Dilemmas: Smaller Bonuses for the Rich 1% and Motel Room Homes for Those The Rich Have Screwed

COMPANION PIECE: How The Rich Are Living with Smaller Bonuses & How Those They’ve Screwed Over Are Barely Managing To Survive:

Wall Street Bonus Withdrawal (1% Bonus Withdrawal)
By Max Abelson
Bloomberg 
 

Florida Homeless Students Increase (Barely Surviving)
By Christine Armario
Huffington Post 

1% Bonus Withdrawal:  Andrew Schiff was sitting in a traffic jam in California this month after giving a speech at an investment conference about gold. He turned off the satellite radio, got out of the car and screamed a profanity.

“I’m not Zen at all, and when I’m freaking out about the situation, where I’m stuck like a rat in a trap on a highway with no way to get out, it’s very hard,” Schiff, director of marketing for broker-dealer Euro Pacific Capital Inc., said in an interview.

Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.”

Barely Surviving:  Zach Montgomery’s dad plugs in the electric skillet and opens the cardboard box containing tonight’s dinner.

The liquid from the canned chicken sizzles as it hits the skillet.

Zach, a 17-year-old high school student in Clermont, Florida, a bucolic town of rolling hills and palm trees outside Orlando, is used to dinners like this now. It’s been six months since his family moved into The Palace motel. Six months since he had a freezer large enough to hold ice cream or a quiet place to do homework.

Zach says he worries, about everything. Getting to school is tough. When his dad’s paycheck dries up a few days early, there isn’t money for gas. Sometimes, his mom says, he just doesn’t want to go. Zach worries about their safety. Police arrested four people running a mobile meth lab near the motel the week before. There are sights and smells Zach had never come across before he lived here. At night, when the television is off, they hear things that scare them.

His father, Ronald Montgomery, tall and spirited, sneaks in a chuckle, in spite or disbelief, as he talks about the last year. The lost house. His wife’s job. The illnesses. He pours in the rice and sprinkles the cheese powder on the chicken in the skillet as Zach looks on.

“It does make you feel like less of a person, or you’re a failure, because you’re not providing everything that you’ve been providing in the past,” he says.

“You’ve only got that door,” Zach says, looking at the chain lock and deadbolt separating their room and two beds from the outside world. “I’m thinking someone’s going to come in, just come in and do whatever they think they can do.”

1% Bonus Withdrawal:  The smaller bonus checks that hit accounts across the financial-services industry this month are making it difficult to maintain the lifestyles that Wall Street workers expect, according to interviews with bankers and their accountants, therapists, advisers and headhunters.

“People who don’t have money don’t understand the stress,” said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. “Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”

Barely Surviving: “I do but don’t,” the stocky, soft-spoken boy says. “If we were in a car I’d say we were more homeless.

“I’d like to have a house,” he continues. “But at least I have a roof.”

Here in Lake County the number of homeless students has skyrocketed, from 122 in 2005 to more than 2,600 this school year. It’s the largest increase in hard hit Florida and echoes the rising numbers seen nationwide as well. Some of those children are living with their parents in a friend’s or relative’s house. Others are in shelters or motels like Zach. Some with nowhere else to turn take refuge in the woods.

While the nation’s unemployment rate has declined to 8.3 percent, in rural Lake County it’s still a bruising 9.9 percent. Clermont, the county’s largest town, was once predominantly an agricultural community, but in recent years, farms were sold and land cleared for new developments. Then came the recession.

Roads paved in anticipation of new homes and families lead to empty lots. Restaurants that dotted the sparse suburban landscape like Perkins and Dairy Queen have shuttered their doors. Jobs here are scarce.

“We had a lot of people in the construction field, and that has pretty much come to a standstill,” says Kristin McCall, the Lake County School District’s homeless liaison. “I’m not sure if they’ve all been able to get back to work. And if they are, I don’t think financially it’s what they were at before.”

Teachers like Sheri Hevener started seeing signs of the distress, and in some cases, homelessness, in her students. They seemed lethargic. More started falling behind on their homework.

“There are some students where it is easily identifiable,” she says. “They wear the same thing. It’s visibly easy to tell.

“And then there are others that you can’t tell because they hide it, for fear.”

1% Bonus Withdrawal:  Facing a slump in revenue from investment banking and trading, Wall Street firms have trimmed 2011 discretionary pay. At Goldman Sachs Group Inc. (GS) and Barclays Capital, the cuts were at least 25 percent. Morgan Stanley (MS) capped cash bonuses at $125,000, and Deutsche Bank AG (DBK) increased the percentage of deferred pay.

