It depends on what it was assessed for and what it sells for. a good attorney can fight to lower the taxes too.

a 3 family in the heights only has a <$5000 annual property tax?

xerxes-whats your correction ? all I know is my nut is covered by the tenants. (Thanks tenants)

I think I know which 3 family that is. its worth about $150k needs another $50 k in renovations inc separating the heat. would bring in atleast $36,000 per year. thats renovated a 2br for 1000 per unit

its a REO property so the bank is just looking to unload it.

loan of $160K x 6.5 rate =$1040
water per month $100
hall utilites $50
taxes $400
insurance $200

total operating $1790 per month
monthly income $3000 per month

APPROX CASH FLOW $1210 PER MONTH

I wasn't really commenting on rent ratios but rather correcting NewHeights calculation in post #111.


Gee, with an ARV (I assime average retail value?) on that 3 family of $350,000 one must wonder why he's not asking $340,000 for this fixer upper of a 3 family. (That's purely rhetorical...no response needed.)
After all it needs is a Gut Renovation...we all know how cheap THEY are (again rehtorical :))

Quote:

hi look, 3 family for 180k in the heights! quick jump on the deal

http://newjersey.craigslist.org/reo/1105037270.html

xerxes -the #'s are even better now for a landlord. usually good 6 -10 familiy properties in the heights & JSQ are 10x-12x rent right now. The larger buildings 20 plus units are even better.

areas like greenville and bergen are seeing even better ratios.

Quote:

Am I reading this wrong?
What I get on a 525k property bought with a rent roll of 10% is an annual rent roll of $52,500.
The $63,000 quoted rent roll represents a price/rent ratio of 8.3 which is of course a MUCH more favorable landlord scenario.

Quote:

Interesting post-script to this story, I was browsing rentals today and stumbled across this exact unit: Asking rent was $2500/mo.... I think my original post on this was back in January 2009, so it's been sitting empty for 3 months. Hopefully whoever owns this place (a bank maybe?) figures out a way to make it work with the maintenance and taxes.

Edit: Actually this place is still available to buy - $459k (unless there are two different 1700sq ft places available in the same building).

Here is an interesting NYTimes article about the "BUYER OF THE FUTURE"

=============
Defining the Buyer of the Future

The New York Times
By ANTOINETTE MARTIN
Published: February 6, 2009

FLUX and turmoil will not rule the state?s residential real estate market forever, as all market specialists agree. But what comes afterward?

AFFORDABLE The Thread Building condominium in Union City has "Manhattan style" amenities at a lower price.

?The question isn?t ?When do things go back to normal?? ? declared Rutgers University?s planning and public policy dean, James W. Hughes. ?It?s ?What will the new normal look like?? ?

The short answer from the housing trend analyst Jeffrey G. Otteau: ?very different.? Economic, financial and sociological changes now in progress will effectively morph the profile of the typical home buyer over the next 15 years, said Mr. Otteau, whose company, the Otteau Valuation Group, issues monthly reports on trends to subscribing brokers and developers.

?Most striking are numbers that indicate the typical buyer of the future will be childless,? Mr. Otteau said in a recent interview. ?Either single, part of a childless couple, or with grown children.?

Although half of all American households included children in the 1980s, he noted, only a third did by 2000.

?This is not a temporary wrinkle,? he said. ?With the so-called Generation Y turning age 30 at the rate of 11,000 per day, and baby boomers retiring at the rate of 10,000 per day in this country, our calculations are that within 10 to 15 years, 75 percent of those buying homes in this region will be childless.? He believes Generation Y will be less likely to bear children than previous generations, based on trends he already sees in places like Hoboken.

Another major change is that an overwhelming majority of buyers for at least a decade will consider ?value? much more important than luxury features or amenities. Economic fallout from the collapse of various Manhattan financial institutions will affect the entire metropolitan region, keeping consumers in a value-oriented mind-set for the foreseeable future, or until new ?economic drivers? are found, Mr. Otteau said.

