Poorest Americans give much more to charity than rich

When Mort Zuckerman, the New York City real-estate and media mogul, lavished $200 million on Columbia University in December to endow the Mortimer B. Zuckerman Mind Brain Behavior Institute, he did so with fanfare suitable to the occasion: the press conference was attended by two Nobel laureates, the president of the university, the mayor, and journalists from some of New York’s major media outlets.

 

Many of the 12 other individual charitable gifts that topped $100 million in the U.S. last year were showered with similar attention: $150 million from Carl Icahn to the Mount Sinai School of Medicine, $125 million from Phil Knight to the Oregon Health & Science University, and $300 million from Paul Allen to the Allen Institute for Brain Science in Seattle, among them. If you scanned the press releases, or drove past the many university buildings, symphony halls, institutes, and stadiums named for their benefactors, or for that matter read the histories of grand giving by the Rockefellers, Carnegies, Stanfords, and Dukes, you would be forgiven for thinking that the story of charity in this country is a story of epic generosity on the part of the American rich.

It is not. One of the most surprising, and perhaps confounding, facts of charity in America is that the people who can least afford to give are the ones who donate the greatest percentage of their income. In 2011, the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income. The relative generosity of lower-income Americans is accentuated by the fact that, unlike middle-class and wealthy donors, most of them cannot take advantage of the charitable tax deduction, because they do not itemize deductions on their income-tax returns.

But why? Lower-income Americans are presumably no more intrinsically generous (or “prosocial,” as the sociologists say) than anyone else. However, some experts have speculated that the wealthy may be less generous—that the personal drive to accumulate wealth may be inconsistent with the idea of communal support. Last year, Paul Piff, a psychologist at UC Berkeley, published research that correlated wealth with an increase in unethical behavior: “While having money doesn’t necessarily make anybody anything,” Piff later told New York magazine, “the rich are way more likely to prioritize their own self-interests above the interests of other people.” They are, he continued, “more likely to exhibit characteristics that we would stereotypically associate with, say, assholes.” Colorful statements aside, Piff’s research on the giving habits of different social classes—while not directly refuting the asshole theory—suggests that other, more complex factors are at work. In a series of controlled experiments, lower-income people and people who identified themselves as being on a relatively low social rung were consistently more generous with limited goods than upper-class participants were. Notably, though, when both groups were exposed to a sympathy-eliciting video on child poverty, the compassion of the wealthier group began to rise, and the groups’ willingness to help others became almost identical.

Last year, not one of the top 50 individual charitable gifts went to a social-service organization or to a charity that principally serves the poor and the dispossessed.

If Piff’s research suggests that exposure to need drives generous behavior, could it be that the isolation of wealthy Americans from those in need is a cause of their relative stinginess? Patrick Rooney, the associate dean at the Indiana University School of Philanthropy, told me that greater exposure to and identification with the challenges of meeting basic needs may create “higher empathy” among lower-income donors. His view is supported by a recent study by The Chronicle of Philanthropy, in which researchers analyzed giving habits across all American ZIP codes. Consistent with previous studies, they found that less affluent ZIP codes gave relatively more. Around Washington, D.C., for instance, middle- and lower-income neighborhoods, such as Suitland and Capitol Heights in Prince George’s County, Maryland, gave proportionally more than the tony neighborhoods of Bethesda, Maryland, and McLean, Virginia. But the researchers also found something else: differences in behavior among wealthy households, depending on the type of neighborhood they lived in. Wealthy people who lived in homogeneously affluent areas—areas where more than 40 percent of households earned at least $200,000 a year—were less generous than comparably wealthy people who lived in more socioeconomically diverse surroundings. It seems that insulation from people in need may dampen the charitable impulse.

