First years who came on in the Fall of '08.

First years who started in Fall '08.

First year associates started in 2008; second years in 2007.

Firing people who just started a few months ago is evil, pure evil.

Please report on the paycuts at Holland & Knight. Thanks.

Firing first years is like punching the elderly or jump-kicking toddlers.

The 80s Guy- And your point is??

Sigh, the market is really down.

@8: Yep, we're all F-ed.

The sky isn't falling. It's Kaye Scholer. We're not talking about Cravath, Skadden, or Williams and Connolly.

10 - I think 9 is referring more to the stock market, down another 3 percent today.

The sky is falling/already has fallen, but it has nothing to do with Kaye Scholer, Skadden, or Cravath. Good times for all!

different avatar(d)s squaring off = the best.

I'd personally like to see Trophy Wife take on the Glass Cock.

Pretty miserable of them to fire first-years. Crippling to their careers and nowhere to go....

Are the careers of 2nd years crippled too? or do they have more of a glimour of hope?

14: Before a few weeks ago, I would agree, but at this point, screw it, the market is so bad that companies have to do anything possible to stay afloat. Hell, if you're a laid off first year, go tend bar for a year and then give it a shot again later, no one will hold it against you.

This is why law students should go to the firm with the best vault ranking possible. Minimize the chances of having their careers ruined just months after graduating.

There's not much for second years either. I'm an employed second year but looking for other jobs just because. There's not much out there--all my recruiters tell me to be thankful I'm employed.

Those lifestyle firms are doing wonders for their associates now, what with all the free time from layoffs and all.

Guest 16- The management Committee appreciates the skills of any ex-attorney who can pay off their student loans and/or underwater mortgages by bartending. Should have been using those skills to make it rain while still at the firm.

17-Are you paying attention to whats going on? Vault rankings are as useless and arbitrary as rating agency ratings. Wake up.

14: "Crippling to their careers" seems a wee bit melodramatic.

Dow going to break into the 6000's today?

21 - you are correct only as regards to Latham, which is extremely overvalued by Vault.

17: I'm guessing you're still a student, right? Cause when it comes to layoffs, firms will cut those who are poor performers, not those who didn't go to top tier law schools.

The ship be sinking...

25--You need to re-read 17's comment.

--Not 17.

What does this mean for the incoming 3Ls?

Have any the firms who have fired first years offered any rational explanation for it.

@23: Not today, but probably soon.

LAYOFFS?!? Don't talk about -- LAYOFFS?!? You kiddin' me???? LAYOFFS???

Incoming Kaye Scholer 3Ls should flee to Mexico and hope that Sallie Mae can't find them.

8 & 11 -
Keep in mind that you can't complain about the stock market if you voted for Barack Obama.

29, it's pretty obvious. They are the least profitable attorneys (in fact, they lose money). It's the most rational layoff you can make.

Apparently Death Row Records is no longer "in full, motherf*#%ing effizzect."

All this "destroyed careers" talk is B.S. It's not like everyone got disbarred or something.

19, you're a moron. As if there haven't been layoffs among the Vault 25. At least Kaye hasn't frozen salaries (yet).

Nice try, 33. The correct answer is "you can't complain about the stock market if you voted for George W. Bush (either time)."

25--You need to re-read 17's comment.

--Not 17.

33: Yes, you're absolutely right, Obama is the one behind the massive fall in the stock market. NONE of this was going on before he was elected. I mean, it's not like the current decline is the result of years and years incompetent policies and imprudent leverage that lead to unjustifiable gains in the stock market

That being said, if you were being sarcastic, I'm in agreement with you.

39: I did, you're right, I misread. My apologies.

40, No ... not all his fault. But now his incompetent policies--the bailout, the mortgage bailout, his auto industry tactics, and his new banking policies--have been summarily dismissed by Wall Street as wanting. Furthermore, there's no money left to try much else. So, as the market continues to slide, you can thank that terrible twosome, Dubya and Obama. Meet the new boss, same as the old boss.

most of the first year layoffs are all about them being unprofitable. so much first year work has to be written off by partners. that being said, firing first years is ridiculously short sighted. and i agree, firing first years is much like dropkicking toddlers.

Looking at perhaps the only positive in this matter, for a firm of Kaye Scholer's size, 13 confirmed layoffs isn't THAT horrible. That's about 4% of associates or so, right?