He predicted that these two strong trends ? childlessness and economy-mindedness ? would combine to have a ?topsy-turvy? effect on what has traditionally been considered the most desirable type of housing: the spacious single-family home in a suburban town with great schools.

?One of the themes we see emerging is that community school systems become a detriment rather than an asset,? Mr. Otteau said. Although some members of Generation Y obviously will have children and will care about schools, he said, a majority of buyers will be concerned not with school quality but with lower property taxes.

Other factors increasingly important to buyers, as documented by both the Otteau reports and research from the Rutgers University public policy school, are energy costs, commuting time and the availability of mass transit. All these elements enhance the appeal of urban settings.

?Wow, that does all seem to apply to me,? said Michael Hong, a 27-year-old freelance TV editor, who bought his first home last month. Mr. Hong, who is single, bought a two-bedroom two-bath condominium at the Thread Building, which recently opened in Union City.

?The main reason I purchased my unit is that the price was amazing,? said Mr. Hong, who paid $420,000 for a 1,150-square-foot seventh-floor corner apartment with expensive finishes and an expansive view across the Hudson River.

?That, and I work a lot in Manhattan,? he said. ?I catch the bus on the corner outside the building, and I?m there in 10 minutes.? The Thread is near the western end of the Lincoln Tunnel.

Mr. Otteau said that by his choice of Union City, Mr. Hong exhibited another characteristic of the typical buyer of the future. ?Buyers will increasingly choose to locate in a secondary market to find cost advantages,? he said. Manhattan and Hoboken, which borders Union City, ?are primary markets, with Union City a secondary alternative,? he added.

Construction of the Thread Building started in 2007, when the housing market in Manhattan and Hoboken was still at its peak. Developers said then that they were positioning the Thread to provide ?Manhattan-style? quality and amenities at a lower price point. The building has a fitness center, a billiards room, a rooftop terrace with a pet area, and a lounge with a large-screen TV.

As for developers of the future, Mr. Otteau said they were likely to start paring down the amenities, especially as many are being forced to sell properties for less than it cost to build them.

That will be just fine with the buying public ? who will ?also demand smaller and more efficient housing with less glitz,? he said, ?fewer open common areas, not-so-high ceilings, and not-necessarily-designer cabinets.?

In downtown Morristown, where the 40 Park condominium building is going up a few blocks from the train station, the developer, Stephen A. Santola, said relatively affluent buyers still want amenities like a fitness center, in-house film theater and well-equipped lounge.

?We?ve sold 50 percent of our units at a time when nobody is selling anything,? said Mr. Santola, an executive vice president with Woodmont Properties.

Espousing the opposite view, Paul T. Csik, a senior vice president of American Properties, which has long positioned its condominium projects to be ?affordable,? said that ?the time for our type of housing is now.?

?Our product, which is generally priced below $300,000, does clearly appeal to the childless, single or retired demographic,? he added.

At the Preserve at Matawan, now under construction, 40 percent of the units were sold in three months, he said. The 157-unit project offers two-bedroom two-bath units starting at $269,990.

Like other American Properties condo communities in Ewing and Eatontown, the Preserve is designed to have a clubhouse and fitness center. Units have Formica countertops, Kitchen Craft cabinetry, and nine-foot ceilings.

