“Second-tier brokerage firms are hunting for treasure on Wall Street,” writes Jathon Sapsford in today’s Wall Street Journal.

“As the big brokerage firms and banks cut back on personnel, such firms as Jefferies Group Inc., First Albany Cos. and even the much smaller Think Equity Partners of San Francisco have gone on hiring binges in recent months, snapping up both individuals and whole trading groups that are suddenly available.”

“First Albany is an upstate New York company whose First Albany Corp. brokerage unit has hired more than 60 traders, analysts, salespeople and investment bankers over the past year, including chunks of people dismissed from units of J.P. Morgan Chase & Co. and FleetBoston Financial Corp. First Albany, whose own stock trades on the Nasdaq Stock Market, opened a Nasdaq stock-trading desk in San Francisco last year that started with six traders hired en masse from J.P. Morgan’s Hambrecht & Quist unit. That desk now has 14 traders.”

“Other small brokerage firms are also hiring. Ranks at New York-based Jefferies Group, whose shares are traded on the New York Stock Exchange, have swelled by 35%, or more than 300, to 1,375 employees since the end of 2000, while staffing across Wall Street is down by nearly 10%.”

” ‘We wouldn’t be able to do this in a bull market,’ says Rob Gales, First Albany’s head of equity-capital markets, who is in charge of building the firm’s stock team.”

“These firms are, of course, small opportunists in a market dominated by huge financial institutions with global reach. Yet their hiring right now — often at rock-bottom prices — marks a postscript to Wall Street’s consolidation and the attempt of commercial banks to jump into the stock business. Last month, U.S. Bancorp acknowledged that its five-year-old acquisition of regional brokerage firm Piper Jaffray Cos. hadn’t panned out, and announced plans to spin it off. J.P. Morgan has been scaling back Hambrecht & Quist, and Fleet last year shut down its Robertson Stephens unit after failing to find a buyer. As a result, hundreds of bankers and analysts are looking for work.”

“But hiring refugees from these mistakes isn’t a surefire strategy. The market’s slide has sent investors of all stripes into hiding and has dented trading revenue across Wall Street, regardless of the size of the bank. Officials of the smaller banks say they are aware of the risks, but are charging ahead regardless. Piper Jaffray is hiring even as it parts ways with U.S. Bancorp, picking up more than 20 bankers who used to work at Robertson Stephens, including its convertible-bond team.”

“‘If your plan is to get rich fast, it is a bad plan,’ says Deborah Quazzo, president and head of banking at Think Equity, a San Francisco investment boutique. ‘But it is a great time to put a business together.’ “

“Behind that bet is the view that consolidation on Wall Street has gone too far. Over the past two decades, the brokerage industry merged into a handful of megafirms stumbling over each other to serve Fortune 1000 clients.”