 

 

Wealth affects not only how much money is given but to whom it is given. The poor tend to give to religious organizations and social-service charities, while the wealthy prefer to support colleges and universities, arts organizations, and museums. Of the 50 largest individual gifts to public charities in 2012, 34 went to educational institutions, the vast majority of them colleges and universities, like Harvard, Columbia, and Berkeley, that cater to the nation’s and the world’s elite. Museums and arts organizations such as the Metropolitan Museum of Art received nine of these major gifts, with the remaining donations spread among medical facilities and fashionable charities like the Central Park Conservancy. Not a single one of them went to a social-service organization or to a charity that principally serves the poor and the dispossessed. More gifts in this group went to elite prep schools (one, to the Hackley School in Tarrytown, New York) than to any of our nation’s largest social-service organizations, including United Way, the Salvation Army, and Feeding America (which got, among them, zero).

Underlying our charity system—and our tax code—is the premise that individuals will make better decisions regarding social investments than will our representative government. Other developed countries have a very different arrangement, with significantly higher individual tax rates and stronger social safety nets, and significantly lower charitable-contribution rates. We have always made a virtue of individual philanthropy, and Americans tend to see our large, independent charitable sector as crucial to our country’s public spirit. There is much to admire in our approach to charity, such as the social capital that is built by individual participation and volunteerism. But our charity system is also fundamentally regressive, and works in favor of the institutions of the elite. The pity is, most people still likely believe that, as Michael Bloomberg once said, “there’s a connection between being generous and being successful.” There is a connection, but probably not the one we have supposed.

 

By Ken Stern’s book, With Charity for All: Why Charities Are Failing and a Better Way to Give, was published in February 2013

 

Senator: Should hourly minimum wage be $22?

Elizabeth Warren said that a much higher baseline would be appropriate if wages were tied to productivity gains.

Digital Vision-Getty Images-Getty Images

What if U.S. workers were paid more as the nation’s productivity increased?
If we had adopted that policy decades ago, the minimum wage would now be about $22 an hour, said Sen. Elizabeth Warren (D-Mass.) last week. Warren was speaking at a hearing held by the Senate’s Committee on Health, Education, Labor and Pensions.

Warren was talking to Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the issue of minimum wage. “With a minimum wage of $7.25 an hour, what happened to the other $14.75?” she asked Dube. “It sure didn’t go to the worker.”

The $22 minimum wage Warren referred to came from a 2012 study from the Center for Economic and Policy Research. It said that the minimum wage would have hit $21.72 an hour last year if it had been tied to the increases seen in worker productivity since 1968. Even if the minimum wage got only one-fourth the pickup as the rate of productivity, it would now be $12.25 an hour instead of $7.25.

Some of the news media took this to mean that Warren is calling for a minimum-wage increase to $22 an hour. That doesn’t appear to be the case. She seems to be merely pointing out that the minimum wage has grown more slowly than other facets of the economy.

Warren is taking some hits on Twitter for her comments. One user describes her as “clueless and out of touch” while another calls her “delusional.” But other users are praising her arguments as “compelling,” saying she is “asking the right questions regarding minimum wage.”

By Kim  Peterson

 

Anti-Wall Street Protests Spreading to Cities Large and Small

A loose-knit populist campaign that started on Wall Street three weeks ago has spread to dozens of cities across the country, with protesters camped out in Los Angeles near City Hall, assembled before the Federal Reserve Bank in Chicago and marching through downtown Boston to rally against corporate greed, unemployment and the role of financial institutions in the economic crisis.

With little organization and a reliance on Facebook, Twitter and Google groups to share methods, the Occupy Wall Street campaign, as the prototype in New York is called, has clearly tapped into a deep vein of anger, experts in social movements said, bringing longtime crusaders against globalization and professional anarchists together with younger people frustrated by poor job prospects.

“Rants based on discontents are the first stage of any movement,” said Michael Kazin, a professor of history at Georgetown University. But he said it was unclear if the current protests would lead to a lasting movement, which would require the newly unleashed passions to be channeled into institutions and shaped into political goals.

