As the furor over AIG bonuses fades, Paul Krugman today points to a real outrage: "pay at investment banks, after dipping last year, is soaring again--right back up to 2007 levels."
Such a symbol for unquenchable Wall Street greed may serve a political turning point just as did Ronald Reagan's Welfare Queen who drove a Cadillac three decades ago--with a number of added ironies.
Unlike the Great Communicator's character who was never found to exist, today's investment bankers are all too real and, in the 21st century, are ripping off taxpayers on a scale never imagined in Reagan's wildest dreams. The Welfare Queen's $150,000 has morphed into billions.
As Krugman observes, "Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a 'welfare.'"
Perhaps the ultimate irony is that the level of Wall Street compensation has always been disproportionate to achievement but turned astronomic only in recent years, as Krugman notes, as "a reward for their creativity--for financial innovation...new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes."
But the reemergence of such greed may eventually prove to be as powerful a symbol for a new populism as Reagan's Welfare Queen was for the rise of conservatism in the 1980's.
Almost 70 years ago, Fred Schwed in his Wall Street classic "Where Are the Customers' Yachts?" noted: "The burnt customer certainly prefers to believe that he has been robbed rather than that he has been a fool on the advice of fools."
That feeling seems to be stirring again.
Showing posts with label AIG bonuses. Show all posts
Showing posts with label AIG bonuses. Show all posts
Monday, April 27, 2009
Friday, April 03, 2009
Guilty Prosecutors?
This has been a dizzying week for deciding who is above the law or below it, with figures from Ted Stevens and Rod Blagojevich to the AIG bonus recipients parading before the public bench for reappraisal.
*The former Republican senator from Alaska gets a pass from a Democratic Attorney General on the grounds of bad behavior by prosecutors from the Bush Justice Department, which still faces unresolved accusations of firing eight federal prosecutors for not being political enough.
(Sarah Palin wants the Democrat who defeated Stevens to resign, but that idea has as much chance as the moose she shoots from airplanes.)
*The Disney World vacation of the impeached former Illinois governor is interrupted by news he has been charged with numerous counts of fraud and corruption, but only after successfully naming Barack Obama's successor to the US Senate.
His indictment raises again questions about the part played in his case by the universally sainted prosecutor Patrick Fitzgerald, who went public with an inflammatory attack on Blagojevich in December but failed to charge him then. Was Fitzgerald's move, an obvious attempt to keep the governor from selling the seat, proper behavior for a federal prosecutor? Does it open the door to others hounding elected officials in less cut-and-dried cases?
*From, of all people, Fox News' usually rabidly wrong Glenn Beck comes a scathing interview with Connecticut Attorney General Richard Blumenthal pressuring him for legal reasons for his public hounding of AIG bonus recipients, laying bare blatant political grandstanding by Blumenthal and, to a lesser degree, New York's Andrew Cuomo for political gain rather than duties of office. Beck wins that argument handily. Political piling on by officers of the law is an ugly sight, no matter who is at the bottom.
Eric Holder's action in the Stevens case is an encouraging sign that we are moving back to the traditional norms of rule by law but a New York Times editorial suggests more:
"He should not stop with this case. Don Siegelman, the former governor of Alabama, and Paul Minor, a prominent Mississippi trial lawyer, have charged that Justice Department prosecutors engaged in unethical behavior in cases that led to their convictions. Both men claim that they were singled out for prosecution because of their affiliation with the Democratic Party.
"Given the flagrant partisanship of the Bush Justice Department, it is especially reassuring to see Mr. Holder ignore party lines to do the right thing by Mr. Stevens. It has been far too long since the attorney general seemed interested in enforcing ethics and nonpartisanship in a department that has been shockingly lacking in both."
It's time to reaffirm that, while nobody is above the law, neither is anyone below it.
