Throughout the IBM Pension heist, Ellen E. Schultz, a Pulitzer Prize winning investigative reporter with the Wall Street Journal, exposed IBM's and other companies shenanigans that have cost retirees millions and millions of dollars, while enriching corporate executives.
Ms. Schultz has just published a book that every IBMer should read: Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of American Workers. Many IBMers are aware of the "cash balance heist" of 1999. However, IBM has been stealing money from the pension plan dating back to 1991, well before the Gerstner era.
I could not put this book down and read it in two evenings. I then ordered three copies to give to coworkers.
This book explains in plain English how companies manipulate pension plans for their profit to the detriment of the plan participants and retired pensioners. Truly an eye opener with real life examples from Caterpillar, ATT, Verizon, US Steel, and on and on. The author even lists some of the court cases brought by pensioners for those who want to dig a little deeper.
Definitely worth a read.
But as someone surely said before us, for every hello there’s a goodbye, and in this case it’s goodbye to Samuel Palmisano, who’s stepping down as chief executive of IBM after nearly a decade. The company said he’ll retire when Rometty takes over the CEO’s spot on January 1, but will remain as chairman, apparently indefinitely. Palmisano has had a good run, and there’s something to be said for quitting while he’s ahead. Yet after leafing through the company’s proxy and other filings, we couldn’t help but notice a few things about Palmisano’s timing.
For one thing, he’s retiring not long after he turned 60. That’s fortunate, because it seems to make him eligible to receive payouts of any stock options and restricted stock units (including performance-linked RSUs) that are at least a year old and haven’t already vested. In fact, he conveniently became eligible for that cash-out upon turning 60 with 15 years of service at IBM. (The 15-year hurdle is no problem: Palmisano started at IBM in 1973, when he was in his early 20s.)
The board could nix the payout, as it turns out. But assuming it doesn’t, this provision means big bucks for Palmisano. The proxy estimated the value of his unvested stock options at $47 million, and his unvested performance-restricted stock units at $18.7 million, as of December 31 last year. IBM’s shares have only gone up since then, and additional equity grants have passed the one-year cut-off, so we wouldn’t be at all surprised to learn that they’re worth even more now.
This retirement trigger, incidentally, is designed to “ensure that the interests of IBM’s senior leaders are aligned with the Company’s long-term interests as they approach retirement…” We’re not quite sure how it aligns an executive’s interest with the company’s long-term interests if he can cash out his equity on retirement, which after all is something he has a lot of control over, but presumably the board put more thought into this than we have. ...
Although the equity acceleration is the biggest chunk of Palmisano’s potential retirement payout, the proxy lists more, including $1.5 million a year for life under IBM’s Supplemental Executive Retention Plan (which essentially functions as an additional pension plan; the total present value value at year-end was about $20 million). He’d also get $4.9 million a year in cash for five years, and $6.3 million a year for five years in IBM shares, from the company’s deferred compensation program, again calculated as of December 31. (His total deferred-comp balance then was $56.1 million.) ...
Then there’s Palmisano’s pension: As of December 31, it was worth some $29.8 million, or about $3.2 million a year for life. ...
Our rough estimate for the total present value of Palmisano’s exit package: a little over $170 million. And that’s ignoring the fact that most of the underlying calculations date back almost a year, to December 31. It’s undoubtedly higher now. (IBM also doesn’t make it easy to add up: The usual “payments upon termination” table in the proxy confusingly lists some figures as annual amounts and some figures as lump-sum or present-value amounts, which only becomes clear in the footnotes. To get the total, you have to look at a handful of separate tables.)
In response, the usual suspects have rolled out some familiar arguments: the data are flawed (they aren’t); the rich are an ever-changing group (not so); and so on. The most popular argument right now seems, however, to be the claim that we may not be a middle-class society, but we’re still an upper-middle-class society, in which a broad class of highly educated workers, who have the skills to compete in the modern world, is doing very well.
It’s a nice story, and a lot less disturbing than the picture of a nation in which a much smaller group of rich people is becoming increasingly dominant. But it’s not true.
Workers with college degrees have indeed, on average, done better than workers without, and the gap has generally widened over time. But highly educated Americans have by no means been immune to income stagnation and growing economic insecurity. Wage gains for most college-educated workers have been unimpressive (and nonexistent since 2000), while even the well-educated can no longer count on getting jobs with good benefits. In particular, these days workers with a college degree but no further degrees are less likely to get workplace health coverage than workers with only a high school degree were in 1979.
So who is getting the big gains? A very small, wealthy minority.
The budget office report tells us that essentially all of the upward redistribution of income away from the bottom 80 percent has gone to the highest-income 1 percent of Americans. That is, the protesters who portray themselves as representing the interests of the 99 percent have it basically right, and the pundits solemnly assuring them that it’s really about education, not the gains of a small elite, have it completely wrong.
