Poor Babies

QOTD, BobK:

Whenever I hear about "trickle down" I think of "feeding the horses to feed the sparrows" and my mental image is of being pissed on by horses...

John Cole: Quote for the Day

From the shit you can’t make up file:

Dr. Daniel E. Fass, another chairman of the event who lives surrounded by financiers in Greenwich, Conn., said: “The investment community feels very put-upon. They feel there is no reason why they shouldn’t earn $1 million to $200 million a year, and they don’t want to be held responsible for the global financial meltdown.”

Those poor babies.

• as you might imagine, the comment thread to this post is priceless.  And, yes, there are pitchforks.  
  

Kevin Drum on "An Unusual Setback"

This cracks me up:

Big financial firms losing power on Capitol Hill
Large banks are on the verge of losing a key legislative battle over the shape of financial reform, an unusual setback that reflects the continued political backlash over their role in creating the financial crisis.

The particular battle big banks are allegedly losing need not detain us for the moment.  Rather, I have two comments.  First, it's a testament to its essentially imperial status that after nearly destroying the planet the financial industry has any power left to lose.  But the headline writer tells us this legislative loss is "unusual" — as indeed it is.  Check out, for example, who won and who lost on cramdown, plain vanilla, and CFPA exemptions.  Even now, a scant 12 months after triggering the biggest financial meltdown since the Depression, the financial industry almost never fails to get something it wants from the United States Congress.
Second, they haven't lost yet.  The Post informs us that "lobbyists on both sides say they regard the battle as over," but I'll believe that when I see it.  The Senate hasn't yet taken its crack at this legislation, after all, and I will be very much surprised if the finance lobby has decided to cry quietly in its beer and let this particular regulatory indignity pass without sprinkling a few million more dollars on the right committee members in hopes of getting an early Christmas present.  Don't count your chickens before they've hatched.

 Bloomberg News, Wall Street 40% Bonus Rise Feeds Spending on $43 Steak, Co-ops

Oct. 20 (Bloomberg) -- A 40 percent jump in Wall Street bonuses this year may bring relief to New York City and Albany as the state and its biggest metropolis struggle with a combined $14 billion in budget deficits this fiscal year and next.

New York investment houses will dole out $26 billion in bonus checks by the end of March, said Alan Johnson, president of compensation consultant Johnson Associates Inc. The money will probably boost sales of multimillion-dollar co-op apartments and generate extra income-tax revenue for state and city governments.

“I don’t think this is going to make everybody think, ‘Oh, good times are here again,’ but it may ease things a bit,” said Lawrence White, professor of economics at New York University’s Leonard N. Stern School of Business.

Before the financial meltdown slammed bank earnings and the Standard & Poor’s 500 Index of U.S. stocks dropped 38 percent last year, Wall Street’s compensation and corporate profits provided 20 percent of New York state tax revenue and 9 percent of the city’s taxes. New York banks lost $42.6 billion in 2008 and shed 30,000 jobs, according to the city’s Office of Management and Budget.

The city’s unemployment rate is 10.3 percent, the most since 1993, after the private sector cut 96,600 jobs since employment peaked in August 2008.

Bonuses in 2008 fell 44 percent from the prior year, to $18.4 billion, said New York state Comptroller Thomas DiNapoli. The reduction cost the state $1 billion in personal income tax revenue and New York City $275 million, he said. State personal income tax collections in the current fiscal year’s first six months declined $4.4 billion, or 21.6 percent, from the same period a year earlier, DiNapoli’s September cash report said.

Too Soon

It’s too soon to estimate the impact of bigger bonuses, said DiNapoli spokesman Olayinka Fadahunsi and Mark LaVorgna, a spokesman for New York Mayor Michael Bloomberg. New York City will update its financial plan next month.

“New York was ground zero of this crisis,” Governor David Paterson said last week, announcing $5 billion in spending cuts and one-time revenue measures, including a tax-amnesty program, to preserve the state’s credit rating of Aa3 from Moody’s Investors Service and AA from Standard & Poor’s, three and two levels from the top, respectively.

