Only a few short years ago, investment banking was the hottest career of hot finance careers. Lately, Wall Street in general is suffering a major identity crisis. Pilloried as the bane of our economic existence, the financial industry is feeling the heat. At a recent lecture on corporate responsibility, the guy sitting next to me confessed in whispering tones, "I work at Goldman Sachs." I gasped, "Has it come to that?" As a former senior partner in a top recruiting firm from 1997-2009, I remember when talented financiers bragged about their GS pedigree. Nowadays, many folks off the Street view this as a mark of shame. It's reached the point where no one knows: what's a banker to do?
In the case of former Bank of America wiz kid Rasanath Das, he left Wall Street behind. Last week in the Wall Street Journal, RD, as I like to call my dear friend Rasanath, was revealed as a born-again banker in his new incarnation as Bhakti Yoga monk. RD left the gilded halls of investment banking two weeks before the fall of Lehman in September 2008 to take a vow of poverty and chastity in search of deeper truth.
As Rasanath explains, his father asked him to decide his future at the ripe old age of seven. In his native India, RD's Brahmin background allowed him to choose between two careers to assure a financially comfortable future: medicine or engineering. He chose the latter and began the rigorous mathematical training of many fortunate Indian boys. In 1992, at age of fourteen, something unique happened in Rasanath's life. He saw the movie Wall Street, and a dream to come to America and be part of the glamorous world of high-finance was born.
Like some many others in his generation, Rasanath was inspired by Gordon Gekko's confident arrogance. "That was my first exposure to what Wall Street was all about. I used to read about Wall Street quite a bit in newspapers. But, it's something to experience the action. To watch Charlie Sheen on the trading floor and Michael Douglas turning companies around was fascinating. In one sense I could say, it was what I really wanted to get to: the fast-paced, quick decision making, high-flying, exciting trading floor of the finance world. That set the stage for why I wanted to do investment banking." In high school, RD crammed for his entrance exam to the prestigious and highly coveted India Institute of Technology -India's answer to MIT. The young Ram was among the 1% of applicants accepted to IIT's program. Before he graduated, he received multiple offers from large financial institutions and an American visa to go along with these.
After earning an MBA from Cornell University, he headed to the investment banking division at Bank of America Securities. For $170,000 in salary and bonus, the 27 year-old Rasanath recommended investments for some of the biggest companies in media, telecom and technology including Verizon and Microsoft. In the beginning, working in banking was thrilling. "Most of my work was analytical - I used to run a lot of financial models. I was given the freedom and leverage and come out with new ideas an associate would not normally get access to. That was the fun of Wall Street. When I joined there was this innocence. It was all about really making it happen for companies. Of course there was the desire to make it big, but at the same time you really wanted to do a good job for your clients."
But something was missing in the realization of his American dream and Rasanath began to see the cracks in the models he was creating.
"In 2006, leverage buyouts were going through the roof at ratios we never have even heard about. 80%, 90%, some companies were doing 95% leverage. At that time it just seemed as though people knew what they were doing. In Cornell, I had taken a class on mortgage-backed securities. I really didn't understand how these worked. The former head of trading at Morgan Stanley used to teach the class. It just seemed that there was something really wrong with the product. When you looked at the tranches, the way they were designed, being cut up and reselling these. Just to think about how many layers, how complex the system was, seemed to me to be either something really ridiculous or I just didn't get it."
Warren Buffett once warned Federal Reserve Chairman Alan Greenspan about the outsized risk that complex mortgage securities posed to the global economy. He famously dubbed the more esoteric of these products, collateralized debt obligations (CDOs), "weapons of financial mass destruction." Greenspan himself admitted that the products were so complicated in design, even he and his legions of Ivy-League economists didn't understand them.
Rasanath explained: "People were fascinated with the way the products were designed. They were sophisticated. So the complexity buried the cracks. If it was kept complex enough, no one would really ask questions. And the payoffs were pretty high. It was working."
I asked: If no one understood them, why were these instruments so heavily traded leading up to the crisis? Rasanath Das: "It doesn't really matter. Because I don't know how a car works, but I use it. That's our life. We don't really think about how things work, as long as they make our lives comfortable."
This is true enough for most of us in America. On Main Street as well as Wall Street, we love our indulgences and rarely question where they come from or who pays the price for our benefit. One argument presented often by the Street is that consumers were hustling the system the same way lenders are accused of doing. By borrowing far above their means, inflating incomes, refinancing to pull out more equity and enjoying the illusion of wealth. For many homeowners, the payoffs of no money down, easy loans were high too, until they came crashing down.
