will take a long time to get back to where we were," he said, agreeing with most of his colleagues and the president. "But," and here I was brought up short, "it will never look the same." Still, people should be confident that "talent will, as always, find a home."
He emphasized that the current downturn is a very unusual cycle and certainly the worst since pre-World War II. The current dynamics are so different than anything past that it is difficult to predict the bottom. In all probability, he ventured, the bottom will occur this year.
"There are good reasons to expect the recovery to be relatively weak. I am not expecting a quick rebound. Adjustments in the financial sector are going to take time."
I know from speaking with the leadership of my own organization, Orphans International Worldwide , that young finance professional have taken it on the chin at Lehman, Bear Stearns -- even JP Morgan.
He made the following points:
• The Stimulus is appropriate but once the economy picks up, we will need to withdraw this stimulus. Timing is everything. This withdrawal will shape character of recovery.
• The Great Depression was unique for its depth and length. Only two other cycles in U.S. history equal it: 1850's and the 1880's. Today's collapse cannot be compared to the Depression, which was so unique.
• A few features, however, are similar, including the weaknesses in the financial sector. Then, there were long and deep contractions from significant and sustained policy mistakes at the beginning of the Depression. Mistakes made now may be of a comparable kind but smaller magnitude.
• Macro economics play a large role in the recovery today -- lessons learned in part from the Depression. Obviously, the world has changed, and it is not simple comparison. But, we have learned an awful lot in the 70 years since the Great Depression.
• Things are hardly hopeless. Talent will find a home. The world does change, but people should have confidence that smart people who work hard will find a place in it. This is because our economic system does a good job using human resources.
• The financial sector has gone through more its own cycle -- a structural break. The financial system we are evolving towards will have less opportunity for individuals, but be stronger for the economy.
• There are many productive things individuals can do. There will be more new opportunities in a year, even more in two. But it is a stretch to think you can wait for the old jobs to come back.
Ivy-league educated on both coasts, this top economist came to Wall Street in the late 1990's, following a long stint in the public sector with the Federal Reserve and Department of Commerce.
What exactly does a chief economist do? "Help investors face their problems and make their decisions. If I do my job right, they will be more successful." In the private sector, an economist "faces risks and makes better choices." In the public sector, an economist "helps make better policies."
Yet he points out that this is using yesterday's lessons applied to today's challenges. "No one is particular good in predicting the future."
"Economics is a useful discipline -- an analytical tool-kit. To bring economic analysis to bear in solving problems is very useful."
"Is there someone who particularly impresses you?" I ask. "The Economics facility at N.Y.U. has been discussing all of this in a particularly intelligent way. The department chair, Ingo Walter, is a thought leader in this field." Ingo Walter, Ph.D., is the Milstein Professor of Finance, Corporate Governance and Ethics at the Stern School of Business at N.Y.U.
"Our recovery may take years," the economist concluded over our last cup of coffee, "But smart people who work hard will always find a place, as you have." Talent will as always, he believes, find a home.
Edited by Ethel Grodzins Romm