Felix Salmon, over at his new digs at Reuters, writes this on the disbelief by financiers that they’re not worth what they’ve come accustomed to believing they’re worth:

Of course Wall Street’s compensation structures were doubly responsible for its flawed risk management. Firstly, they created excess risks: they encouraged investment bankers to put on what I call the Rubin Trade, where you make massive bets that something with a 95% probability of happening will indeed happen. And secondly, they contributed to the marginalization of the risk-management function in investment banks: since risk managers were paid so much less than star traders and top management, they tended to get overruled a lot, and in any case be discouraged from spending too much time looking at the really important big-picture views of systemic risk.

Look, it’s easy to make lots of money when you pile 40-to-1 leverage on an investment in an up-market. Imagine buying $100,000 in stock with only $2,500 of your own money, borrowing the rest from the bank. You’ve got little to lose and a lot to gain, so your incentive is to press your luck. If your $100,000 doubles, you have a 3900 percent gain on your capital, whereas if you’d invested the whole $100,000 yourself, you’d only be up 100 percent. Leverage is a magic money-making machine!

The unfortunate problem is the obverse is true. Leverage wipes out your $2,500 capital position pretty quickly when the market turns on you. When you can’t sell any of that investment to meet collateral calls, you’re wiped out and your lenders take big hits on their loans because now everybody else wants to sell, too, but nobody wants to buy. You lose your meager investment, which stings, but your lenders go kaplooey and the house of cards that the markets have built up collapses.

Which is what’s happened in the current mess, and which is why leverage won’t be allowed to reach anywhere near the ridiculous heights it did two years ago.

So while the multimillion-dollar bonus days are numbered, this whiner probably won’t have to fall all the way down to the comfortably middle class:

“You can’t live in New York and have kids and send them to school on $75,000,” he continues. “And you have the Obama administration suggesting that. That was a very populist thing that Obama said. He’s being disingenuous. He knows that you can’t live in New York on $75,000.”

Could be a boon to have all these well-bred youngsters going to P.S. 101 or whatever. I’m guessing conditions in the public schools would improve forthwith. Sherman follows the previous paragraph with this one:

That was an argument I heard over and over: that the high cost of living like a wealthy person in New York necessitates high salaries. It was loopy logic, but expressed sincerely.

The kicker for me is Sherman’s reporting on the backlash against the once-fashionable Obama on Wall Street and in Greenwich.

Now, in the wake of the crisis, Wall Street’s politics are shifting rightward. “All the rich people I know took George Bush for granted,” says an analyst at a midtown hedge fund. “I’m a Democrat, but I agree with Rush Limbaugh on a lot of this stuff,” rails the wife of a former AIG executive.

To which Sherman suggests:

The argument that Obama has in fact done a great deal to help Wall Street—to the tune of trillions of dollars—doesn’t have much truck with these critics.

Right, that one guy would be loving that Sysco delivery job these days if not for those government trillions.

This New York piece is a document of a dying era: very rich people, very disconnected from the real world, passing the buck in the delusional hope that we’ll keep passing them ours.

UPDATE: Former New York writer Chris Lehmann at new site The Awl gets this story all wrong. This story was obviously calling the whining rich out, not sympathizing with them or justifying them. Swing and a big miss there.

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.