a lot more than the Internet business models they referred to. The implications

of the terms "business to business" and "business to consumer" went far beyond

the executive summaries of the Internet business plans they defined. In those

byte-sized symbols, neatly wrapped around a number, was all the potential of

the Internet: interconnectivity, communication, commerce, a level playing field

and, of course, numbers , exponential

numbers … big, beautiful numbers!

Now, B2B and B2C have new meaning. At Harvard Business

School, Wharton Graduate School of Business and others, students who have

invested $100,000 in the belief that an education still counts for something in

the business world have redefined B2B and B2C in the form of a joke-albeit a

joke that, like many jokes, is more true than funny:

B2B, B2C: "Back to Banking, Back to Consulting."

This is how the top business students are defining their job

search in the current economy. Investment banking and consulting jobs, which a

year ago seemed staid, boring and, yes, low-paying compared to dot-com land,

are once again really hot.

The same generation of students who not long ago were

blowing off Morgan Stanley & Company's campus presentations are now hoping

that the bankers and consultants they once scoffed at as risk-averse company

drones-mere salaried employees-will find their own limited experience

interesting enough to merit a 30-minute interview. The bankers and consultants,

in turn, are enjoying the reversal of fortune, as well as a certain degree of

prestige that disappeared along with yellow ties and slicked-back hair.

"Last year, when I came to Goldman, I was, like, the stupid

loser," said a Harvard Business School graduate from the class of 2000, now an

associate (and recruiter) at Goldman, Sachs & Company in New York. "People

were like, 'Ooh, poor bastard, he has to go to Wall Street.' This year, it's

the opposite. People are like, 'Oh, wow! Congratulations.'"

"Last year, it was a good year to be a student," said Bob

Bonner, director of M.B.A. career management at Wharton. "This year, it's a

good year to be a company."

At least in terms of recruiting, the firms now seem to be

holding the cards.

"If the pendulum swung

toward the dot-com world last year," said Caitlin McLaughlin, vice president of

M.B.A. recruiting at Salomon Smith Barney, "it has clearly swung toward investment

banking this year."

And consulting. "While it's premature to declare victory in

the war for talent," said Andrew Giangola, chief spokesman for McKinsey &

Company, "interest in McKinsey is certainly surging. This partially reflects

some changes we made internally, as well as the external environment. Dot-com

work has lost some of its allure. Talented people who were looking for a chance

to change the world have now had a dose of reality."

Sure, the comments are self-serving.  But the students looking for jobs are

confirming these assertions. Suddenly, the prospect of 80- or 100-hour work

weeks, superiors, pitch books, discounted cash-flow analyses, operational

analyses and, yes, a biweekly paycheck seems pretty attractive when one

considers the alternatives.

Whereas last year, "anyone who could spell his name could

get a job at an investment bank," at least a second-tier one, this year the

banks, as well as the consulting firms, are able to be a lot more selective,

the Goldman associate said.

It's hard to gauge just exactly how selective, since firms

and business schools are generally reluctant to release hard figures at this

point. But the numbers available do confirm, if somewhat murkily, the trend

being described by students, career

counselors and recruiters.

A spokesman for Salomon

Smith Barney said that applications for investment-banking jobs have doubled

over the last year, and that the yield of students who have accepted offers

from the firm has jumped from 50 percent last year to 73 percent this year for

full-time offers and 86 percent for summer-associate offers. This means the

firm can make fewer offers to fill the same number of slots. Morgan Stanley is

rumored to have received 150 résumés from Stanford Business School this year,

compared to 25 last year (the firm declined to comment for this article).

Combine increased demand

with the softening market (Morgan Stanley, Bear Stearns and Credit Suisse First

Boston have all started downsizing, or at least publicly talking about it;

Mercer Consulting and Blackstone Group, among others, have scaled back

on-campus interviews), and the numbers no longer seem to be in the students'

favor.

"If you haven't worked

in banking before business school or over the summer, you better come from

McKinsey," the Goldman associate said.

And if all you've got is

a dot-com degree, forget it.

"The dot-com veterans

are a bunch of 23-year-olds left with beer money and a dubious experience

base," sniffed a senior banker at one of the Big Three firms.

 "We would hope to have our entire new

associate class come from ex-analysts and summer associates," he continued.

"We're basically recruiting nobody. We do it to keep up an image on campus, but

we don't hire that many people."

"Last year you felt like

students were kind of thumbing their noses at traditional things," said

Wharton's Mr. Bonner. "This year, you feel like firms are kind of thumbing

their noses back."

Indeed, bankers and

consultants-who tend to get A's in school, who cross their T's, dot their I's,

and shine their shoes-have had a lot to swallow during the last couple years as

they watched their long-haired counterparts, who flew by the seats of their

chinos, pile up the paper pay. While the investment bankers had plenty to do

with all the absurd valuations of the Internet bubble, their cut of the

commission fees seemed like mere cab fare compared to the paper wealth reaped

by their clients. More than one Merrill Lynch banker has been known to complain

about how former colleague Halsey Minor, who left Merrill to found Cnet Inc.

and make millions on paper, was a mediocre analyst who, one pointed out, was

often late to work. Mr. Minor responded through a spokeswoman that he finished

in the top 10 percent of his analyst bonus pool and that Merrill Lynch helped

fund his company and lent him office space. Now Cnet's stock price has tanked

84 percent in the last year, and Mr. Minor has been replaced by Shelby Bonnie

as chairman and chief executive. So there's no need to be jealous anymore.

"We don't feel poor

anymore," the senior banker said. "Very few people actually made money on the

Internet, so it does kind of make you feel better about banking."

Of course, with the

economy tanking and with all the layoffs and downsizing, the bankers may soon

find themselves on the sell side of the interview circuit with all the

dot-commers they have gleefully watched flame out.

Meanwhile, the exodus is

reversing direction. Ex-bankers who left for dot-coms, both failed and

successful, are trying to come back to Wall Street.

"She's an aggressive,

driven, impressive person," the senior banker said of one, who actually made

some money off of her Internet venture. "Hopefully, we can make her an offer."

"Investment banking is

probably what I should have done to begin with when I graduated from school,"

said a Harvard Business graduate who spent four years at CSFB before school and

feels lucky to have gotten a job at Merrill Lynch after a brief stint at a

failing dot-com.

"At business school, we

all got really wrapped into Internet world. It sounded like a lot of fun to

work at a start-up-we'd have a lot of responsibility and, you know, create big,

grand businesses. Clearly that was not what it's about."

 "Technology sucks," the senior banker said.

"There's no money. People are going back to traditional safeguards."

It's not just about the

money, however.

Job hunters fed up with

the unorthodox management styles of the dot-com world are craving structure, as

well as the professionalism and "general ability to get things done", as the

senior banker put it, that characterizes bankers and consultants, most of whom

hold M.B.A. degrees. One Harvard Business School student who worked in

investment banking before school opted not to return to either of the dot-coms

she worked at this summer, even though they were arguably legitimate ones: "The

person I reported to at Amazon.com was someone who knew a lot about dot-com

business in general, but she herself had limited business experience. I felt a

little frustrated by not being trained by or working for someone with more

experience and more management skills." She also found her experience at

Firedrop, the Kleiner Perkins Caufield & Byers, Vinod Kjosla–funded

start-up which "shifted its business plan 180 degrees" while she was there,

somewhat unsettling.

She's going to work for

Goldman Sachs after graduation. "The thing I like best about the firm are the

people," she said. "They've recently graduated from Stanford or Harvard."

Investment banks and

consulting firms are also starting to enjoy the benefits of the efforts they've

made to make themselves more attractive. Faced with the brain drain of recent

years, they took steps to address quality-of-life issues, promote high

performers more quickly and make "a general commitment to professional

development," one Harvard student observed. Whereas consulting jobs were once

characterized by parking-lot-option analyses in places like Cleveland, firms

now have diversified their client work to reflect the challenges of the New

Economy. Many firms have venture capitalists as clients, as well as in-house

incubators; as a result, employees can enjoy the education and exhilaration of

the entrepreneurial experience without all that risk. At McKinsey, they've

created the associate-partner position, designed to give the firm's young stars

more responsibility and more money-at least that's what they're telling their

recruits, while junior associates at the firm are reportedly doing pro bono and

internal projects now that business has slowed.

It's true that firms

have gotten better at marketing themselves. Take this interview "question" from

one of the top banks, surely designed to make the associate job sound a lot

more interesting than it actually is: "Pretend you're Michael Eisner. You've

invested a huge amount of money in theme parks in China in a joint venture with

the Chinese government. At the same time, your film division is getting ready

to release a film on the life of the Dalai Lama. The minister of finance in

China calls and says. 'I understand you're going to release this film. We

understand its content is going to make us look bad. We're going to nationalize

the theme parks if you release the film and take away your interest in joint

venture.' What do you do? What are the key things you analyze?" (Supposedly,

this question was loosely based on a real-life situation involving the release

of Seven Years in Tibet .)

The abusive "stress interviews" of the past seem to have

become more or less obsolete. While math questions like "How many degrees are

between the hour hand and minute hand on a clock at 12:15?" are still fair game

(answer: less than 90, as the hour hand moves slightly past the 12), a scenario

like this one at Lehman Brothers, chronicled by Michael Lewis in Liar's Poker in 1989, probably wouldn't

fly today: "Your first interview might begin with the interviewer asking you to

open the window. You were on the forty-third floor overlooking Water Street.

The window was sealed shut. That, of course, was the point. The interviewer

just wanted to see whether your inability to comply with his request led you to

yank, pull and sweat until finally you melted into a puddle of foiled ambition.

Or, as one sad applicant was rumored to have done, threw a chair through the

window."

As job and stock options

proliferated in the late 90's, students at the top schools, and their advocates

in the career-services offices, were able to demand better behavior from

potential suitors.

"Harvard's pretty good

at preventing hardball tactics," said Brian Shortsleeve, a second-year student

at Harvard Business. "Everybody talks here-so if a firm pulls a weird stunt,

the whole class will know a day later."

Consequently the firms,

once desperate for talent, have learned how to rein in their big egos and mind

their manners.

But now, they may not

have to try so hard. The roles have been reversed. Like the fat girl who

returns to school from summer camp 20 pounds lighter, recruiters are enjoying

their newfound popularity and sensing their advantage. Once again, they're in a

position to play hard to get.

"To be successful, they

want to see you're hungry to work at that firm," said Regina Resnick, director

of M.B.A. career services at Columbia Business School. "If at any point you

take them for granted and think, 'Oh, they're dying for me'… you just can't do

that."

One second-year Harvard student noted that some of her peers

got axed from the process this year because they demanded too much going in.

Whereas last year, students who had worked in banking prior to business school

could get themselves hired as second-year rather than first-year associates

(read: as much as 50 percent more in bonus money), that was not really an

option this year. "If you start indicating that you're not going to be happy

unless you're a second-year," she said, "it may be something they don't want to

deal with."

"I didn't appear all that hungry going in," said one of her

classmates, who is headed towards consulting after being rejected by all the

banks. "I think on some level, at the end of the day, I wasn't going to do

banking, and they might have figured that out before I did, so that's why they

dinged me." He paused a minute before admitting, "But I'm sure that's my ego

talking so I can save face."

Indeed, the recruiting experience has become in some cases

so painful that some are exploring other options. Take Alex Ambash, a senior

majoring in computer science at Yale College: He applied to more than 35

companies, only to land one offer he didn't want. Mr. Ambash said he's fed up

with the process, having endured the "asshole" from Credit Suisse and the

"bitch" from Salomon Smith Barney-not to mention the scorn from his more

successful friends.

"As a result of this experience," the undergraduate sighed,

"I may become a doctor."

Now, B2B and B2C have new meaning. At Harvard Business School and others, students who have invested $100,000 in the belief that an education still counts for something in the business world have redefined B2B and B2C in the form of a joke-albeit a joke that, like many, is more true than funny:

B2B, B2C: "Back to Banking, Back to Consulting."