If anything, the protesters are setting the cutoff too low. The recent budget office report doesn’t look inside the top 1 percent, but an earlier report, which only went up to 2005, found that almost two-thirds of the rising share of the top percentile in income actually went to the top 0.1 percent — the richest thousandth of Americans, who saw their real incomes rise more than 400 percent over the period from 1979 to 2005.
Who’s in that top 0.1 percent? Are they heroic entrepreneurs creating jobs? No, for the most part, they’re corporate executives. Recent research shows that around 60 percent of the top 0.1 percent either are executives in nonfinancial companies or make their money in finance, i.e., Wall Street broadly defined. Add in lawyers and people in real estate, and we’re talking about more than 70 percent of the lucky one-thousandth.
I came in under an acquisition as a junior sales 2 years ago and have this year been thrown to the wolves. I overachieved in 2010 to receive my lovely blue badge but this year after restructuring have been left with next to no products to sell and a very poor territory to cover. With "Organizational restructuring" I have been advised to look for a new role however nothing is available what I actually want to do. I'm probably still going to do 75% of my number this year despite everything which is better than a lot of "Settled" IBMers I know.
I've searched through previous threads and have read ol pops' list of what to do when leaving however this is more about retirement in the US. I am far from that stage and also based in the UK. Is there a thread or document somewhere that can offer me advice?
What is the process come year end when I will presumably be told that my role no longer exists? I have had no formal dialogue or notification that this will be happening. To be honest I would like to do something completely different and take a break from sales yet maintain some kind of decent salary. IBM has sucked the lifeblood out of me.
Do they need to put anything in writing before year end? Am I entitled to claim redundancy or look at a constructive dismissal case? Should I just sit tight and hope they pay me to leave or search like hell internally and externally? Any advice is very much appreciated.
2) If you came in with an acquisition, insist that your IBM service time for any departure benefits be counted from when you started with the acquired.
3) If you would like to leave sales, then you need to figure out what you would like to do and how ready you are to do it.
If your resume doesn't match with what you want to do, does it match with some other role at a company where you could eventually transition to what you want?
Would your education and experience be suitable for an entry position in the field of your interest, so you could work your way back up?
Can you afford some years of lower income while that happens?
Would you take a sales job so you could learn your target profession on the side or in a second job or as a volunteer for a nonprofit organization?
In order to ferret out the smart capital allocators and shame those who fritter away shareholder capital, I've begun to track newly announced share repurchase programs. Today, it's the turn of IBM. ...
IBM's announcement contains no reference to price or intrinsic value. That's a red flag because the relationship between price paid and intrinsic value is the only factor that determines whether the share repurchases are compounding or destroying shareholder wealth. How are we to know that IBM's management understands this (or whether they care)? Just how cheap (or expensive) are the shares right now? Based on price-to-earnings, IBM trades in the middle of a group with four of its competitors...
IBM's price-to-earnings multiple is in the middle quintile relative to its industry peers and relative to the companies in the S&P 500, and in the upper half compared with its own five-year history. In that context, and at 13 times the next 12 months' estimated earnings, the shares don't look like any particular bargain. If you want to own a technology stalwart, Microsoft or Hewlett-Packard look like much more attractive choices -- compared to each of the three benchmarks we mentioned for IBM, both stocks are in the bottom quintile.
Inspired by Foshee’s golden handshake, we decided to dig into history and find out what the five biggest exit packages ever were worth. Although $90, $30.7 and $62 million may seem like a lot of money, it turns out that they are relatively modest figures when you look at what we discovered. The five CEOs listed below took home a staggering combined sum of nearly $2.6 billion. ...
The rest, for the most part, are to be classified as merely managers, or caretakers of their shareholders’ property. Yet they, inexplicably, are compensated as if they were visionaries. This is wrong. This is what the Occupy Wall Street crowd should be railing against. (See my previous column: Some Tips For The Simpletons of Occupy Wall Street).
So then, let my evisceration commence. The one to triumph in this year’s tournament for the most rapacious pillage of shareholder property is John H. Hammergren, chairman and CEO of McKesson Pharmaceuticals. His “compensation” which is doesn’t really capture the essence of his remuneration, was a mind blowing $131.2 million U.S. dollars. This number is obscene. It is just shy of 11% of the total $1.2 billion in net income for the entire company. The number is so offensive that my brain thought surely the reference had to be Japanese yen or some other currency. If we were talking 131.2 million yen that would be more reasonable–equivalent to around $1.7 million. That’s a good salary for a manager of 36,400 people. ...
Besides being a matter of greed, and this is also a moral issue and a matter of fairness. Questions to examine: How did this freight train get so out of control and what actions can stop, no, knock this insidious train off its track and watch it burn?
