A View From The Top One Percent

jet-jets-private-plane-planes-planes-fly-rich-wealthy-charterVia Who Rules America?, a financial manager provides his perspective on the wealthiest one percent and 0.1 percent of Americans — i.e. his clients — regarding who they are, how they got so rich, and why he worries that they have too much power:

Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting.

Recently, I spoke with a younger client who retired from a major investment bank in her early thirties, net worth around $8M. Since I knew she held a critical view of investment banking, I asked if her colleagues talked about or understood how much damage was created in the broader economy from their activities. Her answer was that no one talks about it in public but almost all understood and were unbelievably cynical, hoping to exit the system when they became rich enough.

Folks in the top 0.1% come from many backgrounds but it’s infrequent to meet one whose wealth wasn’t acquired through direct or indirect participation in the financial and banking industries. One of our clients, net worth in the $60M range, built a small company and was acquired with stock from a multi-national. Stock is often called a “paper” asset. Another client, CEO of a medium-cap tech company, retired with a net worth in the $70M range. The bulk of any CEO’s wealth comes from stock, not income, and incomes are also very high. Last year, the average S&P 500 CEO made $9M in all forms of compensation. One client runs a division of a major international investment bank, net worth in the $30M range and most of the profits from his division flow directly or indirectly from the public sector, the taxpayer. Another client with a net worth in the $10M range is the ex-wife of a managing director of a major investment bank, while another was able to amass $12M after taxes by her early thirties from stock options as a high level programmer in a successful IT company. The picture is clear; entry into the top 0.5% and, particularly, the top 0.1% is usually the result of some association with the financial industry and its creations. I find it questionable as to whether the majority in this group actually adds value or simply diverts value from the US economy and business into its pockets and the pockets of the uber-wealthy who hire them. They are, of course, doing nothing illegal.

I think it’s important to emphasize one of the dangers of wealth concentration: irresponsibility about the wider economic consequences of their actions by those at the top. Wall Street created the investment products that produced gross economic imbalances and the 2008 credit crisis. It wasn’t the hard-working 99.5%. Average people could only destroy themselves financially, not the economic system. There’s plenty of blame to go around, but the collapse was primarily due to the failure of complex mortgage derivatives, CDS credit swaps, cheap Fed money, lax regulation, compromised ratings agencies, government involvement in the mortgage market, the end of the Glass-Steagall Act in 1999, and insufficient bank capital. Only Wall Street could put the economy at risk and it had an excellent reason to do so: profit. It made huge profits in the build-up to the credit crisis and huge profits when it sold itself as “too big to fail” and received massive government and Federal Reserve bailouts. Most of the serious economic damage the U.S. is struggling with today was done by the top 0.1% and they benefited greatly from it.

Not surprisingly, Wall Street and the top of corporate America are doing extremely well as of June 2011. For example, in Q1 of 2011, America’s top corporations reported 31% profit growth and a 31% reduction in taxes, the latter due to profit outsourcing to low tax rate countries. Somewhere around 40% of the profits in the S&P 500 come from overseas and stay overseas, with about half of these 500 top corporations having their headquarters in tax havens. If the corporations don’t repatriate their profits, they pay no U.S. taxes. The year 2010 was a record year for compensation on Wall Street, while corporate CEO compensation rose by over 30%, most Americans struggled. In 2010 a dozen major companies, including GE, Verizon, Boeing, Wells Fargo, and Fed Ex paid US tax rates between -0.7% and -9.2%. Production, employment, profits, and taxes have all been outsourced. Major U.S. corporations are currently lobbying to have another “tax-repatriation” window like that in 2004 where they can bring back corporate profits at a 5.25% tax rate versus the usual 35% US corporate tax rate. Ordinary working citizens with the lowest incomes are taxed at 10%.

I could go on and on, but the bottom line is this: A highly complex and largely discrete set of laws and exemptions from laws has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. I am not optimistic.

