NJ foreclosure conversion deal moves forward

From the Record:

NJ Senate panel OKs bill turning foreclosed property into affordable housing

A Senate panel unanimously approved a measure Thursday that would let municipalities and a new state corporation buy foreclosed homes and offer them to low- and moderate-income residents.

The bill creates the New Jersey Foreclosure Relief Corp, which would buy foreclosed homes, or allow municipalities to acquire them while getting a two-for-one credit against their affordable housing obligations, according to the bill. Funding would come from the state’s million affordable housing trust fund, municipal affordable housing trust funds, bonds from New Jersey Housing and Mortgage Finance Agency, and the Realty Transfer Fee.

There were 58,000 foreclosure actions filed in New Jersey in 2010 and 66,000 in 2009, according to the bill.

“One foreclosed property can have a negative impact on the value of the rest of the homes on the block,” said Sen. Barbara Buono (D-Middlesex), who co-sponsored the bill with Sen. Raymond Lesniak, (D-Union). “This isn’t just about foreclosed properties or affordable homes – it’s about communities in economic crisis, and it affects all New Jersey residents, whether they qualify for affordable housing, are living in foreclosed home, or not.”

The Senate Economic Growth Committee unanimously approved the bill, (S1566), which heads to the Senate Budget and Appropriations Committee next before going to the full Senate for consideration.

This entry was posted in Foreclosures, Housing Recovery, New Jersey Real Estate. Bookmark the permalink.

174 Responses to NJ foreclosure conversion deal moves forward

  1. grim says:

    From the Record:

    Foreclosure picture get brighter nationally, but NJ lags

    The nation’s foreclosure picture is brightening, the Mortgage Bankers Association said Thursday, but in New Jersey, troubled loans are piling up as mortgage servicers grapple with questions about their legal procedures.

    The United States is about halfway back to normal levels of mortgage delinquencies and foreclosures, compared with the peaks from about two years ago, the mortgage trade group said. About 12.5 percent of mortgages in the nation were either in foreclosure or late on payments in the fourth quarter of 2011, down from 13.6 percent a year earlier.

    “The improvements we’ve seen are clearly tied to improvements in the economy,” said Jay Brinkmann, the mortgage association’s chief economist. As the job market has improved, fewer homeowners are falling behind on their mortgages. The economy added a net 243,000 jobs in January, and the unemployment rate dropped for the fifth straight month, to 8.3 percent.

    But in New Jersey, a record 16.7 percent of mortgages are either late on payments or in the foreclosure process, in part because the state has been slow to deal with problem loans. After New Jersey Chief Justice Stuart Rabner ordered lenders in December 2010 to show they were not robo-signing — that is, signing foreclosure documents without verifying them in the rush to evict homeowners — foreclosure activity dropped 80 percent last year, according to state figures. And lenders have not ramped up activity so far this year, because of continuing questions about legal documentation.

  2. grim says:

    From HousingWire:

    RE/MAX January home sale rise for seventh straight month

    For the seventh straight month, home sales in January inched higher, climbing 3.4% above levels seen a year earlier.

    On a monthly basis, home sales declined 19.3% from December, returning to seasonal norms after an unexpected jump in sales, according to the RE/MAX national housing report.

    The data is based on a survey of 53 metropolitan areas.

    In January, the median price of homes sold in the 53 metros was $129,306, only 0.8% lower than a year earlier and a 3.4% drop from December.

    Perhaps due to falling foreclosure numbers, for the 19th consecutive month, inventory levels dropped in January. The average inventory of homes for sale dropped 24.1% from a year earlier and 4.2% from December.

    “If sales continue ahead of last year’s pace and inventory does not increase significantly, we could start to see increasing home prices this year,” RE/MAX CEO Margaret Kelly said.

  3. Mike says:

    Good Morning New Jersey

  4. grim says:

    From Bloomberg:

    Potomac Gap Shows Court Foreclosures Delay Housing Recovery

    The Maryland and Virginia suburbs of Washington are a lot alike, with similar populations of workers from the U.S. capital, incomes above the national average and unemployment rates below the norm.

    Their housing markets are going in opposite directions.

    Home prices rose 0.8 percent in Virginia last year while across the Potomac River in Maryland they fell 3.6 percent, according to data provider CoreLogic Inc. The reason is that Maryland, like 23 other states including New York and Florida, requires court approval to foreclose on delinquent homeowners, a lengthy process that has slowed comebacks across the country, said Thomas Lawler, a housing consultant and former chief economist for mortgage financier Fannie Mae. (FNMA)

    “States that have dealt with foreclosures in an expeditious way, whether or not it’s good from a social perspective, appear to be recovering,” Lawler said in a telephone interview from his office in Leesburg, Virginia. “The difference is the foreclosure laws.”

    The 24 so-called judicial states, which have about 42 percent of the 50.3 million U.S. residential mortgages, provide automatic court review of home seizures. That gives borrowers a legal forum to demand proof that lenders have the right to foreclose, or to argue for mortgage modifications — while extending the process.

  5. gary says:

    What do you do when your house is on the market for 180+ days (probably a lot more) and doesn’t sell? Of course, you increase the price by $25,000:

    http://www.trulia.com/property/3057120575-Single-Family-Home-Wyckoff-NJ-07481

  6. Comrade Nom Deplume says:

    Apparently there is a new recognized fear out there called nomophobia. It is growing quite rapidly.

    I like to think that it is the fear that I may be right.

    And I think I should have seen it coming and copyrighted it.

  7. gary says:

    This one is at the end of cul-de-sac and it actually made me pause with a “4” handle attached. Although, I hate f*cking bilevels as all they are is raised ranches. The make or break on this one is whether it’s septic and well as opposed to municipal utilities.

    http://www.trulia.com/property/3067090889-413-Obrien-Ct-Wyckoff-NJ-07481

  8. grim says:

    5 – Spring delusion?

    Talked to an agent the other day about a property he listed in the 4s, even though it should have been in the mid 3s.

    He said he gets more shows since 400k is the low bound of many searches. Said they wholeheartedly expect lowballs. House does have good potential for some value post remodel. My clients looked, so the trick did work. I’d expect this to be even more true at the 2/3 transition.

  9. gary says:

    New American Dream Is Renting to Get Rich

    While a home is the main repository of wealth for many Americans, it comes with numerous hefty expenses. The carrying costs – what’s needed to hold and maintain the asset – range from property taxes and home insurance to emergency repairs and renovations. In a rental situation, the landlord covers those costs, leaving the occupant free to invest revenue in other areas.

    http://finance.yahoo.com/news/new-american-dream-is-renting-to-get-rich.html

  10. gary says:

    grim [8],

    Tell your agent friends that 300K will be the low bound by time the Mets are 20 games out of first place.

  11. JJ says:

    Who the heck is buying munis at near zero yield. Tax free interest is meaningless at super low rates!

    People love to chase last years winners. Isnt this why so many people lost their homes after buying in 2006.

    Munis Defy Treasuries; 2-Year Sets Record Low
    Friday, February 17, 2012

    By Taylor Riggs

    Munis defied Treasuries as the tax-exempt market strengthened throughout Thursday despite weaker Treasuries on positive U.S. economic news.

  12. Shore Guy says:

    Are US taxpayers bailing out big banks again?

    (MoneyWatch) U.S. taxpayers may be on the hook to bail out big banks — again. The Financial Times is reporting that taxpayers will subsidize a large portion of the $25 billion mortgage settlement, which was broken down into two distinct pieces:

    1. $5 billion in cash payments, of which $1.5 billion would go directly to approximately 750,000 borrowers who were wrongly or illegally foreclosed on between September 2008 and December 2011. This is the part where you have heard that borrowers who were wrongly foreclosed on could receive up to $2,000.

    2. $20 billion in “credits” the banks will receive for principal write-downs and other aid to nearly 1 million homeowners at risk of default, up to $20,000 per loan.

    It’s part two that’s coming under scrutiny. A clause in the provisional agreement allows the banks to use the government’s Home Affordable Modification Plan, or HAMP, to cover the principal reductions. Neil Barofsky, the former special inspector-general of the TARP, described the clause as “scandalous.” Says Barofsky: “It turns the notion that this is about justice and accountability on its head.”

    snip
    http://www.cbsnews.com/8301-505123_162-57380020/are-us-taxpayers-bailing-out-big-banks-again/

  13. Shore Guy says:

    Is there anything this government will not backstop with taxpayer money?

    http://www.chicagotribune.com/business/breaking/chi-us-loan-guarantees-part-of-lion-air-deal-for-boeing-jets-20120217,0,603540.story

    How do you stump up the money for a $22 billion aircraft deal?