yeah you cant do it with condos, the maintenance alone kills most of the deals. The barometers i use is 1) net net income will payoff the property in 15 years or less 2) the property needs to be located in areas that have potential for growth, just relying purely on inflation for property value appreciation is a big nono. I put my money in stocks/commodities in the US, for real estate, all of it are in asia, over there condos have an ANNUAL netnet (tax+maintenance) of <$300 on a $200-300k unit!!! It was an insane market: 7 year payoffs from rent and property keeps doubling(ended around 07). Still got quite a few units right now riding on the shanghai 2010 world expo. The chinese basically leveled off an entire area and are rebuilding the whole place (think newport) for the expo. Condos around that wasteland was going for $50k a pop and can rent for $350 a month easy, i am hoping the value will double at min when the area is finished. It will be transformed instantly into a financial hub of the city. In the meantime i am rolling in the rents and hedged against the expected onslaught of hyperinflation on the dollar in the next few years The US (real estate) market just isnt attractive right now, it was good back in the early 90s when those apts were going for $50-75k in good areas like forest hills queens etc.. Nowdays it's all a wash. Maybe you can be like newheights and leverage yourself to the neck and make some money off the rents in those 6-8 families. The risk:reward on that is not my cup of tea, you apply leverage in a bull market not a bear/flat market. Quote:

Brewster I agree and I do not think that in 10yrs the market will have doubled but the market will be on the upswing. In 15 yrs-18yrs it will be more than double maybe triple.

The bloodbath that we are seeing now is going to take a long time to recover from.

When I make these assumptions, I am also factoring in that Jersey City is priced substantially lower in comparison to the other boroughs. Let's not forget that this last real estate cycle is what put JC on the map.

More young adults migrated from the NY area and suburbs to NJ than any other area in the country. Their future children or babies in 12 yrs to 20 yrs will all want to rent and buy on this side of the Hudson but still be close to the NJ burbs. What city comes to mind 1st?

I think that with the next real estate boom JC will be competitive with Brooklyn heights and the park slopes of the world !!

Damn it , I hate being such an optimist!!!

Quote:

A real estate maven once told my wife "condos and coops AREN'T REAL ESTATE".

You're buying and paying for stuff that has nothing to do with the physical residence.

Quote:

Some fine points you've made - I guess I failed to make a true distinction in what i was talking about. If you have a cash flowing property that is strictly an investment with relatively stable tenants (or at least a property you can keep rented the majority of the time) I think that over time it's a good way to grow your wealth assuming you have the liquidity to manage those periods when your building may not be 100% leased or unexpected expenses come up.

I guess I should have titled the thread "The problem with the JC *condo* market" because painting all real estate with the same brush is just silly on my part when there's a fairly large difference between a multi-family/commercial property and a condo.

I guess I'm just grasping at what the right model for the affordability of these places is. There's its relationship to incomes in the neighborhood, there's the relationship between price to own and price to rent, or the value of the property as an pure investment. The last of these is what i was getting at earlier - the IRR of holding the condo over a period of time. At current prices, that return seems negative over the shorter term and no better than alternative investments over an intermediate-to longer term.

But valid points all around.

Quote:

You can only truly fail at buying a place that pays it's expenses if you can't just sit tight and hold through the downturn. Leverage only bites your ass off if you sell for less than you paid. Rents are MUCH more stable than prices over time, so the odds of you rents falling dramatically are pretty low.

Personally I think Newheights is optimistic if he thinks the next decade will bring doubling of prices, he needs to study the history more. The cycle is long, it took 12 years in the last cycle, till 2001, to recover values in real dollars. But if you buy on a 15 yr note during the downturn, you've bought low and are that far ahead on your mortgage when prices start to rise again.

You've got to be patient in this game. In 1996 we were shown a condo-ed 6 family on 8th st being unloaded by an investment group who wanted out. The whole thing was $190k! Their shins must be scarred from kicking themselves, especially as they probably put the cash into tech stocks....

Quote:

I think the idea of leverage works very well in an increasing or stable property price environment, but in the current environment, the idea is less palatable. If you can cover all your expenses and amortize your loan, that works. The key is A) getting the price you need on the property B) getting a low enough interest rate on the loan that makes it cover and C) getting the loan on the property at all (no small feat in today's lending environment).

I guess my main point was that even with leverage the prices people want for these days don't make it work.

Given inflation over time, it should all work out (devaluing your debt and increasing in nominal dollars the value of your property) but leverage giveth and leverage taketh away...

Slyng

your not wrong at all. Condos make terrible investments.
let me give a true life example of a proeprty I recently purchased.