Wall Street’s cash bonus pool fell by 14 percent last year to $19.7 billion, the lowest since 2008, according to projections by New York state Comptroller Thomas DiNapoli.

“It’s a disaster,” said Ilana Weinstein, chief executive officer of New York-based search firm IDW Group LLC. “The entire construct of compensation has changed.”

Most people can only dream of Wall Street’s shrinking paychecks. Median household income in 2010 was $49,445, according to the U.S. Census Bureau, lower than the previous year and less than 1 percent of Goldman Sachs CEO Lloyd Blankfein’s $7 million restricted-stock bonus for 2011. The percentage of Americans living in poverty climbed to 15.1 percent, the highest in almost two decades.

Barely Surviving:  Zach wasn’t one of Hevener’s students. When he showed up at her classroom with a friend one day, she wasn’t sure why the teenage boy in a T-shirt and shorts that hovered below his knees had come to see her. He carried himself with a sort of confidence that didn’t indicate he needed help.

“There were no visual signs,” Hevener says. “But I knew he was there for one of two reasons. Nobody comes here unless they’re there for one of two reasons.”

Hevener, a business teacher, runs a pantry at the school for homeless students and others in need.

“I just wanted to know about it,” Zack said when he met her.

She told him about how he could participate in what functions like a secret backpack society. Hevener is the only one who knows the names of the kids involved. Each student is assigned a backpack, which students pack each week with canned vegetables and boxed meals. The pantry also has toiletries, notebooks, baby clothes and prom dresses.

Hevener didn’t ask Zack why he needed the help or what his story was.

“I was just waiting for it to come out,” she says. “And it did.”

1% Bonus Withdrawal:  Comfortable New Yorkers assessing their discomforts is at least as old as Edith Wharton’s 1905 novel “The House of Mirth,” whose heroine Lily Bart said “the only way not to think about money is to have a great deal of it.”

Wall Street headhunter Daniel Arbeeny said his “income has gone down tremendously.” On a recent Sunday, he drove to Fairway Market in the Red Hook section of Brooklyn to buy discounted salmon for $5.99 a pound.

“They have a circular that they leave in front of the buildings in our neighborhood,” said Arbeeny, 49, who lives in nearby Cobble Hill, namesake for a line of pebbled-leather Kate Spade handbags. “We sit there, and I look through all of them to find out where it’s worth going.”

Barely Surviving:  It was a July afternoon. Ronald Montgomery, a Disney bus driver, got home from work and found a foreclosure notice on the front door of their three-bedroom home. All of their belongings had to be out within 24 hours.

They’d been paying $950 in rent every month, but the landlord had not kept up with the mortgage. The rental management company told him it was the first they’d heard of any problems with the bank. She promised to look into it and get back to him.

He got the call at work the next morning. The sheriff was coming to collect the keys. Two movers were going over to help. In the matter of an hour and a half all of their furniture was on the front lawn.

And then it started to rain.

“Needless to say we didn’t make it in time,” Montgomery says.

Zach’s bedroom furniture and two living room sets were ruined. In between trips in a U-Haul to the storage locker Montgomery had rented, neighbors came and plucked items from the yard. When they went through the house one last time, the Montgomerys found the movers had hidden some of their items under sinks and in closets.

“They went through all my drawers,” Zach says.

That night the Montgomerys stayed at a Days Inn. The little savings they had was gone. A friend’s family took in Zach and brought him along on a vacation to St. Augustine.

“He had a wonderful time,” Zach’s mom, Dawn Montgomery says sadly, as though she were recalling a last good memory.

1% Bonus Withdrawal:  Executive-search veterans who work with hedge funds and banks make about $500,000 in good years, said Arbeeny, managing principal at New York-based CMF Partners LLC, declining to discuss specifics about his own income. He said he no longer goes on annual ski trips toWhistler (WB)Tahoe or Aspen.

He reads other supermarket circulars to find good prices for his favorite cereal, Wheat Chex.

“Wow, did I waste a lot of money,” Arbeeny said.

Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don’t save.

“When their means are cut, they’re stuck,” said Scheiner, whose New York-based hedge fund, Lane Gate Partners LLC, was down about 15 percent last year. “Not so much an issue for me and my wife because we’ve always saved.”

Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club in upstate New York. A labradoodle named Zelda and a rescued bichon frise, Duke, cost $17,000 a year, including food, health care, boarding and a daily dog-walker who charges $17 each per outing, he said.

