Down the Up Escalator (26 page)

What, then, would Goldman Sachs do with its “excess capital”? When its chief financial officer was asked that question, he said, “Our number one choice will be to find opportunities to use the capital profitably, and if not we would probably give some more back [to shareholders].”

Companies give money back to shareholders through dividends or stock buybacks. At that point it becomes the problem of people like Pru, Brenda, Henrietta, and much larger investors to figure out what to do with it.

In theory, these big returns should mean that my three investors have bigger heaps of capital to finance businesses that will produce goods and services while generating jobs and more profit to reinvest in more production. That’s what capital not only is supposed to do but has actually done at certain times in history. I know the
three women would like to use their wealth to create new business and employment. Why is it so hard for them to do that now?

Before I answer that question and think about how we’ll emerge from the Great Recession, I’d like to introduce an investor who lost
all
his money and hasn’t gotten a penny back yet. Being penniless was so new to him that he has some refreshing takes on the subject.

“Completely Vulnerable”

Richard Bey (his real name) is a longtime radio and TV talk show host who invented some of the best and worst features of the genre. (You can see him playing himself, the archetypal TV host, in the Sacha Baron Cohen movie
Brüno
.)

Over the years Bey had earned as much as $1 million a year in broadcasting. But when the recession started, he had quit an early morning show to concentrate on the child in his life, the eleven-year-old son of a former girlfriend. “He was experiencing serious issues in school, and his home support system couldn’t deal with them at the time.”

Money would be no immediate concern since Richard had sold his river-view apartment—“same building as Al Pacino,” he volunteered—in 2005 at the height of the market. He added this windfall to the rest of his savings, which he kept in a fund run by a boyhood friend from Far Rockaway High School. As it happens, Bernie Madoff went to school there too.

But Richard’s friend Bill is no Madoff. When the fund crashed, Bill wound up in the hospital with Richard consoling him. Another of the fund’s executives tried to commit suicide on the Long Island
Rail Road tracks but apparently changed his mind and wound up losing only an arm and a lung. Richard feels certain that his friend Bill never actually stole from his investors, but the fund’s finances are still murky.

What’s definitely known is that a couple of real estate deals went bad and a German bank was defrauded. Then one bank after another froze all the money left in the fund’s accounts.

Investors learned by e-mail, from a new set of managers, that all disbursements were canceled (Bey had been drawing out $8,000 a month while he wasn’t working) and all funds were frozen till things could be straightened out.

When he learned that he couldn’t get at his money, Richard went to the nearest ATM and found, he said, “I had $3.29 in my bank account. I had $200 in my wallet. Without a job, without income, that was all the money I had in the world. And I had just had $8,000 of oral surgery that I put on my credit card.

“At that moment I looked at the other people walking down the street. ‘They can get where they need to go. But I can’t buy a MetroCard. I can’t put gas in the car.’
I was completely vulnerable.”
Everyone without enough money to live for the rest of his life is vulnerable that way. But Richard was the first person who said this to me.

“Fortunately, I have friends. One old friend from Yale Drama School is an Obie Award–winning actress, but now she only earns $27,000 a year as a proofreader. She offered me a $1,000 loan.

“I said, ‘I can’t do that.’

“She said, ‘Richard, all your life you’ve done things for your
friends. You take us to dinner; you paid for Broadway shows.’ But that’s how I enjoy myself, going to dinner with my actor friends and talking about shows we just saw. I did that for myself. Besides, I hate to owe credit cards; I hate to owe friends. It’s not in my nature to borrow.”

Nevertheless, Richard took her $1,000. “We all thought the money would unfreeze in a few weeks,” he explained. But because he disliked borrowing, he also raised emergency cash by selling things.

“Everything I owned became an asset—my mother’s jewelry, my father’s coins. I had a comic book collection of
Spider-Man
and
Iron Man
. I’d saved them for forty years, but with only a few dollars left in my wallet, they became disposable. I tried to evaluate them on the Internet, but were they in ‘good’ condition or ‘fair’ condition? Would a creased cover page knock $100 off the price? As I looked at each cover, I swear I remembered the moment when I slipped it off the rack and paid twelve cents at Milty’s Candy Store.

