NY Times-Anti-Virus founder John McAfee lost at least 94% of wealth in financial crisis/recession [View All]

[HamdenRice]

The NY Times has a story today about how the Super Rich's 30 year accumulation of the bulk of income and assets in the country has hit a wall with the recession.

Two things come to mind: First, I couldn't care less that the super rich are hurting from the recession, and second, I'm sure they'll find a way to game the recovery, if there is one, to continue their aggrandizement of the country's wealth and income.

But I do think the story is important to counter what I think is one misunderstanding of the financial crisis on the part of the left: I don't think this was disaster capitalism, or a smash and grab or an engineered failure.

The rich do not conspire to make the rich as a class poorer. Although those executives still employed by surviving banks may be making off with giant bonuses, here in New York, there have been lots of news stories over the last year of billionaires who lost everything or most of what they had, with the collapse of the major investment banks of Wall Street.

Harvard, whose Business School delivered to us several generations of graduates who gave us this collapse, lost about 1/3 of its $36 billion endowment. Again, it's hard to square that with a disaster capitalism scheme.

We are almost at the one year anniversary of the September panic, which almost completely destroyed the entire global financial system. As incompetent, reckless and greedy as the Wall Street elite was in bringing on that collapse, I simply can't believe that any of them intended for it to happen.

And understanding what happened is crucial to coming up with a regulatory scheme that will prevent it from happening again. If you think that bad guys broke into the vaults and stole the money, then you would come up with one kind of new regulatory system. If you think that collective risky financial strategies and predatory behavior caused the collapse, you would come up with a different new kind of regulatory system.

http://www.nytimes.com/2009/08/21/business/economy/21inequality.html?_r=1&partner=rss&emc=rss

Rise of the Super-Rich Hits a Sobering Wall

...

Bill Gates, Warren E. Buffett, the heirs to the Wal-Mart Stores fortune and the founders of Google each lost billions last year, according to Forbes magazine. In one stark example, John McAfee, an entrepreneur who founded the antivirus software company that bears his name, is now worth about $4 million, from a peak of more than $100 million. Mr. McAfee will soon auction off his last big property because he needs cash to pay his bills after having been caught off guard by the simultaneous crash in real estate and stocks.

“I had no clue,” he said, “that there would be this tandem collapse.”

...

In 2007, Mr. McAfee sold a 10,000-square-foot home in Colorado with a view of Pike’s Peak. He had spent $25 million to buy the property and build the house. He received $5.7 million for it. When Lehman collapsed last fall, its bonds became virtually worthless. Mr. McAfee’s stock investments cost him millions more.

One day, he realized, as he said, “Whoa, my cash is gone.”

His remaining net worth of about $4 million makes him vastly wealthier than most Americans, of course. But he has nonetheless found himself needing cash and desperately trying to reduce his monthly expenses.