    The case of Indonesia’s Lion Air, which signed a record order with Boeing this week, is typical of many mega-aircraft deals: with a little help from the taxpayer.

    The U.S. government is offering loan guarantees to help the low-cost carrier buy 230 jets, under a system operating on both sides of the Atlantic to promote exports of strategic goods such as the jetliners built by Boeing or rival Airbus.

    snip

  14. Painhrtz - I ain't dead yet says:

    Shore as I said when the stupid deal was announced bend over and take it like feminine white boy in a California prison

  15. 3B says:

    #5 gary Same thing with the gem below. It has been on the market for over 2 years originally asking around 550k, finally dropped it to 399K, where it sat and rotted for months, just raised the price to 440K!!! Gotta take advantage of the horde of Spring buyers that will be out there. Super Bowl is over you know.

    http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1123384&dayssince=&countysearch=false

  16. grim says:

    Idiocy like that is nothing new

  17. All Hype says:

    3b (16):

    My uncle built a garage that is about that size. I should tell him to add a few more windows and divide his property.

    That is a 200k garage, err, I mean house!

  18. chicagofinance says:

    Monster of Midway: JJ’s life is similar to Let’s Make A Deal…..three possible destinies….behind door #1 Death By Gunshot Wound; #2 Death by AIDS; #3 Working as a Director for Merrill Lynch in Accounting Department making $350K and making wacky trades……same behavior leads to three separate outcomes…..NOT FOR YOUR DP…..

    BearsFan says:
    February 16, 2012 at 9:59 pm
    chifi-Lib – thanks, i know it seems like common sense, but it’s still nice to hear it from u guys whose opinions matter to me. also, it’s tough reading from JJ everyday how I’ve blown a big opp the last 12 months guarding my DP in a MM. hat tip to u all.

  19. 3B says:

    #16 grim: I know but it makes you just shake your head. What is the point?

  20. 3B says:

    #17 All: it ranks way up there on the ugly scale!!!

  21. JJ says:

    Playa 8’er.

    chicagofinance says:
    February 17, 2012 at 9:13 am
    Monster of Midway: JJ’s life is similar to Let’s Make A Deal…..three possible destinies….behind door #1 Death By Gunshot Wound; #2 Death by AIDS; #3 Working as a Director for Merrill Lynch in Accounting Department making $350K and making wacky trades……same behavior leads to three separate outcomes…..NOT FOR YOUR DP…..

    BearsFan says:
    February 16, 2012 at 9:59 pm
    chifi-Lib – thanks, i know it seems like common sense, but it’s still nice to hear it from u guys whose opinions matter to me. also, it’s tough reading from JJ everyday how I’ve blown a big opp the last 12 months guarding my DP in a MM. hat tip to u all.

  22. BearsFan says:

    18 – Life is all sleight of hand :)

  23. Thundaar says:

    15- I believe they found a baby unicorn in River Edge the other day.

  24. Thundaar says:

    Was at a NAHB conference last night in Basking Ridge…had a couple of interesting speakers that were talking about s-1566. They feel if it gets passed by Christie it is the time for builders/developers/investors and even the end user to start grabbing properties….this is the RTC part 2.
    FHA will be giving them away……
    Interesting that the Sierra Club, Realtors and the NJBA are in full support of this bill
    Something not right about it though….maybe it is just me.

  25. thundaar (24)-

    I can think of about 5 unintended consequences without even trying hard. Just the phrase “new state corporation, partnering with municipalities to buy FK homes” should send chills down the spine of any thinking person.

    I’m thinking that the combination of gubmint racketeers…buying FK stuff in a non-competitive bidding environment…with taxpayer money…should end in a smoldering heap of rubble.

  26. Anything the Sierra Club supports, I’m against. Just a bunch of luddites and closet Communists.

  27. When is unicorn season? My freezer needs some meat.

  28. JJ says:

    What a scam. On a rental property if your adjusted gross income is too high they phase out the losses you can take vs. you regular income. So I can’t take any losses on the rental. Then if I depreciate house that all gets added back in as income when I sell.
    However, if it is a 100% vacation home I can fully deduct mortgage and RE taxes. However, if I rent out part time more than 15 days a year I could lose part of mortgage deduction Plus you can only write off mortgage deduction for one single home. But you can write off property tax on more than one home but if you are in AMT the property tax is limited.

    The IRS has set this up in a crazy bizzare way so that folks with high income who buy a second home you might as well pay cash if you get a deal, declare it a 100% vacation home and write off taxes.

    15 days rental is tax free. I could just rent it out Memorial Day weekend, 3 nights, Labor Day three nights and Fourth of July week 9 nights for a total of 15 nights. For year one and then decide in year two whether to convert to real rental of fix up and flip for spring.

  29. JJ says:

    Ment write off mortage on two homes but property tax on many homes.

  30. jj, you need to talk to somebody on how to do 1031 exchanges. This is the way you get into investment property long-term.

  31. Can’t wait to see my shit-for-brains local gubmint set up a RE management company…

  32. Jill says:

    Shore #128 from yesterday: I gave the open house info and e-mail addy to my spouse whose tech support contract is up end of next month and @#$&%^ recruiter who pays him for the contract has stopped paying him already. Not sure if he sent a resume. Not sure I want to know.

  33. JJ says:

    Does it involve matches and gas?

    There Went Meat says:
    February 17, 2012 at 10:22 am
    jj, you need to talk to somebody on how to do 1031 exchanges. This is the way you get into investment property long-term.

  34. POS cape says:

    #15 Interesting, no pics or mention of kitchen. Maybe galley?

  35. The Original NJ Expat says:

    grim [8] – Rockaway Township is awash with homes, some with pretty good bones, in the low 3’s. Some of the 4BR, 2.5bath colonials built in the 60’s there may turn out to be some pretty profitable rentals soon.

    My clients looked, so the trick did work. I’d expect this to be even more true at the 2/3 transition.

  36. Comrade Nom Deplume says:

    [33] JJ

    When JJ asks if a 1031 exchange involves gas and matches, I question the depth of his accounting background.

    I know JJ is manly enough to do his own tax planning, re-roof his house, and fix his own transmission, but some things are best left to professionals.

  37. Anon E. Moose says:

    Meat [30];

    If you start doing the 1031 thing, you’re in it for life. No way to get capital off the table witout paying big tax on it. No matter what the market conditions, it costs too much to NOT roll into another property. The only good thing to be done with it is leave it to your kids when you die, so they get a stepped-up basis.

  38. Comrade Nom Deplume says:

    [13] shore

    Apparently not.

    http://www.opic.gov/insurance/coverage-types/expropriation

    The Exim bank also provides “political risk” insurance.

    Upshot is when Chavez seizes Exxon’s assets, Exxon turns to its carrier—Uncle Sam.

  39. Comrade Nom Deplume says:

    [38] meat

    You can also use charitable planning devices to draw down the investment in 1031 property. Suppose you have a Nompound; you can reduce the value of it by deed-restricting the ag portions for the benefit of some charity, or go further and donate the ag portions to a conservation group with a retained right of “use” in perpetuity (e.g., you get to farm/timber/etc. on the land but cannot put it to commercial use or build on it except for “temporary” structures related to the use). You get a tax deduction and if the Nompound ever dissolves, the remaining taxable property is greatly diminished.

    Disclaimer: Haven’t researched this yet to see if it would actually work.

  40. Comrade Nom Deplume says:

    whoops, meant Moose, not Meat.

  41. Shore Guy says:

    Nom,

    Say oner purchased a rental property for $100 and through a series of four exchanges over the years (each resulting in $100 gains) ended up with a property worth $500. Then, when the owner wanted to sell, either through neglect of the property or through extant market conditions the owner disposed of the property for $100. Under such a circumstance, is the owner free of any gains to tax or are they onthe hook for the intermediate gains?

  42. Comrade Nom Deplume says:

    [35] pain,

    Folks like that are one of the security concerns I have to account for in the nompound concept. Even an occupied nompound site is not safe from someone like that, though the person is much more likely to die of lead poisoning or take off.

    I always planned for the nompound to have reinforced cinderblock and poured concrete lockers that act as vaults, if you will. There, the nompounders will store the guns, ammo, booze, valuables, expensive food stores, etc. Nothing is break-in proof, but multiple layers of security can deter someone long enough for the cavalry to arrive.