Publicity surrounding the recent arrests of hundreds in New York, near Wall Street and on the Brooklyn Bridge, has only energized the campaign. This week, new rallies and in some cases urban encampments are planned for cities as disparate as Memphis, Tenn.; Hilo, Hawaii; Minneapolis; Baltimore; and McAllen, Tex., according to Occupy Together, an unofficial hub for the protests that lists dozens of coming demonstrations, including some in Europe and Japan.

In the nation’s capital, an Occupy D.C. movement began on Saturday, with plans to join forces on Thursday with a similar anticorporate and antiwar group, October 2011, for an encampment in a park near the White House.

 

About 100 mostly younger people, down from 400 over the weekend, were camped outside Los Angeles City Hall on Monday morning. Several dozen tents occupied the lawn along with a free-food station and a media center. People sat on blankets playing the guitar or bongo drums or meditating. Next to a “Food Not Bombs” sign, was another that read “Food Not Banks.”

At the donations table, Elise Whitaker, 21, a freelance script editor and film director, said the protesters were united in their desire for “a more equal economy.”

“I believe that I am not represented by the big interest groups and the big money corporations, which have increasing control of our money and our politics,” she said, adding that she was not against capitalism per se.

Javier Rodriguez, 24, a former student at Pasadena City College, held a sign that read “Down with the World Bank” in Spanish, and said he was anti-capitalist.

“The monetary system is not working,” he said. “The banks are here to steal from us. Everybody is in debt whether it’s medical bills or school or loans. People are getting fed up with it.”

In Chicago on Monday morning, about a dozen people outside the Federal Reserve Bank sat on the ground or lay in sleeping bags, surrounded by protest signs and hampers filled with donated food and blankets. The demonstrators, who have been in Chicago since Sept. 24, said they had collected so much food that they started giving the surplus to homeless people.

Each evening, the number of protesters swells as people come from school or work, and the group marches to Michigan Avenue.

“We all have different ideas about what this means, stopping corporate greed,” said Paul Bucklaw, 45. “For me, it’s about the banks.”

Sean Richards, 21, a junior studying environmental health at Illinois State University in Normal, said he dropped out of college on Friday and took a train to Chicago to demonstrate against oil companies.

He said he would continue sleeping on the street for “as long as it takes.”

Strategists on the left said they were buoyed by the outpouring of energy and hoped it would contribute to a newly powerful progressive movement. Robert Borosage, co-director of the Campaign for America’s Future, in Washington, noted that the Wall Street demonstrations followed protests in Wisconsin this year over efforts to suppress public employee unions and numerous rallies on economic and employment issues.

The new protesters have shown a remarkable commitment and have stayed nonviolent in the face of aggressive actions by the New York police, he said. “I think that as a result they really touched a chord among activists across the country.”

But if the movement is to have lasting impact, it will have to develop leaders and clear demands, said Nina Eliasoph, a professor of sociology at the University of Southern California.

With the country in such deep economic distress, almost everyone is forced to think about economics and politics, giving the new protests a “major emotional resonance,” she said.

“So there is a tension between this emotionally powerful movement,” she said, “and the emptiness of the message itself so far.”

 

* By ERIK ECKHOLM and TIMOTHY WILLIAMS (NYT; October 3, 2011)
Ashley Southall contributed reporting from Washington, Ian Lovett from Los Angeles and Steven Yaccino from Chicago.

 

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Obama tells banks: `We want our money back’ (bonuses obscene)

President Barack Obama told banks Thursday they should pay a new tax to recoup the cost of bailing out foundering firms at the height of the financial crisis.

“We want our money back,” he said.
In a brief appearance with advisers at the White House, Obama branded the latest round of bank bonuses as “obscene.” But he said his goal was to prevent such excesses in the future, not to punish banks for past behavior.

The tax, which would require congressional approval, would last at least 10 years and generate about $90 billion over the decade, according to administration estimates. “If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers,” Obama said.

Advisers believe the administration can make an argument that banks should tap their bonus pools for the fee instead of passing the cost on to consumers.