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  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Amen brother…these sectors do not create value…they extract it…they do invest…they divest…they take…and put nothing back. They have found the miracle seed that grows trees of cash without having to be planted or expended…and they milk it for as much as they can and then run for the hills. If we don’t correct the imbalance…sooner or later there will be abject chaos on par with the worst examples of third world collapse. This cannot go on forever…and it won’t…but how smoothly we transition from one situation to the next is whats at stake.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Amen brother…these sectors do not create value…they extract it…they do not invest…they divest…they take…and put nothing back. They have found the miracle seed that grows trees of cash without having to be planted or expended…and they milk it for as much as they can and then run for the hills. If we don’t correct the imbalance…sooner or later there will be abject chaos on par with the worst examples of third world collapse. This cannot go on forever…and it won’t…but how smoothly we transition from one situation to the next is whats at stake.

    • Andrew

      We, the bottom 99%, are the makers and they, the top 1%, are the takers.

    • Dueyv9

      yeah but if they take all the money….won’t it just eventually become worthless.? What value does something that 1% of the world owns have to the other 99%?……eventually.

      • Anarchy Pony

        Because the 1% convinces 60% to fight for them and lie for them by paying them to do so.

  • Wanooski

    Wealth equals political power, when 1% controls more wealth than the other 90%, then they have more power too, and this is no longer a true democracy.

  • Anarchy Pony

    Wealth equals political power, when 1% controls more wealth than the other 90%, then they have more power too, and this is no longer a true democracy.

    • Pukin Gnome

      Blame the hippies!!!

      • Anarchy Pony

        WTF?

        • Redacted

          The hippies are the current power holders. Nice to see how the flower children are playing when they are in charge.

          • Anarchy Pony

            They might have been hippies once but they are certainly not anymore. And not everyone from that generation was a hippie anyway.

  • Andrew

    Plutarchy.

  • Andrew

    Plutarchy.

  • Anonymous

    It is telling that the article needs to mention that it’s all perfectly legal. One wonders what exactly that means when measured against the damage these people are doing to the rest of us.  Since they plan to pull the plug when they get their cash and retire to enjoy the lifestyle they so richly deserve, we should give them a pass.

  • Audio7

    It is telling that the article needs to mention that it’s all perfectly legal. One wonders what exactly that means when measured against the damage these people are doing to the rest of us.  Since they plan to pull the plug when they get their cash and retire to enjoy the lifestyle they so richly deserve, we should give them a pass.

    • Redacted

      Maybe we should pull triggers before they can pull plugs.

      • Ronniedobbs

        And how does a revolution like that get started, realistically?  I admire the sentiment but its impossible.  No disrespect intended. 

  • Pukin Gnome

    We must eat the rich… The rich, good looking of course.

  • Pukin Gnome

    We must eat the rich… The rich, good looking of course.

    • MadHierophant

      They’re all spoiled rotten. Just throw them in the garbage disposal…

  • Pukin Gnome

    Blame the hippies!!!

  • Pukin Gnome

    Blame the hippies!!!

  • Mr. Roboto

    Every person in America needs to become a Corporation; the system is built to protect those entities.

  • Mr. Roboto

    Every person in America needs to become a Corporation; the system is built to protect those entities.

    • Anarchy Pony

      Then they’d start calling corporations something different and suddenly corporations would no longer be “people”

  • Wanooski

    WTF?

  • Wanooski

    Then they’d start calling corporations something different and suddenly corporations would no longer be “people”

  • Curumim

    Boderline feudalism.

  • Curumim

    Boderline feudalism.

  • Common Man

    ” They have real power and real wealth”, Really? I’d like to see these “powerful” people buy themselves out of death and old age. The truth is, money didn’t do anything, we did. Why humans are so hypnotized by money is beyond me. The only thing about bankers that amazes me is how they have convinced everyone that their money is real. If I had a business where I could just make up money, I’d be rich too. These people may seem to have won the game, but lets be honest, what have they really achieved?

  • Common Man

    ” They have real power and real wealth”, Really? I’d like to see these “powerful” people buy themselves out of death and old age. The truth is, money didn’t do anything, we did. Why humans are so hypnotized by money is beyond me. The only thing about bankers that amazes me is how they have convinced everyone that their money is real. If I had a business where I could just make up money, I’d be rich too. These people may seem to have won the game, but lets be honest, what have they really achieved?

