'Struggling' $350K-a-year exec responds

'Struggling' $350K-a-year exec responds

'Struggling' $350K-a-year exec responds, Banker Bonuses: Wall Streeter With $350K Salary Responds To The Outrage Over His Comments, The Wall Street director whose remarks sparked an outcry said he wasn't complaining. After being cited in a Bloomberg article about the impact of falling Wall Street bonuses, Andrew Schiff is feeling the heat from Americans outraged that someone (anyone) who makes $350,000 a year could complain about their lot in life. The story has gone viral, sparked a boatload of copycat pieces and blogs, most of them highly critical of Schiff, who says he's received a torrent of vitriolic emails.

"I never expected to become the poster child for venality and greed," says Schiff, who is director of marketing for Euro Pacific Capital, where his brother Peter is CEO.

In the accompanying video, Schiff stresses he never complained to the Bloomberg reporter about his lifestyle, realizes he's one of the lucky ones and "understands why people feel bad reading about what I'm saying."

The point Schiff says he was trying to make is twofold:

First, living in New York City is incredibly expensive and $350,000 does not make you rich in Manhattan -- nor San Francisco or Boston or almost any major metropolitan area where Wall Street types tend to work and live.

"What I thought I could've had at my [salary] level -- the reality is different; it's just not there," Schiff says, while conceding he doesn't have to live in New York. "It's a choice I'm making."

Second, Schiff says it takes a lot more money to live a "middle class" lifestyle in NYC today than it did when he was growing up there in the 1970s.

He recalls growing up in a "very nice two bedroom apartment" on the Upper East Side. "We went to summer camp, we took vacations," he says. "To match that kind of lifestyle now takes an absurd amount of money and more money that most people think. That was the point I was trying to make."

Now "middle class" in NYC is not the same as middle class in most other parts of the country -- or even the state. But what Schiff is describing is something that almost all Americans can relate to, assuming they can get by the sticker shock of what it costs to live in NYC: The middle class is getting squeezed and the very definition of "middle class" is changing.

In the Bloomberg story, for example, Schiff is cited as saying he has a summer rental in Kent, Conn. Not surprisingly, he's gotten a lot of flack from Americans who are taking "stay-cations" -- assuming they have a job to take time off from in the first place.

But Schiff notes his grandfather, who was a carpenter -- "a working class guy" -- also had a summer house, "and no one was calling him 'Rockefeller'."

This decline of living standards, even for those Americans with well-paying jobs, "should be part of the debate," he says. "But it's too vitriolic. Too black and white."

Finally, Schiff says the original Bloomberg story was slanted. When he said "I feel stuck," Schiff says he was referring to a specific incident involving a major traffic jam, not a commentary about his bank account. That "inaccuracy" led to "further distortion in the copies and clones of the original article," he says, citing a piece on Gothamist as a prime example.

Another bit of media critique: Schiff is a marketing guy. He's not an investment banker, trader, analyst, "titan of industry" or "master of the universe" in any sense of the term. Hanging a story about bonuses and lifestyles on someone who, by his own admission, is at the bottom of the Wall Street food chain is sloppy journalism, at best. All sense of proportion seems to have gotten lost as this story pinged around the Web, something else that's different about America today.

via: yahoo

$26 billion foreclosure abuse settlement

$26 billion foreclosure abuse settlement

$26 billion foreclosure abuse settlement, $26B Mortgage Settlement: Good for Banks, Not So Good for Homeowners, A record settlement with big banks is only a slap on the wrist, say some experts. After months of wrangling, the long-awaited foreclosure settlement between the government and the banks appears to be at hand.

A $26 billion settlement was announced Thursday morning between the federal government, state attorneys general and the five biggest banks in the mortgage market: Ally Financial (the old GE Capital), Bank of America, Wells Fargo, JP Morgan and Citigroup.

The settlement is being hailed as the biggest multi-state settlement since the 1998 tobacco agreement. But as Henry and I note in the accompanying video, the settlement is too small to really help the housing market, or even do much for individual victims of fraud and abuse. The deal may, in fact, hurt housing by sending a message to people who've stayed current on their mortgages that irresponsible behavior is what gets rewarded in America. That, presumably, is not the intention of policymakers but the "moral hazard" fallout from the settlement. More Americans may "walk away" from uneconomic loans, which will put additional pressure on local housing markets.

Furthermore, several experts note that for all the rhetoric about punishing corporate crimes and helping victims of abuse, the banks have once again gotten away with a slap on the wrist and may end up benefiting most of all from the settlement.

According to The Wall Street Journal, the settlement will be broken down as follows:

$5 billion in cash payments, including $1.5 billion to borrowers who were wrongly or illegally foreclosed on between September 2008 and December 2011. Borrowers could receive up to $2,000, depending on the number filing claims.

$20 billion in "credits" the banks will receive for principal write-downs and other aid to homeowners at risk of default, up to $20,000 per. This tally includes $3 billion for refinancing of mortgages currently under water.

(Yes, I know 20 + 5 = 25, not 26. It's unclear what the "extra" $1 billion will be earmarked for as details are still emerging on the plan.)

A Drop in the Bucket

Now, $26 billion is a lot of money but it's a drop in the bucket compared with the trillions of dollars of household wealth that's been lost since the bursting of the credit bubble in 2008. Furthermore, $2,000 is a small price to pay to homeowners who lost their homes in illegal foreclosures. The $20,000 mortgage modification is great, except the average deficit for underwater mortgages in America is $50,000.