This is how the top business students define their job search in the current economy. Investment banking and consulting jobs-which a year ago seemed staid, boring and, yes, low-paying compared to dot-com land-are once again really hot.

The same generation of students who not long ago were blowing off Morgan Stanley & Company's campus presentations are now hoping that the bankers and consultants they once scoffed at as risk-averse company drones-mere salaried employees-will find their own limited experience interesting enough to merit a 30-minute interview. The bankers and consultants, in turn, are enjoying the reversal of fortune, as well as a certain degree of prestige that disappeared along with yellow ties and slicked-back hair.

"Last year, when I came to Goldman, I was, like, the stupid loser," said a Harvard Business School graduate from the class of 2000, now an investment banking associate (who also recruits) at Goldman, Sachs & Company. "People were like, 'Ooh, poor bastard, he has to go to Wall Street.' This year, it's the opposite; people say things like, 'Oh, wow! Congratulations.'"

"Last year, it was a good year to be a student," said Bob Bonner, director of M.B.A. career management at the Wharton School. "This year, it's a good year to be a company."

At least in terms of recruiting, the firms now seem to be holding the cards.

"If the pendulum swung toward the dot-com world last year," said Caitlin McLaughlin, vice president of M.B.A. recruiting at Salomon Smith Barney, "it has clearly swung toward investment banking this year."

And consulting. "While it's premature to declare victory in the war for talent," said Andrew Giangola, chief spokesman for McKinsey & Company, "interest in Mc-Kinsey is certainly surging. This partially reflects some changes we made internally, as well as the external environment. Dot-com work has lost some of its allure. Talented people who were looking for a chance to change the world have now had a dose of reality."

Sure, these comments are self-serving. But the students looking for jobs this year are confirming those assertions. Suddenly, the prospect of 80- or 100-hour work weeks, superiors, pitch books, discounted cash-flow analyses, business-unit strategy engagements and, yes, a biweekly paycheck seems pretty attractive when one considers the alternatives.

Whereas last year, "anyone who could spell his name could get a job at an investment bank," at least a second-tier one, according to one associate, this year the banks as well as the consulting firms are able to be a lot more selective, one associate said.

It's hard to gauge just exactly how selective, since firms and business schools are generally reluctant to release hard figures. But the numbers available do confirm, if somewhat murkily, the trend being described by students, career counselors and recruiters.

A spokesman for Salomon Smith Barney said that applications for investment-banking jobs have doubled over the last year, and that the yield of students who have accepted offers from the firm has jumped from 50 percent last year to 73 percent this year for full-time offers and 86 percent for summer-associate offers. This means the firm can make fewer offers to fill the same number of slots. Morgan Stanley & Company is rumored to have received 150 résumés from Stanford Graduate School of Business this year, compared to 25 last year (the firm declined to comment for this article).

Combine increased demand with the softening market (Morgan Stanley, Bear Stearns & Company and Credit Suisse First Boston have all started downsizing, or at least have publicly talked about it; Mercer Consulting and Blackstone Group, among others, have scaled back on-campus interviews), and the numbers no longer seem to be in the students' favor.

"If you haven't worked in banking before business school or over the summer, you'd better come from McKinsey," said an associate at a bulge-bracket firm.

And if all you've got is a dot-com degree, forget it.

"The dot-com veterans are a bunch of 23-year-olds left with beer money and a dubious experience base," sniffed a senior banker at one of the Big Three firms.

"We would hope to have our entire new associate class come from ex-analysts and summer associates," he continued. "We're basically recruiting nobody. We do it to keep up an image on campus, but we don't hire that many people."

"Last year you felt like students were kind of thumbing their noses at traditional things," said Wharton's Mr. Bonner. "This year, you feel like firms are kind of thumbing their noses back."

Indeed, bankers and consultants-who tend to get A's in school, who cross their T's, dot their I's, and shine their shoes-have had a lot to swallow during the last couple years as they watched their long-haired counterparts, who flew by the seats of their chinos, pile up the paper pay. While the investment bankers had plenty to do with all the absurd valuations of the Internet bubble, their cut of the commission fees seemed like mere cab fare compared to the paper wealth reaped by their clients. More than one Merrill Lynch & Company banker has been known to complain about how former colleague Halsey Minor, who left Merrill to found Cnet Inc. and make hundreds of millions on paper, at least, was a mediocre analyst; one pointed out that he was often late to work. (Mr. Minor responded through a spokeswoman that he finished in the top 10 percent of his analyst bonus pool and that Merrill Lynch helped fund his company and lent him office space.) In any case, Cnet's stock price has tanked 84 percent in the last year. So there's not as much reason to be jealous anymore.

"We don't feel poor anymore," the senior banker said. "Very few people actually made money on the Internet, so it does kind of make you feel better about banking."

Of course, with the economy tanking and with all the layoffs and downsizing, the bankers may soon find themselves on the sell side of the interview circuit, alongside all the dot-commers they gleefully watched flame out.

Some on the Street already have. Meanwhile, the exodus is reversing direction. Ex-bankers who left for dot-coms, both failed and successful, are trying to come back to Wall Street.

"Investment banking is probably what I should have done to begin with when I graduated from school," said a Harvard Business graduate who spent four years at CSFB before school and feels lucky to have gotten a job at Merrill Lynch after a brief stint at a failing dot-com.

"At business school, we all got really wrapped into the Internet world. It sounded like a lot of fun to work at a start-up-we'd have a lot of responsibility and, you know, create big, grand businesses. Clearly, that was not what it's about."

"Technology sucks," the senior banker said. "There's no money. People are going back to traditional safeguards."

It's not just about the money, however.

Job hunters fed up with the unorthodox management styles of the dot-com world are craving structure, as well as the professionalism and "general ability to get things done," as the senior banker put it, that characterizes bankers and consultants, most of whom hold M.B.A. degrees. One Harvard Business School student who worked in investment banking before school opted not to return to either of the dot-coms she worked at this summer, even though they were relatively legitimate ones: "The person I reported to at Amazon.com was someone who knew a lot about dot-com business in general, but she herself had limited business experience. I felt a little frustrated by not being trained by or working for someone with more experience and more management skills." She also found her experience at Firedrop, the Kleiner Perkins Caufield & Byers, Vinod Khosla–funded start-up which "shifted its business plan 180 degrees" while she was there, somewhat unsettling.

She's going to work for Goldman Sachs after graduation. "The thing I like best about the firm are the people," she said. "They've recently graduated from Stanford or Harvard."

Investment banks and consulting firms are also starting to enjoy the benefits of the efforts they've made to make themselves more attractive. Faced with the brain drain of recent years, they took steps to address quality-of-life issues, promote high performers more quickly and make "a general commitment to professional development," one Harvard student observed. At McKinsey, they've created the associate-partner position, designed to give the firm's young stars more responsibility and more money. And whereas consulting jobs were once characterized by parking-lot-option analyses in places like Cleveland, firms now have diversified their client work to reflect the challenges of the New Economy. Many firms have venture capitalists as clients, as well as in-house incubators; as a result, employees can enjoy the education and exhilaration of the entrepreneurial experience without all that risk-at least that's what the companies are telling their recruits, while junior associates at some of these firms are reportedly doing pro bono and internal projects now that business has slowed.

It's true that firms have gotten better at marketing themselves. Take, for example, this interview "question" from one of the top banks, surely designed to make the associate's job sound a lot more interesting than it actually is: "Pretend you're Michael Eisner. You've invested a huge amount of money in theme parks in China in a joint venture with the Chinese government. At the same time, your film division is getting ready to release a film on the life of the Dalai Lama. The minister of finance in China calls and says, 'I understand you're going to release this film. We understand its content is going to make us look bad. We're going to nationalize the theme parks if you release the film and take away your interest in the joint venture.' What do you do? What are the key things you analyze?" (Supposedly this question is loosely based on a real-life situation involving the release of Seven Years in Tibet.)

The abusive "stress interviews" of the past seem to have become more or less obsolete. While math questions like "How many degrees are between the hour hand and minute hand on a clock at 12:15?" are still fair game (answer: less than 90, as the hour hand moves slightly past the 12), a scenario like this one at Lehman Brothers, chronicled by Michael Lewis in Liar's Poker in 1989, probably wouldn't fly today: "Your first interview might begin with the interviewer asking you to open the window. You were on the forty-third floor overlooking Water Street. The window was sealed shut. That, of course, was the point. The interviewer just wanted to see whether your inability to comply with his request led you to yank, pull and sweat until finally you melted into a puddle of foiled ambition. Or, as one sad applicant was rumored to have done, threw a chair through the window."

As job and stock options proliferated in the late 90's, students at the top schools, and their advocates in the career-services offices, were able to demand better behavior from potential suitors.

"Harvard's pretty good at preventing hardball tactics," said Brian Shortsleeve, a second-year student at Harvard Business. "Everybody talks here-so if a firm pulls a weird stunt, the whole class will know a day later."

Consequently the firms, once desperate for talent, have learned how to rein in their big egos and mind their manners.

Role Reversal

But now, they may not have to try so hard. The roles have been reversed. Like the fat kid who returns to school from summer camp 20 pounds lighter, the leaner recruiters are enjoying their newfound popularity and increased sense of self-worth, if not net worth. Once again, they're in a position to play hard to get.

The students, for the most part, no longer have that luxury. "To be successful, they want to see you're hungry to work at that firm," said Regina Resnick, director of M.B.A. career services at Columbia Business School. "If at any point you take them for granted and think, 'Oh, they're dying for me'… you just can't do that."

One second-year Harvard student noted that some of her peers got axed from the process this year because they demanded too much going in. Whereas last year, students who had worked in banking prior to business school could get themselves hired as second-year rather than first-year associates (read: as much as 50 percent more in bonus money), that was not really an option this year. "If you start indicating that you're not going to be happy unless you're a second-year," she said, "it may be something they don't want to deal with."

"I didn't appear all that hungry going in," said one of her classmates, who is headed towards consulting after being rejected by all the banks. "I think on some level, at the end of the day, I wasn't going to do banking, and they might have figured that out before I did, so that's why they dinged me." He paused a minute before admitting, "But I'm sure that's my ego talking so I can save face."

Indeed, the recruiting experience has become so painful at times that some students are ready to explore other options. Take Alex Ambash, a senior majoring in computer science at Yale College: He applied to more than 35 companies, only to land one offer he didn't want. Mr. Ambash said he's fed up with the process, having endured the "asshole" from Credit Suisse and the "bitch" from Salomon Smith Barney-not to mention the scorn from his more successful friends.

"As a result of this experience," the young student sighed, "I may become a doctor."

A year ago, this Net Baby found himself on the cover of The Wall Street Journal and inside many other publications, including Fast Company , Forbes , Red Herring and Business 2.0 , in stories heralding him as a "dorm-room" entrepreneur. His incubator, which he actually ran from an office near his room in Calhoun College at Yale University, had a $1 million commitment from New Haven-based Dagim Capital. It had 12 employees and had invested in two other student start-ups, including Broadcast Builder (also now defunct), co-founded by Mr. Stern's roommate Ravi Paidipaty, and Goldthumb, a software company run by a bunch of recent Brown University graduates. His company was small, but the message was big: He was a baby entrepreneur, a poster boy for the New Economy.

Now his company has folded, and Mr. Stern is arguably a poster boy for the New New Economy–one who is battle-scarred but not bitter; older and wiser at age 20, with a firsthand understanding of one of the wildest business cycles in history. Mr. Stern is back in college now, but he wears his experience on his tailored shirtsleeve: "I know what I like now," he said, referring to his summer job search. "Small companies, smart, aggressive people and stability ."

Mr. Stern and about 300 others like him–male and female, young and old–had gathered at the Yale Club on Vanderbilt Avenue in Manhattan on Feb. 8 to talk about the New New Economy. The forum, called "Building After the Bubble," featured a panel of industry heavyweights: Merrill Lynch's Internet analyst, Henry Blodget; Fidelity Management & Research Company's chief executive, Robert Pozen; Euclid SR Partners' general partner, Graham Anderson; Lehman Brothers' vice chairman, Fred Frank; Yale School of Management professor David Cromwell, and Hotsocket.com founder Dev Bhatia.