    One of my ideas to deal with break-ins and looters is to leave out a readily accessible bottle of vodka or other foodstuffs during dormant periods that is laced with enough dyphenhydramine and poison to knock out and then kill an elephant. When the next nompounder discovers the body, drag it to the slit trench in the woods with the bags of lime under a tarp, then dump, pour and backfill. Then patch up any damage and wipe for prints. This would require strict controls to prevent accidental deaths however.

    Of course, this is illegal as all hell so don’t do it ;-)

  43. Comrade Nom Deplume says:

    [42] shore,

    In theory no, but because of the imputed depreciation on rental property, the basis will actually be lower for tax purposes, and there’d be Section 1250 deprecation recapture, taxable up to 25%.

  44. Anon E. Moose says:

    Gary [7];

    I thought that street was practically underwater up to the front door?

  45. xolepa says:

    I did a 1031 exchange 8 years ago. It’s sort of true that you are in it for life. There are options, though. Say at the end of your working years, you retire and sell your main home. You get the big tax exemption on that. Then you sell your investment property and build/buy your retirement home with those proceeds under 1031. You rent it out though, for at least a year. Then you kickout the bum renters and move in. It’s your new residence.
    Comrade, correct me if I’m wrong.

  46. Painhrtz - I ain't dead yet says:

    Nom after that description never mind about the beer ; )

  47. moose (38)-

    It’s a one-way ticket, but the estate and heirs come out of it pretty darn well.

    Agreed that it makes no sense at all unless you intend to be a for real RE investor. One way to keep it simple is to go for like-kind exchanges in shares of tenant-in-common ventures. Just have to make sure the partners and management are on the same page with you.

  48. Shore Guy says:

    Nom,

    No pliers to teeth, finger tips cut off, and a little fire? Where did you learn to dispose of bodies, some gentil New England academy? It wasn’t in NJ, that’s for sure.

  49. shore (49)-

    In situations like this, always best to hire a professional to get the job done.

  50. It’s amazing what some guys from Argentina can do with a disposable cell phone, a plastic gun and 48 hours in the US on a forged passport.

  51. JJ says:

    Of course I do my own taxes.

    Apparantly I cant deduct losses due to AGI it phases it out. Dont want to depreciate home as I have to just pay it back in taxes.

    Best way is just pay cash for house. I can get 100% of money via a 100K home equity loan fully deducatable and remainder on a margin loan with interest deductable. I can deduct property tax on a second home automatically. I want to flip house in two or three years anyhow. Declaring it an official rental is just a lot of trouble for nothing. My friends with hampton homes just rent to nice couples for a few weeks each summer to cover annual cost and don’t bother with this nonsense. Unless you own more than two properties what is point. You get most of deductions anyhow on a vacation home. Once I rent an amortize it is like the mob, hard to get out.

    Comrade Nom Deplume says:
    February 17, 2012 at 11:23 am
    [33] JJ

    When JJ asks if a 1031 exchange involves gas and matches, I question the depth of his accounting background.

    I know JJ is manly enough to do his own tax planning, re-roof his house, and fix his own transmission, but some things are best left to professionals.

  52. Nicholas says:

    I love how the discussion has turned into creating corporations, doing head fakes with the IRS and government, donating the lumber/timber/farming to a charity in perpetutity, kicking out renters, etc.

    How about lets add “pay your taxes” to the discussion. You invested your money into property that made a healthy return and now you owe taxes on that money to support the roads, bridges, etc. Might be better if you spent your time trying to fix tax loopholes than take advantage of them.

  53. Comrade Nom Deplume says:

    [47] pain

    Sides hurt from laughing.

  54. Comrade Nom Deplume says:

    [53] Nick

    I’ve paid MORE than my fair share. And as long as I obey the law, that is all I am obligated to do.

  55. JJ says:

    Easy for you to say, I already paid more in taxes in 2012 than most people make in a year. No clue where it goes. Maybe Michelee Obamas giant sized clothes.

    Nicholas says:
    February 17, 2012 at 12:17 pm
    I love how the discussion has turned into creating corporations, doing head fakes with the IRS and government, donating the lumber/timber/farming to a charity in perpetutity, kicking out renters, etc.

    How about lets add “pay your taxes” to the discussion. You invested your money into property that made a healthy return and now you owe taxes on that money to support the roads, bridges, etc. Might be better if you spent your time trying to fix tax loopholes than take advantage of them.

  56. Shore Guy says:

    “Easy for you to say, I already paid more in taxes in 2012 than most people make in a year.”

    Same here. I don’t mind paying more, I just think it would be fair if we all paid the same percentage of income in taxes.

  57. I won’t rest until I’ve figured out a way to stop paying anything to the extortiate and criminal cartel that runs this country.

  58. Brian says:

    You should all just cut out the middle man and send your transfer payment checks directly to me.

  59. 3B says:

    #23 Yes they did. That is why people will even live in places like the one listed below, just to say they live there.

    http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1205151&dayssince=&countysearch=false

  60. Bocephus says:

    The AMT is just one example how anti-family the gubmint really is.

  61. Shore Guy says:

    I love the description, “FURNISHED COZY STUDIO APT IN BASEMENT .”

    Translation, we stuck a cot in a corner of our dungeon.

  62. Shore Guy says:

    AMT = All money transferred.

  63. Shore Guy says:

    I need to go bill some people, Obama needs to redistribute my money.

  64. xolepa says:

    (53)
    I pay over $41000 in just property taxes to NJ alone each year. That doesn’t include income taxes, payroll taxes, out of state property taxes,etc. Go cry me a river.

  65. xolepa says:

    (65)
    ….and if someone is on my side, I will 1031 the NJ properties into another state where there is no GIT. NJ will GET NOTHING. GOOD DAY, SIR.

  66. Libtard in the City says:

    I suppose the nice thing about not being rich is not having to pay so much in taxes. If I was wealthy enough to pay $40,000 in property taxes, I would definitely downsize.

  67. Brian says:

    Yes. They bear a terrible burden. Let us relieve them of it ;P

    67.Libtard in the City says:
    February 17, 2012 at 12:59 pm
    I suppose the nice thing about not being rich is not having to pay so much in taxes. If I was wealthy enough to pay $40,000 in property taxes, I would definitely downsize.

  68. gryffindor says:

    A girl at the office brought in some delicious chewy bagels from Brooklyn a few weeks ago. When someone asked the occasion, it was that she got her tax refund. The office probably thinks I’m cheap because I never bring in bagels, but of course they don’t understand that my bagel budget was spent to pay the tax man so they could get their refunds.

  69. bocephus starting to see how the gubmint is waging war against us. Too bad we don’t have the cojones to fight back.

  70. None of this gets settled without bloodshed and violent revolution.

  71. gryff (69)-

    When the shooting starts, and you’re trapped between the corrupt gubmint cartel on one side- and the transfer payment-addicted zombies on the other…who do you go after first?

  72. Nicholas says:

    Easy for you to say, I already paid more in taxes in 2012 than most people make in a year. No clue where it goes. Maybe Michelee Obamas giant sized clothes.

    You are really pulling at my heart strings here JJ with your “I pay more in taxes than most people make in a year”. I’m really feeling your pain and these are real tears I’m crying for your losss. This is also the worlds smallest violin playing “My heart cries out for you”.

    /sarcasm off

    To have paid more in taxes also means that make more money than everyone else. I have a brother who complains about the same thing “woe is me, I pay so much in taxes” and I remind him that there are a lot of people who are itching to go back to work and pay taxes and would gladly trade places.

    You unfortunately seem to have drifted and started to blame the president’s wife as if the current president somehow created the tax structure that you now pay under. I find this very shallow and small. I don’t think our current president is doing a good job on the economy but I don’t belittle his wife for the clothes she wears.

    Nom, it is all our responsibility to fix a broken tax system. I’m in the top 15% of earners and I have paid quite a bit in taxes myself. I haven’t yet got the privledge to be subject to the AMT but it is my belief that the AMT exist to keep people from using tax shelters to hide or cover legitimate income from taxation. Perhaps I will feel differently when I get there but for now thats where I stand.

  73. JJ says:

    I already paid 100K in taxes so far this year. Or put this way, I am supporting more baby mamas than antonio cromertie.

    xolepa says:
    February 17, 2012 at 12:47 pm
    (53)
    I pay over $41000 in just property taxes to NJ alone each year. That doesn’t include income taxes, payroll taxes, out of state property taxes,etc. Go cry me a river.

  74. JJ says:

    Top 15% of the top 1% is pretty good Nicholas, I am impressed. .