The president’s tone was emphatic and populist, capitalizing on public antipathy toward Wall Street. With the sharp words, he also tried to deflect some of the growing skepticism aimed at his own economic policies as unemployment stubbornly hovers around 10 percent.

The proposed 0.15 percent tax on the liabilities of large financial institutions would apply only to those companies with assets of more than $50 billion — a group estimated at about 50. Administration officials estimate that 60 percent of the revenue would come from the 10 biggest ones.

They would have to pay up even though many did not accept any taxpayer assistance and most that did have repaid the infusions.
Obama said big banks had acted irresponsibility, taken reckless risk for short-term profits and plunged into a crisis of their own making. He cast the struggle ahead as one between the finance industry and average people.

“We are already hearing a hue and cry from Wall Street, suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic, it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses,” Obama said.
He renewed his call for a regulatory overhaul of the industry and scolded bankers for opposing the tighter oversight in legislation moving through Congress.

“What I’d say to these executives is this: Instead of setting a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I’d suggest you might want to consider simply meeting your responsibility,” Obama said.
At issue is the net cost of the fund initiated by the Bush administration to help financial institutions get rid of soured assets.

The $700 billion Troubled Asset Relief Program (TARP) has expanded to help auto companies and homeowners.
Insurer American International Group, the largest beneficiary at nearly $70 billion, would have to pay the tax. But General Motors Co. and Chrysler Group LLC, whose $66 billion in government loans are not expected to be repaid fully, would not.

Administration officials said financial institutions were both a significant cause of the crisis and chief beneficiaries of the rescue efforts, should bear the brunt of the cost.
Bankers did not hide their objections.

“Politics have overtaken the economics,” said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, a group representing large Wall Street institutions. “This is a punitive tax on companies that repaid TARP in full or never took TARP.”
Even before details came out, Jamie Dimon, chief executive of JPMorgan Chase & Co., said: “Using tax policy to punish people is a bad idea.”

Obama is trying to accelerate terms that require the president to seek a way to recoup unrecovered money in 2013, five years after the law was enacted.
So far, the Treasury has given $247 billion to more than 700 banks. Of that, $162 billion has been repaid and banks have paid an additional $11 billion in interest and dividends.
In Congress, Democrats embraced Obama’s proposal while Republicans rejected it.

“I think it is entirely reasonable to say that the industry that, A, caused these problems more than any other and, B, benefited from the activity, should be contributing,” said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee.
But GOP Rep. Scott Garrett of New Jersey, who’s on Frank’s committee, called it a “job-killing initiatives that will further cripple the economy by increasing fees passed on to consumers and small businesses, while reducing consumer credit.”

By Jim Kuhnhenn, Associated Press Writer-WASHINGTON (AP)

Links:

Federal Deposit Insurance Corp: http://www.fdic.gov/
Financial Services Roundtable: http://www.fsround.org/
Troubled Asset Relief Program: http://www.financialstability.gov/
House Financial Services Committee: http://financialservices.house.gov/
Financial Crisis Inquiry Commission: http://www.fcic.gov

 

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Suicide banker found hanged in five-star hotel had blown a fortune on women and drugs

A senior HSBC banker found hanged in a five-star London hotel is believed to have spent tens of thousands of pounds on cocaine and women in the months leading up to his death.

Christen Schnor, who was independently wealthy, had regularly gone missing from his six-figure post as he embarked on a personal journey of destruction.

Sources say Mr Schnor, who was a close friend of the Danish royal family, had been squandering large chunks of his family’s fortune.

High-flying career: Smiling HSBC executive Christen Schnor and a friend in a picture posed on Facebook
A hotel worker found Danish-born Mr Schnor, 49, in his £500-a-night suite at the Jumeriah Carlton Tower Hotel in Knightsbridge a fortnight ago. A suicide note written in Danish was by his side.

The millionaire father of four, who drove an Aston Martin to work, is said to have started using expensive prostitutes and cocaine after moving to London in June 2007 to take up his post.