The event was sponsored by the Yale Entrepreneurial Society, a group formed in September 1999 to foster the spirit among Yalies and others. Y.E.S., as it is known, is now the largest student organization on campus, with 500 student members and another 400 alumni and other adjuncts. Some of the organization's members traveled down from New Haven to join other Yale alum and other members of the financial community at the forum.

It was–as the society's president and the organizer of the event, David Pozen, a Yale junior, unabashedly called it–an evening of "networking and schmoozing." There was media to court, business cards to be swapped and heavy-hitters to listen to, suck up to, pitch to.

But this was not an evening of desperation. The big guys who spoke had a message to impart, and they mostly stuck to it: There's money out there for good, well-thought-out, well-executed ideas. At least for now.

The panel discussion, however, began inauspiciously. As the young Mr. Pozen (son of Fidelity's Robert Pozen) was winding up his introductory remarks, a glass hit the wooden floor of the Tap Room and shattered loudly, evoking images of bubbles bursting and markets crashing.

There was some forced laughter, surely generated by thoughts of recent events. In November, Crosspoint Ventures had pulled the plug on a billion-dollar early-stage tech fund. Lucent Technologies had announced plans to lay off 6,000 more workers, in addition to the 10,000 already let go. The New York Post has no trouble filling its ongoing column, unsubtly titled "Dead Dot-Com of the Day." Add in rising unemployment rates, decreased consumer confidence and the ups and downs of the Nasdaq, and the sound of a crash seemed most appropriate.

Yet the tone of the panel began on a remarkably upbeat note, more in line with the Y.E.S. acronym than with the recent headlines.

"This is an excellent time to be an entrepreneur!" declared Mr. Anderson of Euclid Partners, from his seat at the dais in the front of the memorabilia-filled room. "There is money out there. There's more venture money now than there was in 1995. It will take longer to get it, but the money is still out there."

David Cromwell, an adjunct professor of entrepreneurship at Yale's School of Management and the former chief executive of J.P. Morgan Capital Corporation, noted that the venture-capital industry financed more new ventures– 4,000! –during the last 12 months than ever before. Henry Blodget was characteristically bullish, saying that only five years ago, when Netscape went public, the Internet accounted for $1 billion of market value, mostly from America Online, and everyone thought that was absurd. "Now," he added, "even after Armageddon, we have 400 to 500 billion dollars of Internet value in the market. That's extraordinary value creation."

Of course, there was plenty of self-interest behind all these remarks–these speakers' fame and fortune, after all, rise and fall with every tick of the Nasdaq. Nonetheless, in the face of all the doom and gloom, these words of comfort–delivered in the warmly lit setting of the Yale Club's Tap Room–were, if a little sugar-coated, reassuring.

Mr. Pozen, of Fidelity Management, spoke for the institutional point of view, joking: "I guess I'm gonna have to be the pessimist in the group.

"Since the bubble has burst, I guess people like us feel a little vindicated," he continued. "We were always a little reluctant buyers of companies that had no earnings and sometimes no revenues. But these companies were going up quickly; we tried to get good prices for our shareholders, and we knew a trade when we saw it."

Mr. Pozen lamented how, during the late 90's, "the notion of audited earnings had pretty much become a joke, so the question became: 'Do you have revenues; do you even have an idea ?'"

Fred Frank, of Lehman Brothers, made similar jokes about the exuberance of the last five years: "We used to take companies public that had demonstrable records of achievement. Now we take public companies with demonstrable expectations of achievement."

He made a similar point at the expense of Connecticut Senator Joseph Lieberman: "Roughly five to six years ago, Senator Joe Lieberman came to visit me to determine how can the state of Connecticut–and, more importantly, Yale–attract biotech companies around the Yale Medical Center.

"So I asked Joe a very impolitic and very impolite question. I said, 'How do you define a biotech company?'

"Well, he stammered and he stuttered, but he's a very adroit politician, so he points his finger at me and says, 'Fred, that's a hell of a good question. How does one define a biotech company?'

"I said, 'Joe, it's very simple–a biotech company is a pharmaceutical company not encumbered with revenues.'"

Ba-dump-bump.

And so the panel continued. The senior Mr. Pozen added some weight to it by offering a little case analysis as to why he thought Priceline.com had failed.

"Here's the reason the auction wasn't a success. Travel tickets are what I call perishable goods: If a company doesn't sell seats, then they lose them. Priceline therefore was able to get airline companies to give them low discounted seats pretty close to travel date. Unfortunately, the company misunderstood its success. They thought they were successful because they were a travel company, not because they were a perishable-goods company. So they decided to sell travel insurance, to sell gasoline, to sell all these things that were related to travel but not to perishable goods. I think we've seen the company has had problems since then. One very important lesson for all you people is, understand what your business model is … understand, if you're successful, why you're successful."

Converting to Metrics

It took some pointed questions from the audience, however, to focus the panel on what was on everyone's minds–particularly those Y.E.S. kids: How do you get the money?

One software entrepreneur, who had taken time off from his School of Management studies to start his company, complained that he had met "some of the most prolific angel investors in the world" who had told him that "nothing is getting funded now." He added, "No one knows the metrics which define the path to profitability."

He then asked the panel, "Do you have any working metrics whereby one can define the path to profitability?"

Then came the bad news everyone had been expecting.

Said Mr. Anderson: "If you're already generating revenues at this time and have a loss, and can't show an actual break-even by 2002 second quarter, I don't think you'll get any venture funding at this time. If you don't have revenues right now, typically, I would think–if you could find a venture firm that's doing seed–you would need to demonstrate profitability within eight to 10 quarters, max. At the late stage, some venture firms are not doing any investing unless they can sell their investments within one year."

Dev Bhatia, the founder and chief executive of Hotsocket.com, a database-driven marketer which has raised capital from Goldman Sachs Private Equity Group and Bessemer Venture Partners, among others, shared his experience. One of his venture firms, he said, had spelled out the metrics pretty clearly: Within six months, one had better be gross-margin positive; six months after that, they had better be bottom-line positive.

There were more questions, about global investing and niche versus generalist investing patterns. It wasn't until the end that someone finally asked what a lot of people had presumably been wondering all along:

"Yes, there's been value created," a member of the audience said. "But a lot of people have lost a lot of money. A lot of jobs were lost, and there are clear signs that the pain is not over yet. I was wondering if some of this could have been avoided …. From venture-capital firms to banks to online investors, there was some irresponsible behavior across the board, and I'm wondering is this going to happen again or can some of it be avoided?"

"I'll take a swipe at that," said Henry Blodget, to much laughter. "I've found myself in the role of piñata" of the dot-com shakeout, said the man whose career was made by a bullish Amazon bet. (Amazon recently fired 1,300 employees.)

"Absolutely, this will happen again, hundreds of times," he said. "It's happened hundreds of times in the past …. Sure there were some stupid bets made … people got drunk … expectations got way ahead of reality… but there's also a huge risk of missing the upside."

Shortly thereafter, the panel ended. Many who lingered seemed to have upside on the brain, as they gathered in groups to chat and stood on line to pay homage to the financial luminaries at the dais. Lehman Brothers' Mr. Frank had the most supplicants, not surprisingly. As the lone investment banker on the panel, he was the one who ultimately could turn an idea into I.P.O. riches.

No one seemed deterred by the designs resembling gray storm clouds that decorated his tie.

Class Act

At a gathering at Bliss on East 49th Street following the summit, the Y.E.S.-men were downing kamikazes and making out with their girlfriends. (Y.E.S.'s membership is about 40 percent female, Mr. Pozen said, though there were few female representatives at Bliss on Thursday night.) A few of the guys were talking shop. One could be overheard asking his friend, "Did you get a deal?" Mr. Stern was there, too, though in a league of his own.

Sitting at a corner table with his friends and sipping a drink, he talked exit strategies and bricks-and-clicks with the same passion that some of his classmates might bring to pornography, Derrida or extreme football. He shared industry gossip, reminisced about past experiences with reporters, and made a call from his cell phone to a friend burning the midnight oil at an investment bank.

He was not unaware of the irony of his situation. He brought up the Business 2.0 article, in which Irrational Exuberance author and Yale professor Robert Shiller dismissed him and other undergraduate entrepreneurs as part of a media-driven fad.

"Now," said Mr. Stern wryly, "I'm taking his class."

I promised the world

I talked a good game

Oh, baby, baby

Oops! You bought at the peaks

Yeah, you pitiful geeks

You blew the Internet!

Shelley Faldetta, who works in corporate communications at BNP Paribas bank, was hopping around the stage, belting it out off-key to the tune of Britney Spears' "Oops, I Did It Again." Dressed in a midriff-baring gold lamé pants suit, she was impersonating Mary Meeker, Morgan Stanley Dean Witter & Company's bullish Internet analyst, to a packed auditorium.

People seated at the Bond Market Association's table turned their heads away in embarrassment. They and their peers were at the New York Financial Writers Association's 58th annual Financial Follies dinner on Nov. 17 at the Marriott Marquis Ballroom in Times Square.

Lucky for those onstage, the only people sitting in the room were journalists and flacks. No Mary Meeker. No Sandy Warner. Not even Christian Curry, the former Morgan Stanley analyst who got a nice undisclosed discrimination settlement and bought into a small African-American newspaper, making him a media type, of sorts.

This, after all, is the Financial Follies. The Washington press corps has its annual Gridiron dinner, City Hall journalists have their Inner Circle show, Albany reporters have their Legislative Correspondents banquet. So it's only fair that the financial media have a black-tie event of their own. But unlike the Gridiron, Inner Circle or Legislative Correspondents, none of the subjects of the Follies turn up to watch the show. So there are no corporate bigwigs to suck up to, no sources to work. Just journalists and flacks.

The flacks, for the most part, buy the tables ($300 a plate for non-members, $65 for members) and the journalists eat and drink on the flacks' tab. The proceeds then go towards the worthy cause of bringing more financial journalists into the world (through scholarships).

If the Financial Follies is any indication of what financial journalists are like, that is probably not the best idea in the world. For one thing, they are lacking in manners. The journalists do nothing to conceal their utter disrespect for their peers on the stage or for the flacks buying their dinner. The table -hopping begins even before the appetizer of wild mushroom bisque en croute is served.

For another, they are prone to being, well, snippy. Fueled by jealousy and booze, they enjoy nothing more than taking wiseass pot shots at each other. And at the whole night in general.

Last year, one former New York Times writer criticized a colleague from The Times business section, calling her a "loser" who "never publishes anything." He called the Follies "an absurd event with deadwood journalists." To which another New York Times writer responded this year, "That's a crock of shit."

Yet just a year ago, the idea of breeding more financial writers at least made good business sense. Financial writers and editors were the rock stars of the media world. The market was roaring, investing was the national pastime and news organizations were holding actual bidding wars over experienced writers and editors who could explain it all.

That, however, was before the collapse of the dot-coms, before the slow leak of air from James Cramer and TheStreet.com, before market analysts began to be viewed with skepticism, if not outright disdain. (This time around, no one lined up to pay homage to Floyd Norris, The New York Times' market guru, as they did last year.) This year, despite a record turnout of more than 1,300 people, the timbre of the whole evening was more sober, less exuberant, and some of the Follies' dot-com jokes hit perhaps a little too close to home.

Steve Gelsi of CBS Marketwatch.com, wearing orange Al Gore–esque foundation, noted the irony as he got ready to play Jeff Bezos of Amazon.com Inc. in the show: "I was the first dot-commer to join the Follies and now I'm up there making fun of all the dot-coms."

"It's officially the bear market," joked Erin Arvedlund from Barron's. "And you know how I know that? Because when they announced tonight that 'we have more financial writers here than we've ever had', I was like, 'That is the fuckin' top of the market!"

"The Follies is a contrarian indicator!" her friend laughed.

