September 21, 2008

CRASH TALK SEPTEMBER 21

Alexander Cockburn, Counterpunch - By all rights, this last crisis has brought us to the crossroads where neoliberalism should be buried with a stake through its heart. We’ve had thirty years worth of deregulation - the loosening of government supervision. This has been the neoliberal mantra preached by both major parties, the whole of the establishment press and almost every university economics department in the country. It is central to the current disasters. And if you want to identify symbolic figures in the legislated career of deregulation, there are no more resplendent culprits than the man at McCain’s elbow, Phil Gramm, and the man standing at Obama’s elbow at his press conference, Robert Rubin. . .

If Obama becomes president what advisors will he recruit? Will he keep Rubin at his side along with his passel of Chicago School economists? His left supporters hope that he has a secret plan under wraps, that a populist T-shirt lies under the decorous mask of bipartisanship. I doubt it. Caution and respectability seem integral to Obama’s political persona. His core political task has been to assure the big-money funders of his campaign that as concerns maintenance of the present system his are a safe pair of hands. "Secret plan" theorists have some notion of "the real Obama" ripping off his mask on Inauguration Day. It doesn’t work like that. The political system is designed to ensure that the mask becomes the man. . .

Over the past quarter century the US manufacturing economy went offshore. Lately the so-called New Economy of the "Information Age" has been moving offshore too. Free trade has left millions without decent jobs or prospects of ever getting one above the $15 an hour tier.

Below a thin upper crust of the richest people in the history of the planet there’s the rest of America which in varying degrees of desperation, can barely get by. Millions are so close to the edge an extra 25 cents a gallon of fuel is a household budget-breaker.

Wages have stagnated. Decade after decade the bargaining power of workers has dwindled. We’ve had the macabre spectacle of American=based workers ordered to train their overseas replacements before being fired.

Bipartisan ruses like the Clinton-inspired exclusion of energy and food costs from the measures of "core inflation" ensure that social security payments don’t keep up with real inflation, which - if you take in the soaring costs of groceries and fuel for heat and transport - is double the official rate, the same way real employment - now officially just above 6 per cent - is actually around 12 per cent. . .

But then, as the cranky German in the British Museum liked to point out, the capitalist system is always in crisis. Crisis is integral to the system. In too many ways, over the past twenty years, brooding on its own crises, the left has forgotten that and in the low contour of radical ideas and of radical political organization in this electoral cycle we are suffering the consequences.

Paul Krugman - Historically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets. The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the RTC. The Swedes took over troubled banks, again protecting their depositors, before transferring their assets to their equivalent institutions.

The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system - that is, convince creditors of troubled institutions that everything’s OK - simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem - which seems doubtful - or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here - nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

I hope I’m wrong about this. But let me say it again: Treasury needs to explain why this is supposed to work - not try to panic Congress into giving it a blank check. Otherwise, no deal.

Ann Woolner, Bloomberg - The real kick in the teeth is that the executives who inflicted all this financial pain, who forced unprecedented government takeovers, walk away with hundreds of millions of dollars. It's up to us -- innocent little us -- to dig into our pockets, into our futures and into our children's futures to fix their spectacular errors.

Stanley O'Neal took a $161 million package last year when he left Merrill Lynch & Co. (remember Merrill Lynch?), even without a severance package in the mix. Angelo Mozilo, founder and top executive at Countrywide Financial Corp., reaped almost $122 million during 2007 in stock options alone.

For a mere three months at the helm of American International Group Inc., Chief Executive Officer Robert Willumstad gets a $7 million package.

And while the value of Richard Fuld's shares in Lehman Brothers Holdings Inc. plunged roughly $1 billion, he still pulled in almost $490 million by selling options and share grants in the 14 years that the company's been public, according to Fortune magazine.

We now know those shares were grossly overpriced, resting as they did on subprime mortgages. Shouldn't he give back most of it? All of it?

At least the government is blocking the $24 million given to the fired top guns at Fannie Mae and Freddie Mac, both taken over earlier this month.

As a rule, it isn't easy to take back money or benefits awarded as part of an employment contract, unless you can figure out some way the executive violated the contract's terms.

But it's worth a try. Consider these options.

Toss the rascals in jail. Criminal prosecution allows the government to seize ill-gotten gains. Snip the straps off those golden parachutes and grab them. Take over bank accounts, investment accounts, mansions, private planes and yachts.

The feds did bring charges against a couple of Bear Stearns Cos. hedge fund managers in June, and Federal Bureau of Investigation Director Robert Mueller told Congress this week his agency is pursuing possible suspects "as far up the corporate chain as necessary.''

The hitch is that proving executives lied in criminal ways is easier said than done, Enron and WorldCom convictions notwithstanding. . .

OK, so file civil suits.

WorldCom shareholders sued and wrangled $18 million from the pockets of directors, who agreed to pay more than 20 percent of their combined net worth. Another $36 million came from the directors' insurance carriers. These days, collecting from an insurer might not be the best idea. If AIG is doing the insuring, it would be the taxpayers paying out.

William McGuire, former CEO of UnitedHealth Group Inc., agreed this month to personally cough up $30 million to resolve a lawsuit over stock-option backdating. That's on top of the $600 million in benefits -- mostly in stock options -- he said he will turn in to resolve another shareholder suit.

The problem is that it normally takes something akin to criminal conduct, such as options backdating or accounting fraud, for civil suits to take money out of the hands of the accused. And, as previously noted, it isn't clear we will have that here.

0 Comments:

Post a Comment

<< Home