None of the corporate chieftains Forbes has recognized can pull off these shareholder heists alone. They need complicity. First of all there is the board of directors which, if not handpicked, is then at a minimum approved by the CEO. A subset of this august group is the compensation committee. Once they’re sharpened their pencils and put new batteries in their calculators, then they call up the compensation consulting firm. These guys specialize in designing incentives, long-term this, short-term that, stock options, retirement, supplemental retirement, non-qualified whatever. Blah, blah, blah, all part of the charade that must be acted out. At sunset the consultants produce a leather bound (if it’s not it should be for what it cost) treatise to justify the injustice of preparing the great king for induction to the highest-paid list.
The compensation committee, armed with this divine opinion, is safe from scrutiny. The shameless consultants can just pull their data base of all the other overpaid CEOs as their backup. The composition of most all boards’ of directors of S&P 100 companies goes something like this: CEOs of other big companies, retired CEOs of other big companies, and other. This “other” category includes a lot of talented, highly educated and successful people whose success was likely in fields that don’t pay a lot of money. Retired college professors, museum directors, retired politicians are examples.
Being on the board of an S&P 100 company may pay from $250,000 to $400,000 per year in cash, plus health insurance, and at least one board retreat with spouses for maybe 10 or 15 meetings per year. Good work if you can get it. A lot of these people may serve on two, three or more boards. Serving on a board or two is the difference between a ho-hum retirement and being able to easily put your grandkids through college and being able to comfortably travel the globe. Do they have any incentive to make waves? I think not.
The other CEO and ex-CEO directors will be soundly in favor of giant pay because they too want giant pay and every overpaid CEO is a great comparable for the consultants to continue perpetrating this pernicious cycle. Any director that is not an employee of the company is considered an “outside director.” This is a joke. There are so many CEOs sitting on each other’s boards that the concept of the “board of directors” structure as a system of checks and balances to management behavior has become a joke. It is a corporate aristocracy more likened to a large incestuous family whose inbreeding has finally decomposed what was once a mechanism for sound corporate governance.
My question is, how is that last month (December 2012) handled? Do I need to pick a plan now for that last month? Will I get a choice as the expiration approaches? Or do I get hit with some outrageous unsubsidized (COBRA) bill for December 2012?
I just got my 2012 enrollment packages yesterday, one for the regular plan, and one for TMP COBRA. The COBRA package had some statement about needing to pay unsubsidized rates when COBRA expired, but it wasn't clear about my choices.
Rather than call the ESC right away, I thought I'd ask here. That way, I'll get the right answer!!!! I'm sure lots of you were in my shoes. Thanks.
Because the retiree plans are grandfathered, I don't think we can change plans and choose from the PPA choices even if we want to. From what I understand, IBM could raise the retiree rates SKY HIGH and we would be stuck paying it. Nothing like a captive audience to prop up their retiree profit center.
I'm glad to read that many plans went down in cost this time.
My FHA access only plan (EPO for self only) went from $750.42 per month down to $737.95 - so very little change and less than others reporting reductions (again, assumed better reductions for those with older plans).
It's been a busy last couple of weeks at the CWA local as the union helps new hires get their feet on the ground. The positions they're filling once belonged to workers who took early buyouts and were off-shored to Manila and other foreign cities with the union's agreement. This, after US Airways filed bankruptcy in 2004 for the second time in two years. ...
"The union at that time made a diligent effort to be able to save and retain as much in the contract as we could faced with the economic times," said Hardy. The airline's part of the deal was to protect the remaining positions and eventually route all reservations calls made in the U.S. to U.S. call centers only. ...
Hardy said while as a union official she was pleased to see the jobs return to the U.S. and to Winston-Salem she believed customers on the other end of the phone line would be pleased, as well. "A lot of people when they were calling and getting outsourced you know immediately you've got an outsourced city,” she said. “The customer is going to see they're calling the United States and they're getting the United States."
Baby boomers are members of the first generation since the 1930s who will be worse off in their older years than their parents, says Teresa Ghilarducci, a retirement specialist and economics professor at the New School of Social Research in New York. "According to our projections, it looks like most middle-class workers, not just low-income workers but most middle-class workers, will be living at or near the poverty level in their old age," Ghilarducci said in an interview. "This is the first time since the Great Depression we are looking at poverty rates increasing among the elderly." ...
There are multiple reasons for reversals in gains in fighting elderly poverty, including the impact of the financial crisis on stock prices and interest rates, the end of many traditional defined-benefit pension plans which provided people with a guarantee of retirement income, and the bursting of the U.S. housing bubble. But the trend is in line with statistics showing that median household income fell last year to levels not seen since 1996. ...
