Returning to work was the best therapy for Keefe, Bruyette & Woods
By Megan Barnett
n the weeks after September 11, John Duffy's black gym bag carried much of what was left of investment bank Keefe, Bruyette & Woods. Duffy, KBW's CEO, carted the bag around everywhereand each week as he uncovered more documents, he threw them in. By mid-October, the bag had gotten so heavy that Duffy, 53, couldn't lug it on to the train anymore, so he began driving into Manhattan from his Westchester home instead.
But in truth, the bag was the least of the load on Duffy's shoulders. Keefe, Bruyette & Woods had 172 employees on the 88th and 89th floors of the south tower of the World Trade Center. On the morning of September 11, Duffy was driving down the West Side Highway into work when he heard what was happening. After unsuccessful attempts to get downtown, he returned home to await the newsand it wasn't good. Survivors say the more sparsely occupied 88th floor evacuated immediately after the first plane hit next door. But most on the 89th floor, which housed research analysts and traders preparing for the opening of the stock market, remained after a building announcement indicated the south tower was secure. With clients to call and premarket preparations to make, most traders didn't even flock to the windows to see what was happening next door. A total of 67 KBW employees perished that day. Among them were the firm's co-CEO, four other board members, and 23-year-old Christopher Duffy, who had joined his dad's firm on the trading desk a year before.
But at KBW, there was to be no wallowing in pity or grief, no matter how devastating, not for long, anyway. Like those 89th-floor traders who felt they just had to keep working, the surviving KBW employees are a focused, tenacious bunch. Today, the bank is well on its way to occupying a fully wired and thoroughly renovated midtown officealbeit on the fourth floor, comfortably closer to the ground. The firm now has 258 employees, more than the 220 it had on Sept. 10, 2001. Behind the reception desk hangs the office's only real memorial, a painting of a flag with the 67 names stenciled on its stripes. Just as every individual grieves differently, so does every organization. Following the direction of its stoic and focused leader, this company used the drive to rebuild as its unique form of therapy.
There was never any question the firm would continue. Employees were encouraged to return at their own pace, but many began working around the clock. "We knew that the last chapter of KBW could not be that devastation," says Chief Operating Officer Thomas Michaud, one of several top executives who took charge during the two weeks Duffy took off.
KBW advises companies on public offerings and mergers, and it trades stocks and bonds for institutions, like fund managers. Over the years, it had built lots of relationships, so doors opened. The bank's law firm offered four conference rooms and a bunch of computers. Across the street, French investment bank BNP Paribas had extra space on its trading floor. KBW's small Hartford, Conn., office was transformed into a crisis center for family members and surviving employees. By the time the stock market opened the Monday following the attacks, KBW was ready for businessphysically.
But emotionally, it was a different story. The company had rented a suite at the nearby Palace Hotel with counselors for employees and family members, and "we wanted to let people respond to the situation instead of imposing any notion of how things should unfold," says KBW President Andrew Senchak. "Whoever showed up, we put to work." Before 9/11, days would typically start with a 7:30 a.m. conference call for research analysts, but the 28-member research department in New York now had just six people. The sales and trading floor, which formerly bustled in the morning with 30 people, now consisted of five. The firm chose to wait for the stock market to reveal its emotions before jumping back in. So it began trading the next day, Tuesday.
Like lots of people, KBW customers wanted to offer support to the victims. That aid came in the form of trades. On the first day trading resumed, KBW handled three times the normal volume. In the first few months, even competitors reached out; Merrill Lynch and Salomon Smith Barney were among banks that included KBW on deals at the last minute. The handouts were welcome, but KBW executives knew they couldn't count on them for long.
Before the bank could begin competing for business, it had to restore its own. After KBW pieced together its financial picture, the firm focused on finding new office space and employees, even as memorial services for its former ones continued. Moving to midtown was one of its simpler decisions. Many of KBW's clients were already there, and "we didn't want to put our employees through the trauma of walking past the site every day," says Duffy.
With Wall Street unemployment rates skyrocketing, there was no better time to find new talent. Résumés poured in, and retired employees returned. "I told them, 'I'm not a fireman, I'm not a policeman, but I know how to analyze stocks,' " says Michael Corasaniti, an old friend and former client of KBW. Corasaniti became the director of research in October.
Corasaniti also became the de facto chief headhunter. His autumn and winter passed in a daze of interviewshe stopped counting at 750. Despite KBW's fragile psyche, analysts and traders from top Wall Street firms still wanted ineven though Corasaniti was brutally honest. "It's a mess here," he'd say. "The only thing that works is the men's room, and that's because BNP [Paribas] runs it."
KBW executives discourage references to the "old KBW" and "new KBW." "We still have a special collegial culture here, but we know it can't be the same as it was," says Michaud. One way KBW's survivors keep the memory of former colleagues alive is by staying connected to their families. Michaud calls it "a new line of business"; KBW set up a Family Fund that has raised $9.6 million. Each year it will donate one day's trading commissions to the fund. KBW also plans to commemorate the 9/11 anniversary with a service after the market closes. A month later, it will host an open house for clients to come see the new offices, join in a toast to KBW's future, and accept thanks for their help.
To have rebuilt an investment bank during such a dismal stock market year is particularly remarkable. While many Wall Street banks downsized, KBW started over. And what it went through affords executives there a new perspective. "For us, rebuilding has been a distraction from how bad the market is," says Duffy. Over the past year, the folks at KBW have learned there are some things you just can't control.