At approx 10x ret roll scenerio that can work in todays market.

$525k 6 family located in JC heights for example. Now can probably get similiar property under $500k

Rent roll $5250(below market) per month x 12= 63,000

put down 25% 393,000 loan x .065

$2550 per month mortgage
$875 per month taxes and ins
$700 per month heat and water
=4125 per month total expense

$1125 per month cash flow for repairs improvements etc

over the course of 10 yrs you will have paid off approx $70k
and hopefully in the 10-12yr period properties atleast double. ( lets say ball park 1.2 million). this is an assumption. double over 10 yrs not 2yrs like we just saw.

condo convert by pulling out equity for construction costs or getting construction loan.

700 sq ft per unit x 6 units = 4200sq ft .construction approx $600 k in renovations total.

in tomorrow dollars $700 per sq ft condo x4200 total ft=approx $2.9million-less $1 mill in original loan and construction loan.

= a net of approx $1.9 million in profits over 10-12 yr period.
not to mention all the write offs you get along the way.

hold it 15 to 20 yrs and those numbers should be significantly better if you time the markets correctly.

remember this was done with a mere $130k down.

Ahhh the power of real estate !!!!

SLyng, what you're missing from the investors POV is leverage. I'm not investing $300k like I would in equities or bonds, I'm putting in $60k. So even if I have no cashflow to start with, the renter pays my expenses and my mortgage, I get all the appreciation and end up owning it outright, get higher rents over the life of the loan, pay off the fixed loan in ever decreasing real dollars, and write off depreciation and interest.

I don't see a real reason why 10 x yearly rents should be outlandish. Our first JC rental purchase in 97 was under 6x. A ratio of 4-5x was a traditional benchmark of a "good" investment in the RE guides.

In another thread (about Zillow prices, etc) someone made a comment about rent vs. current market values. I think this is a common sense way of looking at things, i.e if you buy something and don't want to live there, what can you rent it for? That person suggested if properties went to 10x rent that they would be a buyer. Now I'm not saying that's the right number, seems a bit low to me (maybe they were only looking at a specific area), but it certainly makes calculations much easier...:

Since I live in Paulus Hook, I'll be selfish and do an example from there... Take your typical 2br/2ba "luxury" unit which rents for about $2500/mo (I called up 3 major places in Paulus Hook and they quoted me rates right around this level for a 1,000sq ft place). So using a 10x multiple, that would imply that the price on a comparable unit should sell for $300,000 - which (to me) seems like a *long* way from where we are now.

Running the numbers: $300k - 60k down payment = $240k mortgage, $1300/mo mortgage payment, and if you add another $1000/mo in taxes & maint (which is the minimum for one of these "luxury" places), That certainly makes sense versus renting for $2500/mo. A buyer could stand to lose a little money in price depreciation if they don't have to pay rent. So a place like that might make sense if you intend to live there and can get it on the cheap - but if you're an investor (correct me if i'm wrong all you investors out there) - if you buy a place like this, at least a $1,000/mo of your cash flow is going to pay tax & maint, so you only clear $1500/mo x 12 - that's only $18,000/yr if you're renting it out. Why not just take your $300k and buy a high quality corporate bond and earn 7-9% on your money (21k-30k)? I must be missing something here...Ok, so you can depreciate the property over a number of years so you get a tax benefit for that, and if you can buy it cheap enough maybe you can get the taxes lowered b/c it's worth a lot less than originally assessed..But still...

And that example runs the numbers on a 300k investment, It doesn't contemplate where people are actually trying to sell this stuff...

Also, keep in mind, i'm only talking about so-called luxury buildings, not your standard brownstone type building or subdivided brownstone that only has like $200/mo in maintenance. I think those should do quite a bit better.

I must be missing something...

Well put. One other thing to factor in is the tremendous property taxes in JC. I see that potentially slowing any recovery that may be on the horizon 4 or 5 or more years from now. The 400K roundtrip might not be that unrealistic.