    Based on the Internal Revenue Service’s 2010 database below, here’s how much the top Americans make:

    Top 1%: $380,354

    Top 5%: $159,619

    Top 10%: $113,799

    Top 25%: $67,280

    Top 50%: >$33,048

  75. joyce says:

    Nicholas,

    A portion of property taxes (whether you pay them directly or indirectly there is no way to escape them) go to the local services in the towns and counties including roads. Major bridges and tunnels have a user fee/tax (a.k.a) tolls; again, no way to avoid paying that if you use them. Gasoline taxes go to pay for major highways, no way to avoid those either, unless your drilling for oil on your property and refining in into gasoline in your basement. Sales taxes are again impossible to avoid unless you and ALL of your merchants are willing to take cash and the risk.

    State Income taxes (in this State) go to pay for nonsense and should be legally avoided at all costs. Federal Income taxes go to pay for MOSTLY nonsense and ditto. I didn’t cover all the taxes (but I did mention the majors ones) because there are countless different ones forced upon by the horrific govt’s we have at all levels.

    Who is avoiding taxes?

  76. The poor don’t pay nearly enough in taxes. Time to get some of their skin in the game.

  77. Painhrtz - I ain't dead yet says:

    Meat gryff should do what any person in an urban environment does with no escape in those movies. Keep shooting till they overtake you

  78. The Original NJ Expat says:

    Stu [67] – You could downsize to Whitney’s Mendham Mansion. The taxes are only $37,400.

    I suppose the nice thing about not being rich is not having to pay so much in taxes. If I was wealthy enough to pay $40,000 in property taxes, I would definitely downsize.

  79. Nicholas says:

    Joyce,

    First, I live in Maryland not New Jersey so perhaps I don’t have the same soul-crushing feelings as people who pay taxes from New Jersey might have. Maryland is also a democratic state with high taxes though.

    I think you are taking a simplistic view of the way things work in terms of taxes. Interstate roads are paid for mostly by the Federal Government which provide mechanism for goods and services to be transfered through the country. The price of goods is lower because of the interstate highway system. Your federal taxes pay for the military, social welfare programs, and national research programs. These taxes brought you the internet, space exploration, and sea lanes where goods can be shipped back and forth without fear of pirates. It brings you medical research, global positioning systems, and disaster recovery assistance.

    Perhaps if you took a larger view of things then you might see how your contributions make America a great nation.

    I view paying taxes and corrupt city, state, federal governments as two different issues. I don’t lump them together and convince myself that its okay to not pay taxes because of corrupt government. If the government needs to be fixed, then lets fix it but your not going to solve anything by avoiding taxes. I posit that it is our responsibility as taxpayers to fix broken government rather then let it languish and unecessarily consume resources.

    JJ, Apparently I’m now in the top 10% base upon your numbers. I still don’t have a problem with paying taxes. I do have a problem with poorly run goverment though.

  80. Nicholas (81)-

    Everything you mentioned happened before banks and corporations turned the gubmint into a protection racket for their own benefit.

  81. Nicholas says:

    There Went Meat,

    Thats hillarious because I work in research and I see government dollars put to use doing those same types of things. The problem is that you can’t see it happening until it has already happened.

    http://www.internet2.edu/

    Internet2 has received a $62.5 million federal stimulus grant from the National Telecommunications and Information Administration’s Broadband Technology Opportunities Program (BTOP). The total project value is approximately $97M. The grant is funding a dramatic expansion of the Internet2 Network footprint and capacity. The upgraded network will have an unprecedented 8.8 Terabits of capacity and use brand new 100 Gigabit Ethernet technology. The Internet2 Network is the first national network to deploy 100 GigE waves on its entire footprint, and will become the most sophisticated research and education platform in the world

    This is a prime example of where government research dollars will have a massive impact on how our country communicates. This effort is led by the US research and education community which in turn receives a lot of money from federal organizations to make this happen. A 100 Gbps fiber optic backbone that spans the entire US for research and education purposes that is 10 times faster than our current network infrastructure. I don’t know if this sounds revolutionary to you but it is current and ongoing development projects funded by your tax dollars.

    I’m sorry that you cannot see the good things that your government does. I have seen poor functioning governments which consist of only taking and no giving. That is not the problem that we have in the U.S. as we have a fairly well functioning government with a few rogue players. I challenge you to ferret out the wrongs and improve the system instead of complaining about it.

  82. Comrade Nom Deplume says:

    We have Brian expounding on tax “justice” under the welfare economics model, Nicholas expounding on tax incidence, and JJ expounding on per capita. Not a bad start to a tax policy debate. Shall I moderate?

  83. Libtard in the City says:

    Nicho (81): “I still don’t have a problem with paying taxes. I do have a problem with poorly run government though.”

    Nailed it buddy. The problem is that the government should be able to gain economies of scale when providing social services. Unfortunately the opposite occurs, where the bureaucracy has gotten so unnecessarily large and the union benefits, so lofty and expensive (traded for the union endorsement of course), that it can always be managed better even in a for-profit privatized model. I would venture to guess that once all public schools were privatized, it would actually cost everyone from the rich who pay $26,000 for private kindergarten (yesterday’s thread) to the poor (who would now get a voucher) a lot less leaving more to pay to actually educate the kids. When I see that it costs less for a person to obtain a year of schooling at a state university (including food, room and tuition) than it costs to educate a child from 8am to 2pm at the average elementary school. Something has gone horribly wrong!

  84. xolepa says:

    JJ,
    Honestly, the only way for you to make money off your own excluding yield-type instruments is for you to find a money losing business that gets significant income in cash (food franchise, etc). Those subchapter S/LLC losses are deductible directly from your fed tax and only under certain conditions affect AMT calcs.

  85. Libtard in the City says:

    Nicholas also says, “lets fix it!”

    Good luck with that one buddy.

    The only way for it to get fixed would require hurting rich people by turning them into poor people. Or with guns. The refusal to allow that natural gas pipeline is the perfect example of WHY we can’t fix it, without bloodshed that is.

  86. Nicholas says:

    Nom, I had to look up tax incidence because I hadn’t heard the term before. Thanks for educating me on that term.

    Lib, I’m of the opinion that “sometimes” the government fails because of bureaucracy and unionization and perhaps that is more common in New Jersey. I don’t necessarily think that private institutions get it right every time either. I think that both public and private organizations have their benefits and strong points and should be used in those cases.

    Anytime that you have a service that everyone enjoys but there are no good ways of collecting payment without destroying the service then public institution is probably a good fit. Everyone benefits from an educated populace but if you required people to pay out of pocket then few would get educated. Everyone benefits from clean streets but few would pay out of pocket for some guy to pick up trash.

    The idea of collecting tolls on roads is crazy to me as the effect of “collecting” destroys the value of the road and is a prime example of why private enterprise isn’t a good fit.

    Anyway, I digressed into public/private domains but in general I believe that each has its niche.

  87. 3B says:

    #62 Shore: Yes but don’t forget the Unicorns.

  88. Nicholas says:

    Libtard in the City,

    The only way for it to get fixed would require hurting rich people by turning them into poor people. Or with guns. The refusal to allow that natural gas pipeline is the perfect example of WHY we can’t fix it, without bloodshed that is.

    By “fix it” I intended that you become more active in your community. Start small by attending your HOA meetings, then expand out a little to meetings in the community/town, and finally get involved in state wide issues. In general participate in the discussion about where and how your dollars are being spent. Vote.

    This doesn’t require hurting rich people or through the use of guns. It just requires time and patience.

  89. 3B says:

    #91 Nicholas: I did all that, BOE Mayor & Council all for naught. Some people wanted to take me out and string me up.

  90. Nicholas says:

    I’m an independent/republican in a massively democratic state and I have heard many times from other republicans that they feel they have no ability to control outcomes in local politics so they don’t even try. I have heard them say that they register as democrats because thats the only way they can have an effect politically.

    I just think that these are just poor excuses.

  91. Painhrtz - I ain't dead yet says:

    nick so we can watch pron without that pesky buffering

    huzzah!

  92. Nicholas says:

    3B, find someone else who agrees with you and hang out with them. It starts out small but if your ideas are sound and effective eventually others will agree with you. Often times changing people’s opinions happens over months if not years.

  93. Nicholas says:

    Painhrtz, thats what I’m talking about! I don’t understand why I can’t get 1080 p quality pron from the internet without buffering. That sh!t should be in real time. None of this third world buffering of pron.

  94. Comrade Nom Deplume says:

    I had no idea that Whitney Houston was being buried in the ‘Brig. The cemetery is a few blocks from my house. I was expecting a sitter and she was 10 min. late because of all the traffic and cops.