His wife Marianne allegedly discovered that he had been siphoning their bank accounts and repeatedly tried to track down Mr Schnor at his office in Canary Wharf, but he was rarely there.

Sources say the bank thought he was off with Legionnaire’s Disease. Mr Schnor was HSBC’s head of insurance for the UK, Turkey, the Middle East and Malta – an arm of the business worth an estimated £750million in profit.

He sat on the executive committee of HSBC Bank plc, which runs the UK and European side of the global bank.

A source at HSBC said: ‘Christen was a big player at the bank. He was one of the most senior executives in Europe for HSBC and it was quite a coup to have brought him over from the Winterthur Group, where he had been an executive board member.

HSBC banker found hanged by belt at 5-star London hotel after ‘committing suicide’

‘Senior management became concerned by his erratic behaviour and appearance but he claimed he was ill with Legionnaire’s Disease. This now seems doubtful. Instead, he appears to have been spending a small fortune booking prostitutes through an
escort agency and buying drugs.’

The source added: ‘He had lost almost two stone in weight and when he did turn up at work he looked a shell of the man who had first arrived at the bank. His poor wife Marianne made many attempts to find him.

‘She had discovered he had been draining their bank account and spending the money on Russian prostitutes and cocaine. The amount of money he had withdrawn had even made it difficult for her to pay the bills by the end.’

Mr Schnor’s wife and children were believed to be back home in Copenhagen at the time of his death on December 17 last year.

Marianne had spent time living with her husband and two of their children at a £390-a-day rented four-bedroom flat in Wellesley House, Lower Sloane Street, Chelsea.

But Mr Schnor told bank bosses that he had to move out of his flat due to ‘refurbishment’ work. HSBC helped relocate him to the Jumeriah Carlton Hotel, which he paid for himself. It now appears there was no work being carried out on his flat and he had just left of his own accord.

Luxury lifestyle: The Schnors owned this villa in France and were friends of Danish royalty
The bank source said: ‘What happened came as a complete shock to management. Some were aware that he was undergoing personal problems but nothing like what was happening in reality.

‘They had tried to support him as much as they could, with the bank later helping to book him the hotel where he was staying but which he paid for himself, and put his absence at work down to him meeting business contacts as he built up their insurance arm.’

Mr Schnor also told bank bosses he had been burgled just weeks before he died. But he was unable to detail what was taken and the Metropolitan Police have no record of any break-in. They are not treating his death as suspicious.

An inquest is due to take place into his apparent suicide and his funeral is expected to be held this week.

The Schnors, who also owned a seven-bedroom villa in Cannes, France, which they let for up to £10,000 a week, were close friends of the Danish royal family, especially Crown Prince Frederik, who is heir to the Danish throne.

The banker had also been one of the elite who dined with Denmark’s Queen Margrethe, 68.

Mr Schnor spent five years in the Danish army after graduating and belonged to the country’s military reserve, recently attaining the highest position of Lieutenant Colonel.

A spokesman for HSBC refused to comment about Mr Schnor’s activities, but said: ‘The bank’s thoughts are with Christen’s friends and family following their tragic loss.’

By James Millbank, 4th January 2009

 

Madoff Scandal Shaking Real Estate Industry

Almost no segment of New York City’s real estate industry was spared in the Madoff scandal, which may be history’s largest Ponzi scheme: commercial brokers large and small, little-known developers and prominent families like the Wilpons and Rechlers all lost money to Bernard L. Madoff, industry executives say.

The outsize impact on the industry may have resulted largely because Mr. Madoff (pronounced MAY-doff) managed his funds much the way that real estate leaders have operated successfully for decades: He provided little information and demanded a lot of trust.

“You have a lot of wealthy people who made a lot of money on handshakes,” said Mark S. Weiss, a commercial real estate broker at Newmark Knight Frank, where several brokers had invested heavily with Mr. Madoff. There was “something about this person, pedigree and reputation that inspired trust,” he said.