Ray O'Rourke, a flack from Morgan Stanley, which hosted a table at the Follies, didn't seem to find it all that funny. When asked how he enjoyed Ms. Faldetta's performance as Morgan's Mary Meeker, he responded grimly: "This is an off-the-record event."

Charlie's Angles

Of course, some things never change, no matter what the markets are doing. Gene Marcial of Business Week was flanked by two blond women, as he was last year. His hair, as always, was perfect. Gary Weiss of Business Week was in his cups early on, while his friends made fun of him. "He's a mockery of a travesty," someone said. And almost as if on cue, someone managed to knock over a platter halfway through the show so that it hit the ground with a loud crash-just like last year.

There were the bizarre gifts: hunks of cheddar cheese last year, popcorn and sewing kits this year.

And there were, again, the shots at Charlie Gasparino, who covers the Street for The Wall Street Journal. The running joke this year was about his name appearing on the seating chart three times, at three different sponsors' tables. Some bitched about not having been invited to the after-party he was co-hosting with his Wall Street Journal colleague Matt Murray, while still others just complained about his aggressive reporting.

"I liked him when he was on my team," a former employer said.

"I hear Charlie Gasparino is a really nice guy," a Smart Money reporter said, rolling his eyes.

"Oh wait," his friend chipped in, "I think he broke that story."

Mr. Gasparino, reached later by The Observer, declined comment.

"It's kind of like going to your high school reunion," explained Scott Wenger, the business editor of the Daily News. "There are old colleagues, some of whom you want to see and some of whom you don't want to see. And there's a degree of trepidation, because there's always that question, 'What are you doing with your life?'"

As in high school, the concept of noblesse oblige was virtually non-existent. David Faber, the CNBC Squawk Box star, sneered at a former colleague from his days in the trenches at Institutional Investor's newsletter division: "I thought you'd be writing features by now." (The Observer was not offended.)

There were other tensions. In particular, people discussed a possible rift between Goldman, Sachs & Company and The New York Times. Apparently, according to one guest, The Times, annoyed that Goldman had been feeding stories to The Wall Street Journal, skimped on their obit of Mike Mortara, the Goldman partner who was featured prominently in Liar's Poker as one of the pioneers of mortgage-backed securities at Salomon Brothers. Mr. Mortara died on Nov. 12 , but The Times didn't publish his obituary until Nov. 16, and when they did, they confined their tribute to the legendary Big Swinging Dick to just a few column inches.

A spokesman from The Times, responding to a call from The Observer, said: "Our obituary judgments are made by editors who have no dealings with Goldman Sachs, and no awareness of any other department's dealings (even if the obit editors happen to assign the obit to a member of the business news staff).

"A 493-word obit in The Times is not a small thing. It reflects our judgment of overall reader interest, as well as our best effort to apportion the limited available space according to the public visibility and public reputations of the people we are writing about, as well as their accomplishments. We believe we did a pretty fair job of apportioning the space that day."

Glenn Kramon, The Times' business editor, denied any bad feelings between Goldman Sachs and the Gray Lady.

But despite the conflicts, the Follies contingent-from reporters at Convenience Store News to editors at The Wall Street Journal, from the flacks to the journalists, from the stars to the people that Claudia Deutsch of The New York Times described as the "has beens and never weres"-was united on one topic (besides alcohol). The show, again, was dubbed "the worst in the Follies' history."

Actually, it wasn't. There were some genuinely funny moments, scripted by the veteran journalist Jeff Grigsby and his team of writers. Leonard Sloane, formerly of The New York Times, playing Alan Greenspan to the "Man of La Mancha": "I am I, Alan Greenspan, the ruler of the nations / Again I have rescued you slobs! / I had to do something / 'Cause bus'ness was too good / And too many people had jobs." And Mr. Gelsi's portrayal of Mr. Bezos of Amazon.com Inc. to the tune of "Seventy-Six Trombones" from The Music Man: "Seventy-six dot-coms crashing every day / With a hundred and ten more facing the end / And a cortege of rows of pimply impresarios / All lined up to file for Chapter Ten!"

Sarah Bradley of CNNfn delivered an almost-Broadway-caliber performance as Hillary Clinton, to the tune of Stevie Wonder's "For Once in My Life." Starting off in a red skirt-suit and later stripping down to a camisole top as she strutted around stage, Ms. Bradley staged a faux press conference on Hillary's "recent divorce":

For once in my life I can do my own lying

The way Bill always taught me to do-

Wait … oh … I'm sorry

For once in my life I will be a real winner

Without that schmuck Bill by my side

So now in my life I can dump that gross sinner

And screw a few hunks on the side--

Oh wait …

And maybe become a new bride

Now in my new life I want monster erections-

Uh, I'll stand erectly

And hold my head up high

No more need to cry

Shalom, Bill, goodbye.

There were references to Hezbolla and Hadassah (Hillary as portrayed by Ms. Bradley mixed them up), with Monica-last year's news-thrown in for good measure. Then the big finish:

If you ever thought that I needed direction

Don't get in my way, I'll mess up your complexion

'Cause what you see now may be or may not be me!

It was the one performance that got substantial applause, and afterwards Sally Heinemann, editorial director of Bridge News, remarked: "If [the real] Hillary were that talented, we'd be lucky."

It was perhaps telling this year that the Follies casting directors had saved their best talent for a non-financial skit, revealing how this year's election had eclipsed the starlight of financial stories in the year 2000. Even in a year that featured the AOL-ing of Time Warner, the comedown of Bill Gates, ICG and other business disasters, the events leading up to Nov. 7 were more compelling.

But it didn't really matter what the skits were about or how good or bad the show was. As in years past, the Follies Committee putting on the show had their hands full enough simply trying to get the guests to sit still and pay attention.

Ms. Deutsch, who covers blue-chip companies for The Times, got so fed up with the disappearing audience that, as president of the Financial Writers Association in 1997, she tried to kill the show. She was overruled. (Some people still wish that that wasn't the case, though she said she went backstage this year and told the cast she had been wrong.) Another year Tony Guida, who now works for CNNfn, reportedly stood up and reprimanded the audience.

This year, the tactics were a little more subtle: They kept the lights dim so that it was harder to find people at other tables, the performers showed some skin and- perhaps in keeping with the theme of this year's show, Survivor-the evening's planners withheld food from the crowd until the performance was over at about 9 p.m.

Still, the committee's efforts had mixed results. People did not talk as much in the aisles, but plenty started bolting for the exit three or four acts into the show, escaping with bottles of wine from their tables.

Outside the ballroom afterward, Kelly Gruel of International Financing Review explained, "I didn't watch any of the acts because the Follies are notorious for having terrible entertainment. If you stayed and watched the whole show, you're obviously a rookie."

James Taranto, the editor of The Wall Street Journal's Op-Ed Web site, Opinionjournal.com, agreed: "Some people are just naturals at what they do, and watching these folks perform, I'm convinced that they're all natural writers."

The Party's Over

Outside on the Marquis balcony at one of the after-parties, Irene Weissman, a Follies cast member formerly of Reuters, dressed in a white fur and sparkly blue eye-shadow, complimented Mr. Gelsi on his performance as Jonathan Lebed, the 16-year-old day-trader who was busted for manipulating stocks on the Internet. Mr. Gelsi had stripped down to his boxers during the performance (his character had used his winnings to pay for hookers) and was joking about Ms. Weissman having followed him into his dressing room.

"This is the first time I've seen a bare chest in three years!" she explained. "It's about time!"

Thom Geier from Entertainment Weekly, who played Bill Gates, explained why Mr. Gelsi's striptease didn't go any further: "We want to keep this PG-13. Otherwise, John McCain and the F.T.C. will swoop down on us and prevent us from marketing to children, which would be a great travesty to financial writers everywhere."

And so the night continued. Mr. Gasparino and Mr. Murray hosted their party at O'Flaherty's Ale House on West 46th Street. They moved the party from last year's venue of Russian Samovar, presumably to eliminate the lethal Russian vodka punch and the staircase that had proven to be hazardous for Mr. Murray in 1999. The result was a much more tame evening. In attendance, in addition to a slew of Wall Street Journal reporters, was Jack Willoughby from Barron's and the P.R. macher George Sard. Allan Dodds Frank from CNN was there, wearing a sealskin bow tie from his days at the Anchorage Daily News and complaining about the coat check at the Follies, which closed early, thereby forcing him to carry his coat around to all the after-parties. Ed Finn, editor of Barron's, introduced himself to The Observer as Paul Steiger, managing editor of The Wall Street Journal, but quickly checked himself. Asked what he thought about the somewhat cozy relationship between reporters and the P.R. people who wine and dine them at the Follies, he shrugged and turned away.

"Only Gasparino can get this many people with a cash bar," someone said irritably as he paid for a drink. (Only the first 100 drinks served were free.)

In contrast was the lavish affair thrown by Diageo, the liquor conglomerate, at the Hudson Theater in the Millennium Hotel on West 44th Street. Outside the party room, a woman lay passed out across two chairs while her friends labored to find her a cab. Inside there was free top-end booze and gift bags with CD's and coffee-table books about cocktail shakers, as well as a 12-piece salsa band, to which the Follies revelers twisted and turned about as well as anyone who reads balance sheets on a daily basis can be expected to do. No one seemed bothered by the stale smell of vomit that permeated the room.

Steve Lipin, The Wall Street Journal's mergers and acquisitions hotshot, was walking around by himself, looking a bit subdued for someone who was immortalized in print as a "young turk" (Howard Kurtz's The Fortune Tellers). But such was the tone of the evening. As the band took a break and a D.J. started playing "Never Can Say Goodbye" by the Jackson Five, there was a subtle but palpable sense that, despite the evening's sexy Latin music and Tanqueray martinis and fancy hardcover books, the big Wall Street Party was over and the people still hanging around were trying a little too hard to have a good time.

Amidst the confetti strewn about the floor, there was a business card from a woman at CNN, symbolic perhaps of a networking or hook-up attempt gone awry, and fitting for these uncertain days at the end of Y2K. The card, though intact, was covered with shoe marks, having been stepped on over and over again by the financial scribes and spin-doctors who kept dancing up there on the Millennium Hotel's big stage, until they gave in to the late hour,and exited, finally, into the cold November night.

The shares of the beleaguered company, which were pledged by a Steinberg family trust as collateral for a loan on Sept. 17, 1999, were sold by the bank at a median price of $2.39 per share. They have since tanked to 19 cents per share in the wake of the announcement and subsequent cancellation of the Leucadia deal, as well as several ratings downgrades and a flurry of class-action lawsuits.

The fact that nearly $2.5 million of soon-to-be-nearly-worthless stock was unloaded onto the public market two weeks before the announcement of the Leucadia deal seems outrageous, if not plain stupid, and begs that old question-what did people know, and when did they know it?

With the Reliance shares valuedat$2.55 a piece in the Leucadia transaction announced May 26, it would seem that whoever knew about the deal knew that was about as much as they could expect to get for their stock, and that the share price had nowhere to go from there but down. This was, after all, not a good-news deal-the shares had once sold for as much as $19-but rather a last-resort fire sale, with no apparent upside.

Sure enough, after the Leucadia deal was announced on May 26, the Reliance shares, which had been hovering between $2.50 and $3.00 per share for weeks, rose to $2.56 on the day of the announcement-a penny higher than Leucadia was to pay-then immediately began a nine-week swan dive to their current price of 19 cents per share. While a May 10 earnings announcement that Reliance had had a bad first quarter caused its price to drop moderately, it partially recouped within a few days. But the Leucadia announcement precipitated a stock slide that didn't turn around.

A Reliance spokesman maintains that since the shares were sold by a bank, not an insider, no insider trading could have occurred. But it seems strange that the bank would sell the shares so close to the announcement of the Leucadia sale. Did Provident simply sell the shares after the May 10 earnings announcement without talking to the trustees, or did the trustees, perhaps knowing about the imminent Leucadia deal, instruct the bank to sell the shares in order to reduce the amount they owed?

