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The Fallout on Main Street – Affluent Towns Feel Economic Crisis, too

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By Tony Pugh

RISMEDIA, Oct. 8, 2008-(MCT)-For residents of this moneyed enclave of Greenwich, Connecticut, just off Long Island Sound, the financial tremors that have shaken Wall Street are more than just business: They’re personal.

Every day, the chauffeur-driven moguls, BMW-driving executives and train-hopping middle managers of Wall Street leave their manicured yards here for the 35-mile trek to New York’s financial district.

Wall Street jobs provide roughly 25% of all of Connecticut’s state income-tax revenue and about half of that amount comes from the well-heeled residents of Greenwich. So as job losses on the stock market continue to mount, the investment bankers, traders and hedge fund managers in and around Greenwich are feeling the pinch.

The wave of business failures, layoffs and declining portfolio assets has hit neighbors and friends here with a startling suddenness that’s rattled the outward calm of one of the nation’s wealthiest towns.

Greenwich is the first stop on a journey across America by McClatchy Newspapers and the American News Project, an independent video news organization, to chronicle the effects of the nation’s financial crisis on Americans of all backgrounds.

In Greenwich, a city of about 60,000, the unraveling economy is just beginning to be felt.

This past week, city officials announced that a municipal hiring freeze might be needed to offset falling tax revenues produced, in part, by the troubled financial markets.

Make no mistake, Greenwich isn’t coming apart at the seams. However, the stress of the economic downturn is taking its toll.

“I have friends who are bankers who are calling their banks and asking, ‘What should I do with my money?’ I mean we’re having conversations that a month ago you couldn’t have predicted. It’s a true panic. It’s a classic panic,” said Greenwich resident Gary Masour, a former dentist-turned construction consultant.

Nine months ago when Sonia Malloy opened Splurge, an eclectic gift shop in the town’s burgeoning home and design district, she had no idea the area’s economic fortunes were about to change.

“I couldn’t have picked a worse time to open a business,” she said. In the weeks after Lehman Brothers folded, Malloy said foot traffic dropped 30%. And September sales were down 16% from August. She wasn’t surprised.

“It’s really difficult when every day you turn on the TV, the radio or the Internet and see the same story, ‘The sky is falling and the economy is in deep trouble.’ That naturally has an effect on people,” Malloy said.

Not so much for the 25 super-rich families whose wealth is managed by Kenneth Russell, New England president of GenSpring, an asset-management firm that helps wealthy families preserve their fortunes across generations.

Russell’s client families have assets valued from $25 million to more than $1 billion, and he estimates their net losses from the economic crisis will be less than 10% because their portfolios are diversified.

About half of his clients live in the Greenwich area, but they aren’t part of the town’s “conspicuous consumption” crowd.

“We don’t have people typically who are shopping for Ferraris and that kind of thing. That’s not really our client base,” Russell said.

Greenwich, once a summer getaway for the rich, has become one of the nation’s most exclusive towns. Looking for a Ford or a Chevy dealer? Try nearby Stamford. But if Aston Martins, Bugattis and Bentleys are more your style, Greenwich is the place to be.

High-end luxury car dealerships dot the landscape like spots on a Dalmatian.

The local Delamar Hotel offers rooms ranging from $400 to $1,700 a night. Greenwich Hospital visitors are serenaded by a pianist.

There’s even valet parking service for emergency room patients.

Yeah, it’s like that.

It’s no wonder that many entertainers have moved to Greenwich along with the city’s resident financial stars. Director Ron Howard and television personalities Frank and Kathie Lee Gifford live here.

Actor Mel Gibson even owns a 15,800 square-foot Elizabethan-style Tudor mansion with 15 bedrooms, 18 bathrooms, a great hall with a 40-foot cathedral ceiling and a walk-in fireplace reminiscent of Xanadu from the movie classic “Citizen Kane.”

Gibson, who is trying to sell the home, originally was asking $39 million. But, in a sign of the area’s troubled real estate market, he recently dropped the price to $35 million.

Just last week, the price of a Greenwich mansion owned by the late real estate tycoon Leona Helmsley was cut to $95 million from $125 million. Both high-end price cuts show how the town’s once high-flying real estate market has seen a substantial downturn.

Home sales in Greenwich are officially off 33% from last year, but real estate agent Joanne Tambascio said she’s sold only half as many homes as last year.

Even foreclosures, while still rare in Greenwich, are beginning to increase. Four properties have gone into foreclosure this year, but owners of more than 20 others got notice that foreclosure is planned.

During a tour of an ill-kept five-bedroom carriage house that appears headed for foreclosure, Tambascio and Richard Breglia, a mortgage loan officer, said the home, originally listed for $3.8 million, was knocked down to $2.2 million and would probably sell for $1.2 million to $1.6 million. In better times, the mold-infested property would be torn down immediately to make room for a newer home.

“But even a builder’s going to be reluctant to come in here and purchase this property because even if he (builds) a magnificent home, the market is still going down,” Breglia said.

Greenwich’s economic woes aren’t exactly stirring sympathy among area residents who long have resented the town’s affluence and attitude.

It wasn’t always like this, said Chris Fountain, a lifelong Greenwich resident. Fountain, a local real estate agent, author and blogger, recalled fondly the economic diversity that’s largely disappeared.

The fathers of his best friends in the neighborhood were a corporate CEO, a Wall Street lawyer, the town’s sewer inspector and a parking-meter coin collector.

“We all lived within a block and a half of each other. It was that kind of mixture. Greenwich has always been more expensive than the neighboring towns, but it was never insane,” Fountain said.

All that began to change in the 1980s when bond traders invaded the city with their new wealth. “They loved flaunting it and showing it off and suddenly the houses started getting bigger and bigger,” Fountain said.

Then the bond traders were replaced by the dot-commers and mergers-and-acquisitions dealmakers, who’ve since given way to the hedge-fund crowd, Fountain said.

“They’ve just taken it to a new level,” Fountain said of the mansions built by hedge-fund wealth. “Now 10,000 square feet is almost quaint.”

© 2008, McClatchy-Tribune Information Services.

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