{"id":13458,"date":"2008-12-08T15:21:20","date_gmt":"2008-12-08T22:21:20","guid":{"rendered":"http:\/\/hill-kleerup.org\/blog\/wp\/2008\/12\/08\/the-schadenfreudiest-victims-of-the-financial-collapse.html"},"modified":"2008-12-08T15:21:20","modified_gmt":"2008-12-08T22:21:20","slug":"the_schadenfreudiest_vict","status":"publish","type":"post","link":"https:\/\/hill-kleerup.org\/blog\/2008\/12\/08\/the_schadenfreudiest_vict.html","title":{"rendered":"The Schadenfreudiest victims of the financial collapse"},"content":{"rendered":"
\"\" <\/div>\n

What happened to all those high-flying investment bankers once their companies, jobs, and stock portfolios went south? A truly touching tale<\/a> …<\/p>\n

\n

Only months ago, ordering that $1,950 bottle of 2003 Screaming Eagle Cabernet Sauvignon at Craft restaurant or the $26-per-ounce Wagyu beef at Nobu, or sliding into Masa for the $600 prix fixe dinner (not including tax, tip, or drinks), was a way of life for many Wall Street investment bankers. \u201cThe culture was that if you didn\u2019t spend extravagantly you\u2019d be ridiculed at work,\u201d says a former Lehmanite. But that was when there were<\/em> investment banks. Now many bankers, along with discovering $15 bottles of wine, are finding other ways to cut back\u2014if not out of necessity, then from collective guilt and fear: the fitness trainer from three times a week to once a week; the haircut and highlights every eight weeks instead of every five. One prominent \u201chedgie\u201d recently flew to China for business\u2014but not on a private plane, as before. \u201cWhy should I pay $250,000 for a private plane,\u201d he said to a friend, \u201cwhen I can pay $20,000 to fly commercial first class?\u201d<\/p>\n<\/blockquote>\n

Why indeed, my friend? Why indeed?<\/p>\n

The biggest problem many of them face is being over-leveraged — being in debt against “wealth” (stock) that made the borrowing quite reasonable at the time, but now is impossible because the stock is worth bupkis.<\/p>\n

Most Lehman bankers saw little risk in borrowing against their stock to fund the lifestyle to which they were, on paper, entitled. \u201cSay you have $8 million of Lehman stock,\u201d suggests a senior investment adviser, using hypothetical numbers but a true-life case about a good friend who worked at Lehman. \u201cYou want to build a $2 million house. You pledge your stock and you borrow the money and you say to yourself, \u2018Let\u2019s say the worst happens: we have a terrible drop in the market. My $8 million will still be worth $4 million, and I\u2019ve only borrowed half of that. So I\u2019m being very conservative.\u2019 But that doesn\u2019t allow for $8 million down to zero.\u201d<\/p><\/blockquote>\n

 <\/p>\n

Of course, some “little” people are being hurt — the retail clerks and chauffeurs and cleaning people and construction workers whose product was in hot demand (for low wages) by now-thrifty Gilded Agers. Ditto the philanthropic and charitable organizations that they supported when not buying another mid-town penthouse.<\/p>\n

But, still, in the end, it’s the families that suffer.<\/p>\n

\n

Alexandra Lebenthal, a New York\u2013based wealth manager for investors with between $2 million and $20 million in assets\u2014the modest to mid-level rich\u2014offers a keenly authoritative portrait of a thirtysomething Lehman banker, married with kids, in a guest column called \u201cWhat It Costs\u201d on the Web site NewYorkSocialDiary. Blake and Grigsby Somerset are fictional, their finances all too plausible.<\/p>\n

Before Lehman\u2019s stock began to plummet, Lebenthal suggests, Blake\u2019s annual compensation was $9.5 million\u2014much of that in company stock. He was carrying a $2 million loan used for a house in the Hamptons, but felt perfectly able to afford his annual expenses: the Park Avenue apartment maintenance ($120,000); the Hamptons house mortgage ($75,000); the nanny and driver ($100,000); his wife\u2019s clothing ($100,000); the personal trainer three times a week ($18,000); food, including restaurants ($30,000); charitable benefits and other nonprofit causes ($200,000); private school for three children ($78,000); Christmas in Palm Beach ($15,000); spring in Aspen ($15,000); and a wedding-anniversary diamond necklace for Grigsby ($50,000).<\/p>\n

At least Blake has been hired on by Barclays. But his Lehman stock portfolio is now worthless. He and Grigsby have to cut their annual living expenses from about $1 million to a fraction of that, and do it in ways that don\u2019t show, for the worst\u2014the worst<\/i>\u2014would be the public disgrace of falling out of their social class.<\/p>\n

First to go: vacations, the trainer, the driver, and entertaining. No restaurants, no shopping excursions, no new ball clothes for Grigsby (last year\u2019s will have to do). But, for now\u2014for appearances\u2014the Somersets will scrimp to keep the kids in their schools, and the nanny, and the Hamptons house. For now.<\/p>\n<\/blockquote>\n

Weep for the children.<\/p>\n

<\/p>\n

(I write the above in at least partial cognizance that my own economic good fortune is far greater than many others in this country — and, in turn, most folks in this country have it vastly better than the majority of the population of the world. It is, I suppose, at least somewhat relative.)<\/p>\n

