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One-Percent Jokes and Plutocrats in Drag: What I Saw When I Crashed a Wall Street Secret Society February 20, 2014

Posted by rogerhollander in Capitalism, Economic Crisis.
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Roger’s note: You know the phrase “how the other half lives,” well this is a peek at how the 1% live.  These are the heartless billionaires who pilot the capitalist death ship.  I guess it is only natural that in their character (or lack thereof) they would reflect the very heartless inhumanity of the system they own and operate. Enjoy.

By 

Recently, our nation’s financial chieftains have been feeling a little unloved. Venture capitalists are comparing the persecution of the rich to the plight ofJews at Kristallnacht, Wall Street titans are saying that they’re sick of being beaten up, and this week, a billionaire investor, Wilbur Ross, proclaimed that “the 1 percent is being picked on for political reasons.”

Ross’s statement seemed particularly odd, because two years ago, I met Ross at an event that might single-handedly explain why the rest of the country still hates financial tycoons – the annual black-tie induction ceremony of a secret Wall Street fraternity called Kappa Beta Phi.

Adapted
from Kevin Roose’s book Young Money, published today by Grand Central Publishing.

“Good evening, Exalted High Council, former Grand Swipes, Grand Swipes-in-waiting, fellow Wall Street Kappas, Kappas from the Spring Street and Montgomery Street chapters, and worthless neophytes!”

It was January 2012, and Ross, wearing a tuxedo and purple velvet moccasins embroidered with the fraternity’s Greek letters, was standing at the dais of the St. Regis Hotel ballroom, welcoming a crowd of two hundred wealthy and famous Wall Street figures to the Kappa Beta Phi dinner. Ross, the leader (or “Grand Swipe”) of the fraternity, was preparing to invite 21 new members — “neophytes,” as the group called them — to join its exclusive ranks.

Looking up at him from an elegant dinner of rack of lamb and foie gras were many of the most famous investors in the world, including executives from nearly every too-big-to-fail bank, private equity megafirm, and major hedge fund. AIG CEO Bob Benmosche was there, as were Wall Street superlawyer Marty Lipton and Alan “Ace” Greenberg, the former chairman of Bear Stearns. And those were just the returning members. Among the neophytes were hedge fund billionaire and major Obama donor Marc Lasry and Joe Reece, a high-ranking dealmaker at Credit Suisse. [To see the full Kappa Beta Phi member list, click here.] All told, enough wealth and power was concentrated in the St. Regis that night that if you had dropped a bomb on the roof, global finance as we know it might have ceased to exist.

During his introductory remarks, Ross spoke for several minutes about the legend of Kappa Beta Phi – how it had been started in 1929 by “four C+ William and Mary students”; how its crest, depicting a “macho right hand in a proper Savile Row suit and a Turnbull and Asser shirtsleeve,” was superior to that of its namesake Phi Beta Kappa (Ross called Phi Beta Kappa’s ruffled-sleeve logo a “tacit confession of homosexuality”); and how the fraternity’s motto, “Dum vivamus edimus et biberimus,” was Latin for “While we live, we eat and drink.”

On cue, the financiers shouted out in a thundering bellow: “DUM VIVAMUS EDIMUS ET BIBERIMUS.”

Click here to listen: https://soundcloud.com/daily-intelligencer/wilbur-ross/s-iFMBX
The only person not saying the chant along with Ross was me — a journalist who had sneaked into the event, and who was hiding out at a table in the back corner in a rented tuxedo.
Several Kappas at the table next to me, presumably discussing the coming plutocracy.

I’d heard whisperings about the existence of Kappa Beta Phi, whose members included both incredibly successful financiers (New York City’s Mayor Michael Bloomberg, former Goldman Sachs chairman John Whitehead, hedge-fund billionaire Paul Tudor Jones) and incredibly unsuccessful ones (Lehman Brothers CEO Dick Fuld, Bear Stearns CEO Jimmy Cayne, former New Jersey governor and MF Global flameout Jon Corzine). It was a secret fraternity, founded at the beginning of the Great Depression, that functioned as a sort of one-percenter’s Friars Club. Each year, the group’s dinner features comedy skits, musical acts in drag, and off-color jokes, and its group’s privacy mantra is “What happens at the St. Regis stays at the St. Regis.” For eight decades, it worked. No outsider in living memory had witnessed the entire proceedings firsthand.

