Sunday, September 21, 2008

Outrage, Where Art Thou?

If you are not outraged yet, you really have been paying no attention to the events of the last few weeks in the financial world. (If that is any consolation, you are in the company of John McCain, who said on Monday that "the fundamentals of our economy are strong"). Or perhaps your really busy life prevented you from following the news.

That is why I have put together this handy digest of quotes and articles that summarize some of the most hair-raising, bloodcurdling, stroke-inducing aspects of the mess we just found out we're in.

From Moguls Steal Home While Companies Strike Out, by Bill Moyers and Michael Winship:
During the last five years of his tenure as CEO of now-bankrupt Lehman Brothers, Richard Fuld's total take was $354 million. John Thain, the current chairman of Merrill Lynch, taken over this week by Bank of America, has been on the job for just nine months. He pocketed a $15 million signing bonus. His predecessor, Stan O'Neal, retired with a package valued at $161 million, after the company reported an eight billion dollar loss in a single quarter. And remember Bear Stearns Chairman James Cayne? After the company collapsed earlier this year and was up for sale at bargain basement prices, he sold his for more than $60 million.

From Free Market Ideology is Far from Finished, by Naomi Klein:
[I]f the state can intervene to save corporations that took reckless risks in the housing markets, why can't it intervene to prevent millions of Americans from imminent foreclosure? By the same token, if $85bn can be made instantly available to buy the insurance giant AIG, why is single-payer health care - which would protect Americans from the predatory practices of health-care insurance companies - seemingly such an unattainable dream? And if ever more corporations need taxpayer funds to stay afloat, why can't taxpayers make demands in return - like caps on executive pay, and a guarantee against more job losses?

From US Empire: An Orgy of Debt, by Eric Margolis:
The "free market" Republican administration has ended up nationalizing nearly $1 trillion worth of businesses, including the federal mortgage agencies Fannie Mae and Freddie Mac, Bear Stearns, and global insurer AIG. Welcome to Wall Street socialism.

From The Complete--Though Ever-Changing--Elite Consensus Over the Financial Collapse, by Glenn Greenwald:
What is more intrinsically corrupt than allowing people to engage in high-reward/no-risk capitalism -- where they reap tens of millions of dollars and more every year while their reckless gambles are paying off only to then have the Government shift their losses to the citizenry at large once their schemes collapse? We've retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses. Watching Wall St. erupt with an orgy of celebration on Friday after it became clear the Government (i.e., you) would pay for their disaster was literally nauseating, as the very people who wreaked this havoc are now being rewarded...

The three key provisions [of the bailout plan are]: (1) The Treasury Secretary is authorized to buy up to $700 billion of any mortgage-related assets (so he can just transfer that amount to any corporations in exchange for their worthless or severely crippled "assets") [Sec. 6]; (2) The ceiling on the national debt is raised to $11.3 trillion to accommodate this scheme [Sec. 10]; and (3) best of all: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency" [Sec. 8].

Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes. (Emphasis added.]

And, finally, you can find a roundup of what several economists think about the bailout plan in 'Taxpayer Ripoff': Many Economists Skeptical of Bailout, by Avi Zenilman. It contains, among many, the following chilling quote:
President Bush is “asking for a huge amount of power,” said Nouriel Roubini, an economist at New York University who was among the first to predict the crisis. “He's saying, ‘Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy.”

Knowing everything we know about how President Bush's has mishandled the power he has been given or that which he has seized during his almost eight years in power, how do you feel about him "doing it right"?

2 comments:

Tom said...

Outrage is right. Do you know if any of the deals that the Federal Gov is making with these companies involves taking some of the capital back from these CEOs who made fortunes while their companies were doing so poorly that taxpayers have to bail them out?

Sirfab said...

Hi Tom.

While the idea of pursuing recovery of the indecent bonuses taken by CEOs when their companies were losing billions has been brought up by many voices in government, the media, and the public, I have seen no indication so far that the bailout package includes provisions for recovery of such funds or special prosecutions for unethical (or criminal) behavior of CEOs involved in the collapses. Perhaps such recovery can be attempted under the provisions of the Sarbanes-Oxley Act.

Otherwise, I am pretty sure I heard Sec. Paulson or some other administration figurehead say something to the extent that it would be impractical to seek redress by confiscating bonuses that have already been paid out. (He said nothing about how these Vegas jackpot style payouts are going to be prevented in the future.)

And here is a quote from an article on Politico.com which seems to confirm my fuzzy recollection, at least in part:

"Democrats, [...] have drafted a bill giving Paulson much of what he wants but requiring that Treasury also demand 'appropriate standards for executive compensation'. Treasury argues that such requirements would make it harder to persuade companies to sell their troubled assets to the government."

If anyone knows differently, please post a follow-up comment.

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