Thursday, March 27, 2008

No More Window Valances For Banker's Wives


If this doesn't make you cry, nothing will.

March 27, 2008 -- Less than 48 hours after news broke that Bear Stearns & Co. Inc. would be bought for a fire-sale price, the wives of two of the firm's senior investment bankers called their high-end interior designer to cancel their contracts.

It's yet another sign that some bankers are slashing spending on luxury items as they fear for their jobs and the value of their firms' shares.

"We only had about $50,000 worth of final touches [to go], and the wife called me last week and said stop," said interior designer Darren Henault, whose work has been featured in Vanity Fair and Elle Decor.

"She said they're not poor, and are never going to be poor," Henault said, "but their capacity for discretionary income for things like window valances just went out the window."

Bear Stearns' near-collapse and deal to sell itself to JPMorgan Chase further unnerved a financial industry already jittery after losses from subprime loans and the nation's economic decline undermined balance sheets at investment banks.

In the first two months of the year, financial-services companies cut more than 20,000 jobs, according to a survey by Challenger, Gray and Christmas.

JPMorgan, for one, is expected to lay off one-third or even half of Bear Stearns' 14,000 employees when it takes over the smaller bank.

The wife of the second Bear Stearns banker had planned to spend about $300,000 on the couple's apartment in the next three months, Henault said.

But despite losing these projects, he remained upbeat, saying he had enough deep-pocketed clients to keep him from feeling the impact of Wall Street's troubles.

Milton Pedraza, CEO of research firm Luxury Institute, said he had heard of people putting summer homes on sale right after the Bear Stearns news broke.

But spending on yachts, jets, watches and luxury apparel had been weak for a while, with bankers reluctant to open their wallets in fear of more layoffs and reduced expense accounts, Pedraza said.

Nightclubs and restaurants, which depend on young traders' and bankers' extravagant nights out, are also feeling a chill.

Tom Martignetti, who owns the brasserie Bar Martignetti and a nightclub downtown, said sales of champagne and vodka bottles had tumbled about 25 percent since last year.

To secure a table, a New York clubber must buy three or four bottles at $300 to $550 each.

The financial sector accounts for about 90 percent of these sales, which make up the bulk of a nightclub's revenue, Martignetti said.

"The nightlife and restaurant industry is based on celebrating," Martignetti said. "And a lot of my customer base has lost their jobs or are worried about losing their jobs, so nobody is celebrating."

Caterers are also finding Wall Street firms more reluctant to book celebrations well in advance.

"There's a concern about sending the right note, not looking frivolous, at a time when things are pretty bad for the banking industry," said Joan Steinberg of Match Catering, an event planner for financial clients.

To be sure, consumers with the highest net worth are more protected from an economic slowdown due to the diversity of their business interests.

Luxury car dealers and other businesses that cater to the highest echelon said they hadn't yet seen a dramatic decrease in demand, even as single-digit millionaires keep a closer eye on expenses.

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