A Kappa neophyte (left) chats up a vet.

I wanted to break the streak for several reasons. As part of my research for my book,Young Money, I’d been investigating the lives of young Wall Street bankers – the 22-year-olds toiling at the bottom of the financial sector’s food chain. I knew what made those people tick. But in my career as a financial journalist, one question that proved stubbornly elusive was what happened to Wall Streeters as they climbed the ladder to adulthood. Whenever I’d interviewed CEOs and chairmen at big Wall Street firms, they were always too guarded, too on-message and wrapped in media-relations armor to reveal anything interesting about the psychology of the ultra-wealthy. But if I could somehow see these barons in their natural environment, with their defenses down, I might be able to understand the world my young subjects were stepping into.

So when I learned when and where Kappa Beta Phi’s annual dinner was being held, I knew I needed to try to go.

Getting in was shockingly easy — a brisk walk past the sign-in desk, and I was inside cocktail hour. Immediately, I saw faces I recognized from the papers. I picked up an event program and saw that there were other boldface names on the Kappa Beta Phi membership roll — among them, then-Citigroup CEO Vikram Pandit, BlackRock CEO Larry Fink, Home Depot billionaire Ken Langone, Morgan Stanley bigwig Greg Fleming, and JPMorgan Chase vice chairman Jimmy Lee. Any way you count, this was one of the most powerful groups of business executives in the world. (Since I was a good 20 years younger than any other attendee, I suspect that anyone taking note of my presence assumed I was a waiter.)

I hadn’t counted on getting in to the Kappa Beta Phi dinner, and now that I had gotten past security, I wasn’t sure quite what to do. I wanted to avoid rousing suspicion, and I knew that talking to people would get me outed in short order. So I did the next best thing — slouched against a far wall of the room, and pretended to tap out emails on my phone.

The 2012 Kappa Beta Phi neophyte class.

After cocktail hour, the new inductees – all of whom were required to dress in leotards and gold-sequined skirts, with costume wigs – began their variety-show acts. Among the night’s lowlights:

• Paul Queally, a private-equity executive with Welsh, Carson, Anderson, & Stowe, told off-color jokes to Ted Virtue, another private-equity bigwig with MidOcean Partners. The jokes ranged from unfunny and sexist (Q: “What’s the biggest difference between Hillary Clinton and a catfish?” A: “One has whiskers and stinks, and the other is a fish”) to unfunny and homophobic (Q: “What’s the biggest difference between Barney Frank and a Fenway Frank?” A: “Barney Frank comes in different-size buns”).

Click here to listen: https://soundcloud.com/daily-intelligencer/queally-jokes/s-qxUq6

• Bill Mulrow, a top executive at the Blackstone Group (who was later appointed chairman of the New York State Housing Finance Agency), and Emil Henry, a hedge fund manager with Tiger Infrastructure Partners and former assistant secretary of the Treasury, performed a bizarre two-man comedy skit. Mulrow was dressed in raggedy, tie-dye clothes to play the part of a liberal radical, and Henry was playing the part of a wealthy baron. They exchanged lines as if staging a debate between the 99 percent and the 1 percent. (“Bill, look at you! You’re pathetic, you liberal! You need a bath!” Henry shouted. “My God, you callow, insensitive Republican! Don’t you know what we need to do? We need to create jobs,” Mulrow shot back.)

• David MooreMarc Lasry, and Keith Meister — respectively, a holding company CEO, a billionaire hedge-fund manager, and an activist investor — sang a few seconds of a finance-themed parody of “YMCA” before getting the hook.

