BUT.
I find the arguments being made by bankers that there should not be a $500K cap on executive salaries for companies USING AMERICAN TAXPAYER BAILOUT MONEY because it is anti-capitalism patently absurd. I find the argument that it will not attract the "best talent" patently absurd because who the freak got us into this mess? I don't want the "best talent" that led investment banks for the last 5-10 years trying to get us out of the mess they got us in to because obviously they are complete idiots. How else do you explain betting on hundreds of thousands of people being able to afford houses whose mortgages exceed their income? Do I think the former homeowners-current foreclosurers-causes of the greatest recesssion/depression of my lifetime are to blame? Yes. Obviously I have zero patience or tolerance for people who live beyond their means - not just in terms of buying homes, but cars, purses, food, toys, etc. Basic rule of life: don't spend more than you can afford. If you make $2000 a month, guess what, you cannot afford that Benz or the Gucci purse or the new plasma TV. If you are guilty of taking out a home equity line to fund any of the above or bought a house with a mortgage that you knew might one day exceed your salary, then you are directly to blame for the downfall of the economy, the 2.5 million + unemployed and the world of pain that is only going to get worse before it starts to get better.
But also to blame are the bankers who allowed these loans to happen. People blame the mortgage lenders, but the entire financial industry knew what was going on, and not only encouraged it but invested and made bets on it. So as much as the stupid family that took out a line of credit on the house they already couldn't afford to buy a new car and designer goods is responsible for the demise of the economy, so are the bankers who took home $18 billion in bonuses and live in penthouse apartments on the upper east side, send their kids to private schools, have nannies and maids and vacay in the Hamptons. Do I begrudge people who live the high life? Not at all. Do I begrudge them when they are asking for taxpayer money to help fund their extravagant lifestyles? Hell yes.
The NY Times recently published an article describing how difficult it is for a NY exec to live on $500K. It made me so incensed that I felt the need to rant.
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PRIVATE school: $32,000 a year per student.
Mortgage: $96,000 a year.
Co-op maintenance fee: $96,000 a year.
Nanny: $45,000 a year.
We are already at $269,000, and we haven’t even gotten to taxes yet.
Five hundred thousand dollars — the amount President Obama wants to set as the top pay for banking executives whose firms accept government bailout money — seems like a lot, and it is a lot. To many people in many places, it is a princely sum to live on. But in the neighborhoods of New York City and its suburban enclaves where successful bankers live, half a million a year can go very fast.
“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.
Few are playing sad cellos over the fate of such folk, especially since the collapse of the institutions they run has yielded untold financial pain. But in New York, where a new study from the Center for an Urban Future, a nonprofit research group in Manhattan, estimates it takes $123,322 to enjoy the same middle-class life as someone earning $50,000 in Houston, extricating oneself from steep bills can be difficult.
Therefore, even if it is not for sympathy but for sport, consider the numbers.
The cold hard math can be cruel.
Like those taxes. If a person is married with two children, the weekly deductions on a $500,000 salary are: federal taxes, $2,645; Social Security, $596; Medicare, $139; state taxes, $682; and city, $372, bringing the weekly take-home to $5,180, or about $269,000 a year, said Martin Cohen, a Manhattan accountant.
Now move to living expenses.
Barbara Corcoran, a real estate executive, said that most well-to-do families take at least two vacations a year, a winter trip to the sun and a spring trip to the ski slopes.
Total minimum cost: $16,000.
A modest three-bedroom apartment, she said, which was purchased for $1.5 million, not the top of the market at all, carries a monthly mortgage of about $8,000 and a co-op maintenance fee of $8,000 a month. Total cost: $192,000. A summer house in Southampton that cost $4 million, again not the top of the market, carries annual mortgage payments of $240,000.
Many top executives have cars and drivers. A chauffeur’s pay is between $75,000 and $125,000 a year, the higher end for former police officers who can double as bodyguards, said a limousine driver who spoke anonymously because he does not want to alienate his society customers.
“Some of them want their drivers to have guns,” the driver said. “You get a cop and you have a driver.” To garage that car is about $700 a month.
A personal trainer at $80 an hour three times a week comes to about $12,000 a year.
The work in the gym pays off when one must don a formal gown for a charity gala. “Going to those parties,” said David Patrick Columbia, who is the editor of the New York Social Diary (newyorksocialdiary.com), “a woman can spend $10,000 or $15,000 on a dress. If she goes to three or four of those a year, she’s not going to wear the same dress.”
Total cost for three gowns: about $35,000
Not every bank executive has school-age children, but for those who do, offspring can be expensive. In addition to paying tuition, “You’re not going to get through private school without tutoring a kid,” said Sandy Bass, the editor of Private School Insider, a newsletter that covers private schools in the New York City area. One hour of tutoring once a week is $125. “That’s the low end,” she said. “The higher end is 150, 175.” SAT tutors are about $250 an hour. Total cost for 30 weeks of regular tutoring: $3,750.
Two children in private school: $64,000.
Nanny: $45,000.
Ms. Bass, whose husband is an accountant with many high-end clients, said she spends about $425 every 10 days on groceries for her family. Annual cost: about $15,000.
More? Restaurants. Dry cleaning. Each Brooks Brothers suit costs about $1,000. If you run a bank, you can’t look like a slob.
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?
The man would certainly not feel like himself on that train, said Candace Bushnell, the author of “Sex and the City” and other books chronicling New York social mores.
“People inherently understand that if they are going to get ahead in whatever corporate culture they are involved in, they need to take on the appurtenances of what defines that culture,” she said. “So if you are in a culture where spending a lot of money is a sign of success, it’s like the same thing that goes back to high school peer pressure. It’s about fitting in.”
By the way, the frozen hot chocolate costs $8.50.
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OH BOO HOO. Your wife might have to stop buying couture dresses. (the horror!) You might have to cut back on the Hamptons trip. (life is so hard!) You might have to send your kids to public school. (God forbid) And oh my god, you might have to cut back on frozen hot chocolate. (the world is surely collapsing)
Obama's $500K condition seems pretty fair to me. EARN YOUR KEEP. Prove you deserve more than that $500K by pulling your company out of the mess it's in.
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