Why the Mess Obama Inherits Might Be His Greatest Opportunity
As long as we're sticking our kids with the bailout tab, let's leave them some souvenirs.
we'd meant to start this column with a few choice expletives about Goldman Sachs and its gall in setting aside nearly $6.9 billion for year-end bonuses even after getting a $10 billion bailout check from the federal government. But someone at Goldman must have finally stuck his finger in the wind, because just before we went to press, the firm announced that its top seven executives would have to settle for their base salaries. (Goldman's other 25,000 employees are still slated to receive their taxpayer-subsidized reward for a job well done.) Don't fret for ceo Lloyd Blankfein, though. In 2007, the company paid him $68.5 million, a figure that must make Treasury Secretary Henry Paulson, who averaged a mere $11 million a year during his eight-year stint at Goldman's helm, a little jealous.
And then there's the tale of Mack Whittle, ceo of the South Financial Group, who last October suddenly moved up his "retirement date" and grabbed his $18 million golden parachute just days before his bank took nearly $350 million in taxpayers' money. Nice timing. Had he waited until the government check hit his books, federal law would have prevented him from cashing in. At least Whittle actually ran his bank for 22 years; Alan Fishman of Washington Mutual got the same size severance when the feds took over his bank in September, after he'd been on the job for just three weeks. And speaking of smart moves: When Wachovia's top execs realized that the shotgun marriage the feds had arranged with Citigroup could cost them their collective $225 million severance, they left Citi at the altar and threw themselves into the arms of Wells Fargo. At which point Wells Fargo issued a press release crowing that this deal "does not demand financial support from our government"—only to turn around and (thanks to an irs rule change the Bush administration had slipped in just a few days earlier) write off Wachovia's losses so as to effectively offset all its profits. That means, as one analyst noted, that Wells Fargo is "basically getting Wachovia for nothing."
And if that seems outrageous, think it through: Every penny of those taxes that Wells Fargo is now avoiding will have to be made up for by someone else. And that someone else is...? Exactly. Already, as former Goldman exec Nomi Prins calculates on page 33, the total government outlays for the various finance bailouts stand not at $700 billion, but at more than $3.4 trillion (yes, with a "tr"). And in case you'd forgotten, we're borrowing this money; interest on the current total amounts to, give or take, $170 billion a year, every year, for decades. Our two babies, born in 2008, could still be paying it off when they graduate from college (if, that is, we can afford to send them).
Each day brings a fresh round of chutzpah: Detroit's Big Three ceos flying hat in hand to DC on three separate corporate jets (the $20,000-per-trip cost funded by the taxpayers via yet another irs codicil); the leaders of the world's 20 largest economies gathering at the White House in November to discuss the crisis over $500 bottles of cabernet. (At least it was California cab.) But what can we do except pick up the tab? We have been trained, after all, to regard the movements of finance like forces of nature. We might sooner hold back a hurricane than curb the cupidity of Wall Street. Right?
Maybe not. Maybe the lesson of the Goldman bonuses is that corporate America can be steered by the wishes of the people. Their future is in Washington's—meaning our—hands. And they seem to have grasped that you can only flip off the people who write the checks so many times before they break out the pitchforks.
At this point, the acolytes of Ronald Reagan are sure to interject, Well, there you go again—you liberals just want a command-and-control economy. The assumption being that unregulated markets are an Edenic state from which only liberal meddling can cast us out (cue John Maynard Keynes as serpent). In fact, the economy has no natural, "free" state; it is shaped by the society in which it exists. For the past 30 years, it's been steered toward unlimited profit taking at the top, book cooking, management for short-term shareholder return at the expense of actual viability, maximum greenhouse gas emissions, and so on. Washington wrote the rules. Wall Street and Detroit followed.
So what if we were to change the rules? What if we acknowledged that shareholders are also citizens—that they have interests beyond quarterly returns? The notion seems almost fanciful, we haven't tried it in so long. But as we learned in 2008, sometimes things we thought could not happen...do.
And, indeed, the rules have already changed. Liberal and conservative pundits and economists no longer argue over whether government should fix the markets with massive public spending, only about how much must be spent: $150 billion, $500 billion, more?
Whatever the butcher's bill ends up being, we better be damn sure we get the best possible return on investment. And here's where things get interesting. Turns out that putting money into the hands of corporations or wealthy individuals has a negative roi—we get no more than 37 cents to the dollar. (See "Bang for the Buck.") By contrast, a dollar spent extending unemployment benefits prompts $1.64 in economic activity; building roads and bridges (or the new utility grid we so badly need) brings $1.59. The very best return? Food stamps, which provide a full $1.73 in return for every dollar's worth of stimulus, with the added benefit that we're investing in the well-being of actual people—the same people who have borne the brunt of the past few decades' corporate and political chicanery.
And how will we pay for it all? Pulitzer winner David Cay Johnston has a few suggestions here. Stop letting executives hide their money offshore—voilà, a $100 billion bump for the treasury. Or how about that corporate jet subsidy, which has taxpayers ponying up for execs' vacation flights to Paris or Dubai—because, the irs rationale goes, it's not safe for them to fly first class.