Forty percent of Provident, according to its chief financial officer, is owned by the Carl Lindner family. Carl Lindner, like Saul Steinberg, was a corporate raider who acquired an insurance company, then used it to assume major equity positions in other companies. Mr. Steinberg and Mr. Lindner's relationship dates back to the 1970's, when Mr. Lindner, through his holding company American Financial Corporation, was the second-largest shareholder of Mr. Steinberg's Reliance. Both Mr. Steinberg and Mr. Lindner were early and devoted customers of the 80's junk-bond king, Michael Milken.

Chris Carey, chief financial officer of Provident Financial Group, refused to comment on whether the Steinberg trustees instructed the bank to sell the shares. He said, "People pledge stocks for loans all the time and sometimes, as the stock goes down, the stock gets sold to pay off a loan. This happens every single day. It has nothing to do with Leucadia or anything else. We certainly wouldn't be privy to any information like that." The Reliance spokesman said that the trustees did not instruct the bank to sell the shares.

In any case, the Leucadia sale and its subsequent cancellation is a sad postscript to the even sadder story of a high-flying corporate raider forced to come down in the world. Saul Steinberg, who with his wife Gayfryd personified the excesses of the 80's as the reigning king and queen of "nouvelle society," has sold his home and his prized possessions as the company that helped make him a billionaire falls to pieces.

While some of his counterparts have started twilight careers in philanthropy and public service, Saul Steinberg has scrambled to stay afloat, trying to find a buyer for his company while hawking his Park Avenue triplex penthouse with 34 rooms and 15 wood-burning fireplaces. The penthouse, once the home of John D. Rockefeller, was sold with its contents for $37 million to the financier Stephen Schwarzman. Mr. Steinberg sold his collection of 61 Old Masters paintings-so vast that Gayfryd had reportedly once hired a Metropolitan Museum cataloguer to keep track of them-for $50 million. Mr. Steinberg was also faced with the loss of his Louis XV and XVI period furniture, Chinese export porcelain, Sèvres biscuit figures, Royal Copenhagen fish plates, a Regency silver tea service and scores upon scores of other furniture and knickknacks. Sotheby's sold a collection of the Steinbergs' belongings for a reported $12 million.

Saul Steinberg was born in Brooklyn in 1939, the son of a Brooklyn plastics manufacturer. He enrolled in the University of Pennsylvania's Wharton School of Management at 16. His grades weren't good, but he was already starting to make money: During his senior year, he acquired 3 percent of a rubber company, threatening a proxy fight if its management did not diversify its holdings. The company bought his shares back at three times what he paid for it.

Mr. Steinberg bought Reliance in 1968, leveraged it with Michael Milken's junk bonds, and used it to launch greenmailing attacks against the likes of the Walt Disney Company and Lomas & Nettleton Financial Corporation. He even owned a piece of the New York Times Company back in 1980. At that time, Times Company executives, worried that he might demand a seat on the board, invited him to lunch to politely express their displeasure with his 2 percent investment. In the course of the meal, during which Mr. Steinberg threw back two martinis, a Times Company attorney made the mistake of calling Mr. Steinberg "Mr. Silverman." Mr. Steinberg reportedly left the dining room in a huff, and immediately bought 350,000 more shares-increasing his stake to more than 5 percent.

As Mr. Steinberg became increasingly feared in corporate boardrooms, he and his wife Gayfryd became forces to be reckoned with on the social scene as well. Mr. and Mrs. Steinberg embraced the Metropolitan Museum of Art, PEN and the United Cerebral Palsy Association as causes. Their parties became increasingly ostentatious: They spent $3 million on Mr. Steinberg's daughter's 1988 wedding to Jonathan Tisch at the Metropolitan Museum of Art. Mr. Steinberg flew in a specially outfitted 727 aircraft; they usually cost $5 million to run.

To feed this gluttonous lifestyle, Mr. Steinberg and his family systematically raped and pillaged Reliance, an old-line insurance company, over the course of 30 years. Mr. Steinberg took Reliance private in 1982, holding it until Reliance became a public company in 1986. It had a secondary offering in November 1993. Since then, the Steinbergs have taken salaries, bonuses and dividends of nearly $165 million-not to mention a range of services with significant fees. And in the face of Reliance's deteriorating condition-for the most part the result of a corrupt, incompetent management-the Steinbergs appear to have sold more than four million shares of Reliance, netting at least $34 million.

Between February 1994 and March 2000, Mr. Steinberg unloaded at least 1.5 million shares for what looks to be $15 million based on median price points. His brother, Robert Steinberg, got rid of more than 2 million shares for an apparent $12 million; his sister Roni Sokoloff disposed of 550,000 for about $5 million; and his other sister, Lynda Jurist, unloaded 200,000 for approximately $1.5 million. Bruce Sokoloff, Roni's husband and a senior vice president of the company, sold 100,000 shares for $350,000.

So while the Steinberg family-between the stock, the salaries and the dividends-came away with nearly $200 million, the shareholders are now left with practically nothing.

This latest sale of stock, by the bank on behalf of the trust, did not involve buying shares in advance of a buyout with the expectation that the stock would go up. If anything, it was an attempt to get out while there was still the chance to see a few dollars off of one's holdings. Though the trust's million shares were sold at a 6 percent discount to the Leucadia sale price of $2.55, this was simply a common-sense move: The loss of 16 cents per share is next to nothing compared to the risk of losing much more after the sale was announced.

Reliance had a net loss of $310 million in 1999 due to dwindling prices for commercial-property and casualty insurance and disputes over workers' compensation policies. The company owes more than $700 million, including $237.5 million in bank debt due in August, $291.7 million in bond debt due in November, as well as $172 million in bond debt due in 2003. Mr. Steinberg stepped down as chief executive of Reliance in February after suspending the company's cash dividend to shareholders and announcing plans to sell Reliance's surety business-its most profitable enterprise-for $580 million to Travelers Property Casualty Corporation. The previous November, Mr. Steinberg fired his brother Robert as president of the company. There has been a rift between the two ever since.

Between Aug. 24, 1999 and Nov. 16, 1999, Saul Steinberg pledged 8.7 million Reliance shares as collateral for a loan from Provident. At the time, those shares were worth about $35 million. On June 23, 2000, the bank sold 3.35 million of those shares for approximately $5 million, and on July 7, the bank sold 580,000 of those shares for $544,500. Between June 2 and June 30, 2000, Roni Sokoloff sold nearly 1.5 million shares for about $1.6 million, while her husband, Bruce, sold 200,000 shares for about $380,000. A Reliance spokesman said that these shares, like the trust's shares, were sold by a bank. And on June 19, the company announced it would sell its financial products, excess and surplus and inland marine business to Hartford Financial Services Group Inc. for an undisclosed amount.

Though not a great deal for shareholders, the Leucadia transaction would have been a sweet deal for Saul Steinberg. At the time the deal was announced, Mr. Steinberg stood to see about $90 million from his 35 million share holdings. But on the day of the announcement Standard & Poor's placed Reliance on "credit watch." Then on June 8, A.M. Best Company downgraded its rating on Reliance, citing the company's unfavorable operating trends, "worse-than-expected" performance and weak balance sheet; the downgrade raised concern over whether the Leucadia deal would be completed.

On July 14, Leucadia backed away from the transaction, and on the same day, S.&P., Fitch and A.M. Best further downgraded their ratings on the company, citing concerns about liquidity and the company's ability to refinance its debt.

On July 19, Leucadia officially terminated the merger agreement with Reliance, with analysts speculating that Reliance's asset situation was worse than Leucadia had anticipated or that the firm couldn't garner enough reinsurance to cover Reliance's mounting losses. The rating agencies subsequently downgraded the company even more.

Now Reliance could find itself facing bankruptcy in the not-so-distant future, with a $700 million debt on the parent company that needs to be paid down, and the threat of several costly class action lawsuits. Given its high debt load and the fact that the company's most profitable business was recently sold, another bank loan would appear to be out of the question .

To make matters worse, Reliance and its directors are now facing class action lawsuits from shareholders represented by several firms, alleging that Reliance misrepresented the company's financial position between February 8, 1999 and May 10, 2000, thereby inflating the price of the stock to as high as $11.00 per share before it crashed back down again.

According to a complaint filed in the United States District Court for the Southern District of New York by the law firm Milberg Weiss Bersh and Hynes & Lerach, the company issued a press release on February 8, 1999 announcing quarterly and annual results which, along with subsequently released financial statements, failed to reflect on the income statement expected losses in excess of $150 million related to business written through Unicover Managers Inc., a third-party manager of reinsurance pools with whom the company had entered into reinsurance arrangements as part of a workers' compensation insurance facility. Under those arrangements, the company reinsured workers' compensation policies, the occupational accident portion of which was in turn reinsured by other reinsurance companies.

According to the complaint, the company made false and misleading statements in S.E.C. filings, stating that its reinsurance contracts were valid and that it expected to recover the full amount of coverage from them, when letters from various life insurers to the company during that period indicated that this was not the case.

Even after Reliance did disclose the content of some of those letters in subsequent filings, the complaint alleges, the company failed to fully acknowledge the adverse affect on the company's financial condition that the Unicover workers' compensation issue implied. It wasn't until May 10, 2000, the complaint alleges, when the company announced an operating loss of $36.5 million for the first quarter of 2000, that the whole truth came out. In the meantime, the complaint alleges, "Defendants' publicly issued statements made were false and misleading, in that those statements failed to disclose that the Company's business operations had become substantially impaired; that the Company had lost significant clients and personnel; that the Company's cost of capital had increased; that the Company's goodwill had been impaired; and that the defendants had reason to believe that the Company was sustaining a loss and that such loss would continue throughout the quarter."

The complaint also alleges that between March 1 and March 3, 2000, "several Reliance insiders privy to the truth concerning the Company's true financial condition sold thousands of shares of Reliance stock." According to the complaint, between March 1 and March 3, Lynda Jurist, Mr. Steinberg's sister, sold 100,000 shares of company stock for $500,000 and Howard Steinberg, the company's chief operating officer who is not related to Saul Steinberg, sold 17,000 shares for $74, 740. According to the complaint, between March 6 and March 8, Howard Steinberg sold 10,000 for $41,300; Bruce Sokoloff, Mr. Steinberg's brother-in-law, sold 100,000 shares for $350,000, and Mr. Steinberg's sister Roni Sokoloff sold 100,000 shares for $350,000.

A Reliance spokesman said the "suit is without foundation and that the company's disclosure with respect to Unicover was scrupulous."

A Milberg Weiss spokesman said that the case probably won't get underway until September. In the meantime, Reliance shareholders are left holding their two-bit shares, wondering if the company's insiders ever had anyone's interests at heart but their own.

He is Paul Leung, the reedy, spike-haired 23-year-old investment-banking analyst at Salomon Smith Barney Holdings Inc. who wrote the now-infamous Brutal Memo.

Mr. Leung inadvertently became the talk of Wall Street during the week of April 3 when his lengthy memo demanding a slew of perks for himself and his young colleagues leaked out of the banking house. The manifesto was soon e-mailed to downtrodden analysts and their bosses all over the Street. It was unsigned, but people clamored to figure out who its author was, because it was unusual for a mere analyst to show such moxie.

"I have friends at other banks who are calling and saying, 'Who is this Paul? He's my hero!'" one Salomon analyst said. "A friend at Goldman called me and said, 'You have balls at Salomon!'"

But while Mr. Leung's fellow slaves on the Street (yes, they're called 'slaves') conferred godlike status on their Spartacus, some banking veterans, recalling their own days of servitude, scoffed at the sense of entitlement pervading the latest batch of young grads.

"My fundamental reaction after reading the memo was that this guy must be a fucking sissy," said one former Salomon analyst who is now a banker with another firm. "It's so absurd what they're asking for. The whole notion of doing whatever it takes to get the job done has been replaced by making sure you get it done in time to get a facial."