• Warren Stephens, an investment banking CEO, took the stage in a Confederate flag hat and sang a song about the financial crisis, set to the tune of “Dixie.” (“In Wall Street land we’ll take our stand, said Morgan and Goldman. But first we better get some loans, so quick, get to the Fed, man.”)

Click here to listen: https://soundcloud.com/daily-intelligencer/dixie
A few more acts followed, during which the veteran Kappas continued to gorge themselves on racks of lamb, throw petits fours at the stage, and laugh uproariously. Michael Novogratz, a former Army helicopter pilot with a shaved head and a stocky build whose firm, Fortress Investment Group, had made him a billionaire, was sitting next to me, drinking liberally and annotating each performance with jokes and insults.

“Can you fuckin’ believe Lasry up there?” Novogratz asked me. I nodded. He added, “He just gave me a ride in his jet a month ago.”

The neophytes – who had changed from their drag outfits into Mormon missionary costumes — broke into their musical finale: a parody version of “I Believe,” the hit ballad from The Book of Mormon, with customized lyrics like “I believe that God has a plan for all of us. I believe my plan involves a seven-figure bonus.” Amused, I pulled out my phone, and began recording the proceedings on video. Wrong move.

The grand finale, a parody of “I Believe” from The Book of Mormon
Click here to listen: https://soundcloud.com/daily-intelligencer/i-believe/s-GmzF7
“Who the hell are you?” Novogratz demanded.

I felt my pulse spike. I was tempted to make a run for it, but – due to the ethics code of the New York Times, my then-employer – I had no choice but to out myself.

“I’m a reporter,” I said.

Novogratz stood up from the table.

“You’re not allowed to be here,” he said.

I, too, stood, and tried to excuse myself, but he grabbed my arm and wouldn’t let go.

“Give me that or I’ll fucking break it!” Novogratz yelled, grabbing for my phone, which was filled with damning evidence. His eyes were bloodshot, and his neck veins were bulging. The song onstage was now over, and a number of prominent Kappas had rushed over to our table. Before the situation could escalate dangerously, a bond investor and former Grand Swipe named Alexandra Lebenthal stepped in between us. Wilbur Ross quickly followed, and the two of them led me out into the lobby, past a throng of Wall Street tycoons, some of whom seemed to be hyperventilating.

Once we made it to the lobby, Ross and Lebenthal reassured me that what I’d just seen wasn’t really a group of wealthy and powerful financiers making homophobic jokes, making light of the financial crisis, and bragging about their business conquests at Main Street’s expense. No, it was just a group of friends who came together to roast each other in a benign and self-deprecating manner. Nothing to see here.

But the extent of their worry wasn’t made clear until Ross offered himself up as a source for future stories in exchange for my cooperation.

“I’ll pick up the phone anytime, get you any help you need,” he said.

“Yeah, the people in this group could be very helpful,” Lebenthal chimed in. “If you could just keep their privacy in mind.”

I wasn’t going to be bribed off my story, but I understood their panic.  Here, after all, was a group that included many of the executives whose firms had collectively wrecked the global economy in 2008 and 2009. And they were laughing off the entire disaster in private, as if it were a long-forgotten lark. (Or worse, sing about it — one of the last skits of the night was a self-congratulatory parody of ABBA’s “Dancing Queen,” called “Bailout King.”) These were activities that amounted to a gigantic middle finger to Main Street and that, if made public, could end careers and damage very public reputations.

After several more minutes spent trying to do damage control, Ross and Lebenthal escorted me out of the St. Regis.

As I walked through the streets of midtown in my ill-fitting tuxedo, I thought about the implications of what I’d just seen.

The first and most obvious conclusion was that the upper ranks of finance are composed of people who have completely divorced themselves from reality. No self-aware and socially conscious Wall Street executive would have agreed to be part of a group whose tacit mission is to make light of the financial sector’s foibles. Not when those foibles had resulted in real harm to millions of people in the form of foreclosures, wrecked 401(k)s, and a devastating unemployment crisis.

