Sunday, December 15, 2013

Execs Got Bailout Bonuses/Pensioners Get Permanent Cuts? (Investing In Prestige - It's Not Charity, Folks!) JP Morgan Chase, the Foreign Corrupt Practice Act and the Corruption of America (Vampires Continue To Suck!)



They can own the mass media, who misrepresent every important event, but they cannot own our  perceptions of it and them. We know when the Congress, whom we've elected to represent the interests of millions of common citizens, pass laws against our interests and in favor of those who pass riches to them for votes that favor their interests, industries and personal wealth.

We are not confused.

And this will not stand.

Watch Mandela and DeKlerk. Its political message is undeniable.

"The future is where we live from now on."
- De Klerk



Could anything akin to the Church Committee’s investigation happen today, in the era of Chelsea Manning and Edward Snowden? Let’s put it this way: It’s about as likely as Idaho, one of the reddest states in the nation, repeatedly electing a progressive, environmentalist Democrat like Frank Church.

(Please consider making a contribution to the Welcome to Pottersville2 Holiday Season Fundraiser or at least sending a link to your friends if you think the subjects discussed here are worth publicizing. Thank you for your support. We are in a real tight spot financially right now and would sincerely appreciate any type of contribution. Anything you can do will make a huge difference in this blog's ability to survive.)

Let's Get This Straight: AIG Execs Got Bailout Bonuses, but Pensioners Get Cuts

"The bonus beneficiaries were among the leading villains in the economic disaster that is still inflicting pain across the country."

by Dean Baker

The Guardian

As we passed the fifth anniversary of the peak of the financial crisis this fall, the giant insurance company AIG was prominently featured in the retrospectives. AIG had issued hundreds of billions of dollars of credit default swaps (CDS) on subprime mortgage backed securities. When these mortgage-backed securities failed en masse, AIG didn't have the money to back them up.

This would have forced AIG into bankruptcy. However Lehman had declared bankruptcy the day before and the world was still engulfed in the aftershocks. The Bush administration and the Federal Reserve board decided that they would stop the cascade of failing financial institutions and bail out AIG. As a result, the government agreed to honor all the CDS issued by AIG and effectively became the owner of the company.

Chicago has been in the news recently because its mayor, Rahm Emanuel, seems intent on cutting the pensions that its current and retired employees have earned. Emanuel insists that the city can't afford these pensions and therefore workers and retirees will simply have to accept reduced benefits.

If the connection with AIG isn't immediately apparent, then you have to look a bit deeper. Folks may recall that AIG paid out $170m in bonuses to its employees in March 2009 with its top executives receiving bonuses in the hundreds of thousands of dollars.

These were people who not only shared responsibility for driving the company into bankruptcy; they also had been at the center of the financial web that propelled the housing bubble into ever more dangerous territory. In other words, the bonus beneficiaries were among the leading villains in the economic disaster that is still inflicting pain across the country.

The prospect of executives of a bailed out company drawing huge bonuses at a time when the economy was shedding 600,000 jobs a month provoked outrage across the country. President Obama spoke on the issue and said that unfortunately no one in his administration was smart enough to find a way that could keep the bonuses from being paid. The problem according to Larry Summers, then the head of President Obama's National Economic Council, was that the bonuses were contractual obligations and they had to be honored.

This provides a striking contrast to what might happen to current and former city employees in Chicago and may happen to current and former employers of the state of Illinois and Detroit. In these cases, it seems that the contracts workers had with their employers may not be honored. Employees who worked decades for these governments, with part of their pay taking the form of pensions in retirement, are now being told that these governments will not follow through on their end of the contract.

The differing treatment of contracts in these situations is striking for several reasons. First, the AIG executives stood to gain much more money with their bonuses on a per person basis. In contrast to the six-figure bonuses going to top executives, pensions for Detroit's workers average just $18,500 a year. Pensions for Chicago's workers average over $33,000 a year, but almost none of these workers will get Social Security, so this will be their whole retirement income.


In contrast to the top AIG executives, who played a role in bankrupting their company and sinking the economy, no one has accused workers in Chicago or Detroit of doing anything wrong. These were people who taught our kids, put out fires, and picked up garbage. They did their jobs.