Over the last year an unprecedented number of kids in the analyst program have jumped ship for jobs at dot-coms and other firms. As a result, Salomon has fretted about the brain drain, while the remaining analysts–who, like their counterparts all over the Street, are almost exclusively recent college graduates who do their firms' grunt work in exchange for an education, business-school recommendations and $70,000 or more a year–gradually discovered they had some real leverage. They didn't have to take it anymore.

The Brutal Memo suggested 36 changes in the work conditions of the Salomon analysts.

Chief among the complaints were the "general disrespect of analysts," slow expense reimbursement, a measly $20 cap on weekend working dinners, and the fact that if business class is booked, an analyst must fly coach instead of getting bumped up to first–"another example of the second-class citizenship of an analyst."

The punch line was that within a week Salomon conceded on most of the requests.

Hans Morris, the popular managing director who is co-head of the bank's financial institutions group, gave a Powerpoint presentation on April 3 outlining the myriad new perks that Salomon's bottom-rungers could look forward to in respone to the memo: casual dress every day ("I think we're the only major bank that hadn't gone casual," said a current Salomon analyst), access to the company gym on weekends, bonuses of up to $20,000 for referring a friend to the firm and a new coffee lounge.

Suddenly, analyst culture as Manhattan has known it for a quarter-century seems doomed. Will the bars of Yorkville ever be the same?

Solly brass said they had solicited the memo in early March after Mr. Leung and a supervisor were chatting about an analyst who had quit two days before. But the memo's frank tone suggested that management was not as eager to hear from the kids as the firm insisted it was. "We are addressing this issue," the memo states, "because frankly, senior management and firm management seem to [be] ignoring this problem, perhaps thinking it will go away." It was this combative stance that had people talking about Mr. Leung.

Mr. Leung went to Stuyvesant High School, right in the shadow of Salomon Smith Barney's TriBeCa headquarters, and graduated last year from Cornell University–the alma mater of Sanford Weill, the notoriously penny-pinching chairman of Citigroup Inc., which owns Salomon Smith Barney. Mr. Leung's personal Web site at Cornell was warmly titled "Paul's house o' lovin." It included a link to a music-downloading site and scenic photographs of the Big Red campus.

At Cornell, he majored in Applied Economics and Business Management and played an active role in the Asian American Playhouse, which put on Grease last spring (Mr. Leung played Kineckie). He also helped run the Chinese Students Association.

"We always looked to him for advice and guidance," said Jannelle Choi, Cornell '00, a member of the club. "He was really good at reaching out to members when they needed encouragement or motivation."

Mr. Leung did not return phone calls to his office. A Salomon spokesman said the firm wanted to protect the burgeoning young author from unwanted fame. Mr. Morris said that Mr. Leung was simply doing what was asked of him.

"He is absolutely not an aggrieved or miserable analyst," said Mr. Morris, who started as an analyst at the company 20 years ago. "He's a highly-regarded guy. And I know he feels terrible about this, but in my opinion he certainly shouldn't. It's not his fault that it leaked."

"Investment banking has always been known as a sweatshop," said one Wall Street associate. "When you work weekends, 100 hours a week, and pull all-nighters until three or four the following afternoon, and then get a book thrown at you for screwing something up, it's an atmosphere that's hard to be upbeat about. There should be a whole shift in the way analysts are treated. You never get a 'Thank you.' You just get, 'I hope you didn't fuck this up.'"

Thanks to Mr. Leung, that shift may be underway.

"Generally, we choose not to comment on compensation-type related material," Mr. Stingi said.

No bonus prognosis?

"None at all, no comment."

Mr. Stingi (pronounced sting-ee , not stinj-ee , actually, though some underpaid Merrill executives who notice his name on compensation memos tend to mispronounce it) was in his office at 7 A.M., hard at work divvying up the spoils of yet another huge year on Wall Street. At Merrill, this is the time of year when bonuses are determined, when the bankers and traders who have been toiling through four seasons on behalf of mammon are allocated their portion of it. They get their number (that's the vulgate) in late January, their check a few days after that.

But at many of Merrill's big bulge bracket competitors, the third week of December is bonus time. Starting Dec. 13, executives and peons at Morgan Stanley Dean Witter, Goldman Sachs, J.P. Morgan, Lazard Frères and Lehman Brothers will file one by one into the office of their boss (or of their designated compensation manager) to be given the six- or seven- or even eight-figure number that they live for and live on. That is, they will find out what their bonus is.

It is the most hallowed ritual on Wall Street, occurring conveniently around the old pagan festival week of the winter solstice, the peak season of conspicuous consumption and family dysfunction. And in the weeks-months!-leading up to it, the anticipation mounts. As the elaborate system of determining compensation, a tortuous process often stretching back into summer, finally winds down, the deal makers and traders get distracted by that looming date with their own Mr. Stingi.

This year, according to headhunters, bonuses are likely to go up. Surprise, surprise. Unlike last year, when huge trading losses and loan defaults in Russia and Asia devastated investment banks' earnings, nearly everyone on the Street has had a splendid 1999. As a result, headhunters say, investment bankers should see an increase in their bonuses this year of 10 to 20 percent, if not more. For example, bankers five years out of business school are expected to earn $850,000 or so, whereas last year bankers five years out made around $750,000, headhunters said.

"Usually, there's this game of psychological warfare," said one banker at a major firm. "I've gotten it every year. They just beat down your expectations. Some do it well, some don't. It's my least favorite part of investment banking. It's all October and November and then nothing gets done in December. But they've done nothing this year to beat them down. So everyone here thinks they're going to get paid through the moon."

"It's gonna be a big year for two reasons," said one headhunter. "Most firms are having a record year. And a lot of firms are having trouble retaining their people."

Ah, yes, the brain drain. All the kids are getting crazy, shunning the firm for dot-com dreams or the venture capital firms that finance them. At the top business schools, students are no longer turning up for Morgan Stanley presentations. They're not even staying in school. They're off to Silicon Valley for a life of sandals and stock options. Meanwhile, the drones at the bank have to contend at cocktail parties with the arrogance of the buy-siders, the hedge fund babies with their open-collar shirts and brown shoes. The lure of real bull market riches, as opposed to a mere safe million, can be overwhelming. "The right price to do a job you don't really like is much higher," said one trader at a major firm. "Because the alternative is to go to the West Coast and do something really fun and kind of cool and maybe even a little bit socially productive."

"It's very simple," said a managing director at one of the big firms. "The firm pays you what they think they need to in order to keep you. That's if they want to keep you. Meanwhile, you know what you're worth and if they don't match that, you're gone."

The two lines most commonly heard in comp sessions are, "We wish we could've paid you more," and "Don't tell anyone else, but you're the big winner this year." ("The guys who walk out smiling are the ones who bought that line," said one banker.)

At one firm, employees have a tactic for finding out where they really stand: Everyone in one department writes down his or her number on a scrap of paper and throws it into a hat. A designated slave crunches the numbers and provides the participants with an average, against which they can measure their self-worth. "It's a check on whether management is lying to you," said a trader.

"Everyone always thinks they should have been paid more," said one banker.

That was certainly the case last year, when the upheaval in the global markets late in the year shattered a lot of hopes. "I got half as much as I should have," said one trader. "I thought I was being very conservative. I went into the meeting knowing that I'd lost a stack of money that year. The guy said, 'O.K., traders who lost money got zero. You got X.' X was a number nominally greater than zero."

Enter the headhunters. Actually, the headhunters insert themselves into the process earlier in the fall, calling around the Street, gathering and dispensing information, seeking out the seeds of dissatisfaction. They compile estimates for how much people at a certain level will make and they share those estimates with their friends and clients. "You develop expectations based on calls from headhunters, who are out to foment dissent," one banker said.

Once the bonuses are paid, the phones start ringing.

"We will feed off of the banks that don't pay well," a headhunter said. "We'll call and say, 'Hey, heard you guys got shitty bonuses.'"

And the bankers will fess up. The headhunters are their confessors; they only talk to their peers if they did well. And when they do well, a lot of people don't even discuss the number with their families. A senior vice president at a major firm, who expects to make around $1 million, said, "I think my parents would be very proud if I told them, but I just don't. My mom will ask, and I'll just say, 'I did fine.' She thinks I make a third of what I make, and she thinks that's huge. At one point, she was trying to get me to buy a house in Florida for her and my dad to go hang out in. It was in some retirement community in Florida. I'm like, 'Listen, I barely make it out of town for the weekend.'"

This year, he's got other ideas: "I'm gonna buy a sports car," he said. "I could spend 100 grand on a sports car and not worry too much, and that's kind of nice."

"A lot of people are talking Ferrari Maranello," said one former banker who is now investing in Internet startups.

They're talking Ferrari now, but somehow, once you get the number, it doesn't take long for the euphoria to give way to worry. You start thinking Audi instead, and then … where's my next deal?

"For a second, you're like, Jesus Christ, that's a lot of money," said a $1 million-a-year (he hopes) vice president. "Then, you think, shit, the tax man gets half. Then it hits you: now I have to start all over again. It's an anticlimax."

"You're facing another year of starting at zero and of having to prove yourself," a managing director said. "The wear and tear in this business is massive. You have to make a number. Waking up every morning and saying, 'I don't have the number and I don't know how to get there, it's a nightmare."

By Christmas, the bitterness is back.

"In the grand scheme of things, we're obviously dramatically overpaid," said one senior vice president. "We're just guys who work for some public company. But the flip side is, if others are getting it, you should, too. We earn it more so than a bunch of Internet schmucks who come up with some stupid idea. I think those people are all full of shit."

"I'd like to do this until I'm managing director," he went on. "Then, I don't know, open a flower shop, like Christian Slater in some stupid movie I watched on an airplane. He was a hitter investment banker who opens a flower shop and sends flowers to some chick who totally falls for him. That's gonna be me."

All of you brokerage houses

Are like teenage girls

Who throw away their dolls

When they dress in pearls.…

Hit me with your downgrade

Why don't you hit me with your down-grade

Hit me with your downgrade

Lower away.

Gene Marcial, Business Week 's Inside Wall Street columnist, was beaming at the stage, where a Paribas flack, dressed in a disco Barbie skirt and top, was impersonating Jill Barad, the embattled chief executive of Mattel Inc. She was belting it out to the tune of Pat Benatar's "Hit Me With Your Best Shot." It wasn't pretty, but Mr. Marcial liked it. "Barbie-I think she was good," he said afterward.

Mr. Marcial and his colleagues were at the New York Financial Writers' Association's 57th annual Financial Follies dinner held on Nov. 19 at the Marriott Marquis hotel in Times Square.

The Washington press corps has its annual Gridiron dinner, and the City Hall crew gets its Inner Circle show, so it is only natural that New York's financial media should have a rubber-chicken dinner of their own.

As rubber-chicken dinners go, it's pretty second-rate. Unlike the Gridiron and the Inner Circle, none of the subjects of the Follies' spoofs or of the journalists' coverage show up. There are no swinging dicks in this room. The corporate chiefs and dealmakers couldn't care less. So it is not a place to work sources or observe the red faces of the corporate elite. It is a night for journalists and flacks. The flacks buy the tables; the journalists dine and drink on the flacks' dime. On Nov. 19 more than a thousand of them showed up at the Marriott in evening dress to watch their peers make light of the year's top stories: Martin Frankel, Bank of New York, day traders.

And Lou Dobbs. Backstage, before the show, Steve Gelsi, a reporter for CBS Marketwatch.com, was getting into his space suit. He was playing Mr. Dobbs, the former CNN-FN president who left in June to start a space Web site. "I've always wanted to be a spaceman," Mr. Gelsi said.

And for a few brief moments he was. His was the sixth number, sung to the tune of Muddy Waters' "Mannish Boy": I'm a star, here on planet Earth/ I'm a star, I'm a broadcast star/ I'm a star, ball of gas . Before the lines were even sung, a Teleprompter conveyed the lyrics to the audience. What laughter there was, was diffuse.