The second thing I realized was that Kappa Beta Phi was, in large part, a fear-based organization. Here were executives who had strong ideas about politics, society, and the work of their colleagues, but who would never have the courage to voice those opinions in a public setting. Their cowardice had reduced them to sniping at their perceived enemies in the form of satirical songs and sketches, among only those people who had been handpicked to share their view of the world. And the idea of a reporter making those views public had caused them to throw a mass temper tantrum.

The last thought I had, and the saddest, was that many of these self-righteous Kappa Beta Phi members had surely been first-year bankers once. And in the 20, 30, or 40 years since, something fundamental about them had changed. Their pursuit of money and power had removed them from the larger world to the sad extent that, now, in the primes of their careers, the only people with whom they could be truly themselves were a handful of other prominent financiers.

Perhaps, I realized, this social isolation is why despite extraordinary evidence to the contrary, one-percenters like Ross keep saying how badly persecuted they are. When you’re a member of the fraternity of money, it can be hard to see past the foie gras to the real world.

Copyright 2014 by Kevin Roose. Reprinted by permission of Grand Central Publishing. All rights reserved.

Woody Guthrie at 100 March 7, 2012

Posted by rogerhollander in Art, Literature and Culture.
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Published on Wednesday, March 7, 2012 by Creators.com

  by  Jim Hightower

Where’s Woody when we need him?

In these times of tinkle-down economics — with the money powers thinking that they’re the top dogs and that the rest of us are just a bunch of fire hydrants — we need for the hard-hitting (yet uplifting) musical stories, social commentaries and inspired lyrical populism of Woody Guthrie.

Woody Guthrie (1912 – 1967)

This year will mark the 100th anniversary of the birth of this legendary grassroots troubadour, who came out of the Oklahoma dust bowl to rally America’s “just plain folks” to fight back against the elites who were knocking them down.

As we know, the elites are back, strutting around cockier than ever with their knocking-down ways — but now comes the good news out of Tulsa, Okla., that Woody, too, is being revived, spiritually speaking. In a national collaboration between the Guthrie family and the George Kaiser Family Foundation, a center is being built in Tulsa to archive, present to the world and celebrate the marvelous songs, books, letters and other materials generated from Guthrie’s deeply fertile mind.

To give the center a proper kick-start, four great universities, the Grammy Museum, the Smithsonian Institution and the Kaiser Foundation are teaming up to host a combination of symposiums and concerts (think of them as Woody-Paloozas) throughout this centennial year. They begin this Saturday, March 10 at the University of Tulsa, then they move on down the road to Brooklyn College and on to the University of Southern California and Penn State University.

If Woody himself were to reappear among us, rambling from town to town, he wouldn’t need to write any new material. He’d see that the Wall Street banksters who crashed our economy are getting fat bonus checks, while the victims of their greed are still getting pink slips and eviction notices, and he could just pull out this verse from his old song, “Pretty Boy Floyd”:

Yes, as through this world I’ve wandered, I’ve seen lots of funny men. Some will rob you with a six-gun, And some with a fountain pen.

And as through your life your travel, Yes, as through your life your roam, You won’t never see an outlaw Drive a family from their home.

Also, witnessing the downsizing of America’s jobs, decimation of the middle class and stark rise in poverty, Guthrie could reprise his classic, “I Ain’t Got No Home”:

I mined in your mines, and I gathered in your corn. I been working, mister, since the day I was born. Now I worry all the time like I never did before, ‘Cause I ain’t got no home in this world anymore.
Now as I look around, it’s mighty plain to see, This world is such a great and a funny place to be. Oh, the gamblin’ man is rich, an’ the workin’ man is poor, And I ain’t got no home in this world anymore.

Guthrie unabashedly celebrated America’s working class, seeing in it the commitment to the common good that lifts America up.

He drove The Powers That Be crazy (a pretty short ride for many of them back then, just as it is today). So they branded him a unionist, socialist, communist and all sorts of other “ists” — but he withered them with humor that got people laughing at them: “I ain’t a communist necessarily, but I have been in the red all my life.”