Wow, that wasn't very positive at all.

42, you wingnut, the market was not, is not, and never will be rational on a month-to-month basis. (It is somewhat rational in the long term, but not in the short term, and nobody knows where the cut-off between long-term rationality and short-term stupidity lies.) We also have been living in a massive asset bubble of all kinds for at least 10 years, set within a somewhat smaller bubble that began 25 or so years ago. There is nothing Obama can do to fix all of his predecessors' problems instantly, and the irrational December/January market has finally figured that out. So right now the market (i.e., folks) is doing what most of the people on these boards seem to be doing: to whit, shitting itself. The Dow could easily go to 6000, and many companies would still not be overvalued. I am dollor-cost averaging into stocks of leading companies, with high dividends that it appears will not be cut (much), and which are positioned to at least survive a long-term recession. Either this is Armageddon and we're all toast, in which case I would lose my dough anyway, or I might as well try to make some money.

-- Obama Lover

The market has tanked so badly since Obama won the election and took office, because all he is doing is redistributionist things that are killing the motivation for people to work hard or invest. It was comical how badly he bungled the announcement about the bailout ("uh, I don't want to step on Geithner's toes...") only to have Geithner come out and say there was no plan. The market reacted accordingly, going into a complete tailspin as a result.

But none of this is the point. The point is that, if you voted for Obama, you voted for redistribution of wealth and against things like the stock market. In other words, you voted for being willing to take the hit in economic vibrance as a whole in order to get redistribution and huge spending, etc. That's just a policy judgment liberals make - people at the top and the nation as the whole suffer, but the poor and unemployed get benefits, so it's worth it to a lib.

40, the market started tanking, receding from its peak well over a year ago, in anticipation of Obama (or any Democrat, really) getting elected, based on the liberal/populist things Obama, Edwards and Clinton were saying to get the Dem nomination. The market prices in future risk. George Bush in his second term was not a future risk. He was priced in from the second it looked like he was going to get reelected. Democrats taking power and following through on campaign promises was a huge risk, and now that risk is being realized.

This stock market crash is all Obama.

How pathetic and sad all the big associates turn out to be. Yeah, the eliTTTists were quite capable of cheering "NY to 190!", but now are willing to cave in.

Every partner that signs off on a layoff, every partner that doesn't fight to keep associates and counsels from being laid off, should live in fear that the minions will put a dent in their wallet by hanging out their own shingle.

KKKaye Scholer

46 - You sound like a real schmuck!

If anything, blame should go on liberals of both parties who pushed the homeownership for urms for decades.

Didn't Schulte Roth also lay off 20-30 associates?

Oh my god, I don't think any of you actually know anything about market economics. The market isn't tanking because of any political party. You speak of failed policies on GM, the banks, etc. but have you failed to realize that these companies failed because they were terribly managed? The market is tanking/has tanked because the "great" companies of the past 100 years were so poorly managed and over-levered in the past 10 years that there is little market value left in them. See GM, F, AIG, FNM, FRE, C, BAC, etc. It's not Obama's or GW's fault. It's efficient markets at its finest ...

52, is that true?

Didn't Schulte Roth also lay off 20-30 associates?

the stock market only knows pure economic fundamentalism, and it is having a hissy fit that it can't go on just like it has before, under the myth that a laissez faire economy is just a way for the people and corporations with the most wealth to amass more while leaving the rest of us in the dust. the legacy of the bush free market is greater poverty.

correction to 56, I meant to say "not just a way"

in 56, i meant to write "not just a way"

Poorly run companies deserve to fall to zero, we just have a government that won't necessarily allow that (whether that government is run by repubs or dems). Also, if you don't know what the following concepts or instruments are, please do not comment about the current market crisis: (1) securitization/monetization; (2) CDO; (3) MBS; (4) Leverage.

53, if that's the case, why is there virtually no correlation between the drop in stock price between high leverage and low leverage corporations? I think it's you who is ignoring market economics: namely, that no matter your leverage you need a MARKET. And when government expenditures are equal to about 35% of GDP and government policy drives consumer expenditures, the party in power matters greatly.

60: Did you just make that statistic up? Cause I would wager that the more highly levered companies like AIG, C, BAC, LEH and Bear (back when they were companies) are doing worse than the more adequately capitalized companies. Now granted, I haven't done an extensive study, but please prove me wrong if you have information otherwise.

