For those celebrating the demise of Wall Street... - PeachParts Mercedes-Benz Forum

SwampYankee · #1 09-22-2008, 03:37 PM

The Greenwich situation to CT is just a microcosm of the Top 1% on a national scale. It may be easy to point and laugh that they're getting theirs and not to feel sorry for them but we're all going to have to pick up the shortfall.

Wall Street Has Greenwich Hurting

We'll All Feel Greenwich's Financial Pain In Our State Budget

By CHRISTOPHER KEATING
Capitol Bureau Chief
September 21, 2008
GREENWICH —

Richard Fuld seemed to have it all.

As the longest-running CEO on Wall Street, Fuld reigned over the investment bank Lehman Brothers, one of the biggest names in the financial world. That brought him a spot — only last year — on the Forbes 400 list of the nation's richest people.

It also bought the accouterments of wealth: a mansion in the affluent "back country" of this most affluent town, complete with its own squash court. The 12-acre estate is worth an estimated $11 million and requires annual property tax payments of more than $70,000. Fuld and his wife own 10 cars, town records show, including a 2006 BMW valued at more than $50,000.

So the bankruptcy last week of the 158-year-old Lehman Brothers — one low light of one of the worst weeks ever on Wall Street — could make some, perhaps, dismiss the plight of this Greenwich billionaire, or any other wealthy resident of the town.

But ordinary residents of Connecticut should, in fact, care very much about the welfare of Greenwich residents.

As the good times rolled in recent years, the state budget became increasingly dependent on Greenwich. Despite having only about 60,000 people, the town contributed nearly $600 million in state income taxes in 2006 — more than three times the income taxes paid by the combined populations of Hartford, Bridgeport, New Haven and Waterbury. With only 1.8 percent of tax filers, Greenwich provides nearly 13 percent of all state income tax, helping to pay for schools in West Hartford and road repairs in Rockville, not to mention every other cost related to running the state.

Lehman Brothers' fall set off just some of Wall Street's shock waves last week. It was combined with the biggest federal bailout, of the AIG insurance company, and the sale of Merrill Lynch, which came on the heels of the federal bailouts of giant mortgage brokers Fannie Mae and Freddie Mac. All of this knocked off billions of dollars in stock market value around the country.

In Connecticut, the state income tax relies on the stock market for about 25 percent of its revenue. A huge drop in capital gains — and subsequent state income taxes — by a relative handful of Greenwich billionaires and millionaires could have a huge effect on the budget already projected to have a $147 million deficit.

When the stock shock is multiplied across lower Fairfield County — to investment bankers, traders and hedge-fund magnates in New Canaan, Darien, Weston, Westport and Wilton — the potentially profound impact on the state budget becomes clear.

Once the smoke clears and Wall Street settles down, state officials will decide whether budget cuts or tax increases might be necessary in the coming months.

State Republican Chairman Christopher Healy is already predicting that the Democratic-controlled legislature — led by incoming House Speaker Christopher Donovan of Meriden — will try to raise taxes when lawmakers return to Hartford in January.

"I foresee the Democrats pushing for a tax increase right out of the box," Healy said. "Their answer lies in the Gold Coast — just make those millionaires pay for it. The difference is, Donovan makes no apologies for his view of the world. He is an unapologetic, class-warfare combat veteran.

"This new leadership in the House doesn't know anything about cutting spending," Healy charged. "They've never done it."

After laughing upon hearing Healy's remarks, Donovan said the legislature must avoid panicking and instead take a sober analysis when the fiscal volatility subsides.

"He's a pretty excitable guy," Donovan said of Healy. "If he thinks I'm going to protect the well-being of the average person, yes, I'm going to do that."

'It's The Human Toll'

During Richard Fuld's glory days — only last year — he received a $22 million bonus from Lehman Brothers. His 11 million shares that were worth more than $700 million at their peak helped catapult him onto the Forbes 400 as a billionaire.

Today, his net worth has taken a massive hit. Lehman's stock has collapsed into virtually worthless paper, and although Fuld sold millions of shares — perhaps reaping a fortune — he ended up with far less than the original value of his holdings. Fuld probably will pay far less in taxes in the future, and he personifies the much wider problems facing the state.