Going down those “ribbons of highway” that he extolled in “This Land Is Your Land,” Guthrie found that the only real hope of fairness and justice was in the people themselves: “When you bum around for a year or two and look at all the folks that’s down and out, busted, disgusted (but can still be trusted), you wish that somehow or other they could … pitch in and build this country back up again.” He concluded, “There is just one way to save yourself, and that’s to get together and work and fight for everybody.”

And, indeed, that’s exactly what grassroots people are doing all across our country today. From Occupy Wall Street to the ongoing Wisconsin uprising, from battles against the Keystone XL Pipeline to the successful local and state campaigns to repeal the Supreme Court’s atrocious Citizens United edict, people are adding their own verses to Woody’s musical refrain: “I ain’t a-gonna be treated this a-way.”

Where’s Woody when we need him? He’s right there, inside each of us.

Find more information on Saturday’s Guthrie Centennial Celebration here.

© 2012 Creators Syndicate

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Jim Hightower

National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be – consumers, working families, environmentalists, small businesses, and just-plain-folks.

Profiting Off Nixon’s Vietnam “Treason” March 4, 2012

Posted by rogerhollander in History, Vietnam, War.
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Roger’s note: it has been my opinion that in our time things really began to go “off the track” with the Nixon presidency and not with the Bush era, as many argue (of course, in a broader sense the car jumped the rail in 1492).  The Nixons and the Bushes and the Obamas and the military-industrial complex behind them sacrifice lives by the hundreds of thousands, and we honor them as presidents and patriots.  The cynicism behind it all is almost beyond comprehension, not to mention surreal.

 

Robert Parry, www.opednews.com, March 3, 2012

This article cross-posted from Consortium News

President Richard Nixon addresses the nation about his bombing of Cambodia, April 30,

As I pored over documents from what the archivists at Lyndon  Johnson’s presidential library call their “X-File” — chronicling Richard Nixon’s apparent sabotage of Vietnam peace talks in 1968 — I was  surprised by one fact in particular, how Johnson’s White House got wind  of what Johnson later labeled Nixon’s “treason.”

According to the records, Eugene Rostow, Johnson’s Under Secretary of State for Political Affairs, got a tip in late October 1968 from a Wall Street source who said that one of Nixon’s closest financial backers  was describing Nixon’s plan to “block” a peace settlement of the Vietnam War. The backer was sharing this information with his banking  colleagues to help them place their bets on stocks and bonds.

In other words, these investment bankers were colluding over how to  make money with their inside knowledge of Nixon’s scheme to extend the  Vietnam War. Such an image of these “masters of the universe” sitting  around a table plotting financial strategies while a half million  American soldiers were sitting in a war zone was a picture that even the harshest critics of Wall Street might find hard to envision.

Yet, that tip — about Nixon’s Wall Street friends discussing his  apparent tip on the likely course of the Vietnam War — was the first  clear indication that Johnson’s White House had that the sudden  resistance from South Vietnamese President Nguyen van Thieu to Paris  peace talks may have involved a collaboration with Nixon, the Republican candidate for president who feared progress toward peace could cost him the election.

On Oct. 29, Eugene Rostow passed on the information to his brother,  Walt W. Rostow, Johnson’s national security adviser. Eugene Rostow also wrote a memoabout the tip, reporting that he had learned the news from a source in  New York who had gotten it from “a member of the banking community” who  was “very close to Nixon.”

Eugene Rostow’s source said the conversation occurred among a group  of Wall Street bankers who attended a working lunch to assess likely  market trends and to decide where to invest. Nixon’s associate, who is  never identified in the White House documents, told his fellow bankers  that Nixon was obstructing the peace talks. Eugene  Rostow wrote…

“The conversation was in the context of a professional discussion  about the future of the financial markets in the near term. The speaker said he thought the prospects for a bombing  halt or a cease-fire were dim, because Nixon was playing the problem as  he did the Fortas affair — to block. …”They would incite Saigon to be difficult, and Hanoi to wait. Part of his strategy was an expectation that an offensive would break out soon, that we would have to spend a great deal more (and incur more  casualties) — a fact which would adversely affect the stock market and  the bond market. NVN [North Vietnamese] offensive action was a definite  element in their thinking about the future.”