Older Americans are already clinging to jobs at the highest rate since before Medicare - the federal health insurance plan for the elderly and disabled - was signed into law in 1965. According to Labor Department statistics in an EBRI report, 31.5 percent of Americans aged 65-69 were still in the workforce in 2010, compared to 21 percent in 1990. Of those aged 70-74, 18 percent were still working in 2010, up from 11 percent in 1990. Labor Department (BLS) statistics also show that the workforce of people 65 and older nearly doubled in the last 20 years, rising to 6.7 million in 2010. ...
Still, many seniors leave the workforce earlier than planned because of health problems or layoffs. And critics say there are simply too many obstacles to building adequate savings for retirement. "Rapidly rising healthcare costs are gobbling up everything," said Alicia Munnell, a veteran economist who heads the Center for Retirement Research at Boston College. Munnell notes that only about half of the private sector U.S. workforce is covered by retirement savings plans. But even among workers who have retirement accounts, along with stocks or stock market mutual fund investments, there is little confidence about building retirement nest eggs. ...
John Bogle, the 82-year-old founder of Vanguard Group, a mutual fund powerhouse, called the U.S. retirement security system a "real mess," saying it was in need of deep-rooted reforms. He also said the current average balance in Vanguard's 401(k) retirement savings plans was only about $26,000, and that rose to only about $60,000 for the median account of older people, far too little for anyone to build a retirement on. "We have to have people save more, we have to have corporations pay more," Bogle said.
We have seen where that course has taken IBM employees.
When Sam Palmisano became CEO in 2002 the IBM US employee population was 154,000. Now it is an estimated 98,000.
We saw resource actions tear through most business segments. Countless thousands were forced out in management initiated separations through the flawed PBC process. We saw employees that were ill targeted for dismissal. Older employees lost their value in the eyes of the executives and were pushed out the door.
Rometty, a champion of off shoring has led the charge on shifting work from the US to low cost and low wage countries. IBM workers, humiliated in being forced to train their offshore replacements, watched as their work moved to the Philippines, to India, to China, to Brazil and many other countries. The course Rometty took was to reject the expertise and value of IBM US employees, off shore the work they were doing and then fire them.
Workers outsourced to IBM from other companies fared no better. Whole IT departments were sold to IBM and IBM quickly transferred the knowledge to off shore workers and then terminated the US workers. IBM talks about hiring in the US, with tax payer money of course, but refuses to say how many of the new hires are L1 or H1b visa workers.
The Alliance@IBM CWA has always recommended a different course:
It is time to change course to one that values IBM employees and grows the US economy!
The way to do that is by organizing and joining the only organization that advocates and works in the interests of employees.
Please help us change course by joining today!
This message brought to you by the dues paying members of the Alliance@IBM CWA Local 1701.
You are also expected to be a "good employee" during the 30 day severance period including training your replacement and doing everything you can to insure that your departure will be as seamless as possible for IBM.
The process is you sign these documents, turn them in to your manager, the party who laid you off, and he submits it. If the manager decides you didn't comply, i.e. you were difficult, they can withhold the payment. So basically the "package" is a settlement payment from IBM for your agreement to their terms for being laid off. Furthermore, you won't get this payment until you have signed the documents and turned in your badge, cc, laptop, and anything else they request. They are not doing it out of concern for you. -anonymous-
Local 3640 President Vonda Hardy discussed the return of jobs in a TV interview in Winston-Salem. About half of the jobs will be at the airline's reservations center in Winston-Salem, and the other half at centers in Phoenix and Reno. "We are excited about the jobs coming back from Manila," said Vonda Hardy, president of CWA Local 3640. "It is a great, great day."
The jobs, once held by stateside US Airways agents who took early buyouts when the company was in bankruptcy, were offshored to Manila and other foreign cities. However, as stipulated in the union contracts, US Airways agreed to bring the jobs back to the United States by Nov. 1, 2011.
"We made a diligent effort to be able to save and retain as much protection for workers in the contract as we could, faced with the economic times," Hardy said.
CWA Chief of Staff Ron Collins, who oversees customer service issues, said, "This move shows that quality, professional customer service wins over low-road, low-wage, high-turnover operations every time. CWA is committed to building the customer service profession and we're pleased that US Airways is a partner in this effort."
Overall, CWA and the Teamsters represent more than 6,000 reservations and customer service employees at US Airways.
At an event in Winston-Salem with US Airways CEO Doug Parker to celebrate the returned jobs, Hardy said that bringing the jobs back will improve the quality of customer service in the United States. "There is a certain comfort to our customers when they call US Airways now; they know their call will be answered in one of our three U.S.-based centers," she said." -Alliance-
Massachusetts boasts the highest rate of insured residents at an estimated 95.1 percent of those younger than 65. The state enacted a law in 2006 mandating nearly every resident obtain health coverage, while offering free insurance to some with low incomes. Of the 20 highest insured rates nationwide, 14 of the counties were in the state.