They also might be excused for thinking that they could count on the governments involved to fulfill their end of the contract. After all, both Michigan and Illinois have provisions in their constitution stating that pensions earned by public sector workers cannot be cut. Since cities like Detroit and Chicago are creations of the state governments, workers for these cities, like workers for the state government, might have thought the state constitution protected their pensions. Apparently they should have hired lawyers who could have explained to them why this is not the case.

There is yet another connection between the plans to cut pensions and AIG. The bond rating agencies played a prominent role in both cases. In the case of AIG meltdown, the bond rating agencies gave investment grade ratings to trillions of dollars of mortgage backed securities (MBS). They often gave these ratings to dubious issues for the simple reason that they were being paid. As one analyst from S&P said in an e-mail, they would rate a new MBS if it "was structured by cows".

The bond rating agencies played a similarly disastrous role in the pension problems facing state and local governments. In the stock run-up in the 1990s, they green-lighted accounting that essentially assumed that the stock bubble would continue in perpetuity, effectively growing without limit. This meant that state and local governments didn't have to contribute to their pensions since the stock bubble was doing it for them. States like Illinois and cities like Chicago clung to this habit even after the bubble burst.

There is one final noteworthy connection between AIG and the Chicago pension situation. Chicago's Mayor, Rahm Emanuel, was President Obama's chief of staff at the time that no one could figure out how to avoid paying the AIG bonuses.

Apparently Emanuel has learned more about voiding contractual obligations now that it is ordinary workers at other end of the commitment.


Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.

Now, we may disagree on the exact definition of "charity."

But if it doesn't have anything to do with helping the poor (or at least those suffering (including institutions) from some type of disability which requires public aid in order to be rectified) or the really needy, then why should it be a tax write-off for those who are only feathering their own nests or just receiving (to great public acclaim) the benefit of having their names prominently associated with prestigious institutions? (Whatever happened to the idea of those with honorable intentions not wanting their "charity" to be acknowledged?)

And, yes, it would be nice to receive rich right-winger's money to re-fund PBS and NPR (after they were de-funded of public monies by these same people - errr - and/or their associated institutions) but not at the price of ownership and much-needed-elsewhere Federal funds, and it probably wouldn't be that bad a thing if it takes a little longer for Harvard, Yale, et al., to achieve their billion-dollar (taxpayer-underwritten) endowments.

It’s their business how they donate their money, of course. But not entirely. As with all tax deductions, the government has to match the charitable deduction with additional tax revenues or spending cuts; otherwise, the budget deficit widens.

In economic terms, a tax deduction is exactly the same as government spending. Which means the government will, in effect, hand out $40 billion this year for “charity” that’s going largely to wealthy people who use much of it to enhance their lifestyles.

To put this in perspective, $40 billion is more than the federal government will spend this year on Temporary Assistance for Needy Families (what’s left of welfare), school lunches for poor kids, and Head Start, put together.

Which raises the question of what the adjective “charitable” should mean. I can see why a taxpayer’s contribution to, say, the Salvation Army should be eligible for a charitable tax deduction. But why, exactly, should a contribution to the Guggenheim Museum or to Harvard Business School?

. . . What portion of charitable giving actually goes to the poor? The Washington Post’s Dylan Matthews looked into this, and the best he could come up with was a 2005 analysis by Google and Indiana University’s Center for Philanthropy showing that even under the most generous assumptions only about a third of “charitable” donations were targeted to helping the poor.

This may turn out to be a Bob Reich day at Pottersville2.

He's written several essays lately that put his/our third finger on the pulse of our sold-out nation.

And I don't mean that it's the citizens who are selling US down the river (although many seem confused by the mass media about their personal financial underpinnings).

Or are enjoying the fruits of it.

When Charity Begins at Home


By Robert Reich, Robert Reich's Blog

13 December 13

t's charity time, and not just because the holiday season reminds us to be charitable. As the tax year draws to a close, the charitable tax deduction beckons.

America's wealthy are its largest beneficiaries. According to the Congressional Budget Office, $33 billion of last year's $39 billion in total charitable deductions went to the richest 20 percent of Americans, of whom the richest 1 percent reaped the lion's share.