*The former Republican senator from Alaska gets a pass from a Democratic Attorney General on the grounds of bad behavior by prosecutors from the Bush Justice Department, which still faces unresolved accusations of firing eight federal prosecutors for not being political enough.
(Sarah Palin wants the Democrat who defeated Stevens to resign, but that idea has as much chance as the moose she shoots from airplanes.)
*The Disney World vacation of the impeached former Illinois governor is interrupted by news he has been charged with numerous counts of fraud and corruption, but only after successfully naming Barack Obama's successor to the US Senate.
His indictment raises again questions about the part played in his case by the universally sainted prosecutor Patrick Fitzgerald, who went public with an inflammatory attack on Blagojevich in December but failed to charge him then. Was Fitzgerald's move, an obvious attempt to keep the governor from selling the seat, proper behavior for a federal prosecutor? Does it open the door to others hounding elected officials in less cut-and-dried cases?
*From, of all people, Fox News' usually rabidly wrong Glenn Beck comes a scathing interview with Connecticut Attorney General Richard Blumenthal pressuring him for legal reasons for his public hounding of AIG bonus recipients, laying bare blatant political grandstanding by Blumenthal and, to a lesser degree, New York's Andrew Cuomo for political gain rather than duties of office. Beck wins that argument handily. Political piling on by officers of the law is an ugly sight, no matter who is at the bottom.
Eric Holder's action in the Stevens case is an encouraging sign that we are moving back to the traditional norms of rule by law but a New York Times editorial suggests more:
"He should not stop with this case. Don Siegelman, the former governor of Alabama, and Paul Minor, a prominent Mississippi trial lawyer, have charged that Justice Department prosecutors engaged in unethical behavior in cases that led to their convictions. Both men claim that they were singled out for prosecution because of their affiliation with the Democratic Party.
"Given the flagrant partisanship of the Bush Justice Department, it is especially reassuring to see Mr. Holder ignore party lines to do the right thing by Mr. Stevens. It has been far too long since the attorney general seemed interested in enforcing ethics and nonpartisanship in a department that has been shockingly lacking in both."
It's time to reaffirm that, while nobody is above the law, neither is anyone below it.
Saturday, March 21, 2009
The Price of Congress' Crazy Rage
This has been a bad week for American leadership, and next week could be worse. In trying to calm the country, Barack Obama made one joke too many while lawmakers in Washington spent their time acting out the worst stereotypes of politicians as fools, cowards and knaves.
"Congress," writes New York Times business columnist Joe Nocera, "with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to the crowds, is out of control. This week, the body politic ran off the rails.
"There are times when anger is cathartic. There are other times when anger makes a bad situation worse. 'We need to stop committing economic arson,' Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson."
The scorched earth from that diversion now litters the battlefield of next week's crucial fight over how to clean out toxic assets from the paralyzed banking system. But how can there be a rational discussion of the Administration's plan to partner with private investors after all this madness? How do people in Wall Street now feel about making deals with a government held hostage by lunatic lawmakers?
When Treasury Secretary Tim Geithner unveils his plan, there will be serious doubts, some of which are surfacing beforehand. Paul Krugman predicts:
"In effect, Treasury will be creating--deliberately!--the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem...
"This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And...when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work."
That argument against Geithner's proposal deserves serious discussion. But in the face of a Congress still slavering from its fit of AIG bonus hysteria, with whom?
"Congress," writes New York Times business columnist Joe Nocera, "with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to the crowds, is out of control. This week, the body politic ran off the rails.
"There are times when anger is cathartic. There are other times when anger makes a bad situation worse. 'We need to stop committing economic arson,' Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson."
The scorched earth from that diversion now litters the battlefield of next week's crucial fight over how to clean out toxic assets from the paralyzed banking system. But how can there be a rational discussion of the Administration's plan to partner with private investors after all this madness? How do people in Wall Street now feel about making deals with a government held hostage by lunatic lawmakers?
