Saturday, March 28, 2009

Get Your Populist Rage Here!

This long-overdue outburst of populist rage could mark a decisive shift in Americans' attitudes toward income inequality. It could also prove temporary, just another populist crest in a long cycle: Revulsion at economic injustice has historically been followed by variants of the "greed is good" credo. But it would be a mistake for Obama to dismiss the current outrage as ephemeral, or as the uninformed ranting of a mob.
I can never resist an article that starts like this:
The peasants are storming the Bastille. The AIG bonuses were a "let them eat cake" moment, and the Ancien Régime is trembling in its gated mansions. The American people are erupting in rage and the racket is so loud that Washington can't tune them out. You know politicians are hearing it from their constituencies when senators start hinting that disgraced businessmen may want to consider emulating their Japanese counterparts and commit suicide. Even Republicans, who normally react to any criticism of profit as if they had been given a lifetime subscription to Pravda, have been forced to climb aboard the Outrage Express: 85 GOP congressmen voted for the House bill imposing a 90 percent tax on bonuses paid by any company that receives federal bailout money. In these parlous times, any entertainment is welcome. It provides a dollop of solace to watch the party of Crony Capitalism flailing as its Joe Six-Pack base turns on the Masters of the Universe whom they are supposed to emulate. The right's brain trust is yelling that the tax is a bill of attainder that will scare off "the investor class," but GOP politicians, facing pitchfork-waving mobs who want to string up that "investor class," have stopped following orders. The pearl of Alfred E. Neumann wisdom from the right, priceless in its political tone-deafness, is the repeated assertion that bonuses must be paid to retain "the best and brightest" executives. The best and brightest? Would that be the frauds and mountebanks who made gazillions of dollars on three-card-monte credit default swaps that destroyed the U.S. economy? For Americans who are warming themselves by burning their worthless 401Ks, like the starving artists at the beginning of Puccini's "La Boheme," the idea of rewarding these geniuses is like giving a raise to the navigator on the Titanic. However, populism never broke out of its rural base. And powerful counter-narratives appeared to justify the extreme income inequality generated by capitalism. Social Darwinism, whose motto was "survival of the fittest," held that only the fittest survived. Society, like Tennyson's nature, was "red in tooth and claw," and those who failed to prosper were simply weak and unworthy. Social Darwinism's optimistic counterpart, the Horatio Alger myth, insisted that anybody, no matter how modest his or her origins, could succeed if they worked hard enough. The capitalist ship righted itself. The Progressives of the early 20th century represented less of a threat to the established order than the Populists. As optimistic nationalists who believed in gradual reform, their position was epitomized by Teddy Roosevelt, who wrote, "Our objection to a given corporation must not be that it is big, but that it behaves badly." Post-World War I prosperity led to the rabidly pro-business culture of the 1920s. Bruce Barton's best-selling "The Man Nobody Knows" pictured Jesus Christ as a business executive. Calvin Coolidge demanded "stability" from the government, meaning that it should not interfere with business in any way. "Brains are wealth," Coolidge declaimed, "and wealth is the chief end of man." Income inequality widened again. But the collapse of the financial markets in 1929, which took the country down with it into the Great Depression, spurred another revolt against unregulated capitalism. Prodded from the left by a revived Socialist Party, empowered labor unions and Louisiana populist Huey Long, FDR faced down conservative objections and created the great institutions of the New Deal: Social Security, bank regulation, the National Labor Relations Board, more control of the stock market and insured deposits. Then, as now, conservatives screamed that liberals were destroying the free market. . . . This individualist ethos was the engine of tremendous creativity and helped make American-style capitalism the most potent economic force in human history. In turn, the wealth generated by American capitalism raised enough boats so that only a few radicals or malcontents dissented from the consensus. Any potential populist discontent at economic inequity was adroitly redirected by GOP operatives like Karl Rove into the culture wars, a process described by Thomas Frank in What's the Matter With Kansas?, which argued Republicans have used God, guns and gays