State Rep. Livvy Floren, a family friend of Fuld, said the toll in Greenwich is far beyond financial. It is emotional and personal for those losing their jobs and part of their fortunes.

"It's the human toll that is frightening," Floren said. "Dick Fuld has spent 39 years of his life doing this. It's more than just money. They're not going to be on the streets starving. ... I think the man worked 24/7. His family and Lehman are his life."

Floren, who represents some of the richest neighborhoods in America, said she is more concerned about the younger bankers with large mortgages and little children. She bumped into three people during the past week who are now unemployed — two from Lehman and one from the investment firm Bear Stearns. With no bonuses that they once relied on, the mid-level Wall Street workers will likely pull back from buying the fanciest cars and the largest boats.

"You'll certainly see a drop in the income tax and the sales tax from the luxury items," Floren said, adding that those at the top will remain relatively unscathed. "The people at the very, very high end have all the cars and jewelry they want."

Democrat Ned Lamont, the Harvard graduate who ran for the U.S. Senate in 2006 before losing in the general election to Sen. Joseph I. Lieberman, noted that the financial shock goes far beyond the high rollers and will be felt right away.

"The roofer and the plumber and the construction guys — a lot of their year is correlated to financial bonuses," said Lamont, who has lived in Greenwich for 20 years. "It's going to immediately affect the lives of some people here more than other places around the state."

Two Rolls Royce Dealerships

While the financial trade winds have shaken Wall Street to its core, you wouldn't immediately know it by taking a walk last week down Greenwich Avenue, the town's main shopping street.

Some of the biggest names in retailing are here — Saks Fifth Avenue, Tiffany & Co., J. Crew, Brooks Brothers. The streets are dotted with high-end cars, and it's not unusual to see celebrities like singer Diana Ross or sports stars along the avenue.

Two major dealers sell Rolls Royces, and some rare cars sell for as much as $1 million to buyers such as designer Tommy Hilfiger. The dealers admit that anyone who can pay this kind of money for a rare car is relatively immune from the day-to-day vagaries of Wall Street. A car in that stratosphere is like art and sculpture. The only difference is you can drive it.

But beneath the surface of extravagant wealth, there is concern and caution throughout the town.

"I don't know what will happen," said Adie von Gontard, an heir to the Budweiser beer fortune who owns a 20-acre estate in one of Greenwich's best neighborhoods. "We've had depressions and wars, but we don't know how lucky we are."

First Selectman Peter Tesei said Wall Street affects everything from philanthropic contributions to a potential increase in public school enrollment if some families can no longer afford private schools. A recently laid-off trader who was making several million dollars annually "is not going to be able to donate the $200,000 they did in the past" to charities, Tesei said.

"While I don't think we're in a crisis, we want to be proactive" in monitoring the markets, he said. "By and large, the general population is very cautious."

Clearly, there has been a cooling down of the once high-flying real estate market, but Greenwich is still affluent by any measure. The combined value of property in town is more than $50 billion, and the median price of a single-family home is $1.5 million — meaning half are above that number and half are below. The average price is $2.2 million, according to town statistics.

While state law prevents the Department of Revenue Services from releasing the individual amounts of taxes paid by Fuld or anyone else, the department's records show that the income taxes paid in Greenwich dwarf even the state's other affluent towns. Its residents paid more in state income taxes in 2006 than those of New Canaan, Darien, Westport, Weston and Wilton combined. Those five towns are not only among the richest in Connecticut, but among the wealthiest in the nation.

The likely explanation is that Greenwich is the home to some of the country's richest hedge-fund kingpins who can earn more than $500 million per year.

Despite the enormous wealth that would appear to largely shield many Greenwich residents from economic dips, the Wall Street volatility has been the talk of the town in the scotch-and-sirloin power dens.

...

Senior information specialist Cristina Bachetti contributed to this story.

Contact Christopher Keating at ckeating@courant.com.

Hatterasguy · #2 09-22-2008, 06:01 PM

I'm concerned. The city keeps CT's economy alive, if the city gets hurt so do we.

Fulcrum525 · #3 09-22-2008, 07:21 PM

"the town contributed nearly $600 million in state income taxes in 2006 — more than three times the income taxes paid by the combined populations of Hartford, Bridgeport, New Haven and Waterbury."