Our employer-based health insurance system was a historical accident. Businesses began offering health benefits during World War II to attract workers during a government-imposed wage freeze, and the perk gradually became the primary form of coverage in the United States. ...
Ours is the only developed nation to deliver health coverage in this way. Most others offer public insurance plans or allow for tightly regulated individual policies sold by private companies. Ours is also the only nation where if you lose your job, your family can become uninsured. ...
Wal-Mart, for one, is coping with higher healthcare costs by reducing the number of its 1.4 million U.S. workers who qualify for coverage. New employees working fewer than 24 hours a week will no longer be insured. The company is also jacking up rates for everyone else, with annual premiums for full-time workers soaring about 36%. "The current healthcare system is unsustainable," said Greg Rossiter, a Wal-Mart spokesman. "Like all businesses, we're making choices we wish we didn't have to make."
"We're seeing health costs becoming a larger and larger expense item for companies," Rother told Siegel. And that poses a particular problem for firms "engaged in international trade, where they're competing against companies that do not have to bear that expense." "Because they're in countries where the government probably bears that expense," Siegel said. "Exactly, which is mostly all other countries," Rother said. ...
So what are the options for part-time workers without insurance? "I don't mean to be flip, but your best option would be to marry somebody who has good health coverage," he said. "Because if you don't, there are very few options. Under the Health Reform Act, you will be able to get affordable coverage, but that's not until 2014."
And records show the Huntsman family business, where GOP presidential candidate Jon Huntsman was once a top executive, received about $1 million. ...
Employer-sponsored health insurance for retirees has been shriveling for years, ever since companies were required to report their liability to investors. Democrats who wrote the new law wanted to encourage employers to keep offering coverage. Only about 6 percent of private companies currently provide such a benefit for early retirees, according to the nonpartisan Employee Benefit Research Institute.
But that still works out to more than 400,000 companies. Add state and local government agencies, as well as union plans, and the number swells. The Obama administration's subsidy program got so many applications it stopped accepting new ones after approving more than 6,000. It pays 80 percent of the claims amount for early retirees ages 55 to 64 whose care costs between $15,000 and $90,000.
In recommendations to the budget-cutting congressional "super committee" in September, President Barack Obama proposed two steps to offset rising military healthcare costs. He said Congress should impose a $200 annual fee on Tricare-for-Life, a health insurance plan for military retirees 65 and older that pays for most expenses not covered by the government's Medicare insurance plan for the elderly. The fee on Tricare-for-Life, which is now free, would then increase annually according to a cost of living adjustment. The White House estimated the proposal would save $6.7 billion in mandatory federal spending over 10 years. ...
Even before Obama and the U.S. Congress agreed in August to cut military spending by $450 billion over the next decade as part of a debt reduction deal, officials were warning that spiraling healthcare costs were becoming a problem. Care for another generation of warriors, those wounded, many grievously, in Iraq and Afghanistan, is expected to raise the burden further. The rising cost of the military healthcare system is "simply unsustainable," Defense Secretary Robert Gates said before he left office earlier this year.
A Congressional Budget Office analysis of the Ryan plan suggested that a voucher system would shift costs from the taxpayers to seniors over time, as the rising cost of health care outstrips the value of the voucher. Mr. Romney said the private plans would be required to offer coverage at least as good as Medicare's.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
The goal is to generate jobs and investment, but the offshore tax holiday was tried before, in 2004, and the lion’s share of the benefits went not to unemployed workers and their families but to corporate shareholders and executives. ...
The current rules for tax repatriation, as the process is called, are a thorn for U.S. firms that make money overseas. American companies face a 35 percent corporate income tax. Money earned offshore is taxed only by the country of origin until it is “repatriated” to the U.S., at which time an additional tax is levied to make up any difference and bring the rate to 35 percent.
The 2004 holiday allowed U.S. firms to bring their offshore profits back and pay a rate of only 5.25 percent.
“I want them to pay their taxes like the rest of us,” said Sen. Carl Levin, the Democrat from Michigan whose committee compiled a report in response to the push for a new tax holiday. “The rest of us don’t get a tax holiday.”
There are 27 million businesses in America, and almost 10,000 have foreign subsidiaries and can qualify for the tax break. But only 843 of these firms took advantage of the bargain tax rates set by the 2004 law, the IRS says. Those 843 companies brought around $362 billion home from overseas. More than half the benefits went to just 15 companies. And just five — Pfizer, Merck, Hewlett-Packard, Johnson & Johnson and IBM — retrieved $88 billion, a fourth of the funds returned. ...