When Treasury Secretary Tim Geithner unveils his plan, there will be serious doubts, some of which are surfacing beforehand. Paul Krugman predicts:
"In effect, Treasury will be creating--deliberately!--the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem...
"This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And...when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work."
That argument against Geithner's proposal deserves serious discussion. But in the face of a Congress still slavering from its fit of AIG bonus hysteria, with whom?
Thursday, March 19, 2009
The Accessible Obamas
The First Couple is out in the real world this week, the President sympathizing with people who have lost their jobs in California and scheduled to schmooze with Jay Leno tonight, while the First Lady is hugging DC school kids and encouraging them to dream big.
The Obamas are easily the most accessible people ever to occupy the White House, and an aged skeptic keeps waiting for the inevitable backlash that will brand their attempts to connect with voters as cosmetic and manipulative.
When Lynda Bird Johnson was working for me during the Johnson Administration, a coworker watching her at an office meeting complained, "Who does she think she is, pretending to be just like other people?"
In the era of connectivity, the White House's societal role is being redefined, and the balance between the President as an authority figure and a source of empathy in hard times is being recalibrated.
So far, as the polls show, Obama is holding on to voters' trust without pretending to perfection, as he did yesterday in deflecting blame from his advisers for the AIG bonuses. But real trials are ahead.
If the economy keeps stumbling, the public's need for a stern father figure rather than a smart, good-hearted big brother will be put to the test, and the "I feel your pain" cliché may collide with "Nice guys finish last."
At least that's what the shiftless Republican relatives are counting on.
The Obamas are easily the most accessible people ever to occupy the White House, and an aged skeptic keeps waiting for the inevitable backlash that will brand their attempts to connect with voters as cosmetic and manipulative.
When Lynda Bird Johnson was working for me during the Johnson Administration, a coworker watching her at an office meeting complained, "Who does she think she is, pretending to be just like other people?"
In the era of connectivity, the White House's societal role is being redefined, and the balance between the President as an authority figure and a source of empathy in hard times is being recalibrated.
So far, as the polls show, Obama is holding on to voters' trust without pretending to perfection, as he did yesterday in deflecting blame from his advisers for the AIG bonuses. But real trials are ahead.
If the economy keeps stumbling, the public's need for a stern father figure rather than a smart, good-hearted big brother will be put to the test, and the "I feel your pain" cliché may collide with "Nice guys finish last."
At least that's what the shiftless Republican relatives are counting on.
Wednesday, March 18, 2009
A Marshall Plan for AIG
With each passing day, the insurance giant is looking more like Western Europe after World War II--devastated, bankrupt and occupied by the American government.
As Congress conducts its equivalent of war crimes trials for AIG executives to recover a fraction of one percent of bailout money, the larger question for American taxpayers is how to rebuild, salvage and/or sell off the corporation, of which they now own 80 percent.
While there may be gratification in vengefully hounding the defeated, there could be much more long-term profit in enlisting AIG people in undoing the mind-boggling deals that led to the mess.
According to the New York Times Wall Street expert, "A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave--the buzz on Wall Street is that some have, and more are ready to--they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.
"So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments."
But there is a less cynical way to look at it. Before the crash, AIG was a top-down company, but its Hitlers, Himmlers and Goerings are gone now. The mid-level people, some still there and many who have left, were doing their jobs back then under the rules that existed.
Couldn't they be invaluable to the Treasury in unwinding the deals they helped structure under the equivalent of a post-World War II Marshall Plan for the company that now belongs to taxpayers? Punishment is less the point than rehabilitation.
"Marshall Plan," Wiki tells us, "has become a metaphor for any very large scale government program that is designed to solve a specific social problem. It is usually used when calling for federal spending to correct a perceived failure of the private sector."
Exactly.
As Congress conducts its equivalent of war crimes trials for AIG executives to recover a fraction of one percent of bailout money, the larger question for American taxpayers is how to rebuild, salvage and/or sell off the corporation, of which they now own 80 percent.
