NY Times: "You Try to Live on 500K in This Town"

In many ways, the past forty years of Anglo-American history have been marked by a revolution of a few who live by wealth upon the many who live by labor. If the first half of the 20th century can be seen at the revolt of the masses, this latter half has been a revolt of the elites. Nowhere is this more apparent than in delinking of increases in labor productivity from growth in real wages. I think that this graphic illustrates what's been happening pretty clearly.

Given this the plea to "Save the Bankers" which will appear on the front page of the style section of tomorrow's New York Times is all the more galling.

The article begins by explaining how $500,000 a year (the CEO salary cap propose by the Obama administration) is simply not enough to keep them in the manner to which they have become accustomed.

“As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”

Sure, the solution may seem simple: move to Brooklyn or Hoboken, put the children in public schools and buy a MetroCard. But more than a few of the New York-based financial executives who would have their pay limited are men (and they are almost invariably men) whose identities are entwined with living a certain way in a certain neighborhood west of Third Avenue: a life of private schools, summer houses and charity galas that only a seven-figure income can stretch to cover.

So how much does the New York Times think is needed so that our bankers don't lose face:

The total costs here, which do not include a lot of things, like kennels for the dog when the family is away, summer camp, spas and other grooming for the human members of the family, donations to charity, and frozen hot chocolates at Serendipity, are $790,750, which would require about a $1.6-million salary to compensate for taxes. Give or take a few score thousand of dollars.

Does this money buy a chief executive stockholders might prize, a well-to-do man with a certain sureness of stride, something that might be lost if the executive were crowding onto the PATH train every morning at Journal Square, his newspaper splayed against the back of a stranger’s head?

And who's going to foot the bill so that these banker's can feel fancy?

With TARP, and the planned son of TARP, it's all those working Americans that these bastards feel that they are better than that are picking up the tab when they go on a shopping spree. And, wait, it gets better. Guess what else we're picking up the tab for.

Wall street lawyers, investment bankers, CEOs and media executives often used corporate credit cards to pay for $2,000 an hour prostitutes, according to the madam who ran one of New York's biggest and most expensive escort services until it was busted last year.

But prosecutors in the Manhattan District Attorney's office chose not to pursue any of the corporate titans, says Kristin Davis, who pleaded guilty last year to charges of running a prostitution business that used more than a hundred women....

Among the names ABC News was able to confirm on the list:

* an investment banker at JP Morgan Securities who "loves Brooke" and spent $41,600

*an investment banker at Goldman Sachs who "only wanted all-American girls" and spent $27,000

*a managing director from Merrill Lynch who saw "Lana" using the name "Nataly"

Now, remember these guys put the hookers on their corporate cards, and guess what all these banks took TARP money.

TARP Recipients

JP MORGAN CHASE - $25 billion
Goldman Sachs — $10 billion
Merrill Lynch & Co. — $10 billion

So let me get this right. We've given $45 billion to companies whose executives used company funds to buy high priced hooks. And we're supposed to feel sorry for these guys because they're going to have to cut down on their "life of private schools, summer houses and charity galas." And even more, we're supposed to be offended by unionized autoworkers making $54,000 a year? I mean at that rate these autoworkers could almost make in a lifetime what they think a banker is supposed to make in a single year. And let's play the Fort Wayne, Indiana version of the game the New York Times wants to play for their banker friends.

"You try to live on $54,000 a year in Fort Wayne"

For the average autoworker with 2 kids and a wife, that $54,000 doesn't come out to much after taxes.

$12,000 for federal taxes. $1,500 for state taxes. Another $500 for city and county taxes.

So after taxes that $54,000 comes out to only $40,000.

Now you try and live on that in Fort Wayne.

Let's start with the house. The median house price is $110,300.

So $8,000 a year for the mortgage. Another $2,00 for taxes and insurance.

And we're down to $30,000 to cover insurance copays, groceries, clothes, utilities and the rest.

The amount of money that these "overpayed" union guys are supposed to make a go on is the less than what it takes to send a banker's little bastard to private school. And yet, we're supposed to feel compassion for these bankers made to make due on $500 K a year, and hate on autoworkers making just enough to live a comfortable middle class lifestyle.

Something just doesn't seem right here.

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Comments

why executive compensation is so important

Firstly, many of these executives truly suck at their job so why they should be rewarded over and over for poor performance is beyond me.

Secondly, New York City has become completely stratified, a whole micro culture of the super rich and everyone else can eat cake.

There are a lot of cities like this in the U.S. where one cannot have a quality of life on normal wages and this increase in income disparity between rich and poor is one of the reasons.

New York City is probably #1 in this truth but it should be absolutely outrageous to the rest of the country when the New York Times talks about the inability to pay for spa treatments and what a crisis that is!

Great post middle, I really feel we are repeating history here but that is no guarantee things will right themselves to a more equal and just society.

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Bubble

I agree with the sentiments in the above post - London (where I grew up) and Sydney (where I now live) has a similar structure and I suspect many other cities that have a significant 'financial services industry' exhibit stratification whereby a small overpaid elite drives up property prices, indulge themselves with egotistical services while the rest of the population gets by.

We should let the banks wither as the financial asset bubble collapses - the value of the banks is now collapsing. Therefore the numb nuts that run these institutions should be paid less and we can focus on things that create real value.

The financial services industry has been a vehicle by which the elites have been able to extract excess unearned value from society - if they greedily take more then everyone takes less.

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