The New York Times‘s business coverage today is good and depressing—a portrait of our Second Gilded Age.
On page one, we learn that the CEOs of Fannie Mae and Freddie Mac, once quasi-public but now nationalized companies, made $9 million and $8 million respectively over the last two years. Taxpayers have already bailed out Fannie and Freddie to the tune of $150 billion and counting and those bailouts were in large part a backdoor bailout of Wall Street and foreign creditors. In other words, taxpayers are paying those multimillion-dollar salaries.
Nine million dollars over two years? Pshaw, says John Paulson, the hedge fund manager who came into crazy riches and fame betting on the subprime crisis, and who some smart people think helped prolong and exacerbate the bubble itself. On an average day last year, by my math, Paulson had made $9 million by mid-afternoon—$4.9 billion for the year. The Times:
Last year was very lucrative for some of the biggest and best-performing hedge funds’ chiefs. Wealth was so concentrated that a mere 25 people pocketed a total of $22.07 billion, according to this year’s annual ranking by AR Magazine, which tracks the hedge fund industry. At $50,000 a year, it would take the salaries of 441,400 Americans to match that sum.
Hedge fund managers can still have huge paydays even in years when their funds do not perform well. That is because of the millions they earn in fees from charging state pension funds, college endowments and wealthy individuals to manage money. These fees are typically collected regardless of whether the firm has a profit or a loss.
Then there’s Warren Buffett, a billionaire forty-seven times over, and the supposed emblem of all that is good and true about American capitalism, now embroiled in an insider-trading scandal of his hand-picked successor, glaring down at us from the dominant art on B1.
Contrast that with the other end of the economy—you know, the far, far larger part. The one where 61 year olds like Richard Dudenhoeffer hold on to their trailer house and car thanks to their $247-a week unemployment checks and charity.
“I sold my 9-millimeter gun,” Mr. Dudenhoeffer said offhandedly, after rattling off the possessions — coin collection, gold jewelry — he had sold to stay afloat. “It was too tempting to blow my brains out.” He added, “I am just so depressed.”
Dudenhoeffer is a cabinetmaker in housing-devastated Florida, which has a headline unemployment rate of 11.3 percent and a U6 jobless rate of 20 percent:
Jobs make news here. A few weeks ago word spread that new Red Lobster and Olive Garden restaurants in town were ready to hire. Hundreds lined up in the sun to file their applications. Only a few dozen were accepted.
Turns out, Florida is slashing unemployment benefits to the shortest in the nation. That’s in no small part because we can’t even temporarily raise taxes on folks like Paulson, who made $247 every 1.6 seconds of last year, much less make them pay income tax rates instead of capital-gains rates on so-called carried interest that are half as high.
The Florida House passed a bill that “would also make it easier for businesses to fire employees, who would then not be eligible for unemployment benefits,” reports the Times. What a place!
And then there’s the middle class—those lucky people who still have jobs but can’t figure out why they can’t get ahead or even stay afloat. The Times reports on a study by a women’s advocacy group that looked at what a somewhat secure middle-class lifestyle costs:
According to the report, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, and nearly twice the federal minimum wage of $7.25 an hour.
A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.
That compares with the national poverty level of $22,050 for a family of four. The most recent data from the Census Bureau found that 14.3 percent of Americans were living below the poverty line in 2009.
Glance up the Business Day front and read about how we bailed out the people who crashed the economy:
The story of the Fed’s efforts to rescue giant banks like Merrill Lynch, Citigroup and Washington Mutual from the consequences of reckless lending and investments is already well known. The central bank released detailed information in December about the emergency programs it created to pump billions of dollars into those banks…
By late October 2008, the volume of outstanding loans topped $100 billion, with several dozen banks borrowing each day.
As we now know, the banks would use these bailouts to preserve their chokehold on the economy. Bankers have as much power and siphon as much money out of the economy as ever. And they pay themselves better than ever.
The rest of us—those hundreds of people waiting in line to apply for an Olive Garden gig come to mind—try to pick up after them.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.