In 2007, a group of investors from Morgan Stanley issued a memo, playfully naming one of the many toxic subprime mortgages that would destroy the economy. Names like “Nuclear Holocaust” and “Subprime Meltdown” were spitballed, but in the end, they gave it an actual name and sold it to China.
Later, in September of 2008, Morgan Stanley treasurer David Wong briefed the Federal Reserve on the “dark scenario” that would lead them borrowing at least $10 billion from the central bank. By the end of the month that had gotten darker, and by the end of it all, they’d borrowed something like $107.3 billion in funds from the Reserve.
Now, in November of 2014, we’re marveling at the massive bonuses that Morgan Stanley is handing out, even as income inequality skyrockets to historical levels and the wage value of the average American plummets.
For all their role in destroying the economy, you’d think that Morgan Stanley would be the last place to find — the last place deserving of — large bonuses. But that’s not the case: Business Insider notes that if you can get into the business (and that’s a mighty big “if” –there’s a 1.1% acceptance rate), you can make bank working for the bank. The base annual salary is $111,801, while the bonuses can jump that figure to $233,446. As Business Insider notes, this is pretty typical for Wall Street firms.
Morgan Stanley, by the way, made $8.9 billion in profits during the third quarter.
Meanwhile, back here in the real world, income inequality in the United States is starting to look a lot like it did in 1929.
While economic growth in the United States appears to be positive and steady, the richest 0.1% of Americans have as much wealth as the country’s poorest 90%. Both groups control roughly 22 % of the total wealth in the country, but while the average wealth of the bottom 90% is $84,000, the top 0.1% consisted of 160.700 families with net assets in excess of $20 million. Meanwhile, the top 0.01% now controls 11.2% of the total wealth.
This share of the wealth that’s held by these roughly 16,000 families with a net worth over $371 million is the largest share that this group has had since 1916, and is the highest on record. Wealth today is 10 times more concentrated than income today, and the Great Recession of 2008 — triggered by banks like Morgan Stanley — didn’t slow it down. Instead, it appears to have boosted wealth gain for the richest Americans.
And Americans have a skewed perception of just who lands up in the ultra-rich category; a large proportion of the wealth held by the very rich in the form of bonds has increased, while the proportion held in stock has declined. What this means is that an increasing portion of the wealth isn’t generated through building businesses and creating jobs, but, rather, through inheritance among the American Aristocracy.
In 30 years, there has been zero growth in the amount of wealth held by the bottom 90%. Likewise, wage rates have stagnated, and the value of those wages have dramatically decreased — those of us down here in the bottom 90% were making more in the 1960s than we are today, but if the numbers are any indication, we’re working even harder for it. Contrast this with banks like Morgan Stanley, who hand out huge bonuses despite being part of the reason our economy tanked to begin with.
Employees who work at Morgan Stanley are almost certainly in the 1%, but the majority of them are not in the 0.1% or 0.01% bracket. But isn’t it amazing that the only people who seem to have bought into the myth of the “hard work” is the bottom 90%? When there’s a larger portion of wealth being inherited than there is being generated through business building among the top 0.01%, and when banks that were responsible for destroying our economy can hand out massive bonuses for doing work that can’t compare with the importance of work done by the vast majority of blue collar and low-income white collar workers (like teachers), it’s pretty obvious who the real suckers are here.
But by all means, America, go right back to pretending you’re an embarrassed millionaire and bury your head in the sand. The vast majority of Americans — 90%, in fact — will never see this kind of wealth in their life, no matter how hard they wish or pray otherwise. And if the trend continues, neither will their children, or grand children.