The fact is that the financial meltdown, now widely known as the Great Recession, started on Wall Street. It is also a fact that the meltdown quickly reverberated off the pavement of Main Street in the form of foreclosures and job losses. These things are clear. What is harder to understand is why so many on Wall Street continue to prosper while Main Street is still in shambles.

Perhaps the most blaring of the Wall Street bling is what has become the hated catch-phrase of this recession: executive compensation. While there have been rumblings and rumors of this from day one of the financial meltdown, reports came out in October that the executives of the top seven banks receiving government bailout money would also be receiving billions in bonuses. Big bonuses to the Wall Street elite is not new news, a fact Time magazine recently pointed with an article on the long history of executive pay.

In the 1890s, banker J.P. Morgan made 20 times what the average worker earned. By 1991, CEOs were earning 140 times what the little guy made. The trajectory of executive pay continues to rise, with an average S&P 500 top executive in 2007 earning in just three measly hours what a minimum-wage worker made in a year. Believe it or not, Plato recommended that top earning individuals in a society should never make more than five times what the lowest earner was paid.

Why do these executives get paid so much? If you ask them, they deserve every penny because their prosperity is necessary for everyone else to prosper, too. Goldman Sachs international chairman recently said, "We have to tolerate the inequality as a way to achieve greater prosperity for all." The research to back these claims has so far been mixed. However, there is some empirical evidence that Wall Street pay has reached a level that no longer supports the prosperity-for-all claims.

The recession certainly seems to bear that data out. The indignant uproar over executive compensation at companies that received bailout money has led to the appointment of a "pay czar." Treasury Department official Kenneth Feinberg has been commissioned with reining in the pay of the top 25 executives at each of the seven financial companies receiving the largest portion of bailout funds.

The pay czar proposes to cut salaries and bonuses of those top executives in half, capping salaries at $500,000 and bonuses at $25,000. The hope is that limiting the compensation will in turn limit the amount of risks financial executives are willing to take. The Federal Reserve plans to take limiting risky banking even further. According to the Associated Press, the Fed proposes to monitor executive pay at thousands of banks, even those that didn't receive a dime of bailout funds.

The reality is that Wall Street will always make considerably more than the average (and even the not-so-average) Joe on Main Street. The argument can be made that these are very talented financial wizards who do more good than Main Street realizes. However, the Great Recession offers a powerful counter argument about too much pay and a cautionary tale about taking too much risk.


Ki lives in Austin Texas and works in the Austin real estate market. His site has a search for listings in the Austin MLS. He also has information on mortgage interest rates and general information on Austin real estate

The Great Recession is not the great American equalizer after all. It's been widely reported recently that this recession hit middle and low income families the hardest, while the wealthy have continued to prosper. It may be chic to save and everyone brags about coupon clipping, but the idea that "we are all in this together" may not actually be the case.

According to the Associated Press, incomes have declined across all demographics, but at a greater percentage for middle and lower income groups. "Median income fell last year from $52,163 to $50,303, wiping out a decade's worth of gains to hit the lowest level since 1997." In fact, the gap between the rich and the poor has widened to the point that the wealthiest ten percent of Americans earned 11.4 times those below the poverty line earning $12,000 a year. Previously, the highest earning difference was 11.22 times higher in 2003.

The unemployment rate stands at a thirty year high of 9.7 and a great majority of those job losses have been lower income ones, particularly in construction and manufacturing. While wealthier Americans have had reductions in executive pay, far more of the middle and lower income earners have lost their jobs. This disparity between the rich and the poor is more pronounced in larger cities, like Atlanta, New York and Chicago.

The recession seems to be coming to a close with signs that the economy is finally growing. The Commerce Department reported that the economy shrank less than expected, with gross domestic product dipping just 0.7 percent from April to June, after dropping 6.4 percent in the first quarter of the year (AP). Measuring the value of all goods and services, the GPD is a good barometer of the health of the economy.

The better than anticipated numbers are attributed to businesses and consumers spending more than expected. The better news is largely credited to the government's $787 billion stimulus package and programs like Cash for Clunkers. What is not expected to improve anytime soon is the unemployment rate, which analysts believe will reach 10 percent by the end of the year.

As hiring in most sectors remains stagnate and layoffs continue, the gap between the haves and have-nots is likely to widen. Congress is considering ways to regulate executive pay and this along with The Great Recession is not the great American equalizer after all. It's been widely reported recently that this recession hit middle and low income families the hardest, while the wealthy have continued to prosper. It may be chic to save and everyone brags about coupon clipping, but the idea that "we are all in this together" may not actually be the case.

According to the Associated Press, incomes have declined across all demographics, but at a greater percentage for middle and lower income groups. "Median income fell last year from $52,163 to $50,303, wiping out a decade's worth of gains to hit the lowest level since 1997." In fact, the gap between the rich and the poor has widened to the point that the wealthiest ten percent of Americans earned 11.4 times those below the poverty line earning $12,000 a year.

The unemployment rate stands at a thirty year high of 9.7 and a great majority of those job losses have been lower income ones, particularly in construction and manufacturing. While wealthier Americans have had reductions in executive pay, far more of the middle and lower income earners have lost their jobs. This disparity between the rich and the poor is more pronounced in larger cities, like Atlanta, New York and Chicago.

The recession seems to be coming to a close with signs that the economy is finally growing. The Commerce Department reported that the economy shrank less than expected, with gross domestic product dipping just 0.7 percent from April to June, after dropping 6.4 percent in the first quarter of the year (AP). Measuring the value of all goods and services, the GPD is a good barometer of the health of the economy.

The better than anticipated numbers are attributed to businesses and consumers spending more than expected. The better news is largely credited to the government's $787 billion stimulus package and programs like Cash for Clunkers. What is not expected to improve anytime soon is the unemployment rate, which analysts believe will reach 10 percent by the end of the year.

As hiring in most sectors remains stagnate and layoffs continue, the gap between the haves and have-nots is likely to widen. Congress considering ways to regulate executive pay along with President Obama suggesting higher taxes on the wealthy as one the ways to pay for health care reform, the resentment between the two ends of the income spectrum may also increase. While the Great Recession is the worst state the economy has been in since the Great Depression, some Americans are faring better than others.


Ki's real estate business is based in Austin, Texas. His website gives comprehensive information on Austin real estate. His website provides future home buyers with a free search of homes in the Austin MLS along with a blog with statistics and commentary on Austin Texas real estate.