Financial Institutions, Markets, and Money, Eleventh Edition

CHAPTER EIGHTEEN

Investment Banking

INVESTMENT BANKING HAS THE allure of allowing one to make lots of money, Careers-in-finance.com recently reported that the typical pay (salary plus bonus) for a first-year associate (which usually requires an MBA) in investment banking was $180,000. Many investment bankers make millions each year as partners in prestigious Wall Street firms. Where else can you even come close to making that much money outside professional athletics or Hollywood? Glamorous profession? Yes, but the job can have its downside.

Unfortunately, the industry has suffered a few black eyes over the years, Investment banks, for example, are frequently accused of having a conflict of interest. In 2002, for instance, Merrill Lynch agreed to a $100 million settlement with New York and other states after being investigated by Eliot Spitzer, the attorney general for New York, Spitzer accused Merrill Lynch and other Wall Street firms of providing its customers with overly rosy research reports about the stocks that the firm's investment banking division was underwriting.

In spite of these black marks on the industry's reputation, few careers offer the same kind of excitement, prestige, and money-making opportunities as investment banking. Analysts work long hours in a high-energy, fast-paced environment where success is quickly rewarded and failure means the end of a career. It is not uncommon to hear of 20-hour work days, ridiculously large salaries and bonuses, and lavish ...