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Commentary on the Real Estate Market - April 2009
by Peter L. Zachary, MAI, MRICS

Here are some headlines in the New York papers:

March 2, 2009: New York Post – "Insurer Shock $30 Billion Band-Aid in Work for AIG's Heavy Bleeding"
March 6, 2009: New York Post – "Mortgage Delinquency Surges 35% New York Worst in Home Sickness"
March 10, 2009: New York Post – "Buffet: Crises is 'Economic Pearl Harbor'"
March 12, 2009: New York Post – "Kirk's Cash Mirage: Kekorian Sees $9 Billion Evaporate in '08"
March 13, 2009: New York Post – "Jobless Claims Hit 654,000"
March 15, 2009: New York Post – "At AIG, Huge Bonuses After $170 Billion Bailout"
March 19, 2009: New York Post – "Fed Will Inject $1 Trillion More to Aid Economy"
March 21, 2009: New York Post – "Natural Gas, Suddenly Abundant is Cheaper"
March 29, 2009: New York Post – "Budget Outrage: Huge Tax Hike – Up to 31% Slap on New York Incomes"
March 30, 2009: New York Post – "U.S. Moving to Overhaul Ailing Auto Industry – GM Chief Out – Chrysler Told to Find Partner"
April 1, 2009: New York Post – "U.S. Plan Sees Easing of GM to Bankruptcy"
April 2, 2009: New York Post – "660,000 More Jobs Lost: Total Surpasses 5 Million – Unemployment Rate, At 8.5%, Tests Government Response to Downturn"
April 4, 2009: New York Post – "Big Bonuses at Fannie and Freddie Draw Fire"

Believe it or not, there was only one interesting although infuriating article in the New York Times this past month. On March 26, 2009, the Business Day section's front page had an article, "Please, Please Don't Go – Many Firms Pay Handsomely to Keep Executives". At least 19 Financial Firms, ranging from giants like Citigroup to regional players like SunTrust Bank of Atlanta, have promised to pay certain executives bonuses just for staying in their jobs, according to an analysis conducted for the New York Times by Eguilar, a compensation research firm. The payments, in the form of cash, stock or both, are expected to be made over the next few years, in some cases regardless of how the executives or their companies perform. The article continues "Companies routinely defend retention bonuses as a way to coax employees to stay on through rough patches". But the idea of giving employees, even valuable ones, a bonus for showing up at work might strike many ordinary Americans as absurd, particularly at a time when so many jobs are disappearing. The article continues: "Many of the bonuses tallied by Eguilar, like those at AIG, were promised before the firms received taxpayer money." The article continues, "Of the 75 biggest bailout beneficiaries, Citigroup appears to have been the most generous with its top executives. Over the past 15 months, the company showered at least nine top executives with stock and cash, payable in the future." One executive cited in the article is Michael S. Klein, who headed Citigroup's investment banking operation who was awarded cash and stock of $19.3 million. The article states, "Even though he announced his departure a few months later, the board nonetheless paid him his full $5.5 million cash bonus in connection with that award. That was on top of nearly $28.8 million in two other cash payouts – one due on March 31, the other in October – for agreeing not to work for several Citigroup rivals."

The article concludes, "Still, if bonuses do not keep people in their seats, the grim job market might." "Right now, there just aren't many places for people to go", said Timothy L. Holt, an executive recruiter at Heidrick and Struggles.

The world is upside down. Capitalism has become socialism for the American executives. Maybe President Obama is right – from each according to his ability and to each according to their need. I know my Russian secretary will like this closing.

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