I love government agnecies who offer jobs that require one year post-JD experience and, then, also disqualify attorneys who have already graduated from intership positions.

You know where this leaves laid off first-years in terms of job opportunities? Screwed by their employer AND screwed by the government.

Just wait until those laid off / freshly minted & unemployed graduated start defaulting on their student loans... you think MBS are the only fixed-income securitized product?

Obviously student borrowing doesn't hold a candle to the mortgage markets, but would be curious to hear how vulnerable this segment is.

63: I'm going to stop paying my student loans so that the securities backed by those loans fall the F apart and there's another great unwinding. F it all, this is just ridiculous.

63, I pray to Baby Jesus everyday that the next bailout will include forgiveness of all federal student loans. I couldn't guess how much it would cost, but it would have to be cheaper than a bank bailout. And, if it happened, I would kiss Obama's sweaty, post-basketball feet.

63: You know, I doubt that many people are still reading this this thread, and I doubt that that many people who read it even know what we're talking about, but I actually think that what is happening now is just the beginning of many long years of painful unwinding. I mean, the main problems thus far have been in the subprime market, but those problems are now creeping into investment grade, then they will creep into car loans, student loans, credit cards, etc. Basically, all of these wonderful securitization and monitization instruments that have fueled growth over the past 10 years will become worthless, literally. I mean, if something is backed solely by a cash flow and that cash flow doesn't exist, then the instrument is worth nothing.

Similar problems will happen with cash flow receivables from companies. Anyway, we're all F-ed. I guess I'm glad I'm gainfully employed, but I don't really want to be a part of this anymore.

47 - You are dead on.

Kaye is going to be revoking offers to incoming 3Ls and delaying the start date for the others to December. Get those resumes out now, 3Ls.

47 and 67, you are both so off it's absurd.

47/67,

Disagree about Obama's effects on the market. We have just started the implosion of the greatest debt bubble in the history of mankind that has been building since 1971 and both political parties are accountable. I think any worry in market prices about Obama is way overshadowed by the financial system catastrophe.

You would probably agree with me however that Obama is going to hasten our demise with overspending.

Deflation---Overspending---Printing Press Inflation---Disintergration.

this is f*ing ridiculous. WHERE ARE WE SUPPOSED TO GET JOBS AFTER WE ARE LAID OFF???

Do you take drugs, Danny?

All, see 66. We're f*cked.

63-

The student loan securitzation market is fairly large. Once you start to get enough defaults on a pool of loans that has been securitized, then the value pretty much goes to zero. I think right now there is a lag due to loan deferral and laid off people still "hoping" to find another job.

The banking system is already insolvent and this looming problem is going to add to the already increasing problems in the other classes of mortgage backed securities other than subprime (and credit cards, etc).

I wonder if they will start to call all the lowered tier school loan backed securities, "subprime". If that's the case, these toxic loans will get government help before the "prime" of school loans.

47, 67, 70: see also 74. The current market fall has nothing to do with politics, there are real and fundamental problems with the financial well-being of this country.

And I don't even believe the market has adequately priced these problems in yet, because the instruments are so complex that few understand the ultimate risk of default.

68- and you know that because....the rest of the market is like that?

I keep waiting for firms to start rescinding 3L offers--is there a chance that many firms will do this or will they avoid the bad pub and just lay off first year associates 3 months in?

77 you sound like a leechfuck douchebag. Firms will definitely rescind 3L offers. They basically have a lot less invested in you.

HTFH

78: if not now, when?

66, 74: Admittedly I know nothing about the securitization of student loans, but I don't see why it necessarily follows that just because the market has been unable to set a price on MBSes, the same would follow for student loans. I have no idea how the tranches were cut on student loans, but there is no reason why credit rating agencies would have undervalued the risk the same way they would have on MBSes. Therefore, not knowing whether absurdly high numbers of tranches were valued investment grade, or knowing how actively they are traded, I fail to see why defaults in the underlying loans would not have been factored in already.

80: I won't get into a complicated debate of CDS along with MBSs, but I'll try to do a quick statement of why the student loan securitization market ("SLM") might fall apart (and I'm always up for a healthy debate, so please, debate away).