“Eventually, I sold twenty comic books for $300 at Midtown Comics. I felt like a fool selling them that cheaply, but my wallet was once again stuffed with twenties. Later I sold the lithograph I had on my wall for fifteen years. I got $4,000. I paid $5,000. But that wasn’t as painful as the comic books. After that I sold my mother’s jewelry, but I still had the Liberty quarters and Indian head nickels my father had left us.”

“Richard,” I couldn’t help asking, “didn’t you ever think of the risk of having all your money in one fund?”

“Yes, Barbara, I did think about it,” he said in answer to my annoying question. “In fact, I can’t tell you how many times I thought of taking a chunk out of the fund for the security. But Bill made it so convenient for his investors.”

Richard also wanted me to understand why it took him a while to grasp his new situation and make long-term changes.

“My rent was $4,600 a month. I had a beautiful two-bedroom. One room was fixed up for the child. That was essential. So I paid the rent by borrowing against credit cards. It didn’t seem like such a bad idea, because I was expecting to pay back the loans in full as soon as the money was unfrozen. At that point they said June, so no more than two months.

“Besides, I figured that something would turn up. In my life it always has whenever I needed it. And it
did
. A friend of mine knew someone who was starting an Internet television talk network. Al Sharpton was going to be on it, Bob Grant, Curtis Sliwa. Most of the hosts were either working for free or simulcasting current radio shows. My friend suggested that with my experience and notoriety I could ask for a small salary, and I did. Six hundred dollars a week. Half the rent,” he said, shrugging. “But I was working.”

Many performers would be too proud or too stunned to make a quick compromise like that. But Richard, who’d had nationally syndicated TV shows, didn’t worry who thought of him as a has-been, or how he’d explain it to himself. He jumped into the Internet show with his full heart.

“For the rest of the summer”—at this point the money would unfreeze in September—“I paid my debts as near the penalty dates as possible. Every Friday, I deposited my paycheck, calculated when it would clear, figured when each credit card payment had to be deducted, and double-checked my balance at the ATM. One mistake and I would face a default interest rate of 29.5 percent. I was walking on financial thin ice and finally …

“One Friday, I deposited my check inside, then walked out to the ATM, and the screen said negative balance. An American Express
card payment of $800 was about to be withdrawn the next day. Chase must have made a mistake. I raced back into the bank to find a manager.

“When he looked at his screen, he saw that an employment check from five weeks earlier had just been reclassified as bounced. Well, five weeks before that TD Bank merged with somebody or other, and there was some computer problem during the switchover, and they stopped all the checks issued that day. Now, five weeks later, they were retrieving that stopped check from my funds. ‘How can you take my money back? I thought once a check cleared, it cleared.’

“The manager explained that there were new rules, that banks had to clear checks faster now, that it was just blips, not actual money they’d move to me. But those ‘just blips’ left me an
actual
$800 short for American Express the next day.

“It was 2:00 p.m., and Chase would close at 6:00. I had less than four hours to come up with $800, and it had to be cash!

“I called that same friend from Yale. She worked from home, so I could count on her to be available. She said she would meet me at the bank at 3:00 p.m. and withdraw the money from her ATM. I jumped on the subway and met her on the Upper West Side. But it turned out her ATM limit was $500. I was three hundred short.

“I still had my father’s coin collection. I ran home, grabbed it, and headed over to Stack’s on West Fifty-seventh Street. The owner lit up when he saw me. ‘Oh, I used to watch your show all the time. You gave me a lot of good laughs.’ I explained my situation as he looked over the coins. He told me that in consideration of all the viewing enjoyment I had given him over the years, he could give me $200 for the lot!