It's pretty simple: Wall St workers made significant income gains in the last 10 years. Now a good percentage of that income gain has been whacked and is not likely to come back soon. Furthermore many jobs levered to the financial services industry have been lost and aren't coming back anytime soon.

Top brass from the financial services world don't live in JC but associates and the like do to a certain extent. Associates who knocked down low to mid six figures for the last few years will be back to the low six figures only. That means less down payment money and tighter personal budgeting.

This means that a lot of the demand driving up brownstones and luxury type apartments doesn't have the dollar muscle anymore. Thus JC RE values will go down. The government can try to goose the mkt with low rates and additional tax breaks but buyers aren't stupid. They're going to wait until the market price clears and up around NYC no one thinks we're anywhere near a bottom.

You could buy an entire VVP brownstone for 400K 10 years ago. Now they go for $1-1.5mm. Those gains were Wall St/financial services spillover to JC. Sure JC is nicer than 10 years ago, but it still has the same lingering problems. I don't know that brownstones roundtrip to 400K, but I think 700-900K is a very likely scenario. We shall see....

Besides the reduced bonuses, some compensation stress is already rearing its head in the financial industry (in the case of a new hire), because of the extent of viable candidates who have been laid off. This price pressure will continue until we start to get out of this mess. How bad it will get is anybody's guess. That said, I do not expect executive caps to have any significant impact on overall company compensation, in and by itself.

You can expect the restricted stock awards to top level management to compensate for some of the bonus loss. This will force executive management to further commit to their companies and only see the big pay day if they pay back the taxpayers (more merit based). What might be the bigger issue is the loss of top talent from compensation constrained companies to those not as constrained. The possible exodus that may ensue will not bode well for the constrained companies and may be equally as bad for the shareholders (tax payers included).



http://www.bloomberg.com/apps/news?pi ... =azVLk.22AkLI&refer=home#


Goldman, JPMorgan Won?t Feel Effects of Executive-Salary Caps

Email | Print | A A A


By Matthew Benjamin and Christine Harper

Feb. 5 (Bloomberg) -- Executives at Goldman Sachs Group Inc., JPMorgan Chase & Co. and hundreds of financial institutions receiving federal aid aren?t likely to be affected by pay restrictions announced yesterday by President Barack Obama.

The rules, created in response to growing public anger about the record bonuses the financial industry doled out last year, will apply only to top executives at companies that need ?exceptional? assistance in the future. The limits aren?t retroactive, meaning firms that have already taken government money won?t be subject to the restrictions unless they have to come back for more.

The new guidelines are the first salvo in a broader financial-rescue plan Obama plans to announce next week. The president and Congress have had to defend billions in aid to banks that continue to provide generous bonuses and luxury perks while posting record losses. Pay caps may provide the political cover the administration needs to deliver additional infusions of capital into the financial sector that may be necessary.

Some analysts said the new rules wouldn?t have much effect.

Obama, 47, ?is not proposing to go back and get that $18.4 billion in bonuses back,? Laura Thatcher, head of law firm Alston & Bird?s executive compensation practice in Atlanta, said of the cash bonuses New York banks paid last year, the sixth- biggest haul in history. ?Right now, we have not clamped down? on pay at banks.

Huge Paydays

In addition, some executives may be compensated for the potential reduced salaries with restricted stock grants, which may result in huge paydays after the bank repays the government assistance with interest.

?They?re just allowing companies to defer compensation,? said Graef Crystal, a former compensation consultant and author of ?The Crystal Report on Executive Compensation.?

The restrictions are ?a joke,? he said, because ?if the government is paid pack, you can be sure that the stock will have risen hugely.?

According to the new guidelines, announced at the White House yesterday by Obama and Treasury Secretary Timothy Geithner, senior executives at banks that negotiate ?exceptional assistance? deals with Treasury, such as the targeted relief provided to Citigroup Inc. last November or to Bank of America Corp. in January, would be limited to annual compensation -- salary plus bonus -- of $500,000.