    Better warn the wife not to take East Broad St. home.

  95. joyce says:

    Nicholas

    “Interstate roads are paid for mostly by the Federal Government which provide mechanism for goods and services to be transfered through the country.”

    I mentioned the major highways being paid for via the tax on gasoline. I would prefer if it was collected locally that way the Federal Gov couldn’t try to withhold the funds if the state’s didn’t conform to some assinine new policy they want to implement.

    “Your federal taxes pay for the military,”

    Yes, there are other ways for the Federal Gov to collect revenue besides the income tax. Tariffs and excise taxes come to mind.

    “social welfare programs, and national research programs. ”

    In my opinion, these shouldn’t exist… we obviously disagree.

    “These taxes brought you the internet, space exploration, ”

    To think that no great advancements have been made or would have not been made without govt help is erroneous. Perhaps the large boot of the govt on our necks is preventing individuals from doing even greater things.

    “and sea lanes where goods can be shipped back and forth without fear of pirates.”

    If a firm wants to do business with someone over international waters, all the risks are theirs.

    “It brings you medical research, global positioning systems, ”

    See above about the internet, etc.

    “and disaster recovery assistance.”

    shouldn’t exist

    How about the rule of law? Is the government supposed to have a function justice system? Any evidence of this? Why did I have to pass through a cell phone, seatbelt, inspection sticker road block/check point in town on my way to lunch? Is that an efficient use of that officer’s time? Are there no thefts, assaults, rapes, or murders that need attention?
    And don’t even get me started at the federal level with all the banking fraud and corporatism, et al.

  96. Libtard in the City says:

    Nicholas,

    Gator and I, against our own interests, told various members of the Montclair town council to reassess property values 3 or 4 years ago. They chose to ignore us. It cost our town somewhere between 10 and 15 million dollars which Montclair taxpayers will be paying for the next 10 years. With that many millions, the school aides would still have health care coverage, the library would still be open more than 6 hours per day, the art’s council would still exist and many more Pre-K scholarships would not have had to been eliminated. There is no fighting at the local level. It’s even more corrupt down there.

    Recently, a group of finance guys volunteered their time to examine Montclair’s financial standing in regards mainly to capital debt. They found that Montclair had the second most non-fixed debt ratio vs. fixed in the state. They also discovered that Montclair had about 300 million in bonds floating out there. They also discovered that many of the pilot payments owed by recent developers were not being paid. They essentially made the town look poorly run and the municipal debt rating was dropped two times during their investigation. So the mayor hired an economist to report that the debt was reasonable. 300 million debt in a town with 37,000 people is not reasonable. Especially when 21% of their municipal spending is now for debt service. Even after this, the volunteers urged the town not to take our more debt to beautify one tiny block in the town center for upwards of another million. The council then shut down the committee of volunteers.

    Your view is biased because you are a recipient of government grants. It will take guns to fix the issues. Trust me. The ruling elite are firmly in control of the sheep.

  97. 3B says:

    #95 Nicholas: There are others who may agree but are or were afraid to say anything. If you do not go along with the party line, you, your spouse, and your children will pay in various ways.

    Be silent or agree with me, that is the philosophy.

  98. 3B says:

    #99 Lib: the same things I was warning about in you know where 6 and 7 years ago, is now happening. It amazes me now when some people say we did not see this coming, sure they did, they ignored it, or just shook their heads at guy seemingly blathering on to himself.

  99. nicholas (83)-

    No time. Gotta work OT to pay the man.

    “I challenge you to ferret out the wrongs and improve the system instead of complaining about it.”

  100. The wrongs are all ferreted out and well-known. However, they benefit the bankster class and their gubmint protectors, so nothing will be changed.

  101. lib (87)-

    Good to see you in the corner of those of us who realize none of this slo-mo car crash will go any differently until blood is spilled.

  102. chicagofinance says:

    clot: suck it!

    WSJ
    NY FOOD
    FEBRUARY 17, 2012

    In the World of Wine, She’s ‘It’ .

    By LETTIE TEAGUE

    What would happen if an unattractive, middle-age man opened a wine bar in Manhattan? Probably not much—at least in terms of press coverage. But if a young woman with serious drinking credentials and a closet full of cute dresses did the same thing? If you’ve followed the buzz around Corkbuzz, you already know the answer. Laura Maniec, the 32-year-old Corkbuzz proprietor, has become the putative “It Girl” of the New York wine scene since she opened her wine bar on East 13th Street some three months ago.

    Ms. Maniec first won fame at age 29 by becoming the youngest woman in the world ever to be named a Master Sommelier. She was also the wine director of BR Guest restaurant group, a position she held for 10 years before deciding to open a place of her own with a small group of investors, all family and friends.

    I asked Ms. Maniec how it feels to be the “It Girl.” She took off her shoes and tucked her feet beneath her dress as she settled into one of the sofas at the front of the wine bar. “I hate making statements about myself,” replied Ms. Maniec, looking uncomfortable enough to suggest this was true. “But humbly, humbly, humbly I think it’ s because I’ve formed relationships with people over the years. For example, when Jean-Baptiste Lécaillon of Champagne Louis Roederer wanted to hold a tasting of off-vintage Cristal, he called me.” Off vintages? That didn’t sound like the sort of thing an “It Girl” of wine would be offered, I said. “We also tasted some great vintages,” Ms. Maniec conceded.

    The Corkbuzz wine bar is open seven days a week and Ms. Maniec has yet to miss a single day. She’s on premises about 12 hours every day, which often includes teaching classes in the back of wine bar. The classes started in January and so far topics have ranged from introductory (Wine 101) to Pairing Wine with Takeout Food. Her most recent class, How to Choose a Wine for a Date, took place on Valentine’s Day. “Wines that are easy to find and to enjoy,” she explained.

    I suggested trying a glass of wine from the list. What did Ms. Maniec like—or, in her words, what was she ‘crushing on’ these days? The 2009 Clos Cibonne Tibouren rosé from Cotes de Provence, she said decisively. “I’m surprised by how much rosé we’re selling in the dead of winter. I’ve ordered nine cases so far.” The wine was slightly oxidative, less like a classical rosé than a real cross between red and white in texture and aroma. It was a tad esoteric, like much of the wine list. “This list suggests to me that you really want the drinkers to talk with the staff,” I observed, looking over listings such as Botani Mosc-tel Seco and Ascheri Pelaverga Verduno.

    Ms. Maniec looked alarmed. “That’s not good. That’s not what I want. I don’t want someone to have to talk to us if they don’t want to. I need to do something about that,” she said, picking up a copy of the list for further examination. “I want at least 40% of the wines to be recognizable names,” she said, pointing out Chardonnay and Muscadet. “But maybe that’s not enough. Maybe it should be 50%.”

    She related a story about the recent visit by her sister, who lives in Chicago (where the next Corkbuzz may open as early as next year). “My sister loves New Zealand Sauvignon Blanc, but I didn’t have any. I felt bad about that.” Her sister had to settle for an Albarino, a white wine from northern Spain. “But I could find some good wines,” mused Ms. Maniec. “It wouldn’t have to be something obvious like a Marlborough Sauvignon—maybe a wine from Nelson. I have a lot of notes somewhere on some New Zealand Sauvignons that I tasted.”

    Never mind the credentials or the cute dresses: It’s the fact that she truly wants people to be happy when they’re drinking wine—whether it’s a Spanish Mosc-tel or a Santa Barbara Chardonnay—that makes Laura Maniec the “It Girl” of wine in New York.

  103. nicholas (91)-

    Ask Stu some more about his community activism. TPTB in his town wants to open a gulag just for him.

  104. No time to talk about oxidative Provencal roses when we’re all engaged in hit-run urban combat.

  105. This ain’t no party, this ain’t no disco.

  106. Nicholas says:

    Libtard,

    Then draw up a list of grievances and remove these people from office. Make it painful for them to be so blatanly stupid. Contact the govenor and ask for his assistance in fixing issues. Sometimes when stupidity reigns that it takes the courage of a few strong people to get the ball rolling in the right direction.

    Contact your local newspapers and have them start looking at the issue. Perhaps they can find out the reason why the council is acting irrationally. If it is corruption then find out the source and nail them to the wall.

    It is happening here in DC where elected delegates were rolling around in SUVs paid for by taxpayer dollars and giving kick backs to those who helped them get elected, 100k jobs just to sit around at desks and new SUVs. Those people got hammered, the administration looks like a joke, and corrupt officials look like deer in headlights. The end result is that there are no more SUVs, politically apointed desk-jockies got the axe, and warnings were sent out about political cronyism. Will it happen again, yes, and thats why people need to remain vigilant.