“It was 5:00 p.m. now, and I was still $100 short. Chase banks are as ubiquitous as Starbucks, so I had a lot of options where to
deposit
the money. But to
get
more money, do I go uptown? Do I go downtown? I only had to come up with another $100. Then I remembered …

“In 1992, I shot a documentary in Turkey and bought a chain in a gold factory. I had never taken it off, not because I love gold, but because it reminded me of a wonderful experience in my life. There was a jewelry store on the Upper West Side that had given me a good price on a necklace of my mother’s. That’s where I unclasped the chain for the first and last time in years and laid it on the scale. The offer was $145. Forty-five more than I needed. Maybe I could take the kid to a movie that weekend. I passed the cash over to a Chase teller at exactly 5:45. I’d made it!”

“Just in the nick of time!” I cheered.

“But I was living with a daily fear that I never want to feel again.”

Millions of Americans live with the fear that Richard described. Their stories don’t involve Turkish gold chains and uptown-downtown subway chases rivaling
The French Connection
. A vast number obviously don’t make it to the bank by 5:45, or there wouldn’t be so many people paying the usurious interest rates that Richard was racing to avoid. For most debtors this race never ends.

It didn’t end for Richard that day either. He was telling me about his close shave in retrospect. If I’d met him at 6:05 that day, he might have reported the 5:45 victory briefly and gone on to tell me about the piano he was trying to sell on eBay (“Never got a single offer”) to make sure he didn’t fall into the 29 percent rate the next month.

“What kind of racket is that?!” Richard demands. “Twenty-nine percent interest rates while your money in the bank is getting less
than 1 percent! Well”—he calms down a little—“at least I kept my American Express at 15.9 percent, the Visa is 19.9 percent. But chipping down that debt once you’ve accrued it, that’s the hardest thing I face now that I’m stabilized.”

This is how Richard Bey finally stabilized himself.

“At that point I had a $600-a-week job and a $1,200-a-week rent. So I decided to move into a studio apartment. I was going to do it in the same building because that way you don’t have to put down a new deposit.”

“To avoid the cash gap between putting down the new deposit and getting the old one back?” I asked.

“Right. That’s the kind of thing I was constantly thinking of. How do you avoid laying down cash for a deposit? How little can you spend for dinner in this restaurant? Is it worth it? Which is cheaper? That kind of thinking, every single day.

“But Richard,” I said, “we all think that way every day.”

“After a certain point, for me at least, you have to turn it into a game of how little can I spend today, or else …” He shook his head at the thought of what constant economizing might do to one’s soul.

“So I looked at a studio apartment in the same building, and I told the woman I’d be by the next day to pick up the lease. Then I showed up for work. Three-quarters of the people weren’t there, and the rest were crying. The guy had pulled the plug on the whole operation.

“The person there said if you do your show today, you’re not going to get paid for it. I said, ‘I’ve already done the research.’ But even as I’m on the air, I’m thinking, ‘I’ll never get another job around Christmas unless I’m going to be Santa in Macy’s.’ ”

“Did you ever think about those kinds of jobs?” I asked. “Santa? Messenger?”

“Not even when I was an actor.”

“Good,” I said. “Because you can’t just pick them up today the way we could in our day.”

“Anyway, it wouldn’t solve my problem.”

So Richard gave up on moving halfway down to a studio apartment and moved all the way down to his parents’ condo in Florida. The hardest part about that was telling the child, he said. But Richard had temporarily solved the school problem, and he promised to return often. Indeed, he manages to crash in New York about ten days a month.

Richard’s parents had left their condo mortgage-free, and he and his brothers maintain it as a vacation home. But moving, even to a free place, takes money.

“When I was an actor, I moved from sublet to sublet by just tossing my stuff in the car. Now I have all these physical possessions.” Richard remembered another resource. “I have a friend who was a vice president of MTV. I see him once a year. I hadn’t touched him yet. So I went and explained that I had to get out of New York and I couldn’t even pay for the movers.

“He said, ‘Just tell me how much you need.’ I said, ‘I think I could do it for $2,000.’ He said, ‘I’ll give you $5,000 but only on one condition, that you never bring it up; you never think twice about calling me as a friend because you owe me the money.’ ”

“That’s just the condition I would make,” I said. “Because if you’re embarrassed to call me, I’d lose a friend by helping out.”