Last year, investment bankers and their spouses kept their wallets shut during bonus season, first, out of panic, and later, fearing mobs with torches would descend upon their gated estates.
Now, after a year of self-imposed austerity and in what is shaping up as a spectacular bonus season, the Wall Street crowd is shaking off what one luxury retailer called its “frugal fatigue.” Unlike earlier spending sprees, however, the consumption will be a lot less conspicuous.
On Wednesday, Morgan Stanley said it was setting aside US$14.4 billion for salary and bonuses, or US$235,000 per employee. A day later Goldman Sachs said it would pay an average of US$498,000, with top producers at each of the two banks earning in the millions.
More than in past years, this year’s bonus numbers are stirring deep resentment in a nation staggering under 10 percent unemployment.
Yet there is another class of individuals, beside the fortunate few receiving Wall Street windfalls, who celebrate bonuses: Purveyors of goods and services to the wealthy, from Greenwich, Connecticut, to Manhattan, who stand to see their own fortunes improve. In the New York area’s own kind of trickle-down, real estate agents, high-end car dealers and luxury retailers are all welcoming this bonus season as if it were their own.
In the Hamptons, where real estate agents court bankers looking for summer homes, the sales are also expected to be a boon for contractors, movers and groundskeepers.
“A community like the Hamptons depends on house trades,” said Diane Saatchi, an agent with Saunders and Associates who just sold a home to a banker for US$4.9 million.
“Don’t ask to talk to him about it, because he won’t,” Saatchi said of the buyer. “They don’t want anyone to know they are buying.”
That includes the banker’s extended family, she explained, because he is worried they will ask him for money.
No one, she said, “is bragging about anything.”
At the heart of Wall Street’s anticipated splurge is pent-up demand after a year dominated by fears of a new depression, retailers and cultural observers say.
“For whatever reason, people feel the need to reward themselves for doing something good even if that just means surviving,” said Alexandra Lebenthal, an investment manager and creator of a fictional column about financial high jinks for NewYorkSocialDiary.com.
At the same time, investment bankers want to avoid the wrath of a fed-up public that continues to blame them for the nation’s recessionary ills. On Jan. 13, the chief executives of the nation’s four largest banks took a drubbing in hearings from congressional leaders, who criticized their pay practices as being out of whack with the rest of the country. The administration of US President Barack Obama is channeling that populism with proposals to further regulate and tax banks.
As such, the prevailing wisdom on Wall Street is less show and no tell.
“Bankers are being told by their bosses to be careful,” said Janet Hanson, who was an executive at Goldman Sachs for 14 years and a founding member of 85 Broads, a professional women’s networking organization. “I mean, how does it look if you got a US$1 million bonus from Goldman Sachs and you are sporting around in a new Audi TT? People will hate you.”
(To deflect criticism, Goldman announced last week it would pay its top 30 executives in stock only.)
Few Wall Street executives or their spouses contacted for this article were willing to discuss how they planned to spend or invest their bonuses, expressing a fear of public scorn combined with the silence about personal rewards that bankers usually observe.
One banker’s wife, who did not want to be named, said she and others like her felt more financially secure these days.
“There is the sense in the community that the world is not coming to an end,” she said.
Of bonus critics, she said, executives like her husband work hard and are unjustly singled out as greedy.
“Everybody wants someone to blame,” she said, “and rich people are an easy target.”
She and her husband have earmarked his bonus for two purposes. First, they want to set aside enough money for their four children’s college funds. But they are also shopping for a vacation home — perhaps from a buyer forced to sell.
“It is a good time to buy,” she said.
A friend of theirs, another financial executive, recently bought a house in Vermont weeks before it was to be foreclosed upon.
As much as Wall Street executives are seeking value, decisions are also based on whether they (and their new possessions) can hide in plain sight. A case in point: Manhattan Motorcars offered two lease programs in December, each costing about US$100,000. The first was a one-year lease for a Rolls-Royce Phantom Drophead Coupe with embroidered headrests and a brushed steel hood. The second was a three-year lease for a Bentley Flying Spur or GT convertible, both of which are more understated than the Rolls.
Brian Miller, the owner of Manhattan Motorcars, said the Bentleys were more popular with Wall Street executives, not because they were less expensive, but because they attracted less attention.
“They said they wanted to tone down their exposure and get something more staid and sedate,” Miller said. “Later on they said they could come back and get something flashy.”
New York’s wealthiest families have always had money to spend whether they received bonuses in a particular year or not. But it might have been seen as insensitive last year to parade down Madison Avenue, shopping bags in hand, while so many other Americans were losing jobs. Even those who had money didn’t spend it, retailers said. But many high-end retailers said they began seeing a shift in November as news of Wall Street’s spectacular profits circulated.
Art sales were brisk in the fall, said Barbara Gladstone, who owns a gallery in Chelsea. She anticipates an even better spring as the dark mood that prevailed in Manhattan through much of last year has begun to brighten. Simply put, shoppers, like teenage girls at a high school dance, move in packs.
Once a few high-end buyers emerge, the rest will follow.
“A lot of clients’ hesitation was psychological,” Gladstone said. “They were waiting until they felt better. And then they got tired of waiting.”
Suzanne Johnson, the general manager of Saks Fifth Avenue’s flagship store, said many wealthy customers were suffering from what she called “frugal fatigue.” After a year of looking, they are ready to treat themselves. Next month, Saks is holding an event at its Kiton men’s wear boutique where made-to-order suits can cost as much as US$21,000. It will feature Kiton’s craftsmen and is timed to bonus season, she said.
She recalled, too, a couple — the husband was a banker — who came in last month and looked at a pair of earrings from the Roberto Coin Cento collection that cost about US$5,000. Days later he returned and bought them for his wife.
“They are turning ‘looking’ into an ‘impulse buy,’” Johnson said. “It is about inner self-gratification rather than letting people know how rich you are.”
At the same time, however, luxury merchants predict it will take at least five years to return to 2007 spending levels. On reason is some bankers are getting restricted stock that they won’t be able to sell for years, instead of cash.
“It’s not like they are running around screaming now,” said Frederick Anderson, president of the fashion designer Douglas Hannant’s company, which opened a boutique in the Plaza last summer. “But they are making their appointments and keeping them. Last year, they used to make an appointment and cancel it. It got to be a joke. After the fourth time you’re like: ‘I get it. You aren’t coming in.’”
“A lot of people are scared to go out because they are afraid of being criticized,” he said. “How you spend your money now is a social comment. Everyone is looking.”
In a striking twist on how the have-a-lots see themselves, social distinctions seem to have developed regarding who can flaunt what and where. It is in poor taste, for example, for employees of investment banks that were bailed out using taxpayer dollars to show off much of anything. But that is not the case among hedge fund managers whose companies didn’t receive federal assistance.
Lebenthal, the investment manager and columnist, recalled being at a party recently and getting on an elevator with the wife of a hedge fund manager who was wearing a US$10,000 white fur jacket paired with faded jeans. Surprised at the display, Lebenthal stared.
“They feel much less a sense of propriety because they didn’t get government money,” Lebenthal said of employees at hedge funds. “They don’t feel as if they have to spend less.”
But spring is not far off — and that means more opportunities for financiers and their spouses to reward themselves: paintings bought at art auctions, summer homes in Sag Harbor and silken gowns to wear to the season’s gala parties. Will Wall Street restrain itself as it seeks to repair its damaged image?
“I think it will be interesting to see what big houses go up for sale or who buys the first big necklace,” Lebenthal said. “Even when there is still so much populist anger.”
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