    If you are having these same problems bring the issue to light and the sunshine will cause that infection to go away. I dissagree with There Went Meat on not having time or that nothing in the system will change. I think that plenty will change and that sleepers in America are waking up to that fact. I think you will have a much better time reaching a willing audience now then back in 2008.

    I applaud you for what you have done Lib.

  107. joyce says:

    Isn’t the “internet2” ultimately just an attempt of taking it over by the govt?

  108. JJ says:

    Chifi, really hanging out with 32 year old window. What are you sweating to the oldies. Women generally go insane around 29. Under 23 there are intolerably stupid. 23-28 is the prime for ladies.

    My favorite stupid 23 example was time I was dating a 23 year old without a car. I was in Jersey Shore for weekend with the boys chasing skirt. She wanted to come to and catch ride with me. But she was staying at her girlfriends house. I said I can’t get out of work early tell you what Thursday night I drive into city in my bright red jeep wrangler, with top down, etc. I stay over your place in city, I leave my jeep in garage overnight I go to work and then you can take off for Shore Friday morning with your girlfirends. So far, this lets me hook up Thursday night after work and lets me hook up Monday night after work as I have to pick up car.

    Now Friday night I take my other car, (ps. playas always have two cars). and head to shore with buddies in my mercedes. I chased a lot of skirt but apparantly very hard to hook up in NJ, tough drinking laws, early closing times, staying on friends coach and he lied and girls in his house was ugly. Anyhow, GF is in my bright red wrangler with her three girlfriends. I can see that car a mile away and she has all seats filled. I actually saw my jeep on way to beach in my mercedes and pulled up to GF who introduced me as the great guy who lent the wrangler.

    Being 23 she did not realize, A. I got to go to Shore by myself. B. I arranged a hook up Thurdsay night and Monday night in City, C. Got kudas from her GFs, D. I was bleeding out owning two cars so if she totaled it I would get insurance check. E. Guilted her out about hooking up as she had my jeep and since with three GFs in a four seater no room for her to pick up a guy. E. this is where plan failed, my friend lied girls in his house were hot. F. in the plan was funniest we had a cell phone back when cell phones were expensive so I pretended to talk on it in my mercedes before entering house full fo 23 year old girls was just yelling, buy, sell, by, hedge whatever. Funniest thing ever. Older women would have been on to whole scam. In the end fun weekend and I my Jeep came back safely, unfortnately.
    chicagofinance says:
    February 17, 2012 at 3:36 pm
    clot: suck it!

    WSJ
    NY FOOD
    FEBRUARY 17, 2012

    In the World of Wine, She’s ‘It’ .

    By LETTIE TEAGUE

  109. JJ says:

    Lets ask Al Gore,

    joyce says:
    February 17, 2012 at 3:50 pm
    Isn’t the “internet2″ ultimately just an attempt of taking it over by the govt?

  110. Juice says:

    re # 83 – “revolutionary” I do remember 10GB being around in the 1990s. I fail to see how better fiber optic multiplexing is revolutionary or even evolutionary in communications. Waste of taxpayer money private enterprise namely big telecoms should be funding all of this development, to me the grants are a handout in this case while we continually get crammed by telecom with higher prices and more fees. You do know we pay more for broadband in the USA than many 3rd world jerk water places.

  111. Double Down says:

    http://www.washingtonpost.com/world/national-security/federal-agents-arrest-man-who-allegedly-planned-suicide-bombing-on-us-capitol/2012/02/17/gIQAtYZ7JR_story.html

    Federal agents arrest man who allegedly planned suicide bombing on U.S. Capitol

    The FBI and the U.S. Capitol Police arrested a Moroccan man Friday in downtown Washington after a lengthy investigation into an alleged plot to carry out a suicide attack on the Capitol.

    Amine el-Khalifi, 29, was picked up while carrying an inoperable gun and a fake suicide vest provided to him by undercover FBI agents posing as al-Qaeda associates, U.S. officials said. They said he entered the United States when he was 16 and was living as an illegal immigrant in Arlington, Va., having reportedly overstayed his visitor’s visa for years.

  112. joyce says:

    111

    Nicholas,

    So no one went to jail (in your story)?

  113. Comrade Nom Deplume says:

    [91] nick,

    Bullets are more fun than ballots.

  114. joyce says:

    116

    When was the last time they arrested a terrorist in a non-sting/non-entrapment?

  115. Bocephus says:

    113. Jj. Sigh. You lost me after the first paragraph. Lay off the Testors bro.

  116. Painhrtz - I ain't dead yet says:

    stupid FBI, J Edgar would have given him a real vest, let him go through with it and blamed it on the commies.

    In other news do they actually think if they blew up congress we would be upset?

  117. joyce says:

    Pain

    touche

  118. nich (111)-

    Sorry to bust on you, but have you been to Montklair? The stupid have massive strength in numbers. And the numbers are striving to plumb new depths in stupid.

    “Then draw up a list of grievances and remove these people from office. Make it painful for them to be so blatanly stupid.”

  119. Latest Martin Armstrong:

    Quite frankly, Greece should simply default 100% and call it a day. They should reintroduce the drachma. If Greece tried to honor its debts, it couldn’t. If it converted its debt to a new drachma, there would be at least a 60% devaluation and still they would struggle to meet that. There are some that would fear a coming hyperinflation. That would be possible by trying to honor the past debts and the Greeks are withdrawing their cash from banks accelerating the economic implosion. There is a greater risk of a military coup or a civil war. At some point, the choice will have to be made – saving society or honoring the debt. This is the PRELUDE to the Decline and Fall of ALL Western Nations. You cannot borrow perpetually with no intent of ever paying anything off. It just does not work. Until we get political reform and eliminate this professional political class whose self-interest will always be against that of the people, there is little hope on the horizon.

    http://www.martinarmstrong.org/files/Greece%2002-15-2012.pdf

  120. Confused in NJ says:

    Obama poised to win 2012 election with 303 electoral votes: The Signal Forecast

    That should be the final nail in the 12/21/2012 coffin.

  121. Shore Guy says:

    “Obama poised to win 2012 election with 303 electoral votes”

    Unless we end up with a brokered Republican convention, out of which comes a strong candidate, he will win with more electoral votes than that.

  122. njescapee says:

    i don’t plan to vote this november but if I do I will write in the shore-meister or perhaps pat buchanan for old time sake. i know a lot of people thinking the same.

  123. No way in hell Santorum can even carry his home state. It would be a 50-state skunk job for O.

  124. Libtard at home says:

    Nicholas….We’ll chat at a GTG some day. The collective stupidity in Montclair is so staggering I’m surprised Rush or Beck doesn’t focus on it. Google “Wildwood Tract” for the ultimate in stupidity.

  125. Confused in NJ says:

    127.Shore Guy says:
    February 17, 2012 at 10:29 pm
    “Obama poised to win 2012 election with 303 electoral votes”

    Unless we end up with a brokered Republican convention, out of which comes a strong candidate, he will win with more electoral votes than that.

    Considering how badly things have eroded since we lost our moral compass, it’s probably time to hit reset and start over anyway.

  126. relo says:

    JJ:

    Re: rental, if you’re intending to flip in a few years putting it in an LLC may work out despite not being able to take the PALs in the current year. You don’t lose them, the are freed up upon dipsosition and will likely offset the depreciation recapture. Also, do you have any other passive income to offset?

    Disclaimer: Consult your tax advisor as I am just familiar enough to be dangerous.

    Nick, I hear you screaming and too want this country to be the land of opportunity again for my kids. However, the time for platitudes has passed.

  127. Mikeinwaiting says:

    It is all over but the screaming.
    “Nick, I hear you screaming and too want this country to be the land of opportunity again for my kids. However, the time for platitudes has passed.”

  128. chicagofinance says:

    WSJ
    WEEKEND INVESTOR
    FEBRUARY 18, 2012
    Honey, They Shrunk My Bonus

    By ROBERT FRANK

    When a banker from Deutsche Bank recently sat down for dinner with a friend at an upscale Manhattan restaurant, the two started joking about who would pick up the check.

    “I’ll pay with my deferred-stock chips,” the banker joked, referring to shares Deutsche Bank is paying some of its employees instead of cash.

    Financial-industry executives around the world are grappling with the new realities of pay and spending. Volatile markets, weak economies and new regulations are crimping profits—and putting workers at all levels in a squeeze.