This year, Wall Street’s banks are set to pay near-record bonuses after the U.S. injected $700 billion into financial- services companies, guaranteed their debt and lowered the Federal Reserve’s benchmark interest rate to almost zero. The number of Wall Street competitors declined after Lehman Brothers Holdings Inc. collapsed, Bear Stearns Cos. was bought by JPMorgan Chase & Co. and Merrill Lynch & Co. was taken over by Bank of America Corp.

Up 46 Percent

Goldman Sachs Group Inc. said Oct. 15 it had set aside $16.7 billion for compensation in 2009’s first three quarters, or $527,192 per worker, up 46 percent from the same period a year earlier and just under the record $16.9 billion set in 2007’s first nine months. JPMorgan set aside $353,834 per investment-bank employee, up from $210,854 last year.

Americans have a “limited tolerance” for Wall Street bonuses, said David Axelrod, a senior adviser to President Barack Obama, on ABC’s “This Week” on Oct. 18. “On the same day that you saw stories about these bonuses, you saw a story about how wages are at a 19-year low,” Axelrod said.

After Obama’s administration proposed capping executive pay at companies that accept government rescue funds, Mayor Bloomberg described bonuses as important to New York’s economy.

‘Enormous Amount’

“They may be an enormous amount of money for one person, but they are how our people in the city in all industries get paid, whether you drive a cab, work in a restaurant, work in a store, whether you are a municipal employee,” Bloomberg said Feb. 5 at City Hall.

“All of this gets filtered down through our economy,” he said. “No matter what you think about the propriety of any individual person’s bonus, we want companies in the city, and we are dependent on Wall Street finance, to do well.” The mayor is the founder and majority owner of Bloomberg LP, parent of Bloomberg News.

“Certainly, it’s good news for the city if Wall Street salaries and bonuses continue to be high,” said Doug Turetsky, a spokesman for New York City’s Independent Budget Office.

Limited Impact

Bonus increases will have a limited impact on revenue, said Matt Anderson, a spokesman for New York state’s Division of Budget. Many payments come in stock that isn’t taxed immediately, and companies that disappeared in the crisis won’t be paying any bonuses at all, he said.

“While Wall Street bonuses are an important component of state revenue, they are not the only component,” Anderson said in an e-mail. “We continue to see substantial declines in tax collections across the entire budget. There is little prospect, if any, for a rebound in receipts by the end of the fiscal year that would remove the need for difficult deficit reduction actions.”

The number of Manhattan apartment sales increased 46 percent in the third quarter from the previous period, the biggest such gain since 1996, according to an Oct. 2 report from Miller Samuel Inc., a New York appraiser. The median price of a luxury apartment in Manhattan in the third quarter was $3.9 million, up from $3.66 million.

Some homes are selling for more than their listing price.

Madoff’s Home

The former Montauk, New York, home of Bernard Madoff, who is serving a 150-year prison sentence for running the biggest Ponzi scheme in history out of his investment firm, sold for $9.41 million, the U.S. Marshals Service said last week. It had been listed for $8.75 million. Home prices in the Hamptons rose 4.7 percent in the third quarter amid a surge in sales of properties from $2 million to $5 million.

Public anger over Wall Street bonuses, and the need to rebuild savings and pay down debt, may limit how much bankers and traders spend once they get their bonuses, said Charlie Attias, a senior vice president at Corcoran Group, a New York real estate brokerage.

“In 2007, we really saw people who were very confident, who knew that they will make a certain amount of money and it will not stop,” Attias said. “I think they are very cautious right now.”

Delmonico’s, the landmark steakhouse a few blocks from the New York Stock Exchange, has seen traffic pick up and its catering business improve as firms start to take clients out in bigger groups, said managing partner Dennis Turcinovic, 31, after overseeing a lunch for 150 people last week.

The restaurant, which sells prime New York strip for $43, lost about 20 percent of its business after Lehman Brothers’ bankruptcy last year.

“If anybody does well on Wall Street, they come here and they spend their money,” Turcinovic said. “Some people come in and spend an astronomical amount of money.”

For Related News and Information:

To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net .