Two Points on the Bloomberg Article on Wall Street Bonuses: Rentiers and Bonus Culture

I think everyone has commented on this Bloomberg article, Wall Street Bonus Withdrawal Means Trading Aspen for Coupons.  People making six figures take a 20% hit to their bonus and all hell breaks loose. Example:

“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?”

Fun stuff.  Two things stand out.

1.  Subtle rentier logic in the background.  Like Josh Mason, I was flabbergasted that Carmen Reinhart told Institutional Investor that “Financial repression is manifesting itself right now” alongside the notion that financial repression is like “the rape and plunder of pension funds.”  The idea that owners of financial capital are lovely savers who deserve low inflation, high interest rates and predictable, passive income regardless of there being 8%+ unemployment is beyond me.  But I also caught that the article says that “Reinhart is the toast of economic circles these days” for speaking out on financial repression.  Who is the audience?

Two quick, subtle points in the Bloomberg article about the frustrations, rage and sadness of financial elites in the 1% and monetary policy:

Andrew Schiff was sitting in a traffic jam in California this month after giving a speech at an investment conference about gold…

[the hedge fund manager 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 low interest rates that have been “artificially manipulated” by the Federal Reserve.

Good to see everyone in the financial 1% is blaming expansionary monetary policy (and lack of a gold standard) for their troubles.  What do they believe they deserved in a Great Recession?

2.  Bonus culture.  Notice how people both feel that they (a) deserve their bonus and (b) budget their fixed expenses and lifestyle as if they are going to get their bonus.  Is there any wonder you see so many people not report problems or actively “race to the bottom” in terms of ethics?  Their salary is managed in such a way that they can’t leave easily, and that there’s always a not-so-subtle mechanism for pulling away a full year’s compensation at a moments notice.  There’s a lot written on how the bonus culture caused fraud and problems at the front-lines of the securitization channels – I’d like to see more about how it functions among the financial 1%.