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On the Street

The biggest beneficiaries of global markets, lower taxes and decreased regulation are on Wall Street, where the number of billionaires has proliferated. New York has routinely had the greatest concentration of billionaires worldwide, with a total of 71, but it got edged out for the first time this year by Moscow, with 74 billionaires, spawned by Russia’s oil and commodity boom.

Some well-known names perennially lead the list of Wall Street winners, including hedge-fund mogul and political activist George Soros, hostile takeover maven Carl Icahn, big-time investor Kirk Kerkorian and New York City Mayor Michael R. Bloomberg, who made his $11.5 billion fortune with his Wall Street information service.

But many previously unknown billionaires also have emerged as they profited from a burgeoning number of exotic financial instruments, ranging from credit derivatives to “dark pools” of commodity funds made possible by the extensive deregulation of markets in the 1990s.

Hedge fund manager John Paulson vaulted to billionaire status last year by short-selling the complicated subprime mortgage securities that imploded during the credit crisis - making money as many hedge funds do as the market went down.

A frenzy of leveraged buyouts last year made billionaires out of David Bonderman and James Coulter of the Texas Pacific private equity group, as well as William Conway, Daniel D’Aniello and David Rubenstein of the Carlyle private equity group and Blackstone equity fund managers Peter Peterson and Hamilton “Tony” James.

Oil and commodities were a major source of wealth last year and are likely to be even more so this year. The youngest member of the Forbes 400 list of billionaires last year was John Arnold, a 33-year-old former Enron trader who now runs hedge fund Centaurus Energy and has amassed a $1.5 billion fortune.

The cutoff point to make the Forbes 400 list last year was the highest ever - $1.3 billion in net worth, up from $800 million in 2002.

Myth of CEOs

The fact that billionaire investors and Wall Street managers are the largest category of “super rich” is not well understood by Americans or the media, which tends to focus on rich corporate chieftains and assign them blame for amassing fortunes at the expense of lower-paid workers.

The median pay of chief executives is 150 times the median household pay in the U.S., but they account for only about 6 percent of the top echelon, which is populated more by hedge fund managers and oil and technology tycoons, said Matthew Miller, a senior editor who compiles the Forbes 400 list for the magazine.

“If you’re a CEO, I don’t think the outlook’s as bright as it was in the past,” when company boards showered stock options on CEOs to provide incentives to improve earnings, he said. Accounting rule changes enacted in the wake of the Enron scandal now require companies to charge stock-option compensation against earnings, and that has caused a big reduction in the amount of stock options companies offer to their executives.

“The potential for making enormous realized pay is less now” that companies are replacing stock options with less-lucrative stock grants, Mr. Miller said. “You couldn’t have had an [Oracle CEO Lawrence] Ellison or [Disney CEO Michael] Eisner” under today’s regime, he said.

Wall Street players - including investment bankers at top firms such as Goldman Sachs and JP Morgan as well as hedge-fund managers, venture capitalists and private-equity investors - together earned more than twice as much as all American CEOs last year, or more than $80 billion versus $33 billion for CEOs, said Steven Kaplan, professor at the University of Chicago business school.

“Billionaires and the very top are dominated by investors and entrepreneurs,” he said. Also, unlike CEOs, the managers of hedge funds, private equity and venture capital firms are not required to disclose their pay in filings before the Securities and Exchange Commission (SEC), he noted.

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