Office Redecoration

Other perks that enraged Americans -- such as a $1.2 million office redecoration by the chief executive of Merrill Lynch & Co., which took $10 billion in government funds, or a four-day Las Vegas junket for executives at Wells Fargo & Co., which accepted $25 billion -- will be subject to new disclosure rules.

A White House official called it the name-and-shame provision, based on the idea that banks would limit such benefits if forced to disclose them.

?For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it?s a bad strategy, and I will not tolerate it as president,? Obama said yesterday.

Yet none of the new rules will apply to any firm until it negotiates an extraordinary deal with the federal government to remain solvent.

?Double Dippers?

?What I?m a little bit surprised by is that those pay restrictions don?t apply to what I would call the double dippers, which is basically Citigroup and Bank of America, which have come back for capital,? said Charles Peabody, an analyst at Portales Partners LLC in New York. Both banks received money under the Treasury?s $700 billion Troubled Asset Relief Program, and required additional bailout funds and a government guarantee of their assets.

The Financial Services Roundtable, a Washington-based trade group representing banks, called the restrictions ?a measured response? in a news release yesterday.

For some firms, the rules are insignificant. Morgan Stanley is among companies that don?t expect the restrictions to affect their business because they foresee no need for additional government help.

?We have one of the highest Tier 1 capital ratios among financial services firms, so we do not anticipate the need for additional government capital,? said Mark Lake, a spokesman for Morgan Stanley in New York, when asked about the new restrictions.

Repaying TARP

Goldman Sachs said yesterday it wants to repay $10 billion it got from Treasury under the TARP to signal the firm is healthy and to escape limitations that came with that infusion of money. ?Our financial condition is sound and, subject to approval from regulators, we hope to repay TARP money as soon as practicable,? said Lucas van Praag, a spokesman for New York- based Goldman Sachs.

JPMorgan CEO Jamie Dimon said Feb. 3 that the firm didn?t need capital and didn?t ask for TARP funding. The lender accepted the $25 billion it received from the first capital injection at the request of the government and to help stabilize the banking system, he said.

Other restrictions on banks that get major new bailout packages include a ?say on pay? provision that would require new executive pay packages to be subjected to nonbinding shareholder resolutions. Companies also must have in place provisions to reclaim, or ?claw back,? bonuses and incentives from the top 25 senior executives if they are found to engage in deceptive practices. Bans on so-called golden parachute severance payments will be extended to more executives.

Treasury Discretion

Jen Psaki, a White House spokeswoman, said Treasury ?will have discretion to apply? the restrictions ?to the top leadership of the firm, but the size of that group will vary depending on the structure and size of the institution.?

Some of the new rules, including disclosure of luxury perks and the ban on golden parachutes, will also apply to banks taking part in generally available government capital programs, similar to the TARP, which has provided capital to some 360 financial institutions so far. The rules do not apply retroactively to TARP participants, however.

White House spokesman Robert Gibbs said the rules weren?t intended to be ?overly punitive,? while a senior administration officials said their primary goal is to align the interests of top executives at bailed-out firms with those of shareholders, who now include U.S. taxpayers.

Right Direction

Nell Minow, founder and president of the Corporate Library, a corporate-governance research company in Portland, Maine, said the rules are in the right direction.

?Not allowing the restricted stock awards to vest until the government?s been paid back goes a step toward the goal,? she said.

Bill Black, a professor of economics and law at the University of Missouri-Kansas City, said the entire Wall Street pay structure is dysfunctional and needs to be revamped.

?Compensation is the root that created the perverse incentives and led to the current financial crisis,? he said.

Yet the new guidelines won?t bring about that change, said Sharyn O?Halloran, a professor of political science at Columbia University in New York.

?The goal is for accountability and the argument is that if a large portion of executive pay is based on excessive risk- taking, then you would anticipate them taking excessive risk,? she said.