In addition, the $20 billion isn't coming out of the banks' pockets; it's coming from investors and, ultimately, taxpayers.

"The mortgage principal write-downs are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s," writes Yves Smith at Naked Capitalism. "That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public." (See: Obama's Refi Plan Is Another Bank Bailout, Stockman Says: "The Worst Kind of Crony Socialism")

Meanwhile, several Fed watchers believe the central bank is gearing up for another round of quantitative easing that will focus on (wait for it) mortgage-backed securities. If QE3 is focused on MBS, it will further ease pressure on bank balance sheets and make any hit from modifications easier to digest.

Every state AG, with the exception of Oklahoma, has reportedly agreed to the settlement. One housing expert speculates key holdouts such as New York Eric Schneiderman and California's Kamala Harris agreed to the settlement in return for promises that the banks aren't being completely left off the hook.

During the State of the Union address last month, President Obama called for a new financial crimes unit to pursue mortgage-related fraud.

Not coincidentally, the SEC is now reportedly stepping up its investigations of illegal marketing and selling of mortgage-backed securities during the boom. The Journal reports Ally, Bank of America, Citigroup, Goldman Sachs and Deutsche Bank are among the firms being examined in the civil investigation.

via: yahoo

Secrets of the 401k millionaires

Secrets of the 401k millionaires

Secrets of the 401k millionaires, Members of this rare class of savers -- just 0.2% of 401k owners -- don't necessarily have higher salaries or the investing IQs of Warren Buffett, advisers say. Those hoping to occupy Easy Street in retirement may want to follow the lead of the 0.2% -- that topmost tiny fraction of savers who have managed to sock away more than $1 million in their 401ks.

That figure, based on data from the Employee Benefit Research Institute, may depress those with sums closer to the median 401k balance of roughly $60,000 -- and for good reason. Even among employees 55 and up who have been contributing to the same 401k plan for more than 20 years, just 2% are estimated to have cracked the $1 million mark, says Jack VanDerhei, EBRI's research director.

To some, the remaining 98% of savers 55 and older who haven't cracked $1 million show that the 401k, the principal vehicle for U.S. retirement savings, is at best inadequate and at worst a colossal failure. Even Ted Benna, the man credited with developing the first 401k plans out of an IRS tax loophole in 1981, now concedes that they've grown overly complex, with too many options, too-high fees and too many ways to cash out one's nest egg.

401k providers aren't happy, either

Even some 401k providers don't disagree. With traditional pensions, employers hired teams of experts to make the tough investing decisions now entrusted to individual employees, says Catherine Golladay, vice president of participant services for Charles Schwab. "Left to their own devices, most people do not have the knowledge or the discipline to do this themselves," she says.

Schwab, like other 401k providers, has found that efforts to educate employees haven't proved to be very successful -- and that only 10% of workers take advantage of such offers of help. In response, the company has announced a new index-fund-only 401k, which will keep expenses down and include mandatory advice on investments. "Many employees don't understand what they are losing to expenses -- sometimes 55 to 110 basis points," says Jim McCool, an executive vice president at Schwab. "They don't realize what a drag it is on their retirement savings."

Target-date funds, which allocate investments based on the saver's age, have also proven inadequate, McCool says. "It's a cookie-cutter, one-size-fits-all approach. We're hoping that by adding independent, one-on-one advice, we can help tailor plans to the needs of individuals and stop them from panicking and making bad decisions when the market gets scary."

How some make it work

So if that's what's wrong with the 401k, who are these super-rich among retirement savers who have managed to make the system work? And what are they doing differently? They don't necessarily have higher than average salaries or the investing IQ of Warren Buffett, VanDerhei says. "The one characteristic that differentiates the winners from the nonwinners here is contribution rate -- a high percentage of those million-dollar savers had constant participation and high contribution rates," he says.

Though many savers may be scarred by the past decade of lousy returns, getting to $1 million over the course of a 40-year career should be a manageable goal -- even for some lower-income employees, says Greg Burrows, a vice president of Principal Financial. Someone who earns $35,000, saves 12% to 13% (including a company match) and who gets an annual raise of 3.5% and annual returns of 7% would save a million dollars.

Despite the current volatility, many may still do that, he says. "One thing you have to keep in mind is that the 401k hasn't been around long enough for us to see people take full advantage of it over the course of an entire career."

Of course, those who earn big salaries are more likely to have big balances in their 401k's, says Mike Alfred, the CEO of Brightscope, which monitors and rates retirement plans. Further, the Great Recession not only wiped out many 401k balances, but its fallout also has hampered saving -- particularly among the middle class, he says. "There are a lot of families who have to simply stop saving because of a job loss or major health-care issue," he says.

On top of that, most participants can't -- or don't -- take full advantage of their 401k's, says Alfred. Advisers recommend savers max out their 401k contributions. But while the IRS raised the cap $500 to $17,000 for 2012, just 9% contribute the maximum, according to EBRI.

And to put $1 million in perspective: As nest eggs go, it's not exactly Fabergé. The rule of thumb, advisers say, is to accumulate enough to be able to replace 75% to 80% of one's income in retirement, without -- ideally -- having to draw down more than 5% of the balance per year. So a $1 million nest egg would give off just $50,000 annually, enough to replace 75% of the income of someone who made $66,666. Even if the retiree collects the current maximum Social Security payment of $30,156 annually for a total income of $80,156, that's still just the recommended replacement for an annual income of $106,874.

via: msn