Sure, there could be a case for some direct aid to corporations. Maybe there is a sensible way to reboot Detroit. Step one: Backbench Rep. John Dingell, D-General Motors. (Done.) Next, push out all the top execs, sans parachutes, as none other than Detroit scion Mitt Romney has suggested. And the Big Three must be forced to build cars whose gas mileage leaves the Prius in the dust. But hello? Carmakers are in the shape they're in because they've been criminally stupid and lazy, but also because health care accounts for more of a car's cost than does steel, which is partly why more cars are now made in Ontario than in Michigan. Let's not pretend we don't know how to fix that.
The lesson here is this: Sometimes more is more. As our house economist, James K. Galbraith, points out, "stimulus" packages based on pumping cash into the economy are the equivalent of feeding it candy; after the sugar jolt comes the crash. Fixing health care, rebuilding roads and bridges, and inventing a new energy system are bigger projects, but they have bigger, longer-term benefits, too. As long as we're sticking our kids with the tab, maybe we should leave them some souvenirs.
Page 1 of 1 
Yes, we can try to curb the appetites and corruptions of the wealthy and powerful yet doesn't history show that a fresh crop of influentials will arise as times change, under new auspices, flags and pretexts?
Whatever President Obama can achieve with an upgrade in the policies and ethics that govern the top... we need to match with a new approach to living down on the ground, day-by-day - to wisely manage our desires, beliefs and tendencies at the level of our fundamental nature.
A New Message from God (http://www.newmessagefromgod.com) seems to offer just such a new way forward - a new approach to living in a radically changed world, one soon to be racked not only be further revelations of corporate malfeasance, but by the paradigm-shifting affects of climate change, peak oil and escalating war and conflict worldwide.
If some legal means to recover these excessive salaries from bailed-out companies does not exist, it needs to be created, eh?
Nice work if you can get it... sit around in an office all day splitting your time between plotting about how to screw everyone down the food chain and how to enhance your share of the new money being mainlined in by the feds.
Meanwhile, our health insurance COBRA is set to expire in May and we have no plan how to continue health insurance. But we see ads on TV for pet health insurance. Maybe we should claim to be animals, since that's how the bottom 50% of Americans are viewed from the Goldman Sachs building.
-Wexler
"Yes, we can try to curb the appetites and corruptions of the wealthy and powerful yet doesn't history show that a fresh crop of influentials will arise as times change, under new auspices, flags and pretexts?"
It has already. That fresh crop of influentials is also known as the U.S. gov't. And, as for insurance, as with food, even animals innately know they are NOT entitled.
What is missed here, as always, (without mentioning names)is the fact that the problem is not with that of the private corporation; it is the problem of two types of voters and/or electorate: those that vote consistently without question for representatives that espouse for the "poor, the unfortunate, the middle class", and those apathetic voters.
Since LBJ's War on Poverty, where are we? Nowhere! The previous post (again, won't mention names)is crying that gov't hasn't given him cradle to grave health insurance. Now, while I advocate lessening the impact on the rising prices of this matter, health insurance, I do not expect the gov't to jump in and give it to me. Where in the Constitution does it say that I am mandated to take care of my neighbor through forced taxation? The gov't is a (if not the) big part of the current problem now, not the solution. Let us not forget about the apathetic, or non-voter that bemoans his (this)situation as well. Let him shut up and take the alms he is afforded from our labor.
It is the very people who claim to represent the "less fortunate", the "middle class" that ARE the scoundrels in this matter. Let's see, can we put names to these reprobates? Barney Frank, Chris Dodd, Charlie Rangel, do I see a pattern of ...Democrats? And yes, it could be said that even the current president, Bush has a hand in this mess.
It is a mess whenever the gov't gets involved in the free market and you and I are on track to make a big mess not seen since the likes of Jimmy Carter.
In closing, I suggest all of you read the Constitution. This is the home of the brave and land of the free, not the boy and the freeloader.
Read the Preamble to the Constitution.
It tells you what the purpose of the government is... that might give you a clue as to what I'm "crying" about.
Why is it that every other industrialized nation except the Land of the Free takes care of its OWN CITIZENS as a higher priority than trying to achieve HEGEMONY?
It's because they know something we know... they have history, they remember it. Unlike some folks.
Without mentioning any names.
-Wexler
If one does not advocate hegemony externally to one's homeland border, why is it okay internally? Predominance is the same either way.
(Man, a hiatus buys one nothing with this crowd. Same old, same ole)
Maybe if you took another one, the second time would be a charm?
Just sayin'.
Jimmy, what kind of twilight zone are you living in? This whole economic mess is the result of a LACK of government oversight in the free market. For you to say that government has been too interventionist as the cause of our current problems is absolutely crazy. We've had the unfettered free market "business worshipping" policy for 20 years now, and nobody is buying it. Look where unchecked greed has gotten us.
Lincoln: "government of the people, by the people, for the people, shall not perish from the earth"
He did NOT say: of business, by business, and for business.
