Tuesday, December 23, 2008

Revolting Developments

December 23, 2008, 4:30 p.m.

Greed and Corruption Ultimately Plant the Seeds
of Revolution

(Brought to you by FromDC2Iowa.blogspot.com*)

The Federal Reserve Chairman Ben Bernanke gives what is apparently $7.7 trillion of taxpayers' money to his friends in the banking business and then refuses to reveal who they are, how much he gave to each, what he got for the taxpayers in return, what that was worth, and what was accomplished with the gift. For sources see, Nicholas Johnson, "Forget Madoff, Focus on Bernanke," December 17, 2008.

The fellow behind what is perhaps the largest fraud in history, a $50 billion loss for investors in his Ponzi scheme, turns out to be Bernard Madoff, a former chairman of the NASDAQ Stock Market. The $50 billion fraud was never noticed by reviewing officials at the SEC.

On December 23 we learned that Darrel W. Dochow, the Treasury's Office of Thrift Supervision western regional director, who "played a central role in the savings-and-loan scandal of the 1980s, overriding a recommendation by federal bank examiners in San Francisco to seize Lincoln Savings, the giant savings and loan owned by Charles Keating [and] one of the biggest institutions to collapse," was not merely allowed to keep his job.

This year, in a repeat performance, he "allowed IndyMac Bank to receive $18 million from its parent company on May 9 but to book the money as having arrived on March 31 [thereby allowing] the backdated capital infusion . . . to plug a hole that its auditors had belatedly found . . . [without which] its reserves would have slipped below the minimum level that regulators require for classifying banks as well capitalized . . . two months before IndyMac Bancorp collapsed in July, at a cost of $8.9 billion to taxpayers."Edmund L. Andrews, "Irregularity Uncovered at IndyMac,"New York Times, December 23, 2008; and see Binyamin Appelbaum and Ellen Nakashima, "Regulator Let IndyMac Bank Falsify Report; Agency Didn't Enforce Its Rules, Inquiry Finds," Washington Post, December 23, 2008, p. A1.

We read of Congress' submission to the threats from Wall Street and acquiescence in the first $700 billion bailout, with little more questioning, attention to detail, or insistence on conditions than it gave to President Bush's insistence on the urgency of undertaking an unprovoked war on Iraq.

We saw the pictures of the CEOs of Detroit's Big Three auto manufacturers getting out of their private planes before walking into a committee room with their tin cups, asking (initially) for $25 billion of our money. Numerous senators and members of Congress supported the gift -- notwithstanding the absence of anything remotely resembling a business plan explaining how these billions (ultimately $17 billion from the president) could possibly reverse the 40% decline in automobile sales.

Meanwhile, neither the President, the Democratically controlled Congress, or the Obama Transition Team has done one lick to stem the rising tide that's sinking all boats: the unemployment (and underemployment) that results from massive layoffs, and the mortgage foreclosures that are turning former homeowners into the growing ranks of the homeless.

And since the bankers obviously aren't using our money, the taxpayers' money, to help the American people, what are they doing with it? Read on.
Banks that have their hands out in Washington this year were handing out multimillion-dollar rewards to their executives last year.

The 116 banks that so far have received taxpayer dollars to boost them through the economic crisis gave their top tier of executives nearly $1.6 billion in salaries, bonuses and other benefits in 2007, an Associated Press analysis found.

That amount, spread among the 600 highest paid bank executives, would cover the bailout money given to 53 of the banks that have shared the $188 billion that Washington has doled out in rescue packages so far. . . .

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, . . ..

Such bonuses amount to a bribe for executives "to get them to do the jobs for which they are well paid in the first place," said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services committee. . . .

The AP review . . . found that the average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.

Among other findings:

- Lloyd Blankfein, president and chief executive of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million. . . .

It received $10 billion in taxpayer money on Oct. 28 [2008]. . . .

- John A. Thain, chief executive of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. . . .

Like Goldman, Merrill tapped taxpayers for $10 billion on Oct. 28.

The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Asset Relief Program, a law designed to buy bad mortgages and other troubled assets. . . .

The program . . . did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution. . . .

At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said.

Goldman Sachs, paying as much as $233,000 for an executive's car and driver, told its shareholders that financial counseling and chauffeurs were needed so executives would have more time to focus on their jobs.