(via BoingBoing<\/a>)<\/p>\n

<\/small><\/p>\n","protected":false},"excerpt":{"rendered":"

What happened to all those high-flying investment bankers once their companies, jobs, and stock portfolios went south? 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After all, when Morgan Stanley bonuses this year were capped at $150K ... well, insanity ensued.'\"After tax, that\u2019s like, what, $75,000?\" an investment banker at a rival firm said as he contemplated Morgan Stanley\u2019s decision. He ran the numbers, modeling the implications.\u2026","rel":"","context":"In "~PlusPosts"","block_context":{"text":"~PlusPosts","link":"https:\/\/hill-kleerup.org\/blog\/category\/blogging\/plusposts"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":24152,"url":"https:\/\/hill-kleerup.org\/blog\/2011\/12\/02\/is-a-non-darwinian-economy-covetous.html","url_meta":{"origin":13458,"position":1},"title":"Is a non-Darwinian economy covetous?","author":"***Dave","date":"Fri 2-Dec-11 11:46am","format":false,"excerpt":"I've seen this argument touted by any number of individuals -- usually conservative Christian (or playing at it) and usually quite well off. David Barton They all suggest that a progressive tax structure, or a social safety net, or health care programs for the poor, are all theft, and support\u2026","rel":"","context":"In "~PlusPosts"","block_context":{"text":"~PlusPosts","link":"https:\/\/hill-kleerup.org\/blog\/category\/blogging\/plusposts"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":27298,"url":"https:\/\/hill-kleerup.org\/blog\/2012\/04\/02\/foreclosures-requiring-documentation-utterly-radical.html","url_meta":{"origin":13458,"position":2},"title":"Foreclosures requiring documentation? UTTERLY RADICAL!","author":"***Dave","date":"Mon 2-Apr-12 5:32pm","format":false,"excerpt":"I can't imagine why anyone would oppose requiring changes of title be recorded with counties and that foreclosing lenders actually be able to demonstrate that they have the ownership right to do so. Apparently Colorado has an appallingly lax set of laws in this area, and bill fix that died\u2026","rel":"","context":"In "~PlusPosts"","block_context":{"text":"~PlusPosts","link":"https:\/\/hill-kleerup.org\/blog\/category\/blogging\/plusposts"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":24674,"url":"https:\/\/hill-kleerup.org\/blog\/2011\/12\/20\/the-peasants-are-revolting-they-certainly-are.html","url_meta":{"origin":13458,"position":3},"title":"The Peasants are Revolting! (They Certainly Are!)","author":"***Dave","date":"Tue 20-Dec-11 4:43pm","format":false,"excerpt":"File this article under \"Some quotes only marginally less clueless than 'Let them eat cake!'\" #ddtb Embedded Link Bankers Join Billionaires to Debunk \u2018Imbecile\u2019 Attack on Top 1% Jamie Dimon, the highest-paid chief executive officer among the heads of the six biggest U.S. banks, turned a question at an investors\u2019\u2026","rel":"","context":"In "~PlusPosts"","block_context":{"text":"~PlusPosts","link":"https:\/\/hill-kleerup.org\/blog\/category\/blogging\/plusposts"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":19209,"url":"https:\/\/hill-kleerup.org\/blog\/2010\/11\/15\/unblogged-bits-mon-15-nov-10-0431.html","url_meta":{"origin":13458,"position":4},"title":"Unblogged Bits (Mon. 15-Nov-10 0431)","author":"***Dave","date":"Mon 15-Nov-10 4:31am","format":false,"excerpt":"Links (most recent first) that caught my eye, but did not warrant full-blown blog entries .... Bankers Association Looking Forward To \u2018Better Outcomes\u2019 From The Incoming Republican House - No doubt. 'RED': The Comic vs. the Bruce Willis\/Morgan Freeman Film [Review] - A solid comparison between the comic vs the\u2026","rel":"","context":"In "Potpourri"","block_context":{"text":"Potpourri","link":"https:\/\/hill-kleerup.org\/blog\/category\/potpourri"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":24275,"url":"https:\/\/hill-kleerup.org\/blog\/2011\/12\/06\/we-cannot-cut-our-way-to-greatness.html","url_meta":{"origin":13458,"position":5},"title":""We Cannot Cut Our Way to Greatness"","author":"***Dave","date":"Tue 6-Dec-11 11:09am","format":false,"excerpt":"Morgan Stanley Chief Financial Officer Ruth Porat, among others, seems to get it. Increasing income inequality and historically low top tax brackets aren't helpful, and using the mantra of no tax increases to cut public spending is counterproductive. #ddtb Embedded Link Morgan Stanley Executive Calls For Higher Taxes On The\u2026","rel":"","context":"In "~PlusPosts"","block_context":{"text":"~PlusPosts","link":"https:\/\/hill-kleerup.org\/blog\/category\/blogging\/plusposts"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/posts\/13458","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/comments?post=13458"}],"version-history":[{"count":0,"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/posts\/13458\/revisions"}],"wp:attachment":[{"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/media?parent=13458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/categories?post=13458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hill-kleerup.org\/blog\/wp-json\/wp\/v2\/tags?post=13458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}