Bailed-Out Wall Street “Gives Thanks” w Lavish Spending

25 November 2010.

This must be what they mean by “trickle down” economics.

Two years after the onset of the financial crisis,

Wall Street’s moneyed elite are breathing easier again.

And this means they are spending again — at times cautiously, but sometimes with a familiar swagger.

When it comes to personal indulgences, the wallets are beginning to open up.

Traders and executives say that jobs seem much more secure.

25 November 2010.

This must be what they mean by “trickle down” economics.

Two years after the onset of the financial crisis,

Wall Street’s moneyed elite are breathing easier again.

And this means they are spending again — at times cautiously, but sometimes with a familiar swagger.

When it comes to personal indulgences, the wallets are beginning to open up.

Traders and executives say that jobs seem much more secure.

Businesses whose fortunes ebb and flow with the financial markets are thriving again.

“Wall Street is back spending as much if not more than before,”

said the New York dermatologic surgeon Dr. Francesca J. Fusco,

whose business is booming again after a difficult few years.

Christie’s auction house says investors from the financial world who fell out of the bidding market during the 2008 credit crisis are “pouring” back in.

Expensive restaurants report a pickup in bookings.

At the Porter House restaurant in the Time Warner Center across from Central Park —

a favorite of A-list Wall Street executives, including Goldman Sachs’s chief executive, Lloyd C. Blankfein —

the head chef, Michael Lomonaco, says business is up about 10 percent over a year ago and

“people are starting to shake off what happened.”

Bookings for private rooms have increased.

“At some point, firms want to reward their people, and they seem more willing to do so this year,” he said.

Real estate agents say Wall Street executives have already begun lining up rentals in the Hamptons for next summer.

Dolly Lenz of Prudential Douglas Elliman said the bidding this year was “hotter and heavier” than previous years.

“There is a passion now in the market I haven’t seen in a while,” she said.

She said her clients, almost exclusively from Wall Street, were afraid to lose out.

Just recently, Ms. Lenz said, she had three people bidding more than $400,000 for a summer rental in Southampton.

“The mood is absolutely better, much better than even a year ago,”

said David M. Gildea, a health care trader at the Wall Street firm Cowen & Company.

Mr. Gildea was a trader at Bear Stearns before it was sold to JPMorgan Chase at a fire-sale price.

He then moved to another big firm, which went through a similar near-death experience.

In 2008, even on a good trading day, he said, he and other traders were reluctant to even go out for a drink after work,

uncertain if they were going to keep their jobs.

Now, Mr. Gildea said, people are stepping out more,

and firms like Cowen are more optimistic about the future.

“Are we back to where we were? Absolutely not,” he said.

“Many people in our industry have learned to live more responsibly,

but there is a definite buzz on the Street that hasn’t been there in some time.”

Indeed.

Exuberance was definitely in evidence at Josh Koplewicz’s annual Halloween party.

More than 1,000 people packed into a 6,000-square-foot space at the Good Units night club in Manhattan,

a substantially larger crowd than in the last several years.

The open bar was sponsored by Russian Standard vodka,

and Mr. Koplewicz, an investment analyst at Goldman Sachs, was able to snag a big headliner:

the hip-hop star Lil’ Kim, who performed dressed in a black cat costume.

The scene was still more extravagant in September,

at a 50th birthday party in Hong Kong for Brian Brille, the head of Bank of America Asia Pacific.

Mr. Brille, who is well known on the New York social scene, wore a gray Hugh Hefner-esque jacket.

Women dressed like Playmates, with feather boas and satin ears, danced behind a pink silk screen.

J.T. Cacciabaudo, head of equity trading and sales trading at the regional brokerage firm Sterne Agee, says

while there is some concern in the market about the fourth quarter and how it will end,

optimism about the longer term “has come back” and firms like his are in growth mode.

“Going into the third quarter, there was chatter about layoffs and most of that didn’t come to fruition

because firms seem more optimistic about 2011 than the past two years,” he said.

This despite the fact that bonuses on Wall Street are not likely to be up much from last year, though they will still be strong.

Over all, Goldman, Morgan Stanley, Citigroup, Bank of America and JPMorgan Chase

have set aside $89.54 billion this year to pay employees,

2.8 percent less than a year ago, according to data from Nomura.

A study by the influential compensation expert Alan Johnson says broadly that

bonuses will be up 5 percent this year across all financial services companies,

with employees in some businesses like asset management getting increases of 15 percent.

This is a far cry from 2007, when some firms on Wall Street set records for compensation payouts.

That year Goldman Sachs set aside $20.19 billion in compensation and benefits; in 2008, it set aside just half of that amount, $10.93 billion for pay.

In 2009, that number climbed to $16.19 billion.

In the years leading up to Black September 2008, some executives became famous for their expenditures,

like L. Dennis Kozlowski, the former chief executive of Tyco International,

whose $6,000 shower curtain became a symbol of unnecessary extravagance.

Some of that excess remains.

A Morgan Stanley trader recently tried to hire a dwarf for a bachelor party in Miami,

asking the dwarf to meet him at the airport in a “Men in Black” style suit, according to e-mail exchanges.

The trader, who wanted to handcuff the dwarf to the bachelor, was recently fired.

Most expenditures, however, are for more mainstream indulgences.

Marc B. Porter, a senior executive at Christie’s, says Wall Street workers, for whom the auction market was recently seen as “out of range” are pouring back in.

In recent months, Deborah Killoran, a client of dermatologist Dr. Fusco, has been more willing to open the purse strings for cosmetic surgery.

This month she is scheduled for an ulthera, a nonsurgical face-lift that costs $3,000 and upward.

Ms. Killoran, who runs a Brooklyn-based insurance company, says that

over the last two years she cut her annual spending on cosmetic surgery in half, to about $3,000.

She is now spending at pre-2008 levels, according to this disturbing article in the New York Times.

“I have to meet a lot of people, and this is part of investing in myself,” she said.

Investing in myself — that’s what they all say … 😉 …

 

David Caploe PhD

Editor-in-Chief

EconomyWatch.com

President / acalaha.com