The generosity of the super-rich is sometimes proffered as evidence they're contributing as much to the nation's well-being as they did decades ago when they paid a much larger share of their earnings in taxes. Think again.

Undoubtedly, super-rich family foundations, such as the Bill and Melinda Gates Foundation, are doing a lot of good. Wealthy philanthropic giving is on the rise, paralleling the rise in super-rich giving that characterized the late nineteenth century, when magnates (some called them "robber barons") like Andrew Carnegie and John D. Rockefeller established philanthropic institutions that survive today.

But a large portion of the charitable deductions now claimed by America's wealthy are for donations to culture palaces - operas, art museums, symphonies, and theaters - where they spend their leisure time hobnobbing with other wealthy benefactors.

Another portion is for contributions to the elite prep schools and universities they once attended or want their children to attend. (Such institutions typically give preference in admissions, a kind of affirmative action, to applicants and "legacies" whose parents have been notably generous.)

Harvard, Yale, Princeton, and the rest of the Ivy League are worthy institutions, to be sure, but they're not known for educating large numbers of poor young people. (The University of California at Berkeley, where I teach, has more poor students eligible for Pell Grants than the entire Ivy League put together.) And they're less likely to graduate aspiring social workers and legal defense attorneys than aspiring investment bankers and corporate lawyers.

I'm all in favor of supporting fancy museums and elite schools, but face it: These aren't really charities as most people understand the term. They're often investments in the life-styles the wealthy already enjoy and want their children to have as well. Increasingly, being rich in America means not having to come across anyone who's not.

They're also investments in prestige - especially if they result in the family name engraved on a new wing of an art museum, symphony hall, or ivied dorm.

It's their business how they donate their money, of course. But not entirely. As with all tax deductions, the government has to match the charitable deduction with additional tax revenues or spending cuts; otherwise, the budget deficit widens.

In economic terms, a tax deduction is exactly the same as government spending. Which means the government will, in effect, hand out $40 billion this year for "charity" that's going largely to wealthy people who use much of it to enhance their lifestyles.

To put this in perspective, $40 billion is more than the federal government will spend this year on Temporary Assistance for Needy Families (what's left of welfare), school lunches for poor kids, and Head Start, put together.

Which raises the question of what the adjective "charitable" should mean. I can see why a taxpayer's contribution to, say, the Salvation Army should be eligible for a charitable tax deduction. But why, exactly, should a contribution to the Guggenheim Museum or to Harvard Business School?

A while ago, New York's Lincoln Center held a fund-raising gala supported by the charitable contributions of hedge fund industry leaders, some of whom take home $1 billion a year. I may be missing something but this doesn't strike me as charity, either. Poor New Yorkers rarely attend concerts at Lincoln Center.

What portion of charitable giving actually goes to the poor? The Washington Post's Dylan Matthews looked into this, and the best he could come up with was a 2005 analysis by Google and Indiana University's Center for Philanthropy showing that even under the most generous assumptions only about a third of "charitable" donations were targeted to helping the poor.

At a time in our nation's history when the number of poor Americans continues to rise, when government doesn't have the money to do what's needed, and when America's very rich are richer than ever, this doesn't seem right.

If Congress ever gets around to revising the tax code, it might consider limiting the charitable deduction to real charities.

Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.




And as a thrilling follow up, let's discuss the "best banker in the country's" plans for the (our) future after he's paid off everyone he's injured in the past. (But not for more than pennies on the dollar, of course,  as he's a conservative ~ errr - or has that now truly come to be perceived (because he's rich and endorses gay marriage) as that generic epithet librul?.



JP Morgan Chase, the Foreign Corrupt Practice Act and the Corruption of America


By Robert Reich

The Justice Department has just obtained documents showing that JPMorgan Chase, Wall Street’s biggest bank, has been hiring the children of China’s ruling elite in order to secure “existing and potential business opportunities” from Chinese government-run companies. “You all know I have always been a big believer of the Sons and Daughters program,” says one JP Morgan executive in an email, because “it almost has a linear relationship” to winning assignments to advise Chinese companies. The documents even include spreadsheets that list the bank’s “track record” for converting hires into business deals.