While there may be gratification in vengefully hounding the defeated, there could be much more long-term profit in enlisting AIG people in undoing the mind-boggling deals that led to the mess.
According to the New York Times Wall Street expert, "A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave--the buzz on Wall Street is that some have, and more are ready to--they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.
"So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments."
But there is a less cynical way to look at it. Before the crash, AIG was a top-down company, but its Hitlers, Himmlers and Goerings are gone now. The mid-level people, some still there and many who have left, were doing their jobs back then under the rules that existed.
Couldn't they be invaluable to the Treasury in unwinding the deals they helped structure under the equivalent of a post-World War II Marshall Plan for the company that now belongs to taxpayers? Punishment is less the point than rehabilitation.
"Marshall Plan," Wiki tells us, "has become a metaphor for any very large scale government program that is designed to solve a specific social problem. It is usually used when calling for federal spending to correct a perceived failure of the private sector."
Exactly.
Tuesday, March 17, 2009
AIG Lynch Mob
Of all people, Barack Obama is the unlikeliest to be stirring up a lynch mob, but there is no other way to describe his stoking of public anger over the AIG bonuses.
"In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama took the podium to say yesterday. “How do they justify this outrage to the taxpayers who are keeping the company afloat?” He railed against "recklessness and greed."
Undoing unconscionable bonuses in the company that keeps getting huge taxpayer bailouts is a fair exercise of government power, but demonizing a relative handful of people who were part of a huge systemic failure is out of character for a president who is a peacemaker by instinct and an economic optimist by necessity.
The growing anger is leading to a mob mentality. "A tidal wave of public outrage over bonus payments swamped American International Group yesterday," the Washington Post reports.
"Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all."
It's disheartening to see Obama leading a pack of tinhorn politicians and media mouths when he should be confirming his stand against unfairness but emphasizing the positive steps he is taking for national recovery, as he did with his announcement yesterday of a "substantial program" to get credit flowing to small businesses.
A New York Times editorial notes that "the bonuses are something of a distraction. Seen by themselves, the payments are huge, but they are less than one-tenth of 1 percent of the money already committed to the A.I.G. bailout."
Billions of the money, we learned Sunday, has gone to American and European banks on the other side of AIG's failed deals.
"Congress must investigate," the editorial urges, "and the new disclosures give them enough to get started. Untangling all the entanglements is not only essential to understanding how the system became so badly broken, but also to restoring faith in the government that it is up to the task of fixing it."
If public anger needs an outlet, that's where it should go.
"In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama took the podium to say yesterday. “How do they justify this outrage to the taxpayers who are keeping the company afloat?” He railed against "recklessness and greed."
Undoing unconscionable bonuses in the company that keeps getting huge taxpayer bailouts is a fair exercise of government power, but demonizing a relative handful of people who were part of a huge systemic failure is out of character for a president who is a peacemaker by instinct and an economic optimist by necessity.
The growing anger is leading to a mob mentality. "A tidal wave of public outrage over bonus payments swamped American International Group yesterday," the Washington Post reports.
"Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all."
It's disheartening to see Obama leading a pack of tinhorn politicians and media mouths when he should be confirming his stand against unfairness but emphasizing the positive steps he is taking for national recovery, as he did with his announcement yesterday of a "substantial program" to get credit flowing to small businesses.
A New York Times editorial notes that "the bonuses are something of a distraction. Seen by themselves, the payments are huge, but they are less than one-tenth of 1 percent of the money already committed to the A.I.G. bailout."
Billions of the money, we learned Sunday, has gone to American and European banks on the other side of AIG's failed deals.
"Congress must investigate," the editorial urges, "and the new disclosures give them enough to get started. Untangling all the entanglements is not only essential to understanding how the system became so badly broken, but also to restoring faith in the government that it is up to the task of fixing it."
If public anger needs an outlet, that's where it should go.
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