A funny thing happened on the way to the bailout. A number of the members of the bucket brigade — that’s us, taxpayers — realized that for all the billions of dollars worth of bailing we’re doing, we still appear to be sinking. Our task seems to be keeping things afloat long enough for first class passengers to fill the lifeboats. And as the water rises, more of us are less content with apparent the "brokers and bankers first" rule.
And let there be no doubt, as the U.S. economy looks like it’s going down for the first time, "brokers and bankers first" is the rule.
In the waning days of, well, everything from the George W. Bush era, to the Reagan era and 30 years of conservative rule — as is often the case in a disaster — men’s true characters reveal themselves, and they reveal their intentions when they have little left to lose.
It’s heard in back channels, on conference calls when they believe no one from steerage class can hear them.
How
do you know that the Wall Street types were trying to steal from us,
other than the fact that they said that the refusal to hand over money
was akin to a terrorist act? Treasury officials had a secret conference
call with Wall Street executives. Unfortunately for them, some bloggers
were on the call. The ‘Treasury boys’ on the call made it clear that
"the tranching is a mere formality, and the Treasury boys as much as
said so. They could take the $700 billion max as soon as the bill has
passed." That was always obvious.And they admitted
that "the exec comp provisions sound like a joke, They DO NOT affect
existing contracts, they affect only contracts entered into during the
two years of the authority of this program and then affect only golden
parachutes." Both of these provisions were ‘concessions’ sought by
Democrats. Of course, no one could have predicted this bill’s
‘concessions’ to Democrats were farcical. No one at all.
And it can be heard in committee meetings,
where there’s strangely little concern that the news will drift down to
steerage, when they essentially ask "How much do you think the take
will be?"
In the final days of the election many
Republicans seem to have given up the fight for power. But don’t be
fooled: that doesn’t mean they are relaxing. If you want to see real
Republican elbow grease, check out the energy going into chucking great
chunks of the $700bn bail-out out the door. At a recent Senate banking
committee hearing, the Republican Bob Corker was fixated on this task,
and with a clear deadline in mind: inauguration. "How much of
it do you think may be actually spent by January 20 or so?" Corker
asked Neel Kashkari, the 35-year-old former banker in charge of the
bail-out.When European colonialists realized that they
had no choice but to hand over power to the indigenous citizens, they
would often turn their attention to stripping the local treasury of its
gold and grabbing valuable livestock. If they were really nasty, like
the Portuguese in Mozambique in the mid-1970s, they poured concrete
down the elevator shafts.Nothing so barbaric for the Bush gang.
Rather than open plunder, it prefers bureaucratic instruments, such as
"distressed asset" auctions and the "equity purchase program". But make
no mistake: the goal is the same as it was for the defeated Portuguese
– a final, frantic looting of the public wealth before they hand over the keys to the safe.
Whether
most of us heard the message in such explicit terms, we got the
message. The public anger over the bailout, that in the end did nothing
to stop it and little to change it, was probably rooted in what was
unsaid in how the bailout was sold: it was never about helping everyday
Americans. Certainly, we were told that the bailout was necessary to prevent financial disaster that would devastate Main Street. That much would trickle down. But the rescue, to date, has not.
As a result, more of us are angry, looking for targets, and sometimes fixing on the wrong —though convenient — ones.
It’s hard, however, to miss targets that have $700 billion and $1 trillion
bulls eyes painted on them. That’s because the bailout, thus far seems
to be the final act in the long, slow grift of transferring wealth from
the bottom of the economic ladder, and from public into private hands.
The show is over — the "prosperity" of the last eight years or so
fading away without most of us getting to enjoy it — and we get to
sweep up after (pun intended) the elephant act.
Economic growth and tax cuts, we were told, were an inseparable
pair. We definitely couldn’t have one without the other. And if we
looked up and saw all that prosperity at the top, we were told to "just
wait" for it to dribbled down our way, like champagne from an
over-filled glass. Turns out we were sold a bill of goods, and by the
time we realized it, the party was over, leaving much to be cleaned up
and paid for. Again, Krugman, circa 2006.
