Maybe you don’t feel bad that someone in Palm Beach, Fla values their net worth as down to $12 million. But if you consider that prior to Madoff’s momentous swindle that figure was closer to $30 million, then you think, ‘Ouch.’ Even for the superrich, that’s gotta hurt.
While places like Palm Beach, considered one of the most affluent neighborhoods in the country, may seem recession proof, it’s actually not that lucky. As yesterday’s NY Times revealed (through an apt metaphor of Bernie Madoff’s unclaimed $2,000, custom-made Italian pants) economic hard times aren’t hurting America’s wealthiest, but they are hitting them. While people around the country are losing their jobs, health benefits and dignity, people in Palm Beach are lamenting the good old days—when they could heedlessly spend $800 on a shirt.
But the impact of the economic crisis among the uber-wealthy involves a different sort of scale-balancing. In Palm Beach, it’s become a social war between Jews and Gentiles. According to the NY Times, the significant losses to the Jewish community there have buffeted the island’s gentile population. What has spiraled in recent months (but was always a feature of the Palm Beach social arrangement) is a tit-for-tat accounting of which team—or rather, club—is enjoying higher social standing. So, millions in Madoff losses is worse than simply losing money—it equals “points” for the other side.
From Sunday’s NY Times business section:
To learn what ails the place, you need to talk to retailers and the rare chatty local. Palm Beach, they will tell you, is reeling and much of it is seething, too. Jews and gentiles here have long lived and socialized in different spheres, with some of the latter quietly irked to find more of the former moving in every year. The Madoff scheme targeted the Jewish populace, as everyone knows, and among Jews there is a galling sense that the gentiles are privately thrilled by the fiasco.
As paranoid as this might sound, it has a ring of truth to Laurence Leamer, a Palm Beach resident and author of “Madness Under the Royal Palms,” a history of the island.
“In fact, there are a lot of gentiles here who thought the Jews got what was coming to them,” he says. “The gentiles think this is their place. As far as they’re concerned, the Jews have Boca Raton and Miami. What are they doing in Palm Beach?”
WHEN you try to take the temperature of Palm Beach, you quickly learn that it won’t so much as look at the thermometer, let alone open up and say “ah.” Even servants sign confidentiality agreements. Request an interview with the mayor, Jack McDonald, and you get a call from his assistant saying, “The mayor doesn’t do interviews with reporters from out of town.”
The cold shoulder seems part of the local DNA. There aren’t any hospitals, cemeteries or funeral homes here, as though illness and death could be willed out of mind, no mean feat for a place filled with 80-year-olds.
Aside from death and money, the topic that preoccupies everyone here the most, and is spoken of the least, is the gentile-Jewish divide. As recounted in “Madness Under the Royal Palms,” Palm Beach was founded in the late 19th century by Henry Flagler, a Standard Oil executive, and for years it was dominated by white Anglo-Saxon Protestants.
In the middle of the last century, A. M. Sonnabend, a Jewish entrepreneur, started buying commercial property, including what became the Palm Beach Country Club, and nouveau-riche Jews suddenly had a hotel, beach club and a golf course of their own. Gradually, enough moved here to be described by the Christian elites as “the other half,” many of them clustered in large condominium buildings south of a place called Sloans Curve, known informally by just about everyone as the Gaza Strip. (That the real Gaza Strip is inhabited by Palestinians is apparently beside the point.)
The score between these two tribes has traditionally been kept on the society pages of The Palm Beach Daily News, known as the Shiny Sheet for its smudge-free paper, which covers parties and galas. The more you’re covered, the better your tribe is doing.
So that article about the Duchess of Marlborough’s 50th birthday party at the Everglades, for which the ladies reached “into the vault,” as The News put it, for their finest jewelry — that goes in the win column for the gentiles. An article about the three-day, Brooklyn-themed 80th birthday party for Larry Herbert, the father of the Pantone color system, with a quotation from his wife, “The president said to go out and spend money, so I did” — chalk one up for the Jews.
But the Madoff fiasco has changed the game here. It’s hard to find local victims of his fraud to talk on the record, but one retiree agreed to speak on the condition that he not be named. He says he and his wife lost a modest sum, compared with others.
“When this whole thing broke it was like they dropped a veil over this town,” he said. “Now, Madoff is all we talk about. Today, I was hitting golf balls with a friend of mine. He turns around, out of nowhere, he says, ‘My accountant told me the I.R.S. said you can take a 95 percent loss against ordinary income going back five years.’ I says: ‘Where the hell did that come from? I’m in the middle of hitting 9-irons!’ ”
He estimates that 80 percent of the Jewish community here was affected in one way or another, either directly or through charitable endeavors that are now struggling. Hit worst were the people who took out a second mortgage on their home to give Mr. Madoff additional funds. If the guy delivered a steady 10 percent or 12 percent, why not?
“We’re going to dinner tonight with a few couples,” this man continues, slightly amused by how obsessed everyone has become by this topic. “We’ll raise a glass and make a vow — no Madoff talk. It’ll last five minutes.”
Read more of this fantastically fun story here.