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Posted by on Dec 6, 2008 in Economy, Society | 2 comments

The Bear that Devoured Wall Street is Still Hungry; Now Nibbling at Private Wealth of Its Citizens

There is no one on earth I hate enough to want to watch him or her being mauled by a bear, so I’m not laughing or anything at this sorrowful tale of the woes of “Big Rich” as Michael Schnayerson calls them. Cue the mournful scraping of a solitary violin!

With Wall Street hemorrhaging jobs and assets, even many of the wealthiest players are retrenching. Others, like the Lehman Brothers bankers who borrowed against their millions in stock, have lost everything. Hedge-fund managers try to sell their luxury homes, while trophy wives are hocking their jewelry. The pain is being felt on St. Barth’s and at Sotheby’s, on benefit-gala committees and at the East Hampton Airport, as the world of the Big Rich collapses, its culture in shock and its values in question.

Perhaps like the wealthy family in Jane Austen’s Persuasion, they could retrench by cutting back on a few unnecessary charities.

I’d like to say I feel their pain, but I’m too busy at the moment feeling my own.

Anyway, Schnayerson says, reassuringly,

It may be premature to say our gilded age has ended. Third Point dropped 10 percent in October, bringing it down 27 percent for the year, but Daniel Loeb is still moving into his extravagant new apartment. Steven Cohen’s SAC was down 11 percent in October and 18 percent for the year to date, but that still leaves him plenty of money to add a second ice-skating rink to his Greenwich, Connecticut, estate. And Larry Gagosian is still selling plenty of art.

It’s just that there may be fewer aristocrats among us once the economic guillotine that is lopping off jobs and the Big Bad Bear have reaped their fell harvests and devoured their victims.

And if you wondered whether the financial collapse has touched the Riches and Richesons of Richistan, you can stop wondering now.

Almost everyone has lost something—if not their jobs, then 25 to 50 percent of their retirement savings—and nearly everyone is glum, anxious, hung over. Prudence is the watchword now: sackcloth after the brilliant silks and brocades of the gilded age. The day after Lehman Brothers went down, a high-end Manhattan department store reportedly had the biggest day of returns in its history. “Because the wives didn’t want the husbands to get the credit-card bills,” says a fashion-world insider. A prominent designer says ruefully, “People really aren’t shopping at all unless there’s a deal or sale. It’s pretty dramatic—they have the stores at their mercy.”

Even those who have plenty left to spend aren’t spending it. “I ran into a couple I always see at the antiques show,” one Upper East Side woman recounts of her visit to the Armory show on Park Avenue. “They always buy something fairly grand. ‘What have you bought this time?’ I asked. ‘Oh, nothing!’ they said. ‘We’d feel … ashamed.’” Another Upper East Side woman often goes from lunch at Michael’s restaurant on West 55th Street to Manolo Blahnik a block away to pick up a $600 or $700 pair of shoes as “retail therapy.” No more. “I was at Michael’s yesterday and was thinking, Oh, Manolo’s … But then I thought, Why? Why do that? It just doesn’t feel good.”…

The new thriftiness takes a bit of getting used to. “I was at the Food Emporium in Bedford [in Westchester County] yesterday, using my Food Emporium discount card,” recounts one Greenwich woman. “The well-dressed wife of a Wall Street guy was standing behind me. She asked me how to get one. Then she said, ‘Have you ever used coupons?’ I said, ‘Sure, maybe not lately, but sure.’ She said, ‘It’s all the rage now—where do you get them?’”

One former Lehman executive in her 40s stood in her vast clothes closet not long ago, talking to her personal stylist. On shelves around her were at least 10 designer handbags that had cost her anywhere from $6,000 to $10,000 each.

“I don’t know what to do,” she said. “I guess I’ll have to get rid of the maid.”

Why not sell a few of those bags?, the stylist thought, but didn’t say so.

“Well,” the executive said after a moment, “I guess I’ll cut her from five days a week to four.”(Vanity Fair)

If you haven’t barfed yet at this proof that the Very Rich Have Their Problems Too, you can read the rest of this tragicomic 6 page account of the deprivations and retrenchments of the denizens of “Richistan.”  For some, it might prove to be the feel-good reading of the day.   But just this bit has already told me more than I really needed to know.

Meanwhile, I’m more interested in finding out how those among us who brought much greater misery on those who had less to retrench are going to be made to answer for it.  Yglesias says, and he means The Atlantic:

One notion gaining in popularity among writers for publications likely to be read by members of the financial elite is that maybe this whole “finding out who’s responsible for this giant catastrophe” business is a mistake.

Ross Douthat, he says, did a little round-up of people who think it would be.

This is true.  In discussing the link between power and responsibility,  Douthat—who needs to build put in more paragraph breaks if he expects me to follow the skein of his arguments—notes:

[I]t’s….worth noting that saying “we’re all to blame” for what’s happened doesn’t exclude the possibility that some people, and some kinds of people, are more to blame than others – because some people have greater responsibilities than others, and all mistakes are not created equal…

And the piece is called “Great Power, Great Responsibility”, which:  exactly.  Though Douthat doesn’t exactly mean “great responsibility” in the same way I do. In the end, “responsibility” seems to mean that we pause a minute to shake our heads over the “current wreckage,” whereas I’d like to shake the actual people who caused it till their teeth rattle.

It may be that cultivating your elite through meritocracy is like government by, for and of the people – the worst possible sort of system, except for all the others.

But that doesn’t mean that we shouldn’t pause a moment, amid the current wreckage, to ponder what went wrong with this elite, here and now, and how its particular sins helped produced this particular crisis.
I am going to pause for a moment to ponder the word “meritocracy”, which probably means to Douthat and “his elite” as he calls them something very different from what it means to me.  Then I am going to ponder “its particular sins,” which are described at some length in the Vanity Fair piece referenced above.  Then I am going to move on without looking back.

Yglesias says:

[T]he underlying premise of our finance-led rush to hyperinequality has been that the rich are very very very very different from you and me and that it’s so excruciatingly important that we maintain adequate incentives for them to ply their trade that we should ignore the immense damage rising inequality does to middle class well-being.

One we realize that that’s not the case, that there’s no “magic” at work in the financial field and people are just mucking around I think that has quite radical implications. If nothing the CEOs and top fund managers are doing makes them worthy of taking the blame when the crash hits, then they also don’t deserve nearly the share of the credit — and money — that they got while things were going up.

Yes, that’s right, except it’s not only the “middle class” that’s been hurt here and not only the middle-class that matters.  In Schnayerson’s account of the executive who planned to retrench by cutting her maid down to four days a week, it’s the maid’s family that’s going to feel the loss most.

And now I am off to do a round-up of my own, very unlike Douthat’s:  blankets and clothes to hand over to the van that takes clothes out to the homeless families camping in our homeless woods.  As this video shows, whole families are being laid off.

We all have our own “elite,” Ross Douthat.  Mine consists of the people who actually drive the van out into the woods and who actually get out of the van and actually look the homeless in the face as they confer on them a few necessary charities.

CROSS POSTED AT BUCK NAKED POLITICS

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  • Jim_Satterfield

    This sounds more and more like the Great Depression, doesn’t it?

  • DLS

    Or like Japan (hints at future reduced demand as well as activity overall), though one source I read said it could be as bad as or worse than our (US) Great Depression given how many people have mortgages and other debt compared to the 1930s. (I still see people continuing to use their credit cards, but this will have to stop sometime, obviously.)

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