Finally, there’s the government’s most direct method of affecting incomes: taxes. In this arena, Bush
has made sure that the rich pay lower taxes than they have in decades.
According to the latest estimates, once the Bush tax cuts have taken
full effect, more than a third of the cash will go to people making
more than $500,000 a year — a mere 0.8 percent of the population.It’s easy to get confused about the Bush tax cuts. For one thing, they are designed to confuse. The
core of the Bush policy involves cutting taxes on high incomes,
especially on the income wealthy Americans receive from capital gains
and dividends. You might say that the Bush administration favors people
who live off their wealth over people who have a job. But
there are some middle-class "sweeteners" thrown in, so the
administration can point to a few ordinary American families who have
received significant tax cuts.Furthermore, the administration has engaged in a systematic campaign of disinformation about whose taxes have been cut. Indeed, one
of Bush’s first actions after taking office was to tell the Treasury
Department to stop producing estimates of how tax cuts are distributed
by income class — that is, information on who gained how much.
Instead, official reports on taxes under Bush are textbook examples of
how to mislead with statistics, presenting a welter of confusing
numbers that convey the false impression that the tax cuts favor
middle-class families, not the wealthy.In reality, only
a few middle-class families received a significant tax cut under Bush.
But every wealthy American — especially those who live off of stock
earnings or their inheritance — got a big tax cut. To picture
who gained the most, imagine the son of a very wealthy man, who expects
to inherit $50 million in stock and live off the dividends. Before the
Bush tax cuts, our lucky heir-to-be would have paid about $27 million
in estate taxes and contributed 39.6 percent of his dividend income in
taxes. Once Bush’s cuts go into effect, he could inherit the whole
estate tax-free and pay a tax rate of only fifteen percent on his stock
earnings. Truly, this is a very good time to be one of the have mores.
Truly, it was. It was a good time to be Countrywide CEO Anthony Mozillo, whose total compensation in 2007 was $132 million,
and in 2008 the lender went bell y up and was bought by Bank of
America. It was a good time to be Freddie Mac CEO Richard Syron, who made about $10.6 million the year before his company lost $821 and was taken over by the government.
And it still is a good time to be one of the have mores, especially
if you’re an executive of one of the many firms taxpayers have bailed
out this year. Assuming you’re not one of the 165,000 New Yorkers who may lose their jobs in the wake of the economic crisis. While 159,000 of us lost our jobs last month and the rest of us are nervous about keeping ours in what’s reported to be the worst job market in 5 years, they’re lining up for $70 billion in bonuses.
Financial
workers at Wall Street’s top banks are to receive pay deals worth more
than $70bn (£40bn), a substantial proportion of which is expected to be
paid in discretionary bonuses, for their work so far this year –
despite plunging the global financial system into its worst crisis
since the 1929 stock market crash, the Guardian has learned.Staff
at six banks including Goldman Sachs and Citigroup are in line to pick
up the payouts despite being the beneficiaries of a $700bn bail-out
from the US government that has already prompted criticism. The
government’s cash has been poured in on the condition that excessive
executive pay would be curbed.Pay plans for bankers have been
disclosed in recent corporate statements. Pressure on the US firms to
review preparations for annual bonuses increased yesterday when
Germany’s Deutsche Bank said many of its leading traders would join
Josef Ackermann, its chief executive, in waiving millions of euros in
annual payouts.The sums that continue to be spent by Wall
Street firms on payroll, payoffs and, most controversially, bonuses
appear to bear no relation to the losses incurred by investors in the
banks. Shares in Citigroup and Goldman Sachs have declined by more than
45% since the start of the year. Merrill Lynch and Morgan Stanley have
fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers
has collapsed.
And that’s not all. Salaries on Wall Street are higher than they would otherwise have been without a little help from us, c/o the government bailout.
Uncle Sam has a new name on Wall Street — Sugar Daddy. Bonuses
for investment bankers and traders are projected to fall 40% this year.
But analysts, compensation consultants and recruiters say the drop
would be much more severe, perhaps as much as 70%, were it not for the
government’s efforts to prop up financial firms. "Year-end pay
on Wall Street will be higher than it would have been had it not been
for the government and mergers," says Alan Johnson, a leading
compensation consultant. "You would expect it to be down much more."Johnson predicts that the
average managing director at an investment bank, a title typically
earned after eight years on the job, will receive a bonus of $625,000.