JPMorgan Chase chairman James Dimon ran up a $211,182 tab for private jet travel last year when his family lived in Chicago and he was commuting to New York. The company received $25 billion in bailout funds. . . .

[Rep. Brad Sherman, D-Calif.] wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds.

"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.
Frank Bass and Rita Beamish, "AP study finds $1.6B went to bailed-out bank execs," Associated Press, December 22, 2008, 10:06 a.m. EST.

So what's my point with all this?

It is that there are limits to how much greed and corruption -- or width of the gap between the rich and the rest of us -- any nation's people will accept before they resort to measures other than free speech to vent their frustration.

This past April 2008, before the seriousness of the last four months' global economic collapse was widely comprehended, I began writing a series of blog essays that ultimately became Part IX of my new book, Are We There Yet? Reflections on Politics in America.

Here are some excerpts from one of the first entries on April 12.
Increasing income disparity, despair. . . I am not a conspiratorial theorist, nor am I charging that anyone truly desires to turn the United States into a third world country, in which the top 1% of super rich rule over a 90% in abject poverty. All I would observe is that what is happening -- as a result of what will be spelled out in this series -- is not that different from what would be happening if that were the goal of government officials and the ruling elite.

[F]rom the late 1980s to the mid-2000s . . . inequality increased across the country. . . . No state has seen a significant decline in inequality during this period. . . .

On average, incomes have declined by 2.5 percent among the bottom fifth of families since the late 1990s, while increasing by 9.1 percent among the top fifth.
Pulling Apart: A State-by-State Analysis of Income Trends, Center on Budget and Policy Priorities, April 9, 2008.

And see, for Iowa data, David DeWitte, "Report finds income gap growing in Iowa," GazetteOnline, April 9, 2008, 11:40 a.m. ("The income gap between rich and poor is growing faster in Iowa than in most other states, according to a new report, which found a 49.3 percent average income growth in the wealthiest Iowa households over the past two decades. . . .")

. . . and Revolution. I recall reading many years ago -- where it was I would have no way of recalling now -- that there is a rough mathematical formula for predicting the point at which a growing income disparity will ultimately produce a revolution.

No, I don't think we're yet there in the United States.

But I am one of those who thinks Senator Obama was right when he said, "Lately, there has been a little, typical sort of political flare-up because I said something that everybody knows is true, which is that there are a whole bunch of folks in small towns in Pennsylvania, in towns right here in Indiana, in my home town in Illinois who are bitter. . . . They are angry. . . ." Perry Bacon Jr. and Shailagh Murray,"'Bitter' Is a Hard Pill For Obama to Swallow; He Stands by Sentiment as Clinton Pounces," Washington Post, April 13, 2008, p. A6. . . .

It's reminiscent of Ben Stein's story about his visit with Warren Buffett.

Buffett, one of the nation's -- if not the world's -- wealthiest men, had just completed a study of the relative tax rates paid by his secretaries and clerks compared with his own.

It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. . . . “How can this be fair?” he asked . . ..

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
Ben Stein, "In Class Warfare, Guess Which Class Is Winning," New York Times, November 26, 2006.

Those who refuse to acknowledge what's happening in America [do] little to assuage the anger of those on the losing side of this warfare.

And when that anger is permitted to seethe long enough the news from elsewhere can serve as a reminder of the limits that ultimately come to constrain the greed of oppressive governments and the super rich elite.

Barbara J. Fraser, "As Economy Grows, Income Disparity in Latin America Widens," Catholic News Service, August 3, 2007 ("a two-day general strike in the region was called to protest government economic policies. . . . The incident was one of many around Peru in mid-July, as teachers, farmers and others took their discontent to the streets . . .. Despite six years of steady economic growth, mainly from the export of minerals such as gold and copper, most Peruvians, especially those in rural areas, say they are not feeling the benefits.")

Thu-Trang Tran, "A new peasant revolution – is China learning from its past?" Inside Asia, June 1, 2006 ("Although the Chinese government may not wish to confront nor discuss the social unrest and violence of the Cultural Revolution, it seems the government is wary of history repeating itself. The government is concerned about the simmering social tension resulting from the widening wealth gap as the giant economy powers its way to the top spot.")

