Chris Hentemann has two pieces of art on the walls of his corner office in midtown Manhattan. One is an oversize photograph of the cockpit of his twin-engine Beechcraft Baron. The other is an Andy Warhol print of Muhammad Ali with his fists cocked.
For Hentemann, a rail-thin money manager who has spent 25 years in finance, the two pictures capture the duality of Wall Street. It’s an industry where you need to manage risk with precision and discipline, but it’s also one driven by audacity, ego and the killer instinct. Or at least it used to be.
In an era defined by a populist backlash against rapacious capitalism, the business of finance has lost its mojo. An industry that used to celebrate the invisible hand of the free market, that once showered shareholders and employees with unprecedented wealth, has been chastened by $284 billion in fines over the past eight years.
While Wall Street has long prided itself as a hotbed of innovation, today it’s ensnared in a web of rules to prevent bankers from once again threatening the global economy. Profitability and compensation are falling as forces unleashed by the 2008 financial crisis take their toll.
“The more the regulators push, the more they’re turning banks into financial utilities,” says Hentemann, 48, a former head of structured finance at Bank of America Corp. who now runs a $1.5 billion credit-focused hedge fund called 400 Capital Management. “But after what happened in the crash, can you blame them?”
The crackdown didn’t seem to matter to supporters of Democratic presidential candidate Bernie Sanders, who called for the breakup of too-big-to-fail institutions. Now the Republican Party platform and the final draft of the one approved by Democrats call for reinstatement of the Glass-Steagall Act of 1933, which separated commercial and investment banking. If enacted, the measure could break up JPMorgan Chase & Co., Bank of America and Citigroup Inc.
The 17 million Britons who voted last month to quit the European Union didn’t care that their nation’s financial-services industry, which accounts for 8 percent of the economy, might have to move some operations overseas.
That’s sobering news for a business that dared to hope the post-crisis reckoning was drawing to an end. For eight years, the men and women who work in finance have been playing defense. More than half a million jobs have vanished from the world’s biggest banks since 2008, data compiled by Bloomberg show. Top-tier hedge funds and money-management firms are dropping fees and cutting employees to stay competitive.
With new capital requirements and tougher stress tests looming, bank chieftains probably will be squeezing even more expenses from their organizations for years to come. This year, revenue at investment banks in the U.S. and Europe will shrink by one-fifth compared with 2010, to $212 billion, according to Boston Consulting Group. Finance pros are confronting a reality they once deemed unthinkable -- the rollicking game they played for so long has been tamed.
As government watchdogs tighten their grip, a sputtering global economy and a horde of fintech startups assailing the castle walls are forcing changes few foresaw in the wake of the crash. Influential bankers such as JPMorgan Chief Executive Officer Jamie Dimon and Banco Santander SA Chairman Ana Botin are investing millions of dollars in ventures to defend their turf from interlopers and win over millennials who live their lives on smartphones. Even the 322-year-old Bank of England is making a move: In June, Governor Mark Carney announced the launch of a fintech accelerator.