The Actual Problem With Income and Debt Has Nothing to Do With Wall Street
I’m supposed to feel sorry for the banker who might have to pull his kids out of private school:
Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.
“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.”
The smaller bonus checks that hit accounts across the financial-services industry this month are making it difficult to maintain the lifestyles that Wall Street workers expect, according to interviews with bankers and their accountants, therapists, advisers and headhunters.
“People who don’t have money don’t understand the stress,” said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. “Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”
First of all, the bonuses, as a whole, are only down 14%. Some investment banks capped bonuses or lowered them beyond that 14% number, but not appreciably.
Second, I know there’s a cottage industry of financial professionals whining about how they’re only millionaires and not multi-millionaires now, but on the priority of economic problems in the country, I’m going to rank this quite a bit higher:
I went through the Federal Reserve’s Quarterly Release on Household Debt and Credit released today, and there were two notable trends. One is that the amount of consumer debt is declining, but that delinquency rates are stabilizing above what they were before the crisis. And the second is in this graph, which is that the number of people subject to third party collections has doubled since 2000, from a little less than 7% to a little over 14% of consumers. Ten years ago, one in fourteen American consumers were pursued by debt collectors. Today it’s one in seven.
Wall Street bankers with slightly smaller bonus checks – outside their normal compensation – is a significantly lesser-order issue than the fact that 1 in 7 Americans have fallen into enough debt that they are being harassed by debt collectors. And this harassment can lead to imprisonment for debts, garnishment of wages or even threats that debtors will be either fired from their jobs or unable to find a new one, as employers increasingly use credit reports in their hiring decisions.
If you prefer, you can add the stat that one in five people didn’t have enough money to feed themselves in 2011. I know I don’t see a report in Bloomberg about this every other week, but I have to believe it has a bit more news value than whether the investment banker can afford his second home. It’s simply a much more vital public policy problem, a more vital social problem, a more vital human problem.
And the people in the story don’t wear fancy suits and eat at Morimoto.
…I do enjoy the part of the Bloomberg article that explains that Wall Street types don’t save their money, so when their compensation gets reduced, they suffer. Aren’t these types of people fond of explaining to the lower orders how they have to be fiscally responsible? Aren’t they often saying that nobody was hurt by foreclosure fraud because it was just about a bunch of deadbeats who didn’t pay their mortgages? Hm.