Vanity Fair on the fate of Lehman Brother bankers
That must really sting.
The lower-echelon bankers who were previously scraping by on $5 million a year are flat broke and in debt, with no way to repay.
Most 60-year-old ex–Lehman Brothers bankers likely squirreled away enough to at least scrape by on a couple of million a year. As for the 25-year-olds, they never earned enough to have much to lose. But the mid-30s or mid-40s Lehman banker who lived up to his high compensation—or beyond it—is reeling, hurting, and possibly bankrupt.Can we all take a moment and send beams of happiness and sunshine in their direction? Profiles in Panic (Thanks, Richard!)One Sunday evening in October, a former Lehmanite in his mid-30s settles into a velvet banquette at the Gramercy Park Hotel’s elegant Rose Bar. At first he’s circumspect. But after a couple of Johnnie Walker Blacks on the rocks, he opens up.
“Let’s take a guy who makes $5 million a year,” the banker suggests. “He’s paid two and a half million dollars of that in equity compensation”—Lehman Brothers stock. Plus he gets to buy that stock at a 30 percent discount, so he’s really getting $3.25 million in stock. “Plus appreciation? Over five years? That’s $25 to $30 million!
“Then let’s say a guy in that position borrowed $5 million against the $30 million in stock. It would seem a very conservative loan, right? Until the $30 million goes down to zero, which is what happened. So now he’s negative $5 million.”
True, that same Lehman banker got the other half of his compensation in cash. The banker nods. “For five years, he made two and a half million dollars a year in cash. So that’s twelve and a half million dollars. But of course he’s had to pay more or less 50 percent in taxes, so divide that and he’s got six and a quarter million. He’s probably spent that money over those five years—$1 million a year, it’s not so hard to do, right? So he has nothing—and he has to repay that $5 million loan.”
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And these are the people our bailout funds are trying to prop back up?
Absolutely. No. Sympathy. At all.
The system was broken, they took advantage, and now they ought to be broken too.
I'm really curious as to how they got those jobs, too. Family connections? Or were they really THAT good? (uhh... obviously not given the failure.)
New Credit Crunch Cereal
"Hmmm ... crunchy, but how do you get it so salty?"
"Aha! Credit Crunch (tm) is made from the dried tears of a thousand sacked investment bankers."
"Yay!"
A very wise man I knew once made an elegant point regarding salaries. "Each profession has a given amount of compensation. When you choose a career, you know that you will, with some outliers, make a given salary range. Teachers will never be paid seven figures, janitors will not buy yachts without winning the lottery or inventing the better mousetrap. Why then do people choose, those who can choose, less rewarding careers? Why be a teacher when a banker pays more? Because there are more rewards than simple pay. Some jobs profit society, others simply profit from it."
That simple idea informs my mindset whenever I hear about out of control executive compensation. These individuals knew the rewards of their profession, they knew the exorbitant benefits associated with it. That now, their reach has exceded their grasp we should pity them, while those who choose to benefit society instead of simply reap profits from the work of others? No thank you.
Ho fucking ho! Merry Christmas one and all!
I'd imagine that just because you made a lot of money before doesn't make being broke, unemployed and in tons of debt suck less.
I don't have much sympathy for the guys who still have millions, but someone who's gone from a seven-figure salary to no job and $5m debt? Yeah, them I have sympathy for. That must really, really suck.
And frankly, I'd rather be someone who can empathise than, y'know, the other thing.
After seeing what's happened to my 401K and other investments, I have no sympathy for these guys.
#6: Meh. They can declare bankruptcy and start over, just like the lower middle class types whose debt they grew rich on. Chances are, if they were earning that much, they'd have more (and better) assets to hang onto through the bankruptcy.
Right now you are down and out,
and feelin' kind of crappy.
And when I see how sad you are,
it sorta makes me happy...
Sorry, Nicky, human nature
Nothing I can do
It's Schadenfreude
Makin' me feel glad that I'm not you.
Hahahahahahahahahaha! Ahahahahahaha!
I mean, I feel for them and I hope that they and their families manage to pull together, scrape by, learn the true meaning of Christmas and all that. But still:
Bwahahahahaha!
I saw this movie before: Boiler Room.
He’s probably spent that money over those five years—$1 million a year, it’s not so hard to do, right?
First Up Against The Wall, Come The Revolution.
I think that tax rate is a bit of. Besides the fact that a great deal of their income is in investments that aren't stock options, these people have the money to pay both accountants and tax attorneys to help them shuffle tax shelters to trim the margin even further.
I have zero sympathy for anyone who borrows $5million using the value of their stock options as collateral.
What did they do with the money?
If I took out $100K in Cash Advances on all my Credit Cards using NOTHING as collateral would you feel sorry for me if I said I could not pay it back?
I don't own a house and I'm too poor to have investments. I'm feeling pretty good right now.
Opportunity. Flocks of people used to money and used to making big easy money. Think I'll be sauntering on over with a little flash roll and a suitcase full of duct taped bricks.
As a dot-com-er, and have only in the recent couple of months paid off the last of my old debts, I have absolutely zero sympathy for any of these folks. In fact, they can go straight to hell. I've seen many a CEO drive a good company with a good product into the ground.
I've been amazed at what I can do with $1.38. What did these people do with millions and billions and hundreds of billions of dollars?!@
Friedrich Hayek on Meet the Press in 1975 might as well have been describing our current mess.
"Just wait until all the bailouts for these assholes (generally) pumps out so much inflation that the purchasing power of your savings and paycheck is practically wiped out!"