Across the city, industry executives said deals had been scuttled or jeopardized because of the scandal. Residential brokers are taking calls from Madoff investors who have had to put their apartments on the market. Many developers had pledged their investments with Mr. Madoff as collateral for projects, and are now worried that their banks will call in their loans.

“The level of devastation, both financial and on a human level, is astounding,” said Robert J. Ivanhoe, a lawyer who is representing 10 developers and investors who lost $5 million to $50 million each with Mr. Madoff.

Indeed, at an industry fund-raiser at the Grand Hyatt hotel in Manhattan last weekend, much of the chatter over sushi and crudités was about money feared lost with Mr. Madoff, according to people who attended. And a Manhattan psychotherapist who counsels real estate leaders and bankers said most of the patients he has seen this week have close friends and relatives who lost money with Mr. Madoff.

The victims include executives at the global commercial brokerage CB Richard Ellis, most prominently Stephen Siegel, a major Bronx landlord who is chairman of worldwide operations at the brokerage and whose wife, Wendy, helped organize Saturday’s fund-raising dinner.

Brian S. Waterman, a principal at Newmark, also invested with Mr. Madoff. So did the Rechler family, which has been a major owner of office buildings in the region. Scott Rechler, the head of RexCorp, one of the family’s largest firms, called the family’s exposure “limited.”

Jerry Reisman, a lawyer based in Garden City, N.Y., said he was representing six commercial real estate investors and developers in the area who lost a total of $150 million to Mr. Madoff. They met Mr. Madoff through contacts at country clubs in the tristate area, he said.
“They knew him from golfing in the Hamptons. They knew him from the locker rooms,” Mr. Reisman said. “He was considered a wizard.”

Mr. Reisman said his clients were especially concerned because they counted on Madoff investments to complete some of their real estate projects, pledging their investments as collateral for projects. Those developers fear that when their banks realize that their investments with Mr. Madoff have disappeared, they will demand new collateral from other sources, Mr. Reisman said.

Finding those alternative lenders will be difficult given the financial crisis — and given that many other real estate investors have been hurt by the Madoff case.
“Many of these developers, their resources are all with Madoff,” Mr. Reisman said.

There are widespread concerns that some developers will have trouble completing projects currently under construction. Edward Blumenfeld, who runs Blumenfeld Development Group, had invested heavily with Mr. Madoff and considered him a friend. Gary Lewi, a spokesman for Mr. Blumenfeld, said he still planned to complete a shopping complex in East Harlem that is to include a Target and a Costco, as well as several other projects where construction is “in the ground.”

Beyond that, though, Mr. Blumenfeld is uncertain of what his development plans hold. His friendship with Mr. Madoff is even more uncertain, Mr. Lewi said.
“Any long-term plans are being reviewed as we conduct a far larger analysis of this scandal and the impact it could have on us and the development community as a whole,” Mr. Lewi said. “Mr. Blumenfeld was friend to a man who apparently didn’t exist.”

The Wilpon family, the major owners of the Mets, has acknowledged investing millions with Mr. Madoff. The family controls a real estate firm, Sterling Equities, whose Web site says it owns 3,000 residential units and 600,000 square feet of office space. It is unclear whether the firm’s real estate holdings are affected by the Madoff investments.
“We are shocked by recent events and, like all investors, will continue to monitor the situation,” said Richard Auletta, a spokesman for Sterling.

Other real estate developers are finding that their charitable giving has been wiped out by Mr. Madoff. Leonard Litwin, one of the city’s largest apartment landlords and head of Glenwood Management, had nearly all of his charitable foundation’s investments managed by Mr. Madoff.
Gary Jacob, executive vice president of Glenwood, said Mr. Litwin had never met Mr. Madoff but had invested with him on the advice of a friend. The Litwin Foundation had donated money to research for cancer and Alzheimer’s disease and charities, many of them supported by the real estate industry.