(The reference to Fortas apparently was to the successful  Republican-led filibuster in the Senate to block Johnson’s 1968  nomination of Associate Justice Abe Fortas to replace Earl Warren as  Chief Justice on the U.S. Supreme Court.)

In other words, Nixon’s friends on Wall Street were placing their  financial bets based on the inside dope that Johnson’s peace initiative  was doomed to fail. (In another document, Walt Rostow identified his brother’s source, who disclosed this  strategy session, as Alexander Sachs, who was then on the board of  Lehman Brothers.)

A separate memo  from Eugene Rostow said the unidentified speaker at the lunch had added  that Nixon “was trying to frustrate the President, by inciting Saigon to step up its demands, and by letting Hanoi know that when he [Nixon]  took office ‘he could accept anything and blame it on his predecessor.’”

So, according to the speaker, Nixon was trying to convince both the  South and North Vietnamese that they would get a better deal if they  stalled Johnson’s peace initiative.

In a later memo providing a chronology of the affair, Walt Rostow  said he got the news about the Wall Street lunch from his brother  shortly before attending a morning meeting at which President Johnson  was informed by U.S. Ambassador to South Vietnam Ellsworth Bunker about  “Thieu’s sudden intransigence.”

Walt Rostow said “the diplomatic information previously received plus the information from New York took on new and serious significance,”  leading to an FBI investigation ordered by Johnson that uncovered the  framework of Nixon’s blocking operation. [To read that Rostow memo,  click here, here and here.]

The Rostow memos are contained in a file with scores of secret and  top secret documents tracing Nixon’s Vietnam peace-talk gambit as  Johnson tried frantically to stop Nixon’s blocking operation and still  reach a peace agreement in the waning days of his presidency.

After Nixon narrowly prevailed in the 1968 election and as Johnson  was leaving the White House without a peace agreement in hand, the  outgoing President instructed Walt Rostow to take the file with him.  Rostow kept the documents in what he called “The ‘X’ Envelope,” although the archivists at the LBJ Library in Austin, Texas, have dubbed it the  “X-File” after the once popular TV series.

Rostow’s “‘X’ Envelope” was not opened until 1994, which began a  process of declassifying the contents, some of which remain secret to  this day.

After Johnson’s peace initiative failed, the Vietnam War dragged on  another four years, leading to the deaths of an additional 20,763 U.S.  soldiers, with 111,230 wounded. An estimated one million more Vietnamese also died.

[For a much detailed examination of what Johnson called this “sordid story,” see Consortiumnews.com’s “LBJ’s “X’ File on Nixon’s “Treason.’“]

 Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Secrecy & Privilege: Rise of the Bush Dynasty from Watergate to Iraq, can be ordered at more…)

For Whom the Bailout Tolls October 25, 2008

Posted by rogerhollander in Economic Crisis.
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by: Michael Winship, t r u t h o u t | Perspective

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(Photo: hoboken411.com)

    During the Stock Market Crash in 1929, that curtain-raising overture to the Great Depression, stories abounded of Wall Street brokers rushing to their office windows and leaping to their deaths. But according to the late John Kenneth Galbraith and other economic historians, those accounts of suicide were, by and large, fairy tales. Perhaps they were more dark-hearted, wishful thinking than reality – revenge fantasies on the part of those whose real life savings had been wiped out by ravenous speculators.

    Nonetheless, the myth of those fatal plunges, like so many urban legends, is hard to shake. With more than a drop of cold blood, some have asked why, during this current fiscal crisis, we haven’t seen similar tragedies in the ranks of high finance.