A couple of numbers later, retired New York Times reporter Leonard Sloane, in a yellow V-neck sweater, was doing Microsoft Corporation's chief executive, Bill Gates. ( I am what I am/ Don't make me out/ Kinder than Jesus/ Nice guys finish last/ They kiss my ass /I'm richer than Croesus. ) As he forged grimly ahead, someone knocked over a platter. There was a loud crash. The journalists and the flack hosts at their tables seemed to take it as a sign that it was time to get up and work the room.

There was Ron Insana, the CNBC star, and his colleague David Faber, who met his fiancée at the Follies a few years ago. And Steve Lipin, The Wall Street Journal 's mergers and acquisitions ace. And whaddaya know, Floyd Norris, the Times financial columnist, not far from the stage. A line of supplicants (mostly women) queued up to talk to him. Tall, rotund and stately in his tuxedo, the white-haired Mr. Norris patiently obliged the fans surrounding his table sponsored by the American Stock Exchange and the National Association of Securities Dealers. He was asked what he thought of journalists occupying the limelight. " This is the limelight?" he sneered.

Well, it was for some reporters. Roberta Yafie, a Follies veteran, was particularly exhilarated after her performance. She had played Tina Brown, to the tune of "Boogie Woogie Bugle Boy of Company B." ( Call me Gotham's golden goddess/ I'm the talk of the town … ) After the show, she smoked a cigarette and recalled the good old days when Variety devoted six column inches to the Follies. "I was so excited!" said Ms. Yafie, a copper editor at American Metal Market , a trade publication. "There I am-my name's in Variety ! I sent a copy to my mother."

At around 10 P.M., the crowd began to head upstairs to the Marriott's ninth-floor indoor terrace, for a reception hosted by Merrill Lynch & Company and a company called Red Chip. There were several bars and two dance floors with deejays and free gift bags with large hunks of cheddar cheese.

A deejay was playing Hazell Dean's "Searching (I Gotta Find a Man)." Three women were dancing together on an otherwise empty dance floor, while two skinny young men in baseball hats and baggy pants-mere civilians, clearly-watched them from the terrace. "Why aren't any guys dancing with them?" one of the young men asked.

They were students at New York University's Tisch School of the Arts. Their names were Ronald and Ernie, and they had come to the Marriott to shoot scenes for a documentary they were making about "corporate events." But they weren't having much luck. They kept getting kicked out of corporate events before they could get anything on film. This was no exception. As the guys stood there with their camera, one of the dancing women rushed off the dance floor toward them. It was Bobbie Collins, a Merrill Lynch flack. She asked to see their ID's. "You guys don't belong here!" she said. "It's 21 and over."

"We've been kicked out of most of these events," Ronald said, after they'd retreated down the hall. "Most adults are pretty mean and not very nice to kids in hats. Why are adults so boring? Why is it that older people lose their personality? They become as much fun as cheese that's been sitting out for 20 days. Is it because they make a lot of money they can be mean to people? Because, if I made a lot of money, I'd be nice. I don't like journalists. I think they're vultures. We want to present beauty on the screen. You guys want the cold hard facts."

Then they left, to seek out more corporate events. On this Friday night, the Marriott was full of them.

Back at the party, the crowd had thickened. People were starting to get drunk. Some of the guys were even starting to dance.

Gary Weiss, a senior writer at Business Week , stood off to the side, summing up the scene. "The P.R. industry that has the money wines and dines the financial press that does not: Everybody knows that a large number of financial reporters are completely co-opted by people they write about. I've been co-opted by the Mafia!"

"He's so crazy !" another reporter gushed.

Before long, people started leaving. Next stop: the after-parties.

Charles Gasparino, a reporter at The Wall Street Journal , was hosting one at Russian Samovar on West 52nd Street. It was after midnight, and a financial reporter from The New York Time s sat at the bar downstairs, eating smoked fish and caviar. As he ate, he started to criticize one of his colleagues from the Times business section (while insisting that his own name not be used). "She's such a loser!" he said. "She never publishes anything! A few years ago at the Follies, she reamed someone for not watching her stupid, lame, deadwood journalism performance."

His friend, a flack, was anxiously trying to shut him up, but the reporter waved him off. "It's an absurd event with deadwood journalists," the reporter said. "All the losers are prancing around with their skin hanging down, some looking over the hill, some looking underage, some looking out of their minds. But it makes political sense to come to these events, even if it's gross."

Upstairs, reporters hovered around a white marble bar, waiting for drinks. One of them, a reporter from Bloomberg Business News, introduced himself to The Observer as Charlie Gasparino of The Wall Street Journal .

"There's kind of an undercurrent of resentment towards Charlie Gasparino," explained his friend, another Bloomberg reporter. "It's because he's done so well."

Downstairs, a lone investment banker from Bear, Stearns & Company had come into the restaurant. It was now close to 3 A.M. He wanted to know what was going on. Why was everyone so dressed up?

Mr. Weiss, the Business Wee k writer, walked in with Karen Donovan, a National Law Journal reporter. They seemed well on their way. "Don't they have any food here?" she said loudly. "Any vodka ?"

Mr. Weiss began merrily bemoaning the state of financial journalism again. Then he noticed the banker. "Oh, do you work in the brokerage industry?" Mr. Weiss asked, casually.

"No," the banker said.

"Where do you work?"

"Priceline.com," the banker lied.

"Oh, that's a legitimate company," Mr. Weiss said. He wandered off, disappointed.

The banker took a sip from his drink and said to The Observer , "I don't understand your circle."

It was getting late. The reporters were starting to leave the restaurant. One of them actually remembered to leave a tip. Amid the empty glasses on the bar he left behind a small pile of dimes.

"Right," Mr. Phillips said. "I'm probably going to have that, too. That's my old standby." Then he considered the spinach artichoke spread. "You know, if you put a little bit of that on the tandoori chicken and the peppers, that would work!" The two bankers nodded in agreement. A fine idea. Synergy.

These two titans of high finance were discussing sandwich fillings because they are principal investors in Cosí, the fast-growing chain of sandwich bars founded in New York in 1996 by Mr. Gleacher's nephews, Jay and Shep Wainwright. The Wainwrights, a pair of preppy brothers raised on the Upper East Side, have capitalized on their connections to get some big-time money behind what might seem a silly idea: fancy sandwiches for the masses. Cosí has 18 restaurants nationwide, 13 of them in Manhattan. But the Wainwrights' dream is to have a Cosí on every corner, in every mall. They want to do with sandwiches what Starbucks has done with coffee.

They have a shot at realizing that dream in part because they have enlisted the support of prominent investors who would usually not even deign to spill diet Coke on a business plan that featured caramelized onions and basil-roasted plum tomatoes instead of fiber-optics and network systems. Besides Mr. Phillips and Mr. Gleacher, the former Morgan Stanley mergers and acquisitions chief who figured prominently in Barbarians at the Gate as an adviser to Kohlberg Kravis Roberts in its hostile bid for RJR Nabisco, Cosí's backers include leveraged buyout mogul Henry Kravis and former Morgan Stanley chief executive Parker Gilbert. It is a bizarre but fruitful intersection of the old-boy network and the old-school inclination to bake things for money. (Everyone knows at least one burnout who has opened a bagel store somewhere in the Rocky Mountains.)

Over lunch at Cosí, The Observer asked Mr. Phillips whether he would have invested in Cosí if he hadn't known the Wainwright boys as well as he did. "Never!" Mr. Phillips said. "Not in a million years! I mean, if someone showed up and said 'I want to open a restaurant business in New York,' we'd be howling with laughter."

"Are you serious?" Mr. Gleacher said. "Do you think we're brain-dead?"

Now the investment seems to be panning out. On Sept. 15, Cosí announced plans to merge with Xando, a chain of coffee-liquor bars started by Nick Marsh and Andy Stenzler, a pair of Larchmont, N.Y., entrepreneurs whose investors include the Ziff family and Chicago real estate magnate Sam Zell. The combined company, Xando Cosí Inc., now has 40 stores nationwide and is valued at $112 million. The two companies hope to go public in 2001. They've even picked a ticker symbol: XOCO. Suddenly, this little sandwich bar concept has the potential to reach a lot of mouths and generate some serious wealth.

The identical Cosí restaurants with their slate floors, earth tones and assembly-line sandwich counters are scattered strategically near office buildings throughout Manhattan, Boston, Washington, D.C., Chicago and Philadelphia. The entry in Zagat's calls Cosí "a deli for the next millennium," but complains that the wait makes it seem "like the yuppie version of a Soviet bread line." At Cosí, for $6 to $8 you get up to three fillings between Cosí's signature olive-oil-dipped, baked flat bread. It's still a sandwich.

But Wall Street loves it-the sandwich and the story. "I'm a card-carrying Cosí man," said Jack Levy, head of mergers and acquisitions at Merrill Lynch & Company and a longtime competitor of Mr. Gleacher's. Mr. Levy was referring to his sandwich card, which gets him a free sandwich for every 10 he buys. "Once you try the bread samples, you're not getting off the line."

This is what a mom-and-pop family business in Manhattan can become, if the right people are involved. Hey, Larry Tisch's nephew works with Xando: He's a landlord. Reached by The Observer , Larry Tisch, a co-chairman of Loews Corporation, said he had never heard of either Cosí or Xando, but when he heard that Henry Kravis was an investor, he brightened. "Oh, good!" he said. "Henry likes salads."

Awesome Investors

On a recent evening, Jay Wainwright, 29, and Shep Wainwright, 27, were in a Soho gallery, attending the opening of an art show by one of their classmates from boarding school. Many of their own Wall Street friends were there. Jay lives downtown; Shep, who is married, lives uptown. But the two sandwich guys still spend all their time together.

At the gallery, a friend, an equity trader, approached them and asked about their recent merger with Xando.

"Have you been taken out with this merger?" the trader asked.

"No, no …" Shep began.

"This is huge-a huge deal. It's been all over the news!" the trader said. "I should have forced Jay to let me invest. He said, 'No, no, no. We're full.' I should have said, 'Shut up and take my fucking money!'"

"Yeah, well," Shep said. "It's all on paper now."

After the art show, the group adjourned to L'Orange Bleue, a French-Moroccan restaurant in SoHo. Jay was chatting with an old friend and was picking at some hors d'oeuvres. He talked about how Cosí was going to start serving hors d'oeuvres at night. He spoke of his "awesome" investors, Mr. Gleacher and Mr. Phillips, both Morgan Stanley alums.

Later that night, another Morgan Stanley alumnus, Phil Potter, walked into the restaurant. Mr. Potter, who was fired from Morgan Stanley in 1997 for talking to the press (and has since landed a more senior position at a rival firm), eyed the hors d'oeuvres as he was introduced to Mr. Wainwright and his friends. He and Jay started comparing Palm Pilots. Mr. Wainwright admitted to going through three Palm Pilots a year. He talked about how he lost the receipts, so he couldn't get the free service plan. Mr. Potter was amused. "Sounds like Mr. Cosí needs a lesson in recordkeeping," he said.

"I have a problem with things like that," Mr. Wainwright said.

Before long, Mr. Potter decided to move on. As he was leaving, he pointed to Jay Wainwright and said, "Just keep making those sandwiches."

Helplessly Hoping

"I don't want to make it sound as if Jay and Shep had a humble life," Mr. Phillips said. "But they grew up in a modest family. They weren't affluent and couldn't rely on their family for a quick start in life."

Depends on one's definition of affluence. The Wainwright boys grew up on 96th Street between Park and Madison avenues. Their mother, Patsy, was the head of the upper school at Nightingale Bamford School on East 92nd Street. (Now she's the headmistress of Greenwich Academy.) Their father, John, was a lawyer at Cadwalader, Wickersham & Taft. They attended St. Bernard's School and played squash at the Union Club. They spent summers in East Hampton, L.I., where their family belongs to the Maidstone Club. They skied during the winters, staying either at Mr. Gleacher's house in Snowmass or at Henry Kravis' house in Vail. They both attended Hotchkiss School in Lakeville, Conn. (where Jay distinguished himself by performing Crosby, Stills & Nash's "Helplessly Hoping" for a school talent show in the dining hall. "Everyone thought it was terrible except for Jay," a friend recalled. "He didn't know how to play guitar"). Both brothers then went to Hamilton College.