to keep heartland populists supporting GOP policies that actually hurt them. Meanwhile, conservatives have continued to proclaim Social Darwinist precepts. "In America," said right-wing jurist Robert Bork, "the 'rich' are overwhelmingly people - entrepreneurs, small businessmen, corporate executives, doctors, lawyers, etc. - who have gained their higher incomes through intelligence, imagination and hard work." (Bork might like to read Malcolm Gladwell's Outliers, which argues success and wealth in America are the result of social currents and luck more than individual intelligence and hard work. It has been the top-selling new nonfiction book for most of this year.) But if Americans have largely accepted such rationalizations for uncontrolled capitalism, they have always been troubled by doubts. They have been quiescently aware that Social Darwinism is a profoundly amoral (and, ironically, un-Christian) doctrine, and that the Horatio Alger myth is like a cheesy Hollywood movie with a happy ending: inspiring but not a portrait of reality. That slumbering awareness comes to life whenever the system breaks down. Which brings us to today. Americans are being forced to come to terms with the fact that our great wealth-generating system has become rotten to the core. Confronted with the terrifying reality that they may never again be as well off as they were before, middle-class Americans have had enough. The outrage over the AIG bonuses is just the tip of the iceberg. As Americans learn more about the rigged system that has been gamed by insiders for years, they are beginning to demand a fundamental change in that system. What would have seemed like wild-eyed radicalism just last year is coming to Main Street. . . . Both political parties are responsible for this corrupt system. But two Republican administrations deserve special mention. By claiming that "government is the problem" and encouraging extreme individualism, Ronald Reagan undercut Washington's moral authority and hence its ability to rein in buccaneer capitalism. George W. Bush practiced what Reagan (mostly) only preached: He simply abandoned regulation and abdicated to business. His tax cuts were responsible for the greatest transfer of wealth to a tiny fraction of a population in human history. Just as in the Gilded Age, a corrupt government and predatory Big Business came together to loot the country. In 2005, the top 1 percent of Americans made almost 22 percent of the nation's reported income, and the top 10 percent made half of it. Things get even more outrageous when you compare the average compensation earned by big executives with that earned by everyone else. In 2007, the average S&P 500 CEO made 344 times what an average worker made. The top 50 investment fund managers made 19,000 times more than the average worker.
Read the rest of this fine essay here. Matt Taibbi teaches us how to properly empathize with the badly-taken-advantage-of AIG execs.
Like a lot of people, I read Wednesday's New York Times editorial by former AIG Financial Products employee Jake DeSantis, whose resignation letter basically asks us all to reconsider our anger toward the poor overworked employees of his unit. DeSantis has a few major points. They include: 1) I had nothing to do with my boss Joe Cassano's toxic credit default swaps portfolio, and only a handful of people in our unit did; 2) I didn't even know anything about them; 3) I could have left AIG for a better job several times last year; 4) but I didn't, staying out of a sense of duty to my poor, beleaguered firm, only to find out in the end that; 5) I would be betrayed by AIG senior management, who promised we would be rewarded for staying, but then went back on their word when they folded in highly cowardly fashion in the face of an angry and stupid populist mob. I have a few responses to those points. They are 1) Bullshit; 2) bullshit; 3) bullshit, plus of course; 4) bullshit. Lastly, there is 5) Boo-Fucking-Hoo. You dog. AIGFP only had 377 employees. Those 400-odd folks received almost $3.5 billion in compensation in the last seven years, a very large part of that money coming from the sale of credit default protection. Doing the math, that averages out to over $9 million of compensation per person. Ask yourself this question: If your company made that much money, and the boss of the unit made almost $280 million in just a few years, exactly how likely is it that you wouldn't know where that money was coming from? Are we supposed to believe that Jake DeSantis knew nothing about Joe Cassano's CDS deals? If your boss and the top guys in your firm were all making a killing selling anything at all - whether it was rubber kayaks, generic Levitra or credit default swaps - you really wouldn't bother to find out what that thing they were selling was? You'd really