Barely Surviving:  Situated on top of a hill on Interstate 27, The Palace is made of brick and has about a hundred rooms on two floors. The lobby reeks of cigarettes. An unfinished puzzle lies scattered on a table.

The motel offers a weekly rate of $155. For the Montgomery family it was just about the only option.

Their room has two full size beds, a table with a television, and a wall stacked with all of their belongings. There’s one bathroom and one sink, which they use to brush their teeth, shave – and wash the dishes. A plastic bag holds all their utensils. The beds double as a dining room table.

For a while, things seemed to be getting better. But then, in October, Dawn Montgomery lost her job as a bus driver at Disney, where she had worked for 13 years. Two months later, her husband got sick. An untreated cavity turned into a painful abscess that caused his entire jaw to swell. Fortunately, they still had health insurance from his job.

The services they thought would help pull them out have come up short. They were denied food stamps because Ronald Montgomery made $160 a month too much. Food banks weren’t much of a help.

“You go to the food bank and its like, `You can go here once a month,'” Dawn Montgomery says. “That bag is not going to last me once a month.”

The Montgomerys also are now caring for their 5-year-old granddaughter. Their daughter lives in California.

They don’t have debt but just can’t get back ahead.

“You just worry,” Ronald Montgomery says. “What’s going to happen today?”

1% Bonus Withdrawal:  Still, he sold two motorcycles he didn’t use and called his Porsche 911 Carrera 4S Cabriolet “the Volkswagen of supercars.” He and his wife have given more than $100,000 to a nonprofit she founded that promotes employment for people with Asperger syndrome, he said.

Scheiner pays $30,000 a year to be part of a New York-based peer-learning group for investors called Tiger 21. Founder Michael Sonnenfeldt said members, most with a net worth of at least $10 million, have been forced to “re-examine lots of assumptions about how grand their life would be.”

While they aren’t asking for sympathy, “at their level, in a different way but in the same way, the rug got pulled out,” said Sonnenfeldt, 56. “For many people of wealth, they’ve had a crushing setback as well.”

He described a feeling of “malaise” and a “paralysis that does not allow one to believe that generally things are going to get better,” listing geopolitical hot spots such as Iran and lowinterest rates that have been “artificially manipulated” by the Federal Reserve.

Barely Surviving:  Under the federal McKinney-Vento Act, districts are required to let homeless students attend their original school, even if they move outside the boundaries, and help provide transportation.

“Home life is not that great,” McCall says. “But if we can keep them at the same school they’ve been attending, same friends, same teacher, and at least keep that consistent and stable, that’s our goal.”

There’s another benefit.

“And if we get them there, we can feed them,” McCall says.

At about $600 a month, the cost of living in a motel is about the same as many apartment rentals. Yet living in a motel quickly becomes its own kind of trap: While families can afford the monthly payment, they can’t save up enough to put down a deposit for a more permanent place.

“We’re going to stay here a few weeks and then somewhere else,” McCall says families tell her. “And then in two weeks you don’t hear from them. They’re still there.”

1% Bonus Withdrawal:  The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.

“I can’t imagine what I’m going to do,” Schiff said. “I’m crammed into 1,200 square feet. I don’t have a dishwasher. We do all our dishes by hand.”

He wants 1,800 square feet — “a room for each kid, three bedrooms, maybe four,” he said. “Imagine four bedrooms. You have the luxury of a guest room, how crazy is that?”

Barely Surviving:  Some of the kids at East Ridge High School know about Zach’s situation. But he doesn’t volunteer much and he doesn’t bring friends home after school.

“I’m not really embarrassed,” Zach says. “It’s just such a small room. You can’t really do anything except sit.”

To escape, Zach immerses himself in video games he was able to save from the house.

Zach’s favorite subject is math and he’s thinking about becoming an auto mechanic. But what he really likes is architecture.

“I want to make buildings,” he says. “Probably houses.”

But Zach hasn’t made it to class lately. He says he often wakes up feeling sick. Some days there just isn’t money for gas. His dad says he tried to arrange transportation to the school, about 10 miles away, but his messages were not returned.

“That seemed to fall on deaf ears,” he says.

The backpack from the school’s food pantry is empty.

1% Bonus Withdrawal:  The family rents a three-bedroom summer house in Connecticut and will go there again this year for one month instead of four. Schiff said he brings home less than $200,000 after taxes, health-insurance and 401(k) contributions. The closing costs, renovation and down payment on one of the $1.5 million 17-foot-wide row houses nearby, what he called “the low rung on the brownstone ladder,” would consume “every dime” of the family’s savings, he said.