So they choose the 4 worst cities...hardly a fair comparison

Seriously though, the money does trickle down. The kid washing the cars at that Roll Royce dealer has a job because of the top 1%, so do all the people working in all the other retail locations in Greenwich etc etc. I know that the town is defiantly connected to Wall Street in a big way, hopefully plenty of other people earn their millions from retail as well. I wouldn't want to live there, but I don't want to see it change either.

Honus · #4 09-22-2008, 07:31 PM

Quote:

Originally Posted by SwampYankee

...For those celebrating the demise of Wall Street...

I haven't heard much celebrating lately.

raymr · #5 09-22-2008, 08:26 PM

No pity here. Sorry. with a $22M bonus, I would hope he could sock half of it away and live happily ever after, and still have money for a Rolls Royce or two. And don't forget the lucrative speaking engagements that most have-beens are entitled to.

Hatterasguy · #6 09-22-2008, 08:33 PM

Its hurting my friend who works on boats, he isn't seeing the big projects that he needs for the winter.

mwood · #7 09-22-2008, 08:39 PM

Quote:

Originally Posted by dculkin

I haven't heard much celebrating lately.

Me either, seems like a stupid title.

SwampYankee · #8 09-22-2008, 09:00 PM

Quote:

Originally Posted by mwood

Me either, seems like a stupid title.

I've seen, read and heard far too many relishing the fact that the wealthy are finally "getting" theirs. With less of their money coming in we're left making up the difference.

Fulcrum525 · #9 09-22-2008, 09:25 PM

Quote:

Originally Posted by SwampYankee

I've seen, read and heard far too many relishing the fact that the wealthy are finally "getting" theirs. With less of their money coming in we're left making up the difference.

Exactly

I've met rich people and i've met poor people. You can be rich and be an ******* or you can be poor and an *******. Doesn't matter, I have met both. Don't think that all rich folks are heartless and uncaring.

Honus · #10 09-22-2008, 11:37 PM

Fulcrum and Swamp Yankee are reading and hearing things vastly different than the things I read and hear. I have not heard or read a single celebratory comment about this debacle. The emotions I hear and read are anger and fear.

As time goes on, I think the anger will grow as more people lose their homes to foreclosure. Based on what I've read and heard, the current proposed bail out figure - $700,000,000,000 - is probably about 33% too low. Using $700B as our baseline, it works out to about $2,300 for every American man woman and child. Instead of buying these lousy loans, why don't we just use that money to pay peoples' mortgages? It's a rhetorical question because I am sure it makes no economic sense, but it is worth thinking about. What does this bail out say about our government? Who does it work hardest to protect?

Regardless of who is to blame for all of our problems, W will leave this place worse than he found it. I generally have agreed with those who say that history will treat W better than his poll numbers would indicate, but now I am not so sure. This country is angry and bitterly divided.

Fulcrum525 · #11 09-22-2008, 11:50 PM

Quote:

Originally Posted by dculkin

As time goes on, I think the anger will grow as more people lose their homes to foreclosure. Based on what I've read and heard, the current proposed bail out figure - $700,000,000,000 - is probably about 33% too low. Using that figure as our baseline, it works out to about $2,300 for every American man woman and child. Instead of buying these lousy loans, why don't we just use that money to pay peoples' mortgages? It's a rhetorical question because I am sure it makes no economic sense, but it is worth thinking about. What does this bail out say about our government? Who does it work hardest to protect?

Regardless of who is to blame for all of our problems, W will leave this place worse than he found it. I generally have agreed with those who say that history will treat W better than his poll numbers would indicate, but now I am not so sure. This country is angry and bitterly divided.

Debt restructuring for the American public, yeah, probably wouldn't work. Also there would always be those who try to take advantage of the system.

Not going to argue at all on the 2nd point.

compress ignite · #12 09-23-2008, 12:23 AM

I can shed Alligator Tears for American Taxpayers.PERIOD

Leveraged Mortgage Investors,Investment Bankers,Bankers,Insurers,Mortgage
Bankers,Lobbyists,Corrupt Politicians,Regulators And all their Ilk...Aroint Them!