    A close look at the recent government bailouts may explain why. The fat cats at the top had nothing to worry their pretty little whiskers about. Not only have most of their businesses been saved, for now at least, but they’ve already been pretty successful at protecting their high-rolling lifestyles, and finding bailout loopholes that allow them to keep hauling in the big bucks. To that ancient business axiom, “Buy low, sell high,” add this amendment: When you get into trouble, beg for a bailout. Then, new money in hand, continue to act with the rapacious greed of Caligula or the Sun King.

    You may already have heard how AIG, the insurance giant, after being saved to the tune of $85 billion, threw a $440,000 shindig at a California spa and then blew another $86,000 on a hunting trip to the English countryside, picking off partridges just as they were asking the Feds for an additional $38 billion. Bit of a sticky wicket, that.

    Caught red-handed, AIG canceled plans for another 160 sales and promotion events that would have cost a cool $80 million AND – get this – agreed to stop spending millions of their newly gained tax dollars on lobbying efforts against increased government regulations – this after being rescued from extinction by that very same government. Talk about biting the hand that feeds you! New York State Attorney General Andrew Cuomo is demanding that AIG get back from its execs millions of dollars the insurer paid out as the company neared collapse, and on Wednesday, the insurance giant agreed to freeze $600 million worth of deferred compensation and bonuses for its top brass.

    There are “claw back” provisions in the big $700 billion bailout passed by Congress three weeks ago, requiring that financial institutions get money back from their senior executives, if the payments were “based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate.”

    But the executive pay limits in the legislation apparently have so many loopholes you could fly a fleet of Gulfstream corporate jets through them. Oregon Congressman Peter de Fazio caught at least seven, “that will protect their outrageous paychecks and golden parachutes,” he wrote fellow Democratic House members, adding, “Imagine how many more loopholes the Wall Street lawyers will find.”

    No doubt the nine banks into which the US is planning to inject billions in capital – again, all taxpayer dollars – have their lawyers searching for those escape hatches. Writing in the Seattle Post Intelligencer, Sarah Anderson and Sam Pizzigati of the Institute for Policy Studies calculated that last year the CEO’s of those nine banks took home “on average, $32.2 million each, nearly triple the average CEO pay at the 500 biggest US companies. This is more than $600,000 a week.” Apiece.

    Bloomberg News columnist Jonathan Weil figures that since the start of fiscal 2004, the once Mighty Five of Wall Street – Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns – lost around $83 billion in stock market value. But they reported employee compensation of around $239 billion. In other words, the engineers who dug this disastrous hole paid themselves almost three dollars for every dollar they lost.

    The cost to the taxpayer of all the bailouts, as calculated by the internet investigative newsroom ProPublica.org, is a whopping $8,750 per household, more than two and a half times what lucky us got to fork over 20 years ago during the savings and loan crisis.

    But the masters of the universe are just fine, thank you, in no small part due to the tolerance and largesse of their guru, Treasury Secretary Henry Paulson, late of Goldman Sachs, where Forbes magazine reports that during a 32-year-career he accumulated more than $700 million. He said limiting compensation too punitively might prevent some institutions from participating in his plan to save the economy.

    No, the people suffering are the nearly 800,000 out of work so far this year. More families with children are homeless. Delinquencies and foreclosures are at their highest in nearly three decades, and The Los Angeles Times reported earlier this month that, “Worries about home foreclosures, job losses and plunging stock prices have sparked a surge in mental health problems.”

    Including suicide. In California recently, where professionals say mental health referrals have tripled in the last year, unemployed financial adviser Karthik Rajaram killed himself and four members of his family, including his wife, children and mother-in-law. In two suicide notes, he said he was broke and had run out of options. Variations of his story are appearing all over the country, from Colorado to Tennessee.

    There are some happier stories. Tom Dart, the sheriff of Cook County, Illinois, suspended all foreclosure evictions because they were throwing into the street tenants of buildings who had nothing to do with their landlords’ inability to make payments. Jocelyn Voltaire, an immigrant from Haiti, was about to lose her home after the death of her eldest son, a Marine in Iraq who had been sending her money to help meet the mortgage.