“It would have no impact to us as a real estate company,” Mr. Jacob said. “But it affects the charitable giving.”
Some members of the real estate industry are receiving the news with a mix of schadenfreude and sadness for their peers. Jeffrey R. Gural, chairman of Newmark Knight Frank, the brokerage firm, said Mr. Madoff had turned his family down as investors about eight years ago because they would not invest at least $20 million. For years, he said, colleagues introduced to Mr. Madoff through relatives or country club friends had sung his praises.
“People used to brag how they were getting these great returns when everybody else was struggling,” he said. “They thought Bernie Madoff was a genius, and anybody who didn’t give them their money was a fool.”
The impact is already spreading to the residential real estate business. Brad Friedman, a lawyer representing about 100 investors primarily in New York and Florida, said several clients have already said they plan to put their apartments on the market. They depended on their Madoff investments to pay their mortgages and co-op fees.
“With that source of money frozen, they’ve got no cash,” Mr. Friedman said. “They can’t pay the electric bill. They can’t pay the mortgage.”
Other buyers have already backed out of deals because they had invested with Mr. Madoff and can no longer finance their purchases. Michele Kleier, a prominent Upper East Side broker, had buyers pull out of purchases on two $2 million apartments because they had lost money to Mr. Madoff. The first buyer put in an offer at 3 p.m. last Thursday, the day of Mr. Madoff’s arrest, only to withdraw it by 5:30 p.m.
The second set of buyers had visited an apartment three times, requested the financial information about the co-op and had the broker notify Ms. Kleier that they would be making an offer on Monday morning. On Monday, she learned that the buyers had backed out because their money was tied up with Madoff funds.
“It’s now two deals in the last four days,” Ms. Kleier said. “It’s amazing.”
Kenneth Mueller, a Manhattan psychotherapist who counsels many real estate and financial executives, said those who lost money to Mr. Madoff called his indictment “the nail in the coffin for the commercial real estate industry,” which had already been hurt by the recession.
Dr. Mueller said many patients were re-evaluating whether they can trust their business partners after Mr. Madoff’s betrayal.
“Madoff was considered a member of the family,” he said.

 

 

* By CHRISTINE HAUGHNEY, 18 December 2008

 

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The Employment Crash

The headline numbers in the employment report for November were worse than dreadful — and they did not reflect the true extent of the weak and worsening outlook for American jobs.

Employers axed 533,000 jobs last month, the worst monthly loss since December 1974, bringing the number of lost jobs in the last year to 1.9 million. Worse, two-thirds of the losses were in the past three months, a sign of an intensifying downturn and of more job cuts ahead.
The unemployment rate for November — which rose to 6.7 percent, or 10.3 million people — also understates the weakness in the job market.
Job loss in a recession is related to the number of jobs created while the economy was expanding. Job creation during the Bush-era business cycle was the weakest since the end of World War II, so there are simply not as many workers to lay off as in past downturns. Instead, workers’ hours have been cut, sharply increasing the number of people working part time who want full-time jobs. Involuntary part-timers and out-of-work people who are discouraged from job hunting because their prospects are dim are measured in the underemployment rate, which at 12.5 percent is now the highest since the government started keeping track in 1994.
Joblessness and the threat of joblessness will depress already dismal consumer spending, which in turn will depress business investment, leading to higher unemployment. Rising unemployment will also fuel more foreclosures, which will further destabilize the financial system and reinforce economic weakness.
One in 10 borrowers in America were either delinquent or in foreclosure in the third quarter, according to the Mortgage Bankers Association, a stunning tally that does not even reflect the drag of rising unemployment in October and November. Unemployment among 25- to 34-year-olds, which includes most first-time homebuyers, is rising fast. Yet, rather than attack foreclosures directly, the Bush administration’s latest economic rescue proposal is to try to spur home buying by reducing mortgage rates. Good luck.