That’s down from nearly $1.1 million last year, but it is still 15
times the income of the average American household. Top bankers could
receive as much as $1 million. Even a bond trader just out of business school could see his or her bank account enriched by as much as $170,000 this Christmas.
"The firms have had an extremely difficult year," says Joan Zimmerman,
a Wall Street career coach. "But they can’t afford to lose talent
either."While the government rescue limits the salaries of five
top executives from each of the participating financial firms, Congress
did nothing to restrict Wall Street firms from using taxpayer funds to
boost the compensation of rank-and-file investment bankers. "Some
people might argue that these bankers should not be penalized if they weren’t personally involved in the risky mortgage-backed securities,"
says Sarah Anderson, project director of the Global Economy Project at
the Institute for Policy Studies, a progressive think tank in
Washington. "My response is that the average taxpayer wasn’t either, but she is being asked to take a hit."
And what a hit. Credit is still tight-to-nonexistant for a growing number of consumers, but banks borrowed up to $105.8 billion per day from the Fed, last week. They’ve borrowed billions — $50 billion here, $75 billion there — since the Fed launched a loan program a year ago,
with an eye towards jump starting our credit-driven economy. Since then
we’ve spent $250 billion partially nationalizing nine banks, and
another $125 billion to infuse banks with capital and coax them into
regular lending.
I use "coax" only semi-facetiously, because since being loaned the money they’re intended to lend to others, banks have been sitting on the cash, and Washington has been reduced to begging them to behave like banks again.
Remember those billions the Treasury Department lent
America’s banks to get them lending again? Well, not much of it is
getting lent, despite pleading from Washington."We’re trying to
get banks to do what they are supposed to do, which is support the
system that we have in America. And banks exist to lend money," White
House Press Secretary Dana Perino said in a press briefing Tuesday.
"And we’re starting to see some evidence that that’s starting to
happen."Really? Where? The lending market is virtually
shut down, according to analysts, as companies and banks wait on the
sidelines until the market turbulence subsides. For the first
28 days of the fourth quarter, banks have arranged just 75 syndicated
loans totaling some $22 billion. That’s down from the 209 loans
arranged in the same time frame last year, totaling $178 billion.Breaking
it down by day, loans totaled just $786 million, according to data from
Dealogic. In the third quarter, when banks underwrote 555 loans worth
$207 billion, the per-day breakdown was $3.2 billion.
And what they’re doing with the money is anybody’s guess. AIG received an $85 billion bailout, and less than a week later sent several of its executives on a luxury retreat at St Regis Resort in Monarch Beach, CA, spending $443, 000 on the spa treatment for seven to 10 executives. At least that much of the the $123 billion of AIG’s emergency loans (they ended up getting another $37.8 billion) can be accounted for. We don’t know what they did with the rest of it.
The American International Group is rapidly running
through $123 billion in emergency lending provided by the Federal
Reserve, raising questions about how a company claiming to be solvent
in September could have developed such a big hole by October. Some
analysts say at least part of the shortfall must have been there all
along, hidden by irregular accounting.“You don’t just suddenly
lose $120 billion overnight,” said Donn Vickrey of Gradient Analytics,
an independent securities research firm in Scottsdale, Ariz.Mr. Vickrey says he believes A.I.G.
must have already accumulated tens of billions of dollars worth of
losses by mid-September, when it came close to collapse and received an
$85 billion emergency line of credit by the Fed. That loan was later
supplemented by a $38 billion lending facility.But
losses on that scale do not show up in the company’s financial filings.
Instead, A.I.G. replenished its capital by issuing $20 billion in stock
and debt in May and reassured investors that it had an ample cushion.
It also said that it was making its accounting more precise.
It’s the same deal, whether its the bailout or taxes, where conservatives are still spreading disinformation about our "high corporate tax rate," despite evidence that corporations are not overtaxed, but most corporations pay no taxes (including some 60,000 who owed $8 billion in unpaid taxes as of April 2008). And, despite conservative rhetoric to the contrary, it’s everyday Americans who pay the price.