Associated Press, "Egypt: American freelance photojournalist and translator detained while covering riots," International Herald Tribune, April 10, 2008 ("Thousands of Egyptians angry over high food prices and low wages have been rioting this week in Mahallah, a Nile Delta city that is home to the Middle East's largest textile factory. Rising prices have struck hard in Egypt, a U.S. ally where 40 percent of the people live in or near poverty.")
. . .

We need to take the impact of our economy and governmental policies on ordinary Americans much more seriously than I sense our leaders and media are willing to do. Why? For starters, because I think it is the decent, just and humane thing to do.

But also for all the reasons I have laid out here . . ..
While I can't really say I'm surprised that America is where it is today after the last four months, I don't mean to leave the impression that when I wrote the series in April I had anticipated the economic collapse would occur when it did.

And I still believe as I wrote in April with regard to imminent revolution, "No, I don't think we're yet there in the United States."

But I've read a blog entry today in "The Hal Turner Show" that causes me concern, one that we may look back upon as among the first tiny tremors that should have alerted us to the earthquake to come, alerted us to the reality that what greed and corruption may be bringing us is something far worse than the mere statistics on unemployment and the homeless -- as awful and heart-wrenching as they may be.

Please understand that what follows, with some of the expletives deleted, was neither written nor endorsed by me. I am not personally urging the action suggested. Nor do I believe, today, that it represents a real threat to bankers or our country. I do think it is worth reproducing, comment, and concern.

December 21, 2008
$1.6 Billion of bank bailout money went to Executive bonuses, stock options and Country Club memberships! It's time to start kicking asses - LITERALLY

Washington, DC -- The government's General Account Office reports that $1.6 Billion of the taxpayer bailout money given to banks, has been spent on executive bonuses, stock options and country club memberships!

This grotesque and reprehensible mis-use of our hard-earned tax money has caused me to blow a gasket in anger. Who the hell do these rich banker f**ks think they are to use our tax money in such a way after they literally BEGGED us for help, claiming their banks would go broke without it?

The government reports that 600 banking executives got the money. If I had my way, I would ask 600 of my fellow taxpayers to walk up to each of those 600 bankers and punch the living s**t out of them wherever they could be found.

I wouldn't care if they were in their offices, walking on the street or at their homes in front of their wives and kids. These scumbags deserve a physical beating. They deserve to be hit in the face with a baseball bat.

I gotta tell ya, I'm REALLY pissed. So pissed that I will be researching the home addresses of these particular 600 people and will release those addresses publicly.

I wonder if I can incite enough anger against these bastards that folks just might go out and hurt them? It might be an interesting thing to try. I think it is worth a shot!

WARNING TO BANKING EXECUTIVES: If you do not return the bonuses, stock options and country club memberships bought with taxpayer bailout money, YOUR NAME AND ADDRESS will be made public in a manner designed to "incite" a reaction by the public. (Special emphasis on the word "incite!)

You have until Friday, December 26, 2008 to return the money. There will be no negotiating, no obeying of court orders of protection, no way to prevent being dealt with harshly.

I don't care about your employment contracts, I don't care about your civil rights and I sure as s**t don't care about the law or the courts.

You guys have f****d this country for the last time. It's time for you to be paid back and I intend to see that you receive your payback.
(color and emphasis in original; this entry in the "Hal Turner Show" came to my attention from a reference in Karl Denninger's The Market Ticker, "To Our Government: You Must Act Now," December 23, 2008.)

Let us hope that those in the Congress and Executive Branch, banks, Wall Street, corporate board rooms, and CEO offices will take these concerns to heart -- from whatever source they may come to them.

Whatever you and I may think of
Thomas Jefferson's belief that a little revolution from time to time is a useful thing, I'm not convinced this is such a time for America. Nor am I convinced it's about to happen. I do think, however, that those who believe it's an impossible scenario are irresponsible gamblers.

* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.

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Anonymous said...
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Anonymous said...

Wonder if this report is of interest to the conversation:

From the New Middle Ages to a New Dark Age: The Decline of the State and U.S. Strategy

From the New Middle Ages

Discussion includes issues of wealth gap, the state's struggle to govern effectively or even find a relevant identity, etc.

The report was cited in Nathan Freier's more recent work "Known Unknowns"

Known Unknowns