    Normally, February is a time of year when financial-industry executives are flush with bonus cash and searching for places to spend it. Now many are staring at shrunken cash payouts and looming bills at home.

    Bankers still make regal salaries relative to the rest of America. But the income shocks on Wall Street over the past few years show why even the highest earners are increasingly vulnerable to cash squeezes—caught between bonuses that increasingly are paid in stock and luxury expenses that continue to soar even in a down economy.

    The result: High earners who once spent on wants are now increasingly thinking about “needs” (needs being relative for $40,000-a-year-private kindergartens). Executives who once regarded their seven-figure bonuses as fair compensation for their grueling hours and rare skills are being forced to examine their lifestyle.

    Bankers aren’t the only ones grappling with volatile high incomes. As a growing number of corporate executives and entrepreneurs derive their wealth from stock-based pay rather than cash-based pay, they are exposed to more extreme, and more sudden, fluctuations in their cash flows. The challenge for many high earners now is figuring out how to smooth out income streams, reduce big expenses and avoid a liquidity crunch.

    Wealth managers and compensation consultants say it all comes down to selective spending, a careful mix of investments and a psychological understanding of self-worth and net worth.

    Of course, some bankers will hardly notice the smaller bonuses. Regular salaries went up for many after the recession to make up for lower bonuses. Salaries for managing directors can often top $250,000. Factoring in the cash bonuses, most are easily in the top 1% of earners. Senior bankers who have sold stock over the years and invested conservatively have plenty of cash to carry them over the income bumps.

    Yet the economics of Wall Street have changed, many say for good, as profits at the big banks come under strain.

    This year, many banks have imposed new limits on cash bonuses. Morgan Stanley is capping them at $125,000. Barclays is limiting the cash component of bonuses to £65,000 (about $103,000).

    Under Deutsche Bank’s new system, the bank will pay out a maximum of €100,000 (about $131,000) in cash and €100,000 in shares, known as “deferred stock chips,” that can’t be sold until later this year. UBS is even clawing money back: It decided to take back 50% of share-based bonuses awarded last year to investment bankers whose bonuses exceeded two million Swiss francs (about $2.2 million).

    For many bankers, after-tax cash bonuses of less than $60,000 represent a fraction of the seven-figure checks they received in previous years. Many built their lifestyles on the assumption that those bonus checks would go on forever, becoming as routine as their February ski trips to Aspen and summer pilgrimages to the Hamptons.

    “For any banker who’s been in the business more than a few years, this is a new reality,” says Michael Holland, who runs investment firm Holland & Co. “The smart and conservative ones probably prepared for this. But there are a lot of bankers who now have to cut back the whole consumption part of their lives.”

    Burn, Baby, Burn
    The lifestyle costs, or what bankers call their “burn rates,” can be substantial. For a typical top Wall Street executive with a family of four, the cost of a Manhattan apartment, household staff and private school can easily top $500,000 a year, consultants and bankers say. That doesn’t include the restaurants, clothing, second- or third-home upkeep and charity dinners that also are fixtures in finance.

    “It’s like the Wilkins Micawber principle from Charles Dickens,” says Keith Whitaker, a consultant at Wise Counsel Research Associates, which advises wealthy families. “If you make $100,000 a year and your expenses are $99,000, that’s bliss. If you make $100,000 and your expenses are $101,000, the result is misery.”

    For now, bankers are mainly trimming around the edges, in hopes that the income dip is temporary.

    H. Dolly Lenz, one of New York’s top luxury real-estate agents, says bankers have cut back their spending in recent years. Few are downsizing, but many are postponing plans for bigger apartments or putting off a vacation-home purchase.

    “Normally this time of year is one of the best times in New York real estate,” Ms. Lenz says. “Bankers would be spending the money they just received and we would see a flurry of activity. Not this year. It’s very quiet.”

    While rentals in the Hamptons for this summer are strong, sales are weak, Realtors say.

    A decade ago, Ms. Lenz says, Wall Street bankers made up the majority of her clients looking to buy in New York and the Hamptons. Now, she says, “I haven’t got a single one.” Her clients now are mostly entrepreneurs and dot-commers.

    To slash their housing costs, some bankers are refinancing their mortgages or personal credit lines to take advantage of low interest rates, according to wealth advisers. Many bankers have multimillion-dollar mortgages, so even a small reduction in their interest rate can make a big difference. Cutting the rate on a $2 million “jumbo” mortgage to the current 4.5% from 5.5% can save more than $1,200 a month, or more than $14,000 a year.

    “A big dial mover for these folks has been refinancing debt,” says Katie Nixon, chief investment officer for personal financial services at Northern Trust and an adviser to many top Wall Street executives.

    Cutting Back
    Wall Streeters also are learning how to trim their household overhead. Steven Laitmon, co-founder of the Calendar Group, a Westport, Conn.-based staffing firm, says many bankers have consolidated their staffs. A family that might have had a butler, private chef, laundress, nanny and cleaning person might now have only a cleaning person “who also does some cooking and is child-friendly.”

    Rather than employing personal assistants at home, some bankers are using the executive assistants at their offices to handle some of their personal logistics. To fill those duties, many Wall Street banks are looking for secretaries with personal-assistant experience, Mr. Laitmon says.

    “I think some bankers realized they were over-staffed at home and now they’re trimming,” he says.

    Cutting education—another big expense in New York and London in particular—is generally off limits for bankers. Although top private schools can run more than $40,000 a year, bankers say cutting their kids’ education is a last resort.

    “Guys on Wall Street would sell the Hamptons house and their art collection before they would take their kids out of a top school,” says one Morgan Stanley banker. “Education is an essential.” The top end of the art market has recovered quickly from the recession, so selling now might not be a bad move.

    Alan Johnson, head of Johnson Associates, the compensation consultancy, said sports cars and other toys are other easy cuts. “It’s particularly uncool on Wall Street now to have a big beautiful Mercedes or sports car,” he says.

    Natasha Pearl, founder of Aston Pearl, which often advises wealthy families on paring their budgets, says high-earners also can save on their “vendor expenses”—everything from florists and landscaping crews to travel agencies and caterers.

    “Until you really analyze your budget, you don’t realize that the bill for your arborist has gone up 20% over the past five years, and it’s not because you have more trees,” she says.

    Cost cutting isn’t the only answer to the bonus crunch. Wealth advisers say their Wall Street clients are reshuffling their portfolios to withstand more frequent income shocks.

    Northern Trust’s Ms. Nixon says many bankers have been preparing for lower pay for years. They have boosted their cash reserves, paid off their debts and diversified into ultrasafe investments, like municipal bonds and Treasurys, to offset the risks of all the shares they hold in their banks.

    She advises bankers to do detailed analyses of their spending and figure out how long they plan to maintain their current budget. Once they know the annual number, they know how much cash they need to set aside and how much income they need from the safest investments that won’t fluctuate with Wall Street. She says bankers typically fund these investments with their years of accumulated bonuses and stock sales.

    Soul Searching
    Still, some bankers are going through a more profound soul searching and lifestyle change, as the value system that sustained them for years comes under threat. Demonized by the public at the same time their pay is declining, some bankers are looking more deeply at their reliance on outsize annual bonuses, wealth managers say.

    Keith Whitaker, an adviser to wealthy families, including some in finance, says bankers can all too easily define themselves by their bonuses. Bankers, he says, work grueling hours and believe they earn their pay.

    “They say, ‘I deserve this and I deserve to live in this house and send my children to that school and maintain this standard of living,'” he says.

    “Behind those costs is the belief that your sense of well-being depends on where your kids go to school or what ZIP Code you live in or how big your house is or what kind of car you drive,” Mr. Whitaker says. “But they can ask themselves, do I really need to be in this house and love this community, or is it an immense burden?”

    Asking the deeper questions can lead to easier cost-cutting, Mr. Whitaker says.

    “I don’t start with ‘Well, how much of your arm should we cut off?’ but ‘What are your beliefs, and are these things working for you?'” Mr. Whitaker says. “That way the focus is not on the arm.”

  129. Fabius Maximus says:

    #85 Lib

    Gvmt economies of scale are the only way out of this. Putting anything in the private sector just makes it worse. Once you open the door “for profit”, costs escalate. The big problem is that gvmt has to cater to all, where “for profit” gets to pick and choose where they compete. Take education, whats the point giving a poor family a voucher if there is no services offered for them to use it. At that point the gvmt has to step back in to back stop the stepped up costs to get providers to go into Newark to educate all. Then you are back into the Abbot issues.