It’s a serious offense. But let’s get real. How different is bribing China’s “princelings,” as they’re called there, from Wall Street’s ongoing program of hiring departing U.S. Treasury officials, presumably in order to grease the wheels of official Washington? Timothy Geithner, Obama’s first Treasury Secretary, is now president of the private-equity firm Warburg Pincus; Obama’s budget director Peter Orszag is now a top executive at Citigroup.

Or, for that matter, how different is what JP Morgan did in China from Wall Street’s habit of hiring the children of powerful American politicians? (I don’t mean to suggest Chelsea Clintongot her hedge-fund job at Avenue Capital LLC, where she worked from 2006 to 2009, on the basis of anything other than her financial talents.)


And how much worse is JP Morgan’s putative offense in China than the torrent of money JP Morgan and every other major Wall Street bank is pouring into the campaign coffers of American politicians — making the Street one of the major backers of Democrats as well as Republicans?

The Foreign Corrupt Practices Act, under which JP Morgan could be indicted for the favors it has bestowed in China, is quite strict. It prohibits American companies from paying money or offering anything of value to foreign officials for the purpose of “securing any improper advantage.” Hiring one of their children can certainly qualify as a gift, even without any direct benefit to the official.

JP Morgan couldn’t even defend itself by arguing it didn’t make any particular deal or get any specific advantage as a result of the hires. Under the Act, the gift doesn’t have to be linked to any particular benefit to the American firm as long as it’s intended to generate an advantage its competitors don’t enjoy.

Compared to this, corruption of American officials is a breeze. Consider, for example, Countrywide Financial’s generous “Friends of Angelo” lending program, named after its chief executive, Angelo R. Mozilo, that gave discounted mortgages to influential members of Congress and their staffs before the housing bubble burst. No criminal or civil charges have ever been filed related to these loans.

Even before the Supreme Court’s shameful 2010 “Citizens United” decision — equating corporations with human beings under the First Amendment, and thereby shielding much corporate political spending – Republican appointees to the Court had done everything they could to blunt anti-bribery laws in the United States. In 1999, in “United States v. Sun-Diamond Growers,” Justice Scalia, writing for the Court, interpreted an anti-bribery law so loosely as to allow corporations to give gifts to public officials unless the gifts are linked to specific policies.

We don’t even require that American corporations disclose to their own shareholders the largesse they bestow on our politicians. Last year around this time, when the Securities and Exchange Commission released its 2013 to-do list, it signaled it might formally propose a rule to require corporations to disclose their political spending. The idea had attracted more than 600,000 mostly favorable comments from the public, a record response for the agency.

But the idea mysteriously slipped off the 2014 agenda released last week, without explanation. Could it have anything to do with the fact that, soon after becoming SEC chair last April, Mary Jo White was pressed by Republican lawmakers to abandon the idea, which was fiercely opposed by business groups.

The Foreign Corrupt Practices Act is important, and JP Morgan should be nailed for bribing Chinese officials. But, if you’ll pardon me for asking, why isn’t there a Domestic Corrupt Practices Act?
Never before has so much U.S. corporate and Wall-Street money poured into our nation’s capital, as well as into our state capitals. Never before have so many Washington officials taken jobs in corporations, lobbying firms, trade associations, and on the Street immediately after leaving office. Our democracy is drowning in big money.

Corruption is corruption, and bribery is bribery, in whatever country or language it’s transacted in.



Who really holds the "bad guy" record?

These guys don't stand a chance.




Or as my friend over at Sardonicky reports:

Friday, December 13, 2013

On the Good Ship Lollipop


The Democrats are taking their We Suck Less 2012 campaign slogan to the next level

House Minority Leader Nancy Pelosi told Democratic House members at a meeting Thursday morning to “embrace the suck” and encouraged enough members to back the budget deal on the floor to allow passage, according to an attendee of the meeting.
“We need to get this off the table so we can go forward,” Pelosi told her members, according to someone inside the closed meeting of the caucus.
Pelosi pushed for including in the budget deal an extension of the unemployment benefits that are set to expire at the end of the month. While she expressed a continued unhappiness that there will be no vote on those benefits before the House heads home Friday, she said that it wasn’t worth holding up the deal.