The political reality is that any serious response to unemployment and foreclosures will probably not occur until the Obama administration takes over. Members of Congress should be working now on another round of economic stimulus, consisting of bolstered unemployment compensation and food stamps and aid to states and localities, including money for creating jobs by rebuilding the nation’s infrastructure. An anti-foreclosure plan to rework troubled mortgages en masse is long overdue and should also be passed, either as part of the stimulus or as a stand-alone measure.

Beyond stimulus, President-elect Barack Obama will need a larger recovery plan that puts employment, rising wages and savings at the center of the agenda. The selection of a strong labor secretary, whose input will be as valued as that of Mr. Obama’s Wall-Street-oriented economic advisers, is crucial. The work force needs a champion who has the president’s full attention.

* EDITORIAL NYT, December 7, 2008

 

Bank of America to Cut 35,000 Jobs Over 3 Years

Bank of America said on Thursday that it planned to cut 30,000 to 35,000 positions — among the largest layoffs ever — over the next three years as it digests its acquisition of Merrill Lynch. That could amount to more than 11 percent of the combined firms’ global work force of 308,000.
Combining two firms as large as Bank of America and Merrill often involves eliminating duplicate jobs. Both have significant overlap in areas like research and investment banking.
But Bank of America, based in Charlotte, N.C., acknowledged that this round also reflected the dismal economy. The firm said the layoffs would cut across all of its businesses, and that a final number would be determined early next year.
Many of the jobs will be lost through attrition, Bank of America said, though a spokesman declined to comment on specifics of the plan, like which offices will be affected and which businesses will see job reductions.
Wall Street’s pain is unlikely to stop there. After years of rapid growth, built largely on the trading of risky securities like subprime mortgages, the financial services industry is in the throes of its sharpest contraction in modern times. As of last week, banks have cut 186,439 jobs since the onset of the financial crisis in July 2007, according to data from Bloomberg News. Bank of America has already laid off 11,150 employees, while Merrill has cut 5,720.
Bank of America, whose stock has fallen 64 percent this year, sealed its shotgun marriage to Merrill last week, creating a colossus of both corporate and consumer finance. But the firm, like its peers, has taken billions of dollars from the government to confront a recession that poses serious threats to many of its businesses.
Banks are already reeling from losses tied to credit card debt, auto loans and commercial real estate mortgages, and analysts worry that more consumers will struggle to stay current on the debts they incurred in more profitable times.
Jamie Dimon, the chief executive of JPMorgan Chase, said in an interview with CNBC that the global economy would be lucky if the current recession, which began last December, lasted just two more quarters.
He added that housing prices could fall another 20 percent, a situation that would force banks like JPMorgan and Bank of America to take even further write-downs on the mortgage assets they still hold on their books.
Shares in Bank of America fell 10.67 percent on Thursday, to $14.91, before the job cuts were announced. Shares in JPMorgan, which Mr. Dimon said experienced a “terrible” November and December, also fell more than 10 percent, leading financial stocks lower across the board.
Citigroup, the embattled financial giant, said last month that it was laying off 52,000 employees, the largest single wave of job cuts in nearly two decades. Even Goldman Sachs, which had dodged the worst of the pitfalls of the credit crisis, has begun laying off employees ahead of what many expect will be its first quarterly loss as a public company.
All the job cuts will be felt perhaps the most in the New York area, whose economy draws much of its city and state tax revenue from Wall Street.
New York City officials are bracing for thousands of additional layoffs. Earlier in the day, the New York City comptroller, William C. Thompson Jr., raised his estimates of Wall Street job losses over the next two years to 170,000. Together with an expected 50 percent drop in bonuses, to their lowest levels since 2002, the city’s tax revenue could fall by 4.3 percent in the 2009 fiscal year.
Last year, Wall Street paid out $33.2 billion in bonuses, a drop of 4.7 percent from the previous year.
“The toll taken by the financial industry makes this one of the grimmest economic periods for the city in many years,” Mr. Thompson said in a statement.

 

By MICHAEL J. de la MERCED, December 12, 2008