just mind your own business, sit at your cubicle and put your faith in the guys up top to fill you in if there was something you needed to know? This would be a believable claim for an employee of some other wing of AIG, a company with well over 100,000 employees. But DeSantis works for tiny, 377-person AIGFP, a unit that had only two offices - one in London and one in Greenwich, Conn. And we're talking about financial professionals, the most shameless group of tirelessly envious gossips ever to walk the face of the earth. The likelihood that Cassano would pull in $280 million for himself, and his equally greedy, hopelessly jealous employees wouldn't know not only exactly how he made that money but every last ugly detail about his life - from what skank he's sleeping with to what side of his trousers he hangs on - is almost zero. I know plenty of people who work in this world, and I've met very few who didn't hate with every cell in their bodies anyone in their own companies who made more money than they did or got bigger bonuses at Christmastime. Gossiping about each others' bonuses, and bitching about each others' compensation, is the national pastime for these people. So forgive me if I don't buy this story that poor Jake and his buddies didn't know about Cassano's CDS business. Also, there's this: let's just say, Jake, that you're telling the truth, that you don't know anything about this toxic portfolio. If that's the case, then why the fuck does anyone need to retain you at an exorbitant salary to help unwind that very portfolio? If these transactions aren't and never were your expertise, then where the hell is your value here? When I spoke to Christine Pretto, the AIG spokeswoman, and asked about those bonuses, she said that AIG needed to retain people like you in order to take advantage of your "knowledge of these transactions." So if you don't have knowledge of these transactions, what are you being paid for? Your winning attitude? Then there's the matter of Jake's other job offers. About that: It was apparent as early as last February that Cassano had basically destroyed not only the unit but perhaps AIG itself. The company announced over $11 billion in losses around that time. If I'm Jake DeSantis, and I'm really innocent, I'm looking for a job that very instant. And I'm taking the first good job anyone offers me. Because by then I'd have realized that I was working for the latest version of Enron. That the man I've been working for the last six or seven years has turned out to be one of the most irresponsible Wall Street villains of all time, a man who single-handedly destroyed the 18th-largest company in the world. If I'm Jake DeSantis, I'm quitting out of moral disgust, because I don't want to be associated with this kind of behavior. The only reason I'd stay is if I didn't have a choice. Which I feel sure is what happened here. If Jake DeSantis didn't take advantage of an opportunity to get a better job elsewhere with a company that didn't hide billions in losses and make $500 billion bets with money they didn't have, that's his fucking problem. The notion that I the taxpayer have to pay this asshole a million-dollar bonus because he turned down a better job at a less-guilty company is repugnant to begin with; the notion that he stayed at AIGFP because he expected me to pay him this bonus makes me hate him even more. But it's all moot, because I feel quite sure it's a lie. As one trader for another firm told me not long ago when I asked what he thought about the need to pay these "retention bonuses" to these "valued employees" at AIGFP: "Yeah, right. Who would hire these guys? They'd stay for a dollar if you offered it to them, much less a million." I mean, half of Wall Street is unemployed right now. There are plenty of unemployed traders out there whose resumes don't include such entries as "Worked for years at small unit of AIG that helped destroy the universe; throughout that time was completely ignorant of burgeoning global disaster unfolding 5 feet from my desk." The idea that other companies would be so eager to pass over the seas of truly innocent available people in order to scoop up some still-employed veteran of AIGFP - and that they would be so enthusiastic in their pursuit of said AIGFP employees that AIG would need to pay those AIGFP folks million-plus retention bonuses to get them to stay - is so ludicrous it almost defies comment. Show me, anywhere, the Wall Street firm that's willing right now to spend more than a million dollars poaching still-employed midlevel executives like DeSantis, when they can just put an ad in the paper and have 500 recently unemployed CEOs begging for work at almost any salary in five minutes. So the idea that the rest of Wall Street is breaking down AIGFP's doors to lavish its idiot personnel with