    • A dude

      This is a great sentiment, but what they have achieved is a foundation for themselves and their families. They can make their sons and daughters successful because they have the funds to build them up.  They can pass their wealth from generation to generation and secure their names in human history. Of course, they also have the ability to purchase the best of health care so that they can die comfortable of old age surrounded by family and friends.

      Does it advance humanity? No, but it makes them happier than the rest of us.

      • Common Man

        None of what they have done will last. When is this world not changing? When does anything stay the same? They have secured nothing. Their time will come and go. What makes you think they are happier than the rest of us?

      • http://www.facebook.com/smudge801 Trevor Ley

        Would that it worked that way.  what we get instead is, as in the Koch brothers, ineritance babies, who know nothing of work or achievement automatically have immense power as a result of their unearned wealth.  The see-saw is so tipped in their favor that whatever whim makes up their agenda becomes the norm.  Not in all, but in many caes, the “foundation” you mention amounts to the inheritors being born on a pedastal regardless of their chracter.  Paris Hilton, anyone?  Shoouldn’t we be grateful she hasn’t aspired to public office?  She could be a Sarah Palin by writign a few checks and the press would help her.

    • http://www.facebook.com/smudge801 Trevor Ley

      I’d say what they’ve achieved collectively is to return us to a feudal society concealed under consumerism.  They beocme the nobles, pay the sheriff of Nottigham to arrest the wrong people and the remainder are serfs laboring in the fiels for a few crumbs.  so far, the serfs have unwittingly cooperted because they;ve been told they actually have a say in things when they dont and that they are convicned that there’s a chance they could become noble someday themselves.  In tht respect “democracy” has been the ultimate scam..how to opress the masses while maing them belive they’re not opressed at all.

  • Andrew

    We, the bottom 99%, are the makers and they, the top 1%, are the takers.

  • http://buzzcoastin.posterous.com BuzzCoastin

    Remember the Golden Rule: He who has the gold rules.

  • BuzzCoastin

    Remember the Golden Rule: He who has the gold rules.

    • Ronniedobbs

      Hope that remake never happens…..

  • Dueyv9

    yeah but if they take all the money….won’t it just eventually become worthless.? What value does something that 1% of the world owns have to the other 99%?……eventually.

  • Wanooski

    Because the 1% convinces 60% to fight for them and lie for them by paying them to do so.

  • Anonymous

    Maybe we should pull triggers before they can pull plugs.

  • Anonymous

    Make them an offer they cannot refuse. Put a bullet in their brains, then offer to turn their wealth over to the State.

  • Redacted

    Make them an offer they cannot refuse. Put a bullet in their brains, then offer to turn their wealth over to the State.

    • G. Orwell

      Before you start your Communist revolution know that there will always be the top 1% that are privileged as it was in the USSR and other ‘workers paradise”.

      • Jin The Ninja

        The USSR was totalitarian state-capitalism. It was not marxist, which you implied.

        • Anarchy Pony

          Nor was it in any way a workers paradise, not after the bolsheviks got done with it.

  • Anonymous

    The hippies are the current power holders. Nice to see how the flower children are playing when they are in charge.

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  • Ronniedobbs

    Hope that remake never happens…..

  • Ronniedobbs

    And how does a revolution like that get started, realistically?  I admire the sentiment but its impossible.  No disrespect intended. 

  • Anonymous

    They’re all spoiled rotten. Just throw them in the garbage disposal…

  • G. Orwell

    Before you start your Communist revolution know that there will always be the top 1% that are privileged as it was in the USSR and other ‘workers paradise”.

  • Anonymous

    The USSR was totalitarian state-capitalism. It was not marxist, which you implied.

  • A dude

    This is a great sentiment, but what they have achieved is a foundation for themselves and their families. They can make their sons and daughters successful because they have the funds to build them up.  They can pass their wealth from generation to generation and secure their names in human history. Of course, they also have the ability to purchase the best of health care so that they can die comfortable of old age surrounded by family and friends.

    Does it advance humanity? No, but it makes them happier than the rest of us.

