Tue. Feb. 24, 2009

Financial Crisis: Can You Spare A Dime For My Wealthy Friend? *

So, the company you work for is starting to lose money and the layoffs have begun. You hold your breath as the names are read. Then suddenly it dawns on you – it just the working stiffs that are being affected. Is there something wrong with this picture? Where’s the equity in this? Not to fear, after careful research I have determined this financial downturn is so bad, that even the well-to-do are suffering – at least in their own way. Consider the following:

When President Obama announced a $500,000 salary cap on pay for executives at institutions receiving bailout funds this caused a great deal grief for our friends working in Manhattan. It was pointed out in a recent article just how difficult it is to live in the heart of NYC on a measly half-mill a year. With Harvard Club dues at $2,000 a year per couple, and Westchester County golf clubs typically charge $16,000; food and entertaining tabs are another $15,000, what’s the well-to-do to-do on a paltry $500,000 per year?

Well at least those guys have a job. What about the poor Joe’s (and Jane’s) that spent a mint ($32k/year out of state) to attend at a top flight institution with hopes of landing a job on Wall Street? As this article points out, for decades, investment banking was a well-worn path to affluence for business-school graduates. As big banks including Citigroup (C), Bank of America (BAC) and Goldman Sachs (GS) cut tens of thousands of jobs, MBA students who just a few years ago would have been aggressively recruited by companies now expect to fight for the handful of positions available.

How about those those less-fortunate wealthy families – those only earning six-figures. As noted in this article, the Lower Hudson Valley’s small, wealthy communities have not gone unscathed in the troubled economy. The six-figure household incomes earned by many residents in such places as Harrison, Mamaroneck, Yorktown and New City have declined or risen less than 5 percent since 2000 while mortgages and rents have risen by double-digit percentages in many of these communities.

Still not convinced the wealthy are having difficult times?

This Wall Street Journal article shows just how bad it has become for the upper-tier. “Rich people are getting hit, and they’re all expressing the need to curtail unnecessary spending,” said Russ Alan Prince, president of Prince & Assoc., a wealth-research firm based in Connecticut. “Lovers are part of the same calculation.” According to a new survey by Prince & Assoc., more than 80% of multimillionaires who had extra-marital lovers planned to cut back on their gifts and allowances. Still, only 12% of the multimillionaire cheaters said they plan to give up on their lovers altogether for financial reasons.

See, the wealthy are just like you and me. They are feeling the pain of this economic downturn, but they just haven’t been here before. As I work on getting my tongue out of my cheek, I’ll leave my wealthy friends with 21 Suggestions for Success to consider while they work on getting their lives back together.

Full Disclosure: No position in the aforementioned securities.

3 Responses to “Financial Crisis: Can You Spare A Dime For My Wealthy Friend? *”

  1. Chris says:

    :) That was great

  2. Greedy Firefighter says:

    Wow, I feel really bad about these high earners. They shouldn’t have to worry about having to live off of a measly 500K per year.

    I feel so foolish, and selfish for getting upset at a company cutting dividends, and thus, my dividend income. How could I be so selfish by investing my hard earned dollars into a company and then have the nerve to be upset when the people who are RESPONSIBLE for the dividend having to be cut rewarded with a measly 500K?

    I make well under 100K, and drive a 10 year old Mazda Protege. I also feel bad about spending an extra 20 dollars a month on the premium movie package.

    PLEASE., go ahead and cut the dividends so that companies can continue to pay “only” 500K to these executives.

    I am so embarrassed that I will even cancel the movie package, and sell my car and take the bus.

    God forbid that someone should have to cancel their country club membership, or have to sell their vacation homes in the Hamptons on my account!

  3. Greedy Firefighter says:

    Glad you liked my response.

    Seriously……..I am sick of hearing everybody that was involved ….from the poor “victimized” sub prime borrower who should have known better, all the way up to the CEO of major companies whine, complain and finger point.
    The reason for all this economic gloom:


    1. You make 40K a year. The bank will lend you 600k. You accept. GREED.

    2. You make a sub prime loan, knowing full well what will happen, but dont care because you will sell the loan to someone else. GREED.

    3. Your bank decides to not only make subprime loans, but you decide to create a “double upside down reverse interest which is added to principle loan” GREED

    4. You are the CEO of a major investment bank. You create CDO’s/default swap and other products that no one understands. But hey they make money. GREED

    5. You are a country/pension fund/money manager/investor who buys the previously mentioned products. You dont understand what the hell thry are, buy man, do they ever offer a too good to be true return. You buy anyway. GREED.

    6. You are one of 450 million of hard working americans who live below their means, save for a rainy day, and walk away if it sounds too good to be true. You are a real example of the American dream, and keep things humming along.
    Now you are expected to foot the clean up bill. SAD!!!!!!!!!!!!!!!!!

    Although I have always respected , and somewhat envied the American way, i must admit i am blown away by this all. It is not the first, nor will it be the last. It is however the first economic “crises” that I have actually experienced as a grown adult with a vested interest in this all.

    Everytime I watch 60 Minutes, Dateline, etc and learn more about all this started, brewed, and the spun out of control, the more I shake my head.

    I am not knocking Americans by any means.

    I am just saying it “aint right”