Sun, Sep 24, 2006 - Page 17 News List

Hey, big spender

By Timothy L. O'brien  /  NY TIMES SERVICE , NEW YORK

David Latko, a money manager and radio host who recently published Everybody Wants Your Money (HarperCollins), a personal finance primer, reduces the mechanics of squandered wealth to handy categories. He says there are five basic ways people become rich: they inherit, marry, steal, win or earn their fortunes. Only those who earn fortunes, says Latko, tend to preserve their wealth. Inhabitants of the other four categories are more prone to be wastrels.

“The first thing you’ve got to look at, always, is where is the money coming from,” he says. “People who’ve made money themselves protect it. People who’ve inherited it spend it.”

Profiles of wealthy debtors may not be quite as tidy as Latko’s list suggests; self-made gazillionaires can wind up insolvent, too. But by and large, Latko’s list rings true and reinforces one of Foreman’s points: America’s rich, it would seem, sometimes do believe that money grows on trees.

Over the last three decades, personal bankruptcy rates in the US have soared. But in a nod to the notion that going belly-up still carries a whiff of disrepute, Congress tightened bankruptcy laws last year to circumvent what US Senator Orrin Hatch decried as “a way to avoid personal responsibility.”

It may be, however, that for most people, a bankruptcy filing simply marks an inability to stay afloat — not an attempt to dodge creditors — because most of those who lose their shirts typically are not rich.

According to a study by the St. Louis Federal Reserve last fall, most bankruptcy filers are blue-collar, lower-middle-class high school graduates who are already overloaded with debt when they get sideswiped by unforeseen miseries like a job loss or overwhelming medical expenses. Rarely do the rich have to ponder the consequences of layoffs or insurmountable hospital bills, yet the social ledger is chock-full of examples of landed gentry who still dissipate their wealth and run the risk of ignominy.

Buffalo Bill hauled in the equivalent of about US$30 million in today’s money overseeing his Wild West show at Chicago’s Columbian Exposition in 1893, according to Erik Larson’s book The Devil in the White City. A financial panic in 1907 ruined him and his show; when he died in 1917 there wasn’t enough money in his till to pay for his burial.

Mark Twain, who had a lifelong penchant for dodgy investments and gimmicky inventions, lost about US$4 million in today’s dollars betting on a newfangled but unwanted typesetting machine in the 1890s. He subsequently had to take to the lecture circuit to stave off bankruptcy.

Michael Jackson, who began churning out Top 10 songs and albums as the lead singer of the Jackson 5 before reaching puberty, found it necessary to pledge a stake in his lucrative songbook of Beatles hits to secure a US$270 million bank loan to forestall a slide into bankruptcy.

Mike Tyson is entangled in his own financial woes despite once having the marquee power to draw US$30 million purses for a single fight. When Tyson filed for bankruptcy in 2004, he listed debts of US$27 million, including about US$13 million in unpaid federal taxes and about US$174,000 for a diamond-studded gold chain.

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