I think the reason the SLM will fails is much the same as the MBS market--the models built to value the instruments contemplated a certain percentage of people being employed, paid a certain salary, and paying back the loans on time or in an accelerated fashion (or even refinancing, they also have to price that in). But, if people are not able to get jobs or are getting fired, then the model falls apart.

Actually, come to think of it, I think the student loan market and the housing market are more similar than others--fixed amount at day one with the anticipation of payback in the future, which anticipation will greatly decrease should you lose your job. Credit card receivables are actually a bit different because they are more like a revolver--drawn down an amount each month and pay back with cash flow. This amount fluctuates instead of staying constant (granted, there are people who borrow down thousands to pay back over years, but we're taking them out of the equation right now).

Anyway, argue away if you want, always up for a good debate. In fact, we should create a financial crisis forum. That could be fun.

At least they own these layoffs ... unlike the October-November period where some were let go for performance but some were just plain laid off.

72 Everyday Mr. Webb

I doubt anyone is reading this thread anymore...

"I don't see why it necessarily follows that just because the market has been unable to set a price on MBSes, the same would follow for student loans."

The two are very similar. Securitzed loans, whether they be student or mortgage loans, work like a bond. The principle and interest pmts pooled together are the coupon pmts. They have factored in that a certain number of defaults will occur on a given pool of loans, but if enough of the loans in that pool default, then bond becomes a loss. How much of a loss becomes uncertain as defaults rise, and no one wants to buy them (that would technically make the price zero). So if we have a wave of defaults in 09 and 10, then the banks will have even more loses to deal with.

Banks holding billions of dollars in loses on these things know how much of a loss they have on their books, but are trying to hide this. Outsiders can make educated guesses based on general default rates and how many securitized loans that they have by looking at their financial statements. Banks currently list them at historical value and are reluctant to mark to market because there is no market, and they would rather hope to see if things improve/stabilize and rehabilitate their values.

I know for a fact that the student loan securitization market is on life support. Investment companies are not buying them right now, they are all trying to sell them instead to others but can't. I know someone who works at one of the major ones and they haven't sold any securitized loans in almost a year.

81, 84: I understand all that; my only problem with it is that it seems to me (once again, not a securitization lawyer) that the problem with valuing MBSes stems from (1) an uncertainty of the true value of the real property that backs the security; and (2) a failure in the understanding that real estate failures wouldn't be merely localized and that spreading risk geographically didn't minimize risk. I don't see either of these being major problems in the securitization of student loans. We know that the value of any assets backing the student loans is zero. That hasn't changed. And we for the most part realized that job market collapses are not necessarily localized. So I don't see why firms wouldn't have priced in the risk on these such that higher rated tranches should rationally be unmarketable. Obviously, I believe you that there isn't a market on these. So I guess my only real question is were the securities so amibitiously rated that you can't find anything marketable among the different pieces? Or is it that no one can scratch up free capital to make a market out of the relatively safe tranches?

- 80

This is 47. I was joking as to the debt markets but totally serious as to the equity markets.

The debt markets were overleveraged and now a 10% fluctuation in price will wipe out 100% of the equity. Deleveraging has caused a liquidity crisis for which the TALF-esque liquidity bailout is pretty appropriate.

However, "reinflating" what we now know was just a housing bubble is so retarded I can't believe Bush's or Obama's treasury guys (and those genii in Congress) are trying to do just that with this housing bailout.

student loan does not just refer to a law school grad whose options are biglaw or fed or state gov. student loans also include culinary students making 8/hour at applebees who have to pay back 50k. basically student loans were just as overhyped as subprime mortgages given to people without proof of employment -- in each case the consumer was sold (whoever the f fault it was, consumer or seller, doesn't matter much anymore) stuff they couldn't in their wildest dreams afford.

77- I think they rather lay off someone three months in than rescind 3L offers. The former has a less awful effect on recruiting..

what effect will bank nationalization have on law firms? http://www.blackbooklegal.com/

Hey, 77, pull your head out the sand, it's already started:

http://abovethelaw.com/2009/02/luce_forward_rescinds_3l_offer.php

Firms are already rescinding offers, and you're nucking futs if you think those firms with giant summer programs will give everyone offers. Your best bet: pray hard, work harder, get lucky.

Will the top firms lay off first years and rescing 3L offers?

Will the top firms lay off first years and rescind 3L offers?

Will the top firms lay off first years and rescind 3L offers?