Tragically, as unjust as it is for those of you who have been responsible and lived within your means, I think the government has the right idea in attempting to foster inflation. One of the biggest reasons why our economy is continuing to roll downhill at such speed is that people still can't pay off the unwise debt that started this whole mess. Inflation, despite all the problems it brings with it, is the cure to a debt-locked economy. While it will hurt buying power, it will also stop our credit markets from continuing to asplode.
Whether the economy in its current form is worth saving is another question. My answer is a tentative yes, but I could see changing that opinion.
http://www.youtube.com/watch?v=jdkCkIaDf2U
#9; does that really apply though? Bankrupt or not, I'd really rather be in their position than mine. I could do a lot with the 5 Million they still have, and tell the banks to bugger off, hurting only my already trashed credit.
http://www.bluegraysky.com/images/Trading-Places--C10045389_sm.jpg
Painful, yes, but eventually we must shift away from Keynesian credit-based spending sprees back to a savings-based economy. Moving money around for its own sake, rather than for solid return on investment (i.e. real growth), is ultimately destructive. If we're to go on living, we can't go on living like this.
'Tis better to have loved and lost
than never to have loved at all.
Or something like that.
The bailout money should go directly to the people, and then the banks should compete to try and get as many of those people to invest or just deposit that money back in their banks.
See what they do with the short end of the stick, for a change.
@microcars
They'd sell the debt on as a CDO and make a nice fee!
@23 Takuan
http://www.youtube.com/watch?v=7EjdC0pjo1A
Interesting that Trading Places was produced by Aaron Russo.
@mark temporis
Read again: The hypothetical guy doesn't have $5 million--that's how deep his hole is.
http://www.youtube.com/watch?v=6WenavtbrtA&feature=related
"Can we all take a moment and send beams of happiness and sunshine in their direction?"
Can we just send high-energy gamma rays instead?
They used to tell me I was building a dream, and so I followed the mob,
When there was earth to plow, or guns to bear, I was always there right on the job.
They used to tell me I was building a dream, with peace and glory ahead,
Why should I be standing in line, just waiting for bread?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it's done. Brother, can you spare a dime?
Here's what I'll be sending them:
When things go wrong and will not come right,
Though you do the best you can,
When life looks black as the hour of night -
A pint of plain is your only man.
When money's tight and hard to get
And your horse has also ran,
When all you have is a heap of debt -
A pint of plain is your only man.
When health is bad and your heart feels strange,
And your face is pale and wan,
When doctors say you need a change,
A pint of plain is your only man.
When food is scarce and your larder bare
And no rashers grease your pan,
When hunger grows as your meals are rare -
A pint of plain is your only man.
In time of trouble and lousey strife,
You have still got a darlint plan
You still can turn to a brighter life -
A pint of plain is your only man.
-- Flann O'Brien (Brian O'Nolan)
"Pork bellies...I knew it..."
50% tax rate? not on your life. These guys never
did a 50% tax they probably paid nothing.
These people (bankers, CEOs, etc) tried to 'justify' their income by claiming to be the risk-takers that enabled, blah blah blah. I never did quite understand how they were taking much risk, since it was my money (and some of yours too, I suppose) they were risking.
Now they get to - some of them - suffer the downside that they have made so widely available to so many other people.
the 'hypothetical' story doesn't add up, if I borrow $5mil, I'm not suddenly $5mil poorer, I have a debt liability of $5mil and a cash asset of $5mil.
That $5mil seems to have disappeared from his calculations.
"He’s probably spent that money over those five years—$1 million a year, it’s not so hard to do, right? So he has nothing — and he has to repay that $5 million loan."
A fella in that position really shouldn't rule out suicide.
-- Justin
David Brin had a far better idea... go to war against the banks and winkle the money back out of those Swiss vaults... someone's made an absolute mint out of this crisis and they stand to make like bandits in the recovery phase by buying everything up at fire-sale prices...
Back to the main story's focus on the changes in the banker's life style: does anyone know what will happen to their trophy wives?
The London art gallery where I work used to be full of them, but I am seeing less and less of them.
In the opinion of this reader, tales of woe about bankers and mortgage brokers are the new unicorn chasers.
From now on, I shall demand the transcribed whining of another Wall Streeter for every story that squicks me.
So I finally had to sign up for an account just to post on this story.
I'm a big-shot consultant. We make good money, even at the low levels. And at the high levels (which I am/was getting close to), it's ridiculous. So when I got my bonus last year and saw that the ibankers and brokers were getting 25x what I was getting (and my bonus was significantly more than my brilliant wife's annual salary), I felt a little dejected, demoralized, etc.
What can I say? Schadenfreude is awesome!
To answer dculberson @2 way up the thread - connections generally don't get you into these jobs. I've done literally hundreds of interviews for my firm. Most recently, a former Lehman analyst and Freddie Mac analyst back to back. They were charming, poised, and seemingly bright. But we ask math and logic questions (case questions) on our interviews. And a reasonably bright Grade 11 student would perform much better on the case. Seriously: two guys whose jobs was to "analyze risk in mortgage-backed securities" couldn't do math!
Sad, and terrifying, and fun all at the same time...
@Starfish and Coffee
The Telegraph just posted an article on the plight of the suffering trophy wife. If you didn't get your schadenfreude fix from the original article above, try this.
(That said, the Telegraph article is all anecdote and no data, and its treatment of stereotypical women is more than a little disgusting. Read with care.)
"He’s probably spent that money over those five years—$1 million a year, it’s not so hard to do, right?"
Right.
Please die. Now.