It’s
hard not to wonder about the pure contrarian inanity of the current
conservative position. Our military is by far the strongest in the
world, while our trains are among the slowest and our sewers are
collapsing. So they propose raising spending on the military and
cutting domestic investment. We suffer Gilded Age inequality,
with the wealthiest 15,000 families — one-one hundredth of one percent
of the population — capturing fully one-fourth of the entire income
growth from 2000 to 2006. Their average income rose from
$15.2 million per year to $29.7 million per year. Meanwhile, the rest
of us — 133 million households that make up 90 percent of the country –
divided up 4% of the nation’s income, adding about $305 to our average
$30,354 income. So conservatives push for more tax cuts for
the wealthy, while proposing to tax employer based health benefits.
Corporate profits (prior to the recession) have catapulted to what is
by far the highest percentage of national income in the past half
century. So they want to cut corporate taxes, inevitably increasing the
burden on labor. The economic future looks dim because
consumers, drowning in debt, are cutting back. So they suggest cutting
taxes on corporate investments will generate new investments and growth
— as if companies don’t need someone to buy the products they make.
(That last sentence is strikingly similar to Obama’s answer to "Joe" the "Plumber,"
about how Joe — in his businessman fantasy — would be "better off if
you’ve got a whole bunch of customers who can afford to hire you…")
At a time when families are preparing to be homeless for the holidays, stay-at-home parents have to look for paychecks, city mass transit systems risk collapse
as banks call in billions of dollars in loans (meaning that some who
still have jobs won’t have buses and trains to get them to work), military families are struggling even as parents and partners are fighting overseas, and desperate times lead more to desperate action, there’s talk of expanding the scope of bailout … to include insurance companies and privately-held banks.
Meanwhile, we’re still waiting for a "rescue for the rest of us," and congressional Republicans and White House aides
dismiss the idea of a second stimulus package that might finally be
aimed directly at Main Street as "irresponsible" and the "wrong
approach."
As both Krugman and Klein point out, the message
and the real outcome — whether it’s the bailout or taxes — don’t
match up and probably weren’t intended to, for reasons rooted in a debate as old as our country.
A
couple of days back, right-wing radio nut Dennis Prager had this to say
at a Republican rally to help Michele Bachmann, Erik Paulsen, and Norm
Coleman:Equality, which is the primary value of the left, is a European value, not an American value.
Some
folks I was talking to were saying "wow, that’s really crazy, what an
extremist." And they are right, of course, in one way. But the fact is
that this kind of philosophy, while rarely these days stated quite so
bluntly, is actually very much in keeping with traditional American
conservatism, dating back to country’s founding.I have a book
coming out in January, entitled The Progressive Revolution: How the
Best in America Came to Be, that is about the historic debate in
America between progressives and conservatives and how that debate
relates directly to today’s political battles. The fight over
equality, along with those over trickle-down vs. bottom-up economic
policy and elites running things, vs. a government of by and for the
people, have been big battles ever since the country was founded.… Conservatives have never liked equality, or democracy, or giving economic or political power to regular people rather than elites.
When John McCain rails against progressive taxation or universal health
care as socialism, and warns against the plague of ACORN registering
people of color to vote, his rhetoric is as old as the rhetoric of
conservatives from the beginning of American history. And when Obama
embraces equality of opportunity and investing in the middle class and
progressive taxation and health care for all, he is harking back to
progressive thinkers and activists throughout that same historical
period.
And the reasons the rhetoric has become so red-hot in this election, and "final frantic looting" are the same.
We
have reached a tipping point, a few steps before the precipice, with a
few feet of earth still under our feet; a point from which we can see
the abyss, and still have a chance to change direction. We have reached
a point where more and more of us realize that neither the "prosperity"
of the last eight years or the "bailout" of the last few months have
"trickled down" to our communities and our families.
We have
reached a point of realization that government by the wealthy, for the
wealthy, and of the rest of us doesn’t work. And that means we’ve
reached a point of possibly considering that perhaps "government of the people, by the people, and for the people" isn’t "government taking care of us." It’s us, taking care of our communities, our families and one another.