When Jay went to Paris on vacation in 1993, he discovered Cosí, a small restaurant in the Latin quarter owned by Drew Harré, a violin maker and wine taster from New Zealand. Shortly thereafter, Shep spent a semester in Paris and fell in love with Cosí as well. At the time, Jay had graduated from Hamilton and was spending a postgraduate year in Telluride, Colo., "I kept remembering that place," Jay said. "It's my favorite place in Paris."

So he and his brother came up with an idea. They approached Mr. Harré. "We said, 'Hi, we're Jay and Shep, and we want to open Cosí all over the U.S.,'" Jay recalled. "He said, 'Whatever.' We made no headway. We faxed him three times a week in May through September. Finally he called me up and said, 'O.K., you wore me down.'"

The Wainwrights went over to Paris in November 1994 and spent two months learning how to duplicate Mr. Harré's bread. Then they came back to New York and with the help of Mr. Phillips' associate at Gleacher & Company, Emil Henry, developed a business plan and began shopping it around.

When it came time to raise money to start a business, they had people to turn to. "We weren't scraping the bottom of the barrel," Shep said. To start with, over dinner a few years before in Aspen, Mr. Gleacher had encouraged his nephews to be entrepreneurs, offering to help back them financially if they came up with a good idea. The Cosí idea may not have been what he had in mind, but he liked it enough to help them out. Mr. Gleacher, after all, knew the food business. He was the man who in 1988 insisted that Ross Johnson, then chief executive of RJR Nabisco, meet Mr. Kravis, touching off one of the most heated and celebrated takeover battles in American history.

Mr. Gleacher required them to put up some money of their own. "I remember the look on Jay's face when Eric told them that as a condition of funding they had to put every last cent of his available capital into this business," Mr. Phillips said. But eventually the bulk of the capital came from family friends: Mr. Phillips, whose son Scott grew up with Shep (Scott Phillips and Shep had a window-washing business in East Hampton when they were teenagers); Mr. Kravis, whose son Robbie was a close friend of Shep's, and Parker Gilbert, whom they met through the Kravises. They raised $500,000, and in February 1996 opened their first restaurant, on East 52nd Street, where they made the sandwiches themselves.

"The first investment I made was an expression of admiration and affection for the boys," Mr. Phillips said. "They invited us over to a rental apartment in some horrible neighborhood to eat so that their investors would actually know what they'd invested in. But the sandwiches were so unbelievably good. That was the first time I felt like, 'Man, this could be a good company.'"

After several more rounds of financing, the group, which also included the Wainwrights' parents and grandparents, has now raised a total of $15 million. Mr. Gleacher is the lead investor.

According to executives at both Xando and Cosí, the stores turn a profit, though the companies as a whole do not.

Now that Cosí has joined with Xando, which, because it serves alcohol, is well positioned to draw people at night, the combined company has tremendous potential for growth. "They're well on their way," said Charles Weissman, a restaurant industry analyst at Bear Stearns & Company. "Their growth has been exponential. The concept-it's very well run. They use the commissary format. They don't actually cook food on the premises, which limits production complexity. It opens up possibilities in terms of where they can lease space. Starbucks is the same way."

"I thought this might be a good four-restaurant business in New York," Mr. Phillips said. "Now, with Xando, I'll be surprised if by 2005 we don't have several hundred."

Mr. Redstone was born five years before William Paley paid $417,000 in 1928 for the radio stations that would become CBS.

But, as Mr. Karmazin pointed out, "This man has not lost his fastball." Mr. Karmazin has been careful to make it clear to the world that he is taking a back seat to Mr. Redstone, with the understanding that as Mr. Redstone's heir apparent, he will one day be the big man out front. But he has to be wondering, at least a little bit–will Sumner Redstone ever really let go?

Mr. Redstone is 76 years old, or thereabouts. (His age is as changeable as his hair color.) Analysts have bellyached for years about a lack of an heir at Viacom. Now he has satisfied them by snapping up one of Wall Street's favorite salesmen, which is but one reason Wall Street seems to love this deal. In the past year, Mr. Redstone has resuscitated his company's stock with a series of shrewd moves that prove that the old man still has it, and that the old man still wants it. It is hard to tell whether this latest, crowning move, Viacom's $38 billion acquisition of CBS, is an exit strategy or an entrenchment ploy for Mr. Redstone. Running a company is like playing blackjack. Whether you're winning or losing, you just want to keep playing cards.

Corporate lions tend not to retreat quietly. Men who spend their lives pursuing power and all of its trappings don't just relinquish it overnight. It's hard enough to get old folks to stop driving. How is a chief executive, especially one who controls his company's voting power, as Mr. Redstone does, supposed to know when the time has come to step down?

In most of corporate America, a company's board of directors is responsible for preventing the onset of King Lear syndrome. America's most celebrated chief executive, General Electric's Jack Welch, is approaching G.E.'s mandatory retirement age of 65. He's a young man, damn it, but policy is policy, especially in a company as devoted to corporate philosophy as G.E. So now a pair of insiders are vying for his job, the company's future hangs in the balance, and analysts and investors have an excuse to wring their hands.

Many would argue that in this day and age mandatory retirement at 65 is arbitrary and obsolete. Life expectancy has increased by 30 years over the last century. With 69 million baby boomers beginning to approach retirement age, there is an incentive–from both a Medicare and Social Security point of view–to keep as many of them in the work force as possible, much as they'd like to retire yesterday.

But what about Mr. Redstone's 76 years? Yes, he is spry, Yes, he is vital. Yes, he still plays tennis, even with that hand. And yes, as fellow septuagenarian and Loews Corporation co-chairman Laurence Tisch put it, "His mind is perfect!" Hey, Albert Gordon ran Kidder Peabody, and was as smart as anybody there, until he was 85. (He is still reportedly going to the office at Paine Webber, at the tender age of 98.) But Ronald Reagan ended the Cold War in his 70's and was afflicted with Alzheimer's in his 80's.

So how old is too old to be a chief executive?

"Some people are old at 50, and some are old at 100," said Bear Stearns & Company's chairman, and Viagra champion, Alan (Ace) Greenberg, 72. Mr. Greenberg relinquished the title of chief executive to James Cayne in 1993, but he said his function at the firm hasn't changed. "Old does not depend on chronological age. I mean, I personally have the body of a girl of 16."

"At the moment, I can outlast most of my colleagues," said Robert Pritzker, the 73-year-old chief executive of Marmon Corporation. "We'll be working 60 to 70 hours a week, more than two or three cities a day. I'm ready to keep going at 10 o'clock at night, and I have to drag the rest of them along. People have been telling me to slow down for years. But they told that to my father, and he died at 90."

"I am told that I stay up later than most people and get up earlier," said Ahmet Ertegun, the 76-year-old founder and co-chief executive of Atlantic Records. He said he has no plans to retire. "Not right now. I'm too busy. But maybe when I'm not that busy I'll think about it."

Silverbacks

"Having taught at Harvard for eight years, at the business school, I've seen enough of the world's brightest 25-year-olds to know that they still have some stuff to learn, so I remain at least modestly skeptical that they're going to set the world on edge," said Andrall Pearson, the 74-year-old chief executive of Tricon Global Restaurants Inc., who was president of Pepsico for 15 years. "The 24-year-old millionaires, we will have to see how they do. That's a recent phenomenon and not one that has yet stood the test of time."

"If we were gorillas, they would say the silverbacks are at the top of the heap because they have an expertise that the younger generation doesn't have," said former Mayor Ed Koch, who just completed an anti-retirement book entitled I'm Not Finished Yet: Remaining Relevant . "Do you think given the choice between some whippersnapper who's terrific in physics and Albert Einstein, I would take the whippersnapper? I wouldn't."

"The only disadvantage to being an older C.E.O. is that your life expectancy is shorter," said Mr. Tisch. "In business, nothing really changes over the years."

But Walter Wriston, the octogenarian former chief executive of Citicorp, disagreed. "The danger of hanging around as a C.E.O. is that you tend to know the things that aren't true anymore. My rule is that I don't even go into the door of my old outfit except to work the cash machines."

Graef Crystal, corporate watchdog and compensation expert, echoed his sentiment. "You get to this point where you just assume you have your whole act together now and you don't have to keep editing the manuscript. The root cause is perhaps an unwillingness to throw out almost wholesale what worked in the past and to incorporate a whole new repertoire of behavior that is needed for today."

("I don't use the computer," said Mr. Ertegun. "But my secretary does. I want to take some computer courses because I'm interested in some of the access to some of the illegal things on the Internet. I'm just kidding. Do you do surfing or whatever they call it?")

"The record is not very good," Mr. Crystal continued. "Armand Hammer, chief executive of Occidental Petroleum, lasted until the day he died, when he was 90. He raped the shareholders, was grossly overpaid, and his performance was terrible. He had a contract that renewed itself every seven years. The day he died, they owed him seven years of salary. The Los Angeles Times dubbed it the 'Golden Coffin.'"

"Then there's Henry Ford!" Mr. Crystal said. Mr. Ford, he pointed out, hung on until his son, who was in the Navy, had to come home during World War II to rescue the family business from his ailing father's increasingly incompetent leadership.

Mr. Crystal was getting warmed up. "Leonard Tow, chairman of Citizens Utilities, chief executive of Century Telecom–he's got to be in his 70's. He was one of the biggest pay abusers. All that may be changing. Everything's going down–even his greed glands are shrinking!"

And then, of course, there was the legendary William Paley of CBS. Jealous, mean and paranoid in his later years, Bill Paley fired heirs apparent Frank Stanton, Arthur Taylor, John Backe and Tom Wyman while he himself stayed on, driving his company, and its ratings, into the ground. While he was in his 80's, according to Sally Bedell Smith's biography of Paley, In All His Glory , he repeatedly asked his friend Jeanne Vanderbilt, "Why do I have to die?"

"I wonder about Sumner having a little bit of the outbreak of William Paley's disease," said Mr. Crystal. "You know, he fired Frank Biondi, who was well regarded. Now he's got Mel. I always thought Mel was pretty smart, but now he's working for Sumner, and I wonder–is Sumner going to do what Bill Paley did, and send Mel to the board and get him fired?"

The Country Club

"I do think that there probably is a fear of loss of role, loss of status, with some loss of power in retirement," said Rose Dobroff, a professor of gerontology at Hunter College. "When you get to be in your 70's, you've seen enough of people being forgotten."

"Without their business these people don't exist any longer," said Tom Wolfe, author, most recently, of A Man in Full , the story of Charlie Croker, an aging real estate mogul in decline. "Because suddenly nobody's inviting them anywhere anymore. All they've got is money. They become non-people, no matter how powerful they may have been. In the case of Charlie Croker, he went to great lengths to try to make people believe that he wasn't old by hiring young people. If I were Sumner Redstone, I'd probably feel the same way. As long as he's running Viacom, he's a force to be reckoned with. But the minute he steps down, what's he got, the country club?"

As Marc Bell, the 32-year-old founder and chief executive of Globix Corporation, put it, "I figure when you stop working it's as if you're waiting to die."

"The highest suicide rate in the United States is among white men in their 80's," said Dr. Robert Butler, chief executive of the International Longevity Center. "Retirement is an aberration, mostly a 20th-century phenomenon. For those who are functioning and healthy, it's destructive. There's only so much golf you can play."

"People are very fearful," said Mr. Wriston, who retired at 65 but still goes to work every day. "They think–what am I going to do on Monday morning? The phone doesn't ring, and I'm in yesterday's newspaper."

The hustle never ends. You're only too old if you admit you're too old. And no one is going to do that.

"At the end of a dinner party, when everyone goes home, I still sometimes have to go out and listen to a band," said Mr. Ertegun. He brightened. "Do you like rock 'n' roll? Call me up sometime and I'll take you to hear a new group at CBGB's or something."

Additional reporting by Gabriel Snyder.