  • Rob

    They take, yea sure they do. But putting nothing back? Wish it was that easy. Then we others wouldn’t have to care, as long as they only take money and put nothing back. But unfortunately their ts taking creates a whole lot of problems for the rest of the worlds. Anything from political unrest and murder, famine because of speculation i food crops, devastations of whole regions and countries because of outsourcing etc. etc. 
      

  • Rob

    They take, yea sure they do. But putting nothing back? Wish it was that easy. Then we others wouldn’t have to care, as long as they only take money and put nothing back. But unfortunately their ts taking creates a whole lot of problems for the rest of the worlds. Anything from political unrest and murder, famine because of speculation i food crops, devastations of whole regions and countries because of outsourcing etc. etc. 
      

  • Wanooski

    Nor was it in any way a workers paradise, not after the bolsheviks got done with it.

  • Wanooski

    They might have been hippies once but they are certainly not anymore. And not everyone from that generation was a hippie anyway.

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Zinrai

    Do we live only in the illusion of democracy? When our government’s controlled by corporations and a select few uber-wealthy families (Rothschild, Rockefeller, among others), why does it even matter who we elect to “lead” us?

  • Common Man

    None of what they have done will last. When is this world not changing? When does anything stay the same? They have secured nothing. Their time will come and go. What makes you think they are happier than the rest of us?

  • J H

    We don’t we start calling these people what they really are – Domestic Terrorists? They’re hell-bent on mowing down the middle class, in order to line their own pockets.  Meanwhile, people’s lives are turned upside down, their education doesn’t mean a thing anymore, their houses are being taken away. And God help us we get sick with no insurance – do you have a million bucks to spend on fighting cancer if you get it?

  • J H

    We don’t we start calling these people what they really are – Domestic Terrorists? They’re hell-bent on mowing down the middle class, in order to line their own pockets.  Meanwhile, people’s lives are turned upside down, their education doesn’t mean a thing anymore, their houses are being taken away. And God help us we get sick with no insurance – do you have a million bucks to spend on fighting cancer if you get it?

  • http://www.facebook.com/smudge801 Trevor Ley

    “I think it’s important to emphasize one of the dangers of wealth concentration: irresponsibility about the wider economic consequences of their actions by those at the top.”

    That says an awful lot in one sentence.  its the major diffeence between wealth and success.  These people know full well they contribute little or nothing for their gain, but claim it as a right anyway and lobby to protect their gains without regard for the democratic process or just plain decency and fairness.  What’s wrong with America at the root is the above.

  • http://www.facebook.com/smudge801 Trevor Ley

    “I think it’s important to emphasize one of the dangers of wealth concentration: irresponsibility about the wider economic consequences of their actions by those at the top.”

    That says an awful lot in one sentence.  its the major diffeence between wealth and success.  These people know full well they contribute little or nothing for their gain, but claim it as a right anyway and lobby to protect their gains without regard for the democratic process or just plain decency and fairness.  What’s wrong with America at the root is the above.

  • http://www.facebook.com/smudge801 Trevor Ley

    I’d say what they’ve achieved collectively is to return us to a feudal society concealed under consumerism.  They beocme the nobles, pay the sheriff of Nottigham to arrest the wrong people and the remainder are serfs laboring in the fiels for a few crumbs.  so far, the serfs have unwittingly cooperted because they;ve been told they actually have a say in things when they dont and that they are convicned that there’s a chance they could become noble someday themselves.  In tht respect “democracy” has been the ultimate scam..how to opress the masses while maing them belive they’re not opressed at all.

  • http://www.facebook.com/smudge801 Trevor Ley

    Would that it worked that way.  what we get instead is, as in the Koch brothers, ineritance babies, who know nothing of work or achievement automatically have immense power as a result of their unearned wealth.  The see-saw is so tipped in their favor that whatever whim makes up their agenda becomes the norm.  Not in all, but in many caes, the “foundation” you mention amounts to the inheritors being born on a pedastal regardless of their chracter.  Paris Hilton, anyone?  Shoouldn’t we be grateful she hasn’t aspired to public office?  She could be a Sarah Palin by writign a few checks and the press would help her.

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