Masters of the Universe No More

By Denis Campbell —

New York City suburb, Greenwich, Connecticut, has 55 houses for sale asking $9 million dollars or more. Staff at East Hampton Airport on Long Island, a scene of private Gulfstream jet gridlock, says traffic is down 35%. Bettridge Jewelers on Wall Street sees traffic mostly selling off jewels to make mortgage payments.

It means deals on classic pieces to resell. Consigned Couture is doing a bumper business reselling designer gowns and clothes, so much so their appointment book is full for the next three months.

Vanity Fair’s Michael Schnayerson’s essay in the current edition shows that the panic amongst the ultra-rich, a group Tom Wolfe termed ‘Masters of the Universe’ in his breakthrough 1987 book The Bonfire of the Vanities, is reaching alarming heights and taking down retailers and charities across the city.

The amusingly and obscenely rich characters (formerly) running Wall Street’s trading houses are now caught up in a huge personal financial decline. Hardest hit are those who held boatloads of now bankrupt Lehman Brothers stock and saw it collapse after first borrowing millions against its paper value.

They were mostly conservative, borrowing no more than 50% of the value so even if the market “fluctuated” they would still have half their portfolio. No one, though, planned for a stock price of £0.15 a share (down from $80) the Friday before their bankruptcy filing.

Those at the top salted away rainy day funds and will likely feel less pain than so-called ‘middle’ managers worth ‘only’ $5 to 10 million dollars on paper. They were hardest hit because they lived a lifestyle of penthouses, homes, and private schools leveraged to their eyeballs on stock loans that are now coming due with nothing to take their place.

Panic has hit the exclusive corners of New York City so hard, a place where Wolfe described socialite women as “social x-rays,” so thin one could actually see their skeletons if they walked in front of a very bright light and “lemon tarts,” women so young and stunningly beautiful/perfect hanging on the arms of ultra powerful men in their 50’s-70’s that it was like being at an all-you-can-eat dessert buffet, that New York City’s mayor Bloomberg is seriously worried about Manhattan’s tax base. He has already projected a shortfall of 20% and once bonuses are announced… or not… in January, that panic could rise even higher.

And here in the UK the effects on tony Notting Hill and other key London addresses where a Maserati in every driveway was the norm are even worse. Real estate prices have been in a two-year nosedive; the financial district in Canary Wharf is a ghost town as even Lehman employees were told to come to work after the bankruptcy filing or risk losing their jobs even though they had nothing to do before being made redundant one afternoon. And Russian oil paper ‘billionaires’ are walking away from huge London real estate deals, forfeiting huge deposits and leaving empty buildings by the dozens. This is why the first quarter on Wall Street barons could have a huge global financial ripple affect.

The growing cloud, super rich apartments and townhouses for sale and the cutbacks amongst the super rich, could ultimately be a good thing. There are some, including this writer, who sees this as a huge opportunity for us to re-evaluate our global values system. Yes, there will be pain and seeing us return to a place where there is a sense of fairness and balance across the globe could be good for all of us.

The death of: obscene stock price based compensation, CEO’s being paid one or two thousand times their workers, managing for the short term of this quarter and ignoring the long-term picture for the health of the company and our planet, are all notions we could gladly see end up in the dustbin.

denis-campbell-2.gifThere were those who used greed and could never answer the basic question, how much is enough? Now the altar of the market which they worshipped greed, arrogance, and hubris whilst playing Sheriff of Nottingham, shipping jobs abroad and making shareholders more important than stakeholders in the community, the environment or even global warming, is closing down.

So here we go. Major systemic change is coming.

Fasten your seatbelts.

Denis Campbell

Denis Campbell is a US journalist based in the United Kingdom. He contributes to newspapers and magazines, is a BBC Radio election commentator and publishes the daily e-magazine The Vadimus Post from the Latin Quo Vadimus – where are we headed and do we know why?

Articles by Denis Campbell:


  1. says

    Good question Frank.

    CEO compensation has been too long tied to share price and the mythical expected daily rise in it. Some of that will take care of itself in this market and… when managing just to raise stock price, no matter what, that is the environment where dodgy accounting and schemes like credit default swaps and derivatives are born.

    I would manage for the long run by bringing in solid regulated corporate governance that ensures a company adresses all stakeholders vs. the fear of lawsuit now if a stock price fluctuates whichis what markets do.

    The role of the Board of Directors used to be to ensure a company was a good citizen and took care of all stakeholders, that included employees, the environment and the community. Now if a CEO tries to do that he or she is run out of town on a rail.

    What we have seen is a complete lack of accountability and religious-like focus on share price above all.

    I was listening to an old npr broadcast where the Harvard professor responsible for asking questions about TARP funds literally said that the middle men, the ones who create the secondary mortgage markets, are being sued by investors from trying to help re-negotiate mortgages out of foreclosure because they want them to fail because they make money either way.

    That is the degree of the sickness we face in a corporate driven society. No one is willing to do the right thing when the expedient thing will keep them in their job.

    Thanks for your comment.

  2. says

    You say that CEOs should manage for the long run. How, exactly, does one manage for the long run vs for the short run? More to the point how does an interested person or a shareholder judge?

  3. Kim says

    There seems , quite understandably , to be a lot of resistance by the average person to bailing out the rich . What I would suggest is a full bailout of the rich but make the rich pay for it fully . Yes – it would be a two tiered tax system but it would ensure that the rich have their concerns addressed . It would have to have two elements – the personal wealth side and the corporate wealth side – being seperately and jointly addressed .

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