    After seeing a report produced by the American News Project, members of the antiwar group CodePink raised $30,000 to save Voltaire’s house.

    Testifying before the House Budget Committee this week, Federal Reserve Chairman Ben Bernanke agreed that homeowners in jeopardy of foreclosure need help. “I agree that stopping preventable foreclosures is extremely important,” he said. “I hope we continue to look for ways to do that.”

    But so far the government and the businesses bailed out haven’t looked very hard. They’ve done little or nothing and it’s every man for himself, devil take the hindmost. In his history of the 1929 market crash, John Kenneth Galbraith wrote, “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.”

In other words, virtually nonexistent, somewhere around zero. In other words, my fellow Americans, look out below. Do not ask for whom the bailout tolls. It tolls for thee.

Any Pay Cuts on Wall Street Yet? October 22, 2008

Posted by rogerhollander in Economic Crisis.
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by: Dean Baker, t r u t h o u t | Perspective

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(Photo: Emmanuel Dunand / AFP / Getty Images)

   

 

 Congress assured us that there would be no more big paychecks for incompetent Wall Street bankers when they passed their bailout bill. They told us that the tough pay provisions would put an end to the multimillion-dollar payouts to these folks.

    Last week, Treasury Secretary Henry Paulson mailed $150 billion in checks to the big banks. From that point forward, the CEOs and all the other top executives of these banks are now our dependents. They are living off the tax dollars of schoolteachers in Iowa, truck drivers in Montana and even Joe the Plumber.

    It is difficult to understand why we should be taxing people who make $40,000 a year to boost the paychecks of bankers who make more than $1 million a year and in many cases more than $10 million a year. Senator McCain has called Senator Obama a socialist because Obama believes that it is O.K. to impose higher tax rates on rich people than poor people. Senator McCain considers this sort of redistribution unacceptable.

    But, if redistribution from the rich to the rest of the country is socialist, what do you call the upward redistribution that Congress approved in the bailout package? It’s hard to justify taxing people who make $40,000 a year to benefit bankers who make more than 100 times as much.

    The Wall Street bailout was a classic, if totally foreseeable, bait and switch. The public has a real interest in ensuring the continued operation of the financial system. This was threatened by the credit crunch last month. This was the legitimate goal of the bailout.

    However, if Congress only wanted to preserve the financial system and not reward the people responsible for the financial crisis, it would have been a simple matter to impose safeguards to ensure that the bank executives were forced to take large pay cuts. While many members of Congress implied that the bill would rein in executive pay, almost all the experts who have examined the provisions on executive pay have concluded that they are largely toothless.

    The bailout also did not prevent the banks from paying out dividends to shareholders, as was done in the United Kingdom when they injected capital into their banks. This restriction makes sense not only as a punitive measure but also as a way to help the banks build capital. Every dollar paid out in dividends is a dollar that is not going towards building up capital. Stopping dividend payments should hasten the date at which the banks have sufficient capital without relying on help from the government.

    The failure to seriously restrict executive compensation or prohibit dividend payments, coupled with the relatively generous terms given the banks on the capital obtained from the government, shows that the bailout was not just about keeping the financial system operating. It was also about giving money to the banks’ executives and their shareholders.

    The media seem to think this is all very funny. After having done public relations work to help get the bill through Congress, most major news outlets have not highlighted the fact that no bank executives are likely to get pay cuts as a result of the bailout. Nor have they highlighted the generous terms of the bailout compared to the UK.
The public should continue to follow this issue even if the media does not. They should keep asking the members of Congress who touted the pay restrictions in the bailout bill which executives are getting their pay cut.

    The public should also recognize that in the US economy, what you earn has little to do with your ability or the quality of your performance. It matters much more if you can get Congress and Henry Paulson to give you money. Just tell your kids to be sure to make good friends with powerful politicians.

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