I asked Rasanath when he began to question his life in finance. He said, "Over the course of the last year, the innocence changed into questions. Questions changed into introspection. The questions were primarily around what's really happening in this business. As I started working more on bonds and securitized bonds specifically, I began to understand how they worked. Also gaining confidence that I really did understand how it worked. In a closed room conversation with one of the vice presidents I asked him, how are we doing this? He said to me, 'You need to understand, this is a game of musical chairs. And when the music stops, the banks that have the garbage sink.' To me that was shocking."
For all the innocence of the mortgage lending and securitization industry, this one statement reflects a greater truth that insiders like RD's boss fully understood the poor quality of the mortgage products. Rasanath says, "It wasn't just the bank; every person that was playing the game had to be alert to the situation. Because if they knew that the garbage was coming back, they had to quit the business. It was all about timing. Make your money before it explodes. "
In a unique chapter entitled, "The Game" in Conversations with Wall Street, co-authored by yours truly (out in stores this month), a top MBS trader discusses about how fast he had to move the products "off his books" to keep up his P&L. When asked about his trading strategy, he replied, "I am just a moving man. I move these off my books in two months."
For Rasanath, the recognition of the "musical chairs" game sent him on a soulful search for meaning. He relayed, "That was the time when I really started thinking about my career on Wall Street in a more serious ethical way. I guess from integrity and honesty and what I really wanted in life."
I wondered if Rasanath believed the industry was aware of the potential systemic damage of short-term profit strategies. The yogi responded: "I don't think that anyone thought about the far-reaching effects on the economy and the lives of people. I guess one of the things I learned on Wall Street was that greed is blinding. Not just for what one does for oneself, but the damage that one does to oneself, one's own integrity, the effects that is has on the people around you. Sometimes it's just not possible to assess the damage. In fact, you don't even see it. It's just like getting blinded."
He explained how greed worked in the markets he found himself in. "It was not malicious. It's not like they said: I want to harm people. No one really thought about conscious harm. It's the effect of collective greed. This is something we as a society should think about. Only when the goal disappears or blows up into something else do we look around and ask: Is this what I did?"
MM: How do you reconcile both worlds -- the deeper moral conscience and the world of high finance -- is there a way to do that?
Rasanath revealed: "The experiences on Wall Street were extremely helpful on some of the lessons the Gita gives. One of the lessons is about greed....how greed begins in the seed of obsession to really 'make' it. I remember in business school on Day Two we were listening to a talk on business ethics. The speaker said, 'Watch out when you tell yourself you deserve.' That was a very powerful statement. Because when we unconsciously tell ourselves 'we deserve' and we attach ourselves very strongly to that self-image that I deserve- that I have to be perceived as being successful. If we start defining success as profits, adoration, distinction, power...then we eventually end up at a point where we not only destroy ourselves, but we destroy the world around us. This is exactly what we have seen happen."
MM: Is there any way to use that power for a socially positive outcome?
"We have been taught that with great power comes great responsibility. But in order to really wield power, we need to be taught that power needs to be rooted in character. If it's not about character, it doesn't really work," answered the yogi.
MM: Is there a way to replace the "musical chairs" financial model with something that works for everyone?
RD: "Character development begins at a very young age. We have to start to think differently about how we train people entering the business. There was nothing in my training that goes into explaining character. Things like character development and integrity are not really viewed as valuable to an organization. The first step I think is to really increase awareness about how important these virtues are for the health of an organization."
MM: Do you think there is any hope for real economic change given the damage done to our system and the pain being experienced both on Wall Street and Main Street?
The young yogi paused for a moment and said: "I think the way Wall Street measures itself should change. I think ethics and integrity should be included. It shouldn't be purely based on profits. That's one way of changing the model. It may not exactly be the way we want it to be, but that could be a place to start."
Rasanath Das is the Executive Director of the Bhakti Yoga Center on New York's Lower East Side. He teaches classes on the search for deeper meaning and inner purpose on Saturdays throughout the year. He blogs on the Huffington Post. www.gitanyc.com
Monika Mitchell is the former Chief Operating Officer of a premier search firm serving the institutional debt and equity markets. Her experiences in the mbs markets are chronicled in the newly released book, "Conversations with Wall Street: The Inside Story of the Financial Armageddon and How to Prevent the Next One." www.good-b.com
Follow Monika Mitchell on Twitter: www.twitter.com/monika_mitchell