Recession, bear markets hit the rich, too
Fri, Jun 25 2010
By Joseph A. Giannone
NEW YORK (Reuters) – Turns out the rich may not be so different from you and me: They, too, are falling behind on their mortgages.
|ternyata orang kaya juga sulit membayar angsuran kredit rumah mereka||sebenarnya sudah 2 tahun sejak 2008, krisis finansial berlangsung, hal itu menyebabkan orang kaya pun mengalami kesulitan memenuhi kewajiban, sehingga harus menunda pembayaran atau mengembalikan rumah hasil kredit mereka, terutama karena merosotnya aset portofolio mereka||orang kaya pun harus mengurangi utang2 mereka karena resesi mengurangi kemampuan mereka mempunyai pemasukan yang cukup untuk membayar angsuran, walau pun tentu saja lebih lambat terjadi dibandingkan orang yang lebih miskin||resesi dan krisis finansial telah menyebabkan kemerosotan 11 T dolar yang amat berimbas pada portofolio ekuitas, obligasi, properti dan usaha bisnis para orang kaya, dan ternyata mereka tetap belum mampu mengembalikan kesehatan keuangan mereka||mula-mula krisis menyebabkan orang miskin langsung terkena imbas negatif, namun kemudian secara bertahap orang kaya pun terimbas dan makin berat terimbas negatif|
The U.S. housing market crash triggered the 2008 financial crisis and fueled a wave of mortgage defaults and foreclosures over the past two years. Now, growing numbers of well heeled Americans, their portfolios hammered by depressed markets, have stopped repaying loans or even walked away from mortgages.
“The affluent are not immune to the recession. It just took a while to manifest itself,” said Jay Welker, chief executive of Wells Fargo Private Bank. “In this economy, the high net worth segment has had to de-leverage itself as well.”
The rich by definition can weather a job loss or down markets longer than the average Joe. Yet their wealth is linked to securities, properties and hard-to-sell assets such as private businesses. North America’s millionaires still have not yet fully recovered $11 trillion lost in the crisis.
“Early on in the crash, the weakness was in the lower-price tiers. In the past year, most of the biggest price declines have been in the upper tiers,” said Mark Zandi, chief economist of Moody’s Analytics. “That suggests high-end households are coming under increasing pressure.”
First American CoreLogic, which tracks U.S. real estate and mortgages, says the percentage of $1 million-plus loans more than 90 days delinquent rose to 13.3 percent in February, half again as high as the 8.6 percent overall delinquency rate.
The million-dollar delinquency rate has exceeded the overall delinquency rate since April 2008.
“The high end of the housing market has deteriorated at a worse rate than the market as a whole,” said Sam Khater, senior economist at CoreLogic. “This recession is unlike prior recessions. It hit the high end just as much as the low end.”
Last month there were 205 foreclosure filings for mortgages of $5 million or more, the third straight month such filings rose, according to RealtyTrac, which manages an online foreclosures marketplace. The 205 foreclosures totaled $813 million.
Analysts noted the recession did not start with Federal Reserve tightening, a spike in inflation or a slowdown in spending. Rather, the subprime freeze created a credit crunch that spread to every market.
“A lot of the wealthy are less wealthy. The stock market hasn’t fully recovered, taxes are on the way up, and real estate isn’t worth what it once was. That shakes people,” said Christian Magoon, an adviser to asset management companies and a former president of Claymore Securities.
After snapping back in 2009, markets have turned south again, weighed down by worries about European sovereign debt, the Gulf of Mexico oil spill and the uncertain outlook for the global economy. Near-zero interest rates mean investors get a lot less income from bonds and cash vehicles.
This trend could pose a problem for U.S. private banks, which help the rich manage their money, provide credit and keep deposits.
Bank of America Corp’s (BAC.N: Quote, Profile, Research, Stock Buzz) venerable U.S. Trust unit reported a sixfold increase in its loan-loss provision in the first quarter, to $184 million from $31 million a year earlier. The increase in credit costs was a key reason the unit’s profit fell to $36 million from $106 million.
The U.S. Trust loan-loss provision “rose primarily due to higher reserve additions in the residential mortgage and commercial portfolios,” Bank of America said in an April conference call.
U.S. Trust, which ended March with $53.4 billion of total assets, declined further comment.
Northern Trust Corp (NTRS.O: Quote, Profile, Research, Stock Buzz), a bank catering to wealthy individuals, also saw higher first-quarter credit costs. Net charge-offs rose to $31 million from $2.7 million a year earlier, though they were down from the 2009 fourth quarter.
JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) do not disclose credit data for their private banks.
Foreclosure filings among the biggest properties, to be sure, are well down from their January 2009 peak of 621 and from the 489 in February this year.
Even so, Rick Sharga, head of operations and management at RealtyTrac, predicts foreclosures among the rich will continue to rise.
“This is probably the first foreclosure cycle that crept into the more affluent corner of the market,” he said. “This cycle triggered a downturn which triggered job losses and a second wave of foreclosures. I don’t think we’ve peaked yet.”
(Reporting by Joseph A. Giannone; editing by John Wallace)
… tampaknya ada juga yang berhasil mengatasi persoalan pajak : yaitu karena TINGKAT TABUNGAN TINGGI dan ANGKA PERTUMBUHAN EKONOMI TINGGI (itu sebabnya resesi dan inflasi adalah MUSUH #1)
Tax doesn’t matter much if you’re rich enough
JUN 24, 2010 10:05 EDT
Would-be billionaires often say they’re discouraged by high tax rates. For example, the British Venture Capital Association complained the UK’s increase in the tax rate on capital gains to 28 percent, would damage capital formation. The latest World Wealth Report from Merrill Lynch and Cap Gemini suggests otherwise.
The report looks at what used to be called rich people, who are now known as high net worth individuals (HNWI). The cut-off is investible capital of $1 million.
The financial crisis and recession have been a little rough on those at the top of the global economic heap. From booming 2006 to busting 2009 both the millionaire headcount and their total net worth increased by a piddling 5 percent — to 10 million and $39 trillion respectively. After inflation and a generally weak dollar, it’s a loss.
They are still rich and numerous enough to be worth studying. One trend is not surprising. During the period, the global millionaire mix shifted away from the finance-intensive United States and UK towards rapidly growing China, India and Brazil. It certainly wasn’t tax rates that made the difference.
Another pattern is more surprising — the lack of correlation between the concentration of wealth and the rate of taxes. A good measure is the ratio of HNWI to billion dollars of GDP, which corrects for the larger number of millionaires in richer countries.
In that count, low-tax Switzerland is in the lead, with a ratio of 453. Low-tax (and high government-spending) Japan is second at 323. But high tax Germany comes in third at 263. And the ratios in lightly taxed China, Brazil and India are all well down, around 100.
Tax rates are not a key ingredient in the recipe for growing millionaires. Social factors play a role. As for economic policy, two things seem to be necessary. First, a high savings rate. That helps explain why Germany and Japan are ahead of Britain and the United States. Second, time. Traditionally rich countries are more millionaire-rich than the nouveaux riches. But China’s extraordinary savings and growth rates should enable it to catch up soon.