To contact the reporter on this story: Matthew Benjamin in Washington at mbenjamin2@bloomberg.net To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

Last Updated: February 5, 2009 00:01 EST

I say boo freaking hoo.

They're millionaires.

They're smart people.

They'll figure out how to "get by" on half a million a year.

I think you can count on one hand the number of potential JC homebuyers affected by this proposal. A general decrease in income isn't a good thing, but it could attract some people who would be priced out of NYC.

If these firms start laying off even more workers en masse or start moving operations to Birmingham, AL or Wheeling, WV, that would be more worrisome.

Quote:

the implication was that even though the top 5 paid employees probably dont live in jc, thousands of their 'underlings' probably do. if the head honchos get their pay reduced from $10 M to $500K, you can assume that the 'underlings' would likewise get their pay reduced, or at the very least frozen (so those counting on a bonus or a raise to help pay down their mortgage or whatever would be out of luck)

It's the top 25 employees. Granted, the world has changed over the past two years but in 2007 the average employee made ~ $650,000. There were more than 25,000 employees. Given that probably less than five (more likely zero) of the top 25 employees of the affected institutions live in Jersey City, I'm not seeing the direct link. Indirect? Sure - what hurts the overall economy of Manhattan hurts Jersey City.

Quote:


I think below quote from cnbc is a good summary. Now the confusion is you think it's only the top 5 executives, but it's not. It's senior/top paid/etc.. executives which pretty much means all the people that are making millions right now. The top 5 rule is an old restirction that's ALREADY in place.

On the plan being only forward looking, that's true. But it doesnt really change anything. Out of the big firms still have large operations in nyc: c, bac, ms, gs, jpm: c, bac, and ms are pretty much guarenteed to require more bailout. jpm may be able to wing it, and gs doesnt (but those guys are cowboys they are going to payback the tarp soon anyway) The effect will be very detrimental to the city, it's like rubbing salt on a wound.

Also there is another bill getting pushed that will limit the pay to 400k and that one is even more stricter, it requires everyone who got tarp not just the big boys.

The main point is you guys are not understanding the trickle down effect. If the top guys are making 500k, it would not be possible for the guys already making 500k to continue get that (otherwise why would the top producers continue be productive?), so the guys making 500k will get their salary reduced to the next level, and now the guys at that level are affected, etc..

Quote:

I'll tell you what's driving me crazy. These damn politicians telling everyone that you can get a 4% mortgage. Rates have only been going up for the past 3 weeks.

The Fed is dumping money into MBS and the large banks are artificially keeping rates higher to slow the volume of mortgage applications. They are taking OUR money and putting it into their pockets instead of passing it down to the consumer by offering lower rates.

Wibbit I often agree with you but your facts are way off on this.

The 500K cap would only be for top executives, at this point they said the top five but that isn't definite. It also doesn't apply to any companies yet and could only be applied to companies that borrow more money in the future.

This isn't going to affect goldman and most other banks. It will only be the Citis and AIGs of the world. This pay cap will not affect JC housing. Continued financial industry recession might, but this won't.

Per Bloomberg:

"The rules apply to companies that in the future take ?exceptional? amounts of bailout money from the Treasury, as Citigroup Inc. and American International Group Inc. have in the past."

and

"The rules won?t be applied retroactively to companies that already have received aid from the Treasury Department through the $700 billion Troubled Asset Relief Program fund."

http://www.bloomberg.com/apps/news?pi ... d=a6fHgp5yAPLw&refer=home

So it appears that folks at Citi and AIG can continue to make over $500k and even future TARP applicants can have execs make over $500k if they take an "exceptional amount", whatever that means.

I don't think too many folks who would have their compensation limited to $500k were planning on moving into Crystal Point or 77 Hudson, anyway.

And wouldn't a decline in some heavy hitter's income make JC a more attractive destination for them? I guess you could argue either way.

I think they are also talking about the top 25 at least that's what I read on cnbc.com