Why do Investment Banks hire and fire ?

The answer is short termism. The IB's and broker/dealers suffer from very short termism. A traditional bank takes in deposits, builds a reputation for cautious and prudent investment, and then lends to credit worthy counterparties for the long-term. However, an Investment Bank or broker/dealer makes all its money in fees...and gambling (also called proprietary trading). Consequently, they have absolutely no way of predicting their revenues for the next year. Sure, you can do back of the envelope calculations about the size of the market, and market-share. The truth is that the Shamans in their finance department, and their counterparts in Senior Management, have no clue as to their projected revenues. The best guesstimate is to take last year's numbers, and add a "stretch" target.

All these investment banks are run by former Salesmen. Their projections are always rosy and optimistic, and never really based on any objective assessment of the market. So, the only variable under their control is the operating budget which they use and abuse to make the numbers tie. So if the revenue numbers came in above estimate, as was the case last year, when the government was giving away free money, and the competition had thinned due to the crisis, all these IB's were on a crazy hiring spree. No long term need for it, no vision, no strategy. They held career super days where they hired fifty people in one day, to resource all kinds of grand expansion plans. Ofcourse, they made sure to pay themselves big bonuses for doing such a great job in puting together all the "talent". Now when the market came back to reality, and the revenues are nowhere near predicted, these same visionaries are on a firing spree. The long knives are out, and scores are being settled. Its every pirate for himself, and for his team ( these guys have gang affiliations that would put the Bloods and the Cripps to shame).

Anyway, do not buy all the BS about how they are upgrading and top grading etc. It is all about the money. The guys that have both hands in the till, are stuffing their pockets as fast as they can. Government regulation is so far behind that these guys will be long gone to their favorite secret island, by the time this next party is over. Onward to the next crisis!