Synopsis from The New York Observer (scroll down for link to full article):
Vanity Fair’s Michael Shnayerson has issued yet another dispatch from the front lines of the hedge fund massacre. It’s a report on the death of a culture in which, as one former Lehman Brothers employee explained, those who didn’t “spend extravagantly” on staples like $1,950 bottles of 2003 Screaming Eagle Cabernet Sauvignon at Craft, $26-per-ounce Wagyu beef at Nobu, and Masa’s $600 prix fixe dinner would be “ridiculed at work.”

The piece includes a host of increasingly familiar scenes of the ways in which the ultra-rich cut back: the still-employed money man who, while planning a trip to China, asks himself, “Why should I pay $250,000 for a private plane when I can pay $20,000 to fly commercial first class?”; a Wall Street wife asking her Westchester neighbor how exactly one obtains a Food Emporium discount card; a reminder that the usually booked-solid St. Regis Hotel in Aspen currently has Christmas week available at $13,920 for two.

Over in Greenwich, residents are cutting back by “letting the pastures grow, canceling the leaf blowers, doing the storm windows themselves.” Customers are hauling sacks of jewelry over to Betteridge Jewelers (“Wall Street’s jeweler) to make the mortgage payments while others send their housekeepers and daughters on similar runs to Consigned Couture.

One of the piece’s central characters is former Lehman Brothers COO Joe Gregory. Mr. Gregory’s story, Shnayerson argues, “even more than [CEO Richard] Fuld’s, seems emblematic of the age now past.” The 56-year-old Mr. Gregory owned homes on the North Shore’s Lloyd Harbor; Bridgehampton (which he just put up for sale); Manchester, Vt.; Manhattan; and a $500,000 house in rural Pennsylvania, which he used approximately twice a year when he went to visit his son at boarding school (the townie hotels were apparently not up to his standards). Tired of his 90-minute commute to the office, he purchased a helicopter and a seaplane to shorten the trip. A house guest once spotted a $4,600 price sticker on one of her dinner plates (whether it was for the plate itself or the set wasn’t clear). It’s estimated that Mr. Gregory’s after-tax expenses approached $15 million per year, excluding mortgage payments.  

He and wife Niki also donated generously to medical charities like Huntington Hospital, Weill Cornell Medical Center, and the Maurer Foundation for Breast Health Education. “Joe had a huge heart—he gave a ton of money away,” one ex-colleague is quoted as saying

Profiles in Panic  By Michael Shnayerson, Vanity Fair Magazine, Jan 2009

With Wall Street hemorrhaging jobs and assets, even many of the wealthiest players are retrenching. Others, like the Lehman Brothers bankers who borrowed against their millions in stock, have lost everything. Hedge-fund managers try to sell their luxury homes, while trophy wives are hocking their jewelry. The pain is being felt on St. Barth’s and at Sotheby’s, on benefit-gala committees and at the East Hampton Airport, as the world of the Big Rich collapses, its culture in shock and its values in question.


A snapshot: East Hampton, late summer, a lawn party at a house on the ocean overlooking the dunes. The host is a prince of private equity known for dressing well. One of his guests is Steven Cohen, the publicity-shy billionaire whose SAC Capital, with $16 billion under management, is perhaps the most revered of the 10,000 or so hedge funds spawned by this giddily rich time. Nearby is Daniel Loeb, of Third Point, one of the better-known “activist” hedge funds, who hopes to move soon into a 10,700-square-foot, $45 million penthouse at l5 Central Park West, a Manhattan monument to the new gilded age. Gliding easily between them is art dealer Larry Gagosian, so successful at selling Bacons and Serras to Wall Street’s new titans—including to Cohen—that he now travels in his own private jet and has his own helicopter to take him to it.

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But here’s the odd thing: despite the beauty of the ocean view, nearly all the guests have their backs to it. Cohen is deep in conversation with a colleague who seems to be pitching him a deal. Loeb hovers close to his wife, a former yoga teacher. Gagosian is near his stunning young girlfriend. No one notices the clouds that are, quite literally, on the horizon. Snap.

Six weeks later, the photograph is cracked and sepia-toned, curling at the edges, a historic print. In just that short time, the storm has hit and nothing looks the same.

It may be premature to say our gilded age has ended. Third Point dropped 10 percent in October, bringing it down 27 percent for the year, but Daniel Loeb is still moving into his extravagant new apartment. Steven Cohen’s SAC was down 11 percent in October and 18 percent for the year to date, but that still leaves him plenty of money to add a second ice-skating rink to his Greenwich, Connecticut, estate. And Larry Gagosian is still selling plenty of art.

What’s definitely gone—along with Lehman Brothers and Bear Stearns—is leverage, at least to the dizzying degree it was recently used by Wall Street’s investment banks, hedge funds, and private-equity firms to parlay each dollar of their assets into $10, $20, even $30 or more of credit to make gargantuan deals and profits. The credit crunch has made such leverage as quaint as the market in Dutch tulips. Without it, Wall Street salaries have already started drifting gently back to earth like so many limp balloons.

Gone, too, are jobs—lots and lots of them. Along with a sizable portion of Lehman’s 26,000 worldwide, and Bear Stearns’s 14,000, Wall Street firms across the board—even Goldman Sachs—are cutting back, and that pain radiates out to the limousine drivers and caterers and lawyers and personal trainers and restaurant owners and real-estate brokers who rely on Wall Street clients, not to mention to the many nonprofits and charities that have grown accustomed to Wall Street money. The latest estimate of jobs New York will lose, both on and off Wall Street, is l60,000. Governor David Paterson says the state’s budget deficit has already reached $12.5 billion. In New York City, where Wall Street accounts for more than a quarter of the tax revenues, Mayor Michael Bloomberg thinks the financial-sector crisis will leave a $2 billion hole in the next fiscal year’s budget.

Almost everyone has lost something—if not their jobs, then 25 to 50 percent of their retirement savings—and nearly everyone is glum, anxious, hung over. Prudence is the watchword now: sackcloth after the brilliant silks and brocades of the gilded age.

The day after Lehman Brothers went down, a high-end Manhattan department store reportedly had the biggest day of returns in its history. “Because the wives didn’t want the husbands to get the credit-card bills,” says a fashion-world insider. A prominent designer says ruefully, “People really aren’t shopping at all unless there’s a deal or sale. It’s pretty dramatic—they have the stores at their mercy.”

Even those who have plenty left to spend aren’t spending it. “I ran into a couple I always see at the antiques show,” one Upper East Side woman recounts of her visit to the Armory show on Park Avenue. “They always buy something fairly grand. ‘What have you bought this time?’ I asked. ‘Oh, nothing!’ they said. ‘We’d feel … ashamed.’” Another Upper East Side woman often goes from lunch at Michael’s restaurant on West 55th Street to Manolo Blahnik a block away to pick up a $600 or $700 pair of shoes as “retail therapy.” No more. “I was at Michael’s yesterday and was thinking, Oh, Manolo’s … But then I thought, Why? Why do that? It just doesn’t feel good.”

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