A Golden Boy On The Federal Reserve Board

Monday, March 20, 2006

Compared to their counterparts in commercial banks Fed governors are a quite poorly paid lot with annual salaries in the very low six figures. All of the sitting governors can be called millionaires in terms of assets but the Federal Reserve Board's (FRB) true golden boy is Kevin Warsh whose combined assets with wife Jane Lauder are stated with a low end estimate of $65.8 million dollars and a hig end valuation of $116.5 million, reports Financial Markets Center (FMC). Most of the money is his wife's though.
FMC has the following on Lauder's investments:
The assets reported in Ms. Lauder's portion of the filing are organized into three trusts ("distribution trust," "accumulation trust" and "2003 revocable trust") and a personal account (A - B), each of which includes holdings in similar debt and equity instruments.
For example, each of the four collections of assets contains a large and nearly identical portfolio of municipal bonds pooled in a tax-exempt account.
In addition, Ms. Lauder's personal account has holdings in venture capital funds that invest in emerging companies, technologies and markets (particularly China).
Through an investment in Hope Capital Partners, two of Ms. Lauder's trusts hold shares in such well-known companies as Anheuser Busch, Comcast, Microsoft, Tyco and Wal-Mart.
The disclosure report also lists stockholdings in Bank of America, Citigroup and Shinsei Bank. Due to the depth and diversification of her portfolio, Ms. Lauder's investments include shares in Altria (parent company of Philip Morris) as well as New York and California bonds backed by payments from the tobacco industry's 1998 settlement with state attorneys general. (Interestingly, her husband once authored a law review article that discusses tobacco industry strategies for dealing with class-action litigation.)
FMC concludes:
On the basis of these marital assets, Mr. Warsh ranks as the wealthiest individual to serve on the Board in many years. In 2005, the income that he and his wife reported on their holdings was equal to more than three-quarters the total assets held by his six fellow governors (using high-end values as a basis for comparison). Moreover, the disclosure report substantially understates the true scope of those holdings.
For one reason, the reporting form does not ask filers to include the value of their homes. According to the New York Times, Ms. Lauder purchased a penthouse triplex in Lower Manhattan for $12.6 million in 2005. More importantly, the reporting form allows filers to record assets under the un-revealing category of "over $1 million" if the holding is "solely that of the filer's spouse or dependent children." This reporting classification can disguise the magnitude of very large holdings that otherwise would be reported in ranges such as "$25 million-$50 million" and it almost certainly has this masking effect in Ms. Lauder's case.
Warsh's annual income from this fortune is given at between $8.7 and $25.1 million. He by far outpaces next runner-up Susan Bies who is worth between $8.7 and $17.6 million, making up to half of a million from it. The others are coming in much lower with assets of not more than $6 million.
Is Kroszner Industry's Darling?
Randall Kroszner listed his net worth at between $2 and $4.2 million. The report says that Kroszner's own assets were a maximum of $2 million before he joined the National Economic Council. His money way split in a savings account and four Vanguard Index Funds.
His statement on his income is more interesting, reports FMC:
In addition to his University of Chicago salary of $265,777, Dr. Kroszner collected more than $135,000 in consulting fees and other payments in 2005. These revenues offer a telling illustration of the benefits leading conservative scholars can reap at the cash nexus of academic economics, corporate activity, consulting, litigation and public policy formation.
The report goes on to say that Kroszner's ex-campus work came mainly from three sources, namely Lexecon, the Lindsey Group and the Gerson Lehrman Group.
Let us hope that the new governors will be the first inroad of the lobbying culture into the Fed. Kroszner may be as closely associated with industry as Warsh may be with the big money on Wall Street.
Read all the details of the fortunes of the new Fed governors at this link (pdf).

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26 November, 2011 02:18

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