“I wouldn’t want to whine,” Schiff said. “All I want is the stuff that I always thought, growing up, that successful parents had.”

Hans Kullberg, 27, a trader at Wyckoff, New Jersey-based hedge fund Falcon Management Corp. who said he earns about $150,000 a year, is adjusting his sights, too.

After graduating from the Wharton School of the University of Pennsylvania in 2006, he spent a $10,000 signing bonus from Citigroup Inc. (C) on a six-week trip to South America. He worked on an emerging-markets team at the bank that traded and marketed synthetic collateralized debt obligations.

Barely Surviving:  The next day at school, Zach is not there.

“What can I do?” Hevener says after hearing the news. “There’s something more. There’s got to be more.”

If gas is the issue, maybe there’s someone in the community who can help, she wonders aloud.

“He has dreams and hopes of doing something and when you’re in a situation like this that looks very bleak,” she says.

Others at the school district also struggle for an explanation of Zach’s absences. There is a bus less than a quarter mile away from the motel. Did he know about it?

“If we have a bus that’s going there and he’s not getting to school it’s not because we don’t have a bus,” McCall says.

Hevener said she hadn’t seen Zach come to pick up a bag of food since Christmas. She’d inquired with his teachers and they hadn’t seen him either.

The district can’t say whether anyone tried to contact Zach’s family to make arrangements after he didn’t show up repeatedly for class. After being asked, calls are made and transportation arranged.

Hevener worries about him dropping out.

“I think it’s created a type of anger because of the system, because of what he had to experience,” Hevener says. “And a lot of confusion. Like, `Why?’ Why did you treat me like that? Why did you treat me like I was less than human?'”

1% Bonus Withdrawal:  His tastes for travel got “a little bit more lavish,” he said. Kullberg, a triathlete, went to a bachelor party in Las Vegas in January after renting a four-bedroom ski cabin at Bear Mountain in California as a Christmas gift to his parents. He went to Ibiza for another bachelor party in August, spending $3,000 on a three-day trip, including a 15-minute ride from the airport that cost $100. In May he spent 10 days in India.

Earlier this month, a friend invited him on a trip to Mardi Gras in New Orleans. The friend was going to be a judge in a wet T-shirt contest, Kullberg said. He turned down the offer.

It wouldn’t have been “the most financially prudent thing to do,” he said. “I’m not totally sure about what I’m going to get paid this year, how I’m going to be doing.”

He thinks more about the long term, he said, and plans to buy a foreclosed two-bedroom house in Charlotte, North Carolina, for $50,000 next month.

M. Todd Henderson, a University of Chicago law professor who’s teaching a seminar on executive compensation, said the suffering is relative and real. He wrote two years ago that his family was “just getting by” on more than $250,000 a year, setting off what he called a firestormof criticism.

“Yes, terminal diseases are worse than getting the flu,” he said. “But you suffer when you get the flu.”

Barely Surviving:  Zach was home, still feeling ill after running a fever the night before, when his father walked in. The elder Montgomery had just been fired by Disney.

The teenager seemed nonchalant when he heard his father had losthis job. It was as though the news hadn’t set in. Or as if one more blow was no longer capable of hurting him.

“I’m just waiting for whatever happens next,” he says.

1% Bonus Withdrawal:  Dlugash, the accountant, said he’s spending more time talking with Wall Street clients about their expenses.

“You don’t necessarily have to cut that — but if you don’t cut that, then you’ve got to cut this,” he said. “They say, ‘But I can’t.’ And I say, ‘But you must.’”

One banker who owes Dlugash $20,000 gained the accountant’s sympathy despite his six-figure pay.

“If you’re making $50,000 and your salary gets down to $40,000 and you have to cut, it’s very severe to you,” Dlugash said. “But it’s no less severe to these other people with these big numbers.”

A Wall Street executive who made 10 times that amount and now has declining income along with a divorce, private school tuitions and elderly parents also suffers, he said.

“These people never dreamed they’d be making $500,000 a year,” he said, “and dreamed even less that they’d be broke.”

This entry was posted in CAPITALISM, CORPORATE BRUTALITY, ECONOMY, FASCISM, GREED, HUMAN RIGHTS ABUSES, INCOME INEQUALITY, OCCUPY ALL STREETS!, OCCUPY!, POLICY, TAX THE RICH, UNEMPLOYMENT, Wall Street. Bookmark the permalink.

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