Pelosi (net worth $35.5 million) is at least honest in admitting that more than a million chronically jobless people getting thrown to the curb in January along with all the mulchable Christmas trees are not worth holding up a deal that restores Pentagon funding and continues austerity for the vast majority of people. Not worth letting poor kids back into Head Start. Not worth protecting veterans' benefits.

Although she is, on the surface, loyal to Barack Obama's Bush war crime-enabling mantra of Look Forward, and MSNBC's corporate slogan of Lean Forward/don't question authority, and Obama Jobs Council tax-evading billionaire feminist Sheryl Sandberg's cloying Lean In, what Pelosi essentially just announced is that from here on out, the Dems will be Bending Over.

Embracing The Suck is also another way of saying if the vampire elites are determined to bite us, we should simply proffer our throats and get it over with. People who need suckers are the luckiest suckers in the world.


. . . So here's an idea. You know the guy who's getting all the bad press for his fake sign language "gibberish" during the Nelson Mandela death rally? Give him a job right here in America. Put him next to all the speechifying politicians, turn down the sound, and let him rip. His interpretations are guaranteed to be perfectly accurate. Because flailing and posturing is all they've got.

***

Naturally, the corporate media are falling all over themselves to praise the Stars of the Deal: Patty Murray and Paul Ryan and their improbable bipartisan romance. Gail Collins even thinks that the rapprochement between the Sadism Wing and the Masochism Wing of the Money Party represents a victory for female politicians.Read her column

It's a masterpiece of insider-y identity politics, perhaps unintentionally revealing how these jokers are as thick as thieves, merely pretending to hate each other's guts when they're in front of the cameras, flailing and posturing and appealing for money money money. My comment:

This column touched upon the main problem in the insular world of Washington: bipartisanship and camaraderie amongst politicians trump the common good of this country.
Nita Lowey and Paul Ryan are bosom buds? He calls her Mom and she calls him Naughty Boy?
But what's even sicker than these "frenemies" regaling each other with mutual high-fives, (and worse) when they overcome their phony gridlock for a minute, is who really pays for these bipartisan deals from hell. It's the unemployed. It's the poor. It's federal workers already suffering under a wage freeze being forced to contribute more of their wages to the pension plans that may or may not be there when they retire. It's Medicare providers' reimbursements being cut (translated into higher bills for health care "consumers.") It's veterans whose own benefits will be cut under chained CPI. It's airline travelers slapped with a surcharge and effectively having to foot the bill for being groped by the TSA.
Who doesn't pay? Rich people and the eternal war machine.
It's pretty sad that Patty Murray is being praised for being the patient adult in the room who lets the spoiled brats blather their way to exhaustion and still get most of what they want. I nominate Elizabeth Warren to take her place. Paul Ryan would be more than pooped when she got done with him. He'd be writhing on the floor, begging for mercy.

Charles Blow, meanwhile, again spoke up for the poor and blasted Republican callousness while pretty much giving the Suck-Lovers a pass. My response:

The GOP myth that people falling on hard times become trapped in a "culture of dependency" is as old as the bigoted hills from whence it sprang. From Reagan's welfare queen, to Paul Ryan's hammock for deadbeats, to David Brooks's latest column insinuating that jobless people lack a moral compass, the song remains the same.
What's really scary is the sangfroid with which some Democrats (including the president) greeted this latest bipartisan proposal that punishes the poor and rewards the rich. They see the partial and merely temporary reversal of the Sequester as "a step in the right direction." Of course, most Pentagon cuts have been restored, to be offset by reduced benefits to veterans, increased pension contributions from federal workers already suffering under an effective wage freeze, cuts to Medicare providers, and a surcharge on airline travelers who must now pay for the privilege of being groped by the TSA.
The rich, meanwhile, pay nothing. So much for the battle against extreme wealth inequality.
The nauseating self-congratulations by both corporate parties for their assault on struggling people is just the latest proof that these politicians live a world divorced from reality. They exist to serve somebody, all right, but that somebody is definitely not us.

If any one of them is demanding the restoration of food stamp cuts and low income heating assistance rather than trying to find the compromise between a machete and a scalpel, I haven't heard about it.


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2 comments:

TONY said...

There's a certain amount of 'authentic Frontier gibberish' coming out of America just now for sure.

Cirze said...

Yes, Tony.

But very purposed gibberish.

Love ya,

C