It is high time that executive emoluments and perks in America are examined seriously.They are not only excessive in relation t international standards; besides there is no no relation between the executive emoluments and productivity or efficiency. There oug to be a serious examination of the corporate tax avoidance and transfer pricing practices.
Stimulus package may be wasteful only if this is not married to the needs of the society. Clearly, investment in infrastructure regeneration is not wasteful, particularly in areas where they are in bad shape. Even the bale out of auto companies can be of great social benefit if the money is used properly. Let me give a very naive example. The first fact is that the auto sector needs financial support to maintain their production and employment. The government has decided to lend them the money as a loan. The second fact is that in many U.S. cities urban transport is either inadequate or virtually non-existent. This requires American families to maintain one or more cars. Provision of relatively cheap public transport may reduce the number of cars maintained by many families. This will not only reduce the pressure on urban infrastructure but also slow down environmental degradation. Fact three is that a lot of young men and women are unemployed in the cities. Keeping these three facts in mind, a larges scale plan for providing urban transport, wherever it is needed, can be contemplated. Step one: create a government agency on the lines of Commodity Credit Corporation (CCC) which is funded by the government to buy mini-vans from the auto companies. Instead of giving the auto companies loans, the money paid to them could be treated as an advance for fuel-efficient mini-vans to be delivered to the agency. Step two: The agency sells, on easy hire-purchase terms, these mini-vans to duly vetted unemployed youths. This may create million or more jobs while at the same time provide urban transport. Some more jobs will be created in repair and maintenance of such vans. Some more jobs can also be created in organizing management training for these young drivers who could be encouraged to form their own firms or co-opertives.
sticking the kids with the massive debt does not faze americans.
they want to maintain their standard of living even if it puts their kids in debt for their entire lives.
this is a country that killed one million vietnamese and never batted an eyelid.
the protest was over the draft not the vietnamese being killed.
90% of americans did not even know who the viet cong were.
and iraqis american could care less about iraqis. we have destroyed that country
americans lined up to vote for the bushs.
the real problem is americans not the politicans.
mass media trying to sell you some stuff will not tell you that one will they?
Criminally stupid, lazy, and greedy. For eight years we have allowed the criminally rich to pick our pockets and destroy the economy. It's time to tax the hell out of the rich!
"If one does not advocate hegemony externally to one's homeland border, why is it okay internally?"
Well there's the fix, then. The corporations have had a MUCH worse effect on the US than 9/11. They should be treated like S Hussein. The president should order the armed forces to bomb the sh*t out of them. Wall St should look like Baghdad when they are done. Teach them to endanger the lives and livelihoods of Americans!
Let's not confuse OVERSIGHT with INTERVENTION. Oversight points to supervision, or lack thereof. And, with the current Congress, as with the last, we definitely have experienced lack of oversight.
Intervention means interference; in this case interference of the free market. The free market has been interfered with by Congress' meddlings for far too long. I agree. There is a prime example of this in one of the postings saying the gov't should buy minivans to help the car industry and some inner city folks. This would be by definition INTERFERENCE. It is a prime example of the gov't picking winners of gov't largesse, not the market or a free people.
One of the less than insightful posters to this sight wants us to believe the that preamble to the constitution, specifically "promote the general Welfare", entitles Congress to pick these winners and losers gov't largesse, including him. These people are part of the WIIFM (what's in it for me) crowd. Be it individual or corporate, they are a part of the problem, not the solution.
A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned - this is the sum of good government. -Thomas Jefferson
Spelling correction, "site" not "sight". In haste.
Monika Bauerlein and Clara Jeffery
What a joy it is to read such a carefully crafted piece. Thank you. I doubt it would be a wise choice for any of the top banker's to write themselves a fat check with these two on the case and the President tasking Vice President Biden to do as these women have done.
I'd like to read a piece you two would do explaining why Minnesota did not send a Provisional substitute to mind the vacant Senate seat which remains vacant to this day. The President could have used another vote on some legislation and Minnesota does have a declared, though uncertified, Senator Elect, Liberal Democrat Al Franken.
The GOP-funded Election Contest being staged in Saint Paul is but a Cotton Candy Booth and some Balloon Twisting Clowns short of being a Circus. The Elephants are present bearing basket-fulls of slush-money. Former Senator Norm Coleman, the Ringleader, hasn't missed a day.
There have been lawyers jumping to their feet and rebuking the witness' testifying, on-the-stand, saying: "He's lying! What he just testified too is false! That never happened!" Some other witnesses have been caught in a bold-faced lie by Franken's Attorney during cross-examination. A few have admitted to "Making a mistake just then" while seated in the witness chair.
The Coleman legal team has impugned the Election Judges. Impugned the Recount Canvassing Board. Impugned the Minn Supreme Court. And, earned Sanctions after they impugned the trio of Supreme Court Judges hearing the Election Contest.
Could you two fine journalists investigate the Senate Problem Minnesota is having and see if the State of Minnesota has plans to fill the vacancy in the Senate any time soon?