    Healthcare costs are killing this economy, but the discussion gets masked in attacks against O. Heathcare reform has barly been enacted but the premium costs are at this point unaffordable. The stat that premiums have doubled in the past decade i think is a low ball number. I don’t think it takes into account all the out of pocket costs that people are having to pick up. From the stat above and the discussion yesterday on healthcare premiums. Top 25%: $67,280 So how many of 75% of the population are paying 25% of their pay on healthcare. How many people pay more on healthcare, that property tax/rent. I researched some family plans yesterday to see if the $1,000 or $1700 premium was in the ball park. I found a plan that had a 30% co-insurance and couldn’t find any maximums outside of max benefit for the plan. I think of that like car insurance, I have a crash (heart attack) and if the car cost me $30K (or the ER care and stay), I am looking at what in reality is a $10K deductible.

    Then we get the great clarion call of “cut spending”. If you cut all other spending to zero, revenue still does not cover the 4 horsemen of Medicare, Medicade, Social Security and Defense.

    Is it me, or are people just arguing about the wrong things?

  130. Fabius Maximus says:

    #93 Nicholas

    I am an independant leaning center left, living in NNJ that I affectionatly refer to as “Republ1can He11”

  131. Fabius Maximus says:

    #127 Shore

    A brokered convention will not save the GOP, in fact I think it will do more damage. If a no name comes out there is no money/infrastructure or more importantly boots on the ground to run an effective campaign. The O relelection machine is just gearing up and it looks well funded and well resourced.

    I still hold that it will be 2020 before you see a serious GOP contender. We had Mitch McConnell back in 2008 saying his number 1 priority was O as a one term. Maybe come November, he can get his head out of his a$$ and try and undo some of the damage he has done and get Congress working again.

  132. Fabius Maximus says:

    Don’t always agree with Maher, but he is on the money with this one. I had this same discussion with Eddie Ray back in 2009. Regardless what you think about O as a person, he is the CinC and that post deserves respect.

    http://gawker.com/5886207/bill-maher-cant-abide-the-conservatives-disrespect-for-president-obama

  133. grim says:

    I hear the Newark gangs are calling a truce for the Whitney funeral.

    All is good and right in the world.

  134. gary says:

    grim [141],

    I hear the Newark gangs are calling a truce for the Whitney funeral.

    Now, if we can only get the gangs in Allendale to do the same, it would be unprecedented.

  135. Juice Box says:

    what about the gangs in the Brig?

    Houston will then be buried beside her father, John Russell Houston, at Fairview Cemetery in Westfield.

  136. grim says:

    That’s why prices never fall in the Brig … big stars are just dying to move in!

    Zing!

    I’m here all week, tell your friends, and don’t forget to tip your bartenders.

  137. Welcome to another day in hell.

  138. grim says:

    Is it just the Crips and Bloods? Or is MS13 also joining in as a gesture of cross-cultural acceptance?

  139. Mikeinwaiting says:

    Grim on a roll!

  140. gryffindor says:

    #72 – I think this is when you move to Canada, eh?

    “When the shooting starts, and you’re trapped between the corrupt gubmint cartel on one side- and the transfer payment-addicted zombies on the other…who do you go after first?”

  141. Mikeinwaiting says:

    148, grif if you wait that long it will be to late. Canada already is tightening up citizenship requirements.

  142. Jill says:

    #143: The List family is buried there too.

    On an unrelated topic, check out the description of this monstrosity in WT:

    http://www.weichert.com/41051292/?zip=07676&mls=53&view=gallery

    Note especially the moronitude of marketing copy that talks about the “rap-around travertine terrace.” Call me a spelling Nazi, but that really grinds my gears.

  143. gary says:

    Jill [150],

    In a few years, houses like that will not cost a penny; they will be given away. The only stipulation on the closing will be the responsibility of the new owner to pay the taxes, utilities and maintenance.

  144. Shore Guy says:

    “I hear the Newark gangs are calling a truce for the Whitney funeral.”

    It is hard to believe that any gang member would even know any of her music well enough to care to call a truce for the day of her funeral. It sounds more like the gang unit of the NPD said to the gang leaders, “we are going to have the world’s media here and if any of you stick your heads up and so much as sneezes we are going to come down on you like you never believed possible. Oh and have a nice day” Just a guess.

  145. Thundaar says:

    I didn’t realize the attorney generals got paid to take this deal…..unbelievable….

    http://www.truth-out.org/50-state-25-billion-mortgage-settlement-relief-struggling-homeowners-or-bailout-big-banks/1328977232

  146. Thundaar says:

    An audit in SF reveals 84% of foreclosures contain clear violations……

    http://www.sfassessor.org/modules/showdocument.aspx?documentid=1019

  147. Comrade Nom Deplume says:

    Meat,

    I know Sunderland is an archrival, but I was pleased to see them take out Arsenal.

  148. Comrade Nom Deplume says:

    [139] fabius,

    But liberal disrespect for Bush was perfectly acceptable, right?

  149. Neither Bush nor Bojangles deserves an ounce of respect. Both are bought-and-paid-for whores of banksters.

  150. Confused in NJ says:

    157.There Went Meat says:
    February 18, 2012 at 4:44 pm
    Neither Bush nor Bojangles deserves an ounce of respect. Both are bought-and-paid-for whores of banksters

    True!

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  152. chicagofinance says:

    Ok…things could be worse…
    “Cocaine found on capsized cruise ship captain’s hair, lawyers for survivors say”

  153. gary says:

    My first real estate chuckle of this ‘robust’ prime selling period: a 2 BD/2.5Bth condo listed as an “estate sale” in Wyckoff at a price of $699,000. It says that it’s “updated” and there’s nothing to do but move in! LOL! Let me translate that for you: the children didn’t visit Mom and Dad when they were alive but they sure as he11 hope to cash out on them now that they’re dead. I have two words for the “estate” looking to sell, and it’s not Happy Birthday.

  154. Mike says:

    146 I think the gangs are posting these peace treaties to throw the cops off while they’re at funeral. Car Jackings galore today

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  157. NJGator says:

    Here’s a little story that will warm Gary’s heart…

    Towards the end of 2009, Lib and I made our first offer on a place in Glen Ridge. I think the house had been listed at about $579k…and was sitting with no offers. The place had a lot of space and huge rooms on the ground floor, but a few issues that would limit it’s market – no ground floor powder room, bedroom #3 was a claustrophobic 8×8 (it felt uncomfortably small with even just a pack and play in it), no garage, a bright pink basement and most of the yard was taken up by a small inground pool.

    We offered $525k. Sellers countered at $569k. We upped our bid to $535k and said that was best and final. They came back with a counter of $550k and condescendingly told my agent they would loan us the difference between our offer and the $550k. We told the agent we could afford $550k, but didn’t think the house would be worth it.

    Turns out the sellers were moving out of the place in a week. No other offers on the table, but they still declined ours because they weren’t giving the place away. They were going to rent the place out. Stu and I smugly thought they would come back to us, but a few weeks later they found renters who signed a 3 year lease on the place for $3k/month.

    Fast forward to today. Apparently the tenants trashed the place and broke the lease. Owners had to put about $20k into repairs and are now back on the market – asking $499k.

    We’ll see what they actually manage to sell at today. Oh, and since they’ve been non-resident in the place for over two years, I guess they’re going to owe capital gains taxes on about $200k of profits (they’ve owned since the early 90’s).

    Tick, tick, tick…

  158. Juice Box says:

    Gator link?

  159. 1987 condo buyer says:

    #166, i thinki was the last peron to actuall use a real basis when i converted my condo to a rental, i doubt they will say hey owe money…they will pick a basis based on a 2009, bid, like yours.

  160. Confused in NJ says:

    The world’s first “test-tube” meat, a hamburger made from a cow’s stem cells, will be produced this fall, Dutch scientist Mark Post told a major science conference on Sunday.

    Post’s aim is to invent an efficient way to produce skeletal muscle tissue in a laboratory that exactly mimics meat, and eventually replace the entire meat-animal industry.

    The ingredients for his first burger are “still in a laboratory phase,” he said, but by fall “we have committed ourselves to make a couple of thousand of small tissues, and then assemble them into a hamburger.”

  161. chicagofinance says:

    Incorrect suggested tax treatment…ask nom to clarify….

    NJGator says:
    February 19, 2012 at 8:00 pm
    Oh, and since they’ve been non-resident in the place for over two years, I guess they’re going to owe capital gains taxes on about $200k of profits (they’ve owned since the early 90′s).

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