81/84, I'm still reading. More interesting than anything else going on here. Not to mention that it's an issue that's been underreported. And no, Elie, please don't try your hand at the topic.

85/80, I'm not sure you grasp the basics of securitization [nor at this point is it probably worth pursing given the employment outlook for attorneys specializing in structured finance]:

"We know that the value of any assets backing the student loans is zero."

The loan is the asset that backs the security. Its value is not zero [you wish] or at least it won't be at the time of issuance.

"that the problem with valuing MBSes stems from (1) an uncertainty of the true value of the real property that backs the security."

I don't think that's true. Valuing real property is probably a comparative cakewalk. On the other hand, accurately measuring the risk of default [since you're paying for the stream of CFs in the form of coupons] in the absence of a market/against a backdrop of illiquidity is the nightmare that banks/debt-servicers probably live every day.

The real shame is that in its prior life, securitization was heralded as a savior-- a tool of financial innovation that actually helped Asian banks deal with [i.e., shove off-balance sheet] their NPLs following the Asian Financial Crisis. No such quick-fix will spare us from this mess.

-66

94 here, meant to sign off as
-63

83 - Good. What's the problem then.

Oh my god, I don't think any of you actually know anything about market economics. The market isn't tanking because of any political party. You speak of failed policies on GM, the banks, etc. but have you failed to realize that these companies failed because they were terribly managed?
__________________________________________

So if a company is well-managed, they're thus impervious to the business cycle? Only "terribly managed" firms fail during general economic downturns? Would you like to share more of your vast understanding of "market economics" with us?

97: Not impervious, but better situated to weather the storm. Also, there is so much counterparty risk involved with these enormous companies failing that the rest of the country will be affected. Hundreds of thousands laid off employees will, of course, cause a vast reduction in spending which will cause a vastly reduced influx of capital into even well managed companies. But, I will hold firm to my belief that well managed companies will weather this storm much better than most. Sure, the price of the stock will go down, but that only makes sense. If the price of the stock essentially represents the discounted cash flow of the company, then that price will have to fall in an economic downturn because growth, universally, will slow and therefore the stock price must be adjusted accordingly.

I think you made an illogical leap from what I stated earlier. Just because I said that the various of the companies failed because they are poorly managed does not mean I said that well-managed firms are impervious to the "business cycle." Protected, yes, impervious, no.

I think you made an illogical leap from what I stated earlier. Just because I said that the various of the companies failed because they are poorly managed does not mean I said that well-managed firms are impervious to the "business cycle."
__________________________________________

No, you made the "illogical leap" to the conclusion that these firms failed because their management was uniquely bad rather than because of general economic conditions. After all, up until recently, most of the companies being bailed out have been spectacularly proftiable--much more so than other companies. How is that possible if their management was so much more "terrible" than that of other firms?

As Warren Buffet has said you should only invest in a company that could be run successfully by idiots, because they all eventually will be. Most senior management at large corporations are utterly fungible and bring the same skillset and management philosophy to every firm they run--which is why we have seen so many execs in the last 20-30 years going from autos to chemicals to financial products without missing so much as a step.

The idea that these firms failed because their management was especially "terrible" is Chicago-school naivete at it's worst. Stop mouthing B-school truisms and learn to think for yourself.

99: This is simply where we disagree, but to resort to name calling is juvenile at best. I do firmly believe that Vikram Pandit, Ken Lewis (though not as much so as the others), Rick Wagoner, Allan Mullaney, Dick Fuld, etc. were poor managers. Anyone can "run" a company and make piles of money during a boom time, it's those managers who are able to prepare for and anticipate the downturns that truly get my acclaim. And while these guys may have made a ton of money for themselves and their employees, don't forget that the owners of the company (shareholders) have lost theirs. So, in reality, they have not been profitable for the long term, only on a short-term basis, which is just enough time for the high earners to take the money and run and leave the battered remains to the shareholders/government to pick up.

any word on the meeting today at KS?

So what happened at the firm meeting today?

Did this meeting actually happen? Have these layoffs been officially confirmed?

Yes, the firm is dissolving....tomorrow.

And now KS has fired their CFO. They're folding and folding FAST. Or not.
Maybe the partners just didn't like him. and they don't like lazy associates, and lazy staff, and they even tend to "off" lazy janitorial services.

They're not folding, they're thriving.