million-dollar offers is just utterly preposterous. The fact that DeSantis expects us to believe this is insulting in itself. Also, remember, DeSantis until this year was probably the recipient of performance bonuses. This year, obviously, there was no performance, so AIG doled out these "retention" bonuses instead. And the value of these retention bonuses is seriously in question if AIG never really needed to pay extra to retain this personnel, which I personally believe they didn't. I personally believe these "retention" bonuses were a ruse cooked up by management to suck a few more dollars out of the company before it sank to the ocean bottom. So if DeSantis is "owed" these bonuses, it's only in the sense that someone up above agreed to cheat the shareholders by paying these bonuses when they weren't really necessary; they weren't "earned" in any real sense. But all of this is really secondary to the tone of DeSantis' letter. He acts like he's a victim because he didn't get to keep his after-tax bonus of $742,006.40 in the middle of a global depression. And he really loses his fucking mind when he writes: "None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house." First of all, Jake, you asshole, no plumber in the world gets paid a $740,000 bonus, over and above his salary, just to keep plumbing. Second, try living on a plumber's salary before you even think about comparing yourself to one; you're inviting a pitchfork in the gut by even thinking along those lines. Third, Jake, if you were a plumber, and the electrician burned the house down -- well, guess what? If you and that electrician worked for the same company, you actually wouldn't get paid for that job. Out in the real world, when your company burns a house down, you're not getting paid by that client. It's only on Wall Street, where the every-man-for-himself ethos is built into an insanely selfish and greed-addled compensation system, that people like you expect to get paid in a bubble - only there do people expect their performance bonuses no matter how much money the shareholders lose overall, no matter how many people get laid off after the hostile takeover, no matter how ill-considered the mortgages lent out by your division were. You expect that money because you think it's owed to you. But what money? The money is gone. Your boss, if not you, set it all afire. You want the money, but where exactly do you think it's coming from? Do you just not understand that that money now would have to come out of someone else's pocket? That it would have to come from middle-class taxpayers, real plumbers, people who didn't make millions over the years in equity and commodity trading? Here's the real problem with people like Jake DeSantis. Throughout this whole period, they never were able to connect the dots - to grasp the fact that when they skimmed a million here or a million there off the great rivers of capital that flowed through their offices, that that money came from somewhere, from someone. To them, it wasn't someone else's money, it was just money, and why shouldn't they have it? It's remarkable that when DeSantis, in his letter, touts the reason he deserves his high compensation, all he can talk about is how much money he made: "The profitability of the businesses with which I was associated clearly supported my compensation." For a guy like this, his worth as a human being is wrapped up in buying a bag of beans for $10 and selling it for $11. He states this like it's a law of nature: he was a good equities-and-commodities trader, therefore he should make a lot of money. Only a person with a habitually overinflated sense of self-worth could think he deserves a $700,000 retention bonus, even if it has to be paid by taxpayers, when in reality no one "deserves" that much money. It may be that some people do get paid that much, but most people who make that much money have enough sense to realize their cushy lifestyles are an accident of fate, of birth, of class, not something that is "supported" by some unwritten natural law of compensation. Hey Jake, it's not like you were curing cancer. You were a fucking commodities trader. Thanks to a completely insane, horribly skewed set of societal values that puts a premium on greed and severely undervalues selflessness, communal spirit and intellectualism - values that make millionaires out of people like you and leave teachers and nurses, the people who raise your kids and clean your parents' bedpans, comparatively penniless - you made a lot of money.
Read the rest of this mind-clearing rant here. Suzan _______________________


Dr. Know said...


Phil said...

I need a fucking cigarette and a moist towelette.
All that smack down and not a single expletive.


Phil said...

OK, Bullshit doesn't count in my book as an expletive, it is a necessary tool.