Many firms used the “repatriated” money to launch stock buyback efforts, boosting the value of their shares and — via stock awards to senior managers — increasing executive compensation, rather than investing the money in new jobs or research and development, as the bill intended.
Because of the law’s lax safeguards, firms that took advantage of the tax break in 2004 “did not … significantly increase employment or research and development,” Dhammika Dharmapala, an expert on tax policy, and one of the authors of a National Bureau of Economic Research study of the 2004 holiday, told iWatch News. ...
Drug giant Pfizer, which repatriated the single largest chunk of cash — $37 billion — announced that it was laying off thousands of employees in 2005. Yet from 2004 through 2006, according to the Senate inquiry, Pfizer repurchased more than $17 billion of its stock and awarded its five most highly compensated executives with shares worth $30 million. ...
The 2004 tax break was advertised and sold as a one-time deal, but the affected firms correctly perceived that after a few years had passed they could demand another round of relief, and they have stockpiled hundreds of billions of dollars overseas in anticipation of the next holiday.
The lawyers promised an “armada” of other lawsuits in the next six months making discrimination claims in other regions of the country, as opposed to nationwide. “The case we are starting today is the first of many,” said Brad Seligman, one of the lead plaintiff lawyers. He added that the new lawsuits are “what we like to call Wal-Mart 2.0.”
In rejecting the earlier lawsuit, the Supreme Court found that the plaintiffs, who had sought back pay for as many as 1.5 million women nationwide, had failed to establish that the legal and factual issues involving all those women had enough in common to be examined as a single class. ...
The lawsuit describes Wal-Mart’s California region as being governed by a “good old boy philosophy” where job opportunities were not posted, but were passed along word-of-mouth, usually to men. One California regional vice president, for instance, suggested that women did not seek management positions because of their “family commitments,” the lawsuit says. A California district manager for Sam’s Club said he had paid a female employee less than a male counterpart because the male manager “supports his wife and two kids,” the lawsuit says.
The lawsuit suggests that such attitudes were pervasive companywide. At a 2004 meeting of district managers, for instance, Thomas Coughlin, then chief executive of Wal-Mart Stores, told the group that the key to their success was “single focus to get the job done.” “Women tend to be better at information processing,” he said, according to the lawsuit. “Men are better at focus single objective.”
It doesn’t get any more immoral than this. As the Securities and Exchange Commission civil complaint noted, in 2007, Citigroup exercised “significant influence” over choosing $500 million of the $1 billion worth of assets in the deal, and the global bank deliberately chose collateralized debt obligations, or C.D.O.’s, built from mortgage loans almost sure to fail. According to The Wall Street Journal, the S.E.C. complaint quoted one unnamed C.D.O. trader outside Citigroup as describing the portfolio as resembling something your dog leaves on your neighbor’s lawn. “The deal became largely worthless within months of its creation,” The Journal added. “As a result, about 15 hedge funds, investment managers and other firms that invested in the deal lost hundreds of millions of dollars, while Citigroup made $160 million in fees and trading profits.” ...
This gets to the core of why all the anti-Wall Street groups around the globe are resonating. I was in Tahrir Square in Cairo for the fall of Hosni Mubarak, and one of the most striking things to me about that demonstration was how apolitical it was. When I talked to Egyptians, it was clear that what animated their protest, first and foremost, was not a quest for democracy — although that was surely a huge factor. It was a quest for “justice.” Many Egyptians were convinced that they lived in a deeply unjust society where the game had been rigged by the Mubarak family and its crony capitalists. Egypt shows what happens when a country adopts free-market capitalism without developing real rule of law and institutions.
But, then, what happened to us? Our financial industry has grown so large and rich it has corrupted our real institutions through political donations. As Senator Richard Durbin, an Illinois Democrat, bluntly said in a 2009 radio interview, despite having caused this crisis, these same financial firms “are still the most powerful lobby on Capitol Hill. And they, frankly, own the place.”
Our Congress today is a forum for legalized bribery. One consumer group using information from Opensecrets.org calculates that the financial services industry, including real estate, spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street. ...
Capitalism and free markets are the best engines for generating growth and relieving poverty — provided they are balanced with meaningful transparency, regulation and oversight. We lost that balance in the last decade. If we don’t get it back — and there is now a tidal wave of money resisting that — we will have another crisis. And, if that happens, the cry for justice could turn ugly. Free advice to the financial services industry: Stick to being bulls. Stop being pigs.
Wall Street financiers were always well paid. In the last three decades their representation at the very top of the income pyramid has grown by leaps and bounds. A recent study by two academic economists and a Treasury Department analyst found that financiers — bankers, fund managers and the like — account for about 14 percent of the taxpayers in the top percentile of income distribution. There are more non-financial business executives than bankers in this wealthiest slice of income. But their share of this slice fell over the past quarter century, while the financiers’ share grew substantially. Today financiers account for 16 percent of the income of the top percentile, up from 9 percent in 1979. Their share is now almost as big as that of lawyers and doctors combined.
It’s hard to believe today, but from the 1960s to about 1980 workers in finance made little more than those in the rest of the private sector, on average. Then, things changed: from the ’80s on, administrations from both parties embraced deregulation, undoing many of the rules put in place in the wake of the Great Depression to limit banks’ riskiest, and most lucrative, investments. Gone were the limits on interstate banking, down came the wall separating commercial and investment banks.
From 1979 to 2006, the financial industry’s share in the nation’s corporate profits grew from a fifth to almost a third. By 2006, bankers and insurers were making 70 percent more, on average, than workers in the rest of the private sector. Then they set off one of the worst financial crises in living memory, and taxpayers bailed them out.
The protesters’ grievances may be aimed at Wall Street as a metaphor for broader economic forces. But there is nothing metaphorical about who is taking home the wealth. The protesters might even aim a bit higher: the real income growth is happening in the top 0.1 percent. There are lots of bankers there, too.
Take the flat tax plan of Gov. Rick Perry of Texas. For all his talk about how it would make filing easier — that is dubious — what it would really do is give high-income Americans a big tax break, while almost everyone else could expect relatively modest tax savings or none at all. In his plan, taxpayers could choose to stick with the current system or use the flat tax, under which wages and salary would be taxed at 20 percent, versus a current top rate of 35 percent for the affluent. Investment income and multimillion-dollar estates would be untaxed, versus a current top rate of 15 percent on most investments and 35 percent on estates.
In a recent interview with The Times and CNBC, Mr. Perry said “I don’t care” about criticisms that the plan is a giveaway to the rich. He expressed the magical belief that more and bigger high-end tax cuts would spur economic growth and generate significant new tax revenues. That’s a fairy tale, of course, and one that the conservative Republicans who vote in primaries love to hear. The rest of the country is feeling a lot more skeptical. ...
Mitt Romney has not endorsed a flat tax, and in 1996, when Steve Forbes, then a presidential candidate, floated one, Mr. Romney derided it — justifiably — as a “tax cut for fat cats.” But he is in favor of extending the Bush-era tax cuts and cutting taxes on investments and on corporations. And to tame deficits, he has called for hard spending caps, a tool that could lead to indiscriminate and overly harsh cutting. ...
President Obama has a better plan, but it is only a start. He has called for closing some corporate loopholes, ending the high-end Bush-era tax cuts and capping the value of tax deductions for high-income Americans. Importantly, he would use the new revenue to both finance needed government spending and reduce the deficit. The country also needs a comprehensive reform of the tax system, one that strengthens progressivity and raises more revenue from a mix of sources. All of the needed revenue — to meet health care needs; to improve education, infrastructure and security; to foster new technologies and protect the environment — cannot be raised from rich Americans, nor from the income tax alone.
What’s bringing out the military big spenders is the approaching deadline for the so-called supercommittee to agree on a plan for deficit reduction. If no agreement is reached, this failure is supposed to trigger cuts in the defense budget. Faced with this prospect, Republicans — who normally insist that the government can’t create jobs, and who have argued that lower, not higher, federal spending is the key to recovery — have rushed to oppose any cuts in military spending. Why? Because, they say, such cuts would destroy jobs.
Thus Representative Buck McKeon, Republican of California, once attacked the Obama stimulus plan because “more spending is not what California or this country needs.” But two weeks ago, writing in The Wall Street Journal, Mr. McKeon — now the chairman of the House Armed Services Committee — warned that the defense cuts that are scheduled to take place if the supercommittee fails to agree would eliminate jobs and raise the unemployment rate. ...
Oh, the hypocrisy! But what makes this particular form of hypocrisy so enduring? First things first: Military spending does create jobs when the economy is depressed. Indeed, much of the evidence that Keynesian economics works comes from tracking the effects of past military buildups. Some liberals dislike this conclusion, but economics isn’t a morality play: spending on things you don’t like is still spending, and more spending would create more jobs.
But why would anyone prefer spending on destruction to spending on construction, prefer building weapons to building bridges? John Maynard Keynes himself offered a partial answer 75 years ago, when he noted a curious “preference for wholly ‘wasteful’ forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” Indeed. Spend money on some useful goal, like the promotion of new energy sources, and people start screaming, “Solyndra! Waste!” Spend money on a weapons system we don’t need, and those voices are silent, because nobody expects F-22s to be a good business proposition.
To deal with this preference, Keynes whimsically suggested burying bottles full of cash in disused mines and letting the private sector dig them back up. In the same vein, I recently suggested that a fake threat of alien invasion, requiring vast anti-alien spending, might be just the thing to get the economy moving again. ...
But there are also darker motives behind weaponized Keynesianism. For one thing, to admit that public spending on useful projects can create jobs is to admit that such spending can in fact do good, that sometimes government is the solution, not the problem. Fear that voters might reach the same conclusion is, I’d argue, the main reason the right has always seen Keynesian economics as a leftist doctrine, when it’s actually nothing of the sort. However, spending on useless or, even better, destructive projects doesn’t present conservatives with the same problem. ...
Appeals to confidence have always been a key debating point for opponents of taxes and regulation; Wall Street’s whining about President Obama is part of a long tradition in which wealthy businessmen and their flacks argue that any hint of populism on the part of politicians will upset people like them, and that this is bad for the economy. Once you concede that the government can act directly to create jobs, however, that whining loses much of its persuasive power — so Keynesian economics must be rejected, except in those cases where it’s being used to defend lucrative contracts.
So I welcome the sudden upsurge in weaponized Keynesianism, which is revealing the reality behind our political debates. At a fundamental level, the opponents of any serious job-creation program know perfectly well that such a program would probably work, for the same reason that defense cuts would raise unemployment. But they don’t want voters to know what they know, because that would hurt their larger agenda — keeping regulation and taxes on the wealthy at bay.
Last week, Democrats offered a $3.2 trillion compromise — proposing cuts to domestic spending and social-insurance programs that were so large as to be imprudent. Their proposal was instantly rejected by Republicans on the panel. Why? Because the Democrats included $1.3 trillion in new tax revenues, which is exactly $1.3 trillion more than Republicans are willing to accept.
In contrast, Republicans say they are willing to cut $2.2 trillion from the deficit, but only about $40 billion of that would be from new revenues. None would be from new taxes. (Republicans are actually proposing to lower overall tax rates, paid for by ending some tax loopholes. They say that that would produce $200 billion in new tax revenues, based on the discredited notion that the government can then count on higher revenues from increased growth. No impartial judge, including the Congressional Budget Office, accepts this kind of estimate.)
If the Republicans maintain this intransigence until the Nov. 23 deadline, they will trigger a huge sequester of federal dollars: an across-the-board, $1.2 trillion cut in spending, including $454 billion from defense programs. But it already seems clear that nothing is more important to them than protecting corporations and the wealthy from tax increases: not the Pentagon, not homeland security, not education, and not the country’s economic health. President Obama got burned earlier this year when he tried to work out a “grand bargain” with the Republican leadership of the House. The only real compromise it was interested in was one in which it dictated all of the terms.
While whacking our parents and grandparents with a big cut in Social Security benefits apparently draws bipartisan support, the supercommittee will not even score a plan to tax Wall Street financial speculation. No committee member from either party is prepared to make a simple request to the Joint Tax Committee of Congress that would allow a speculation tax to be one of the items considered in the mix.
It's hard to know which part of this picture is worse. The plan to cut Social Security benefits at a time when seniors are more dependent than ever on them is incredibly pernicious. The people who would see their benefits cuts under this proposal paid for their benefits contributing to Social Security over their entire working career.
Most retirees have little other than Social Security to support them in their retirement. In large part, this is due to the economic mismanagement of the supercommittee types. If they or their friends, like former Federal Reserve Board Chairman Alan Greenspan, actually had been doing their jobs, we would not have had the huge housing bubble that wrecked the economy. The collapse of this bubble caused most of the wealth that retirees and near retirees had accumulated in their home to disappear, leaving them with nothing other than Social Security to sustain them in retirement. Now, they want to cut Social Security as well. ...
While the supercommittee has plenty of time to think of ways to make life more miserable for seniors, it won't even countenance the idea of taxing Wall Street speculation. In spite of the repeated pledges that everything is on the table, taxing Wall Street speculation is absolutely off the table. In order for a tax bill to be considered by Congress, it must be scored by the Joint Tax Committee (JTC). While many members, including some very senior members from both houses, have requested a score from the JTC of a bill taxing financial speculation, the supercommittee has the JTC completely tied up meeting its requests. By refusing to include a financial speculation tax (FST) in its scoring request, the supercommittee is preventing this idea from even being included in the discussion. ...
Given the role of Wall Street in both creating the conditions for the crash and prospering at the expense of the other 99 percent, it might seem reasonable to include a tax on speculation in the mix of items to consider. This is not a radical proposal. The European Commission is currently on the edge of approving a FST. Its leading proponents are the conservative leaders of Germany and France. ...
This contempt for the 99 percent coupled with protection for the 1 percent is the reason Congress has an approval rating of 9 percent. When both parties in Congress work against the interest of the overwhelming majority in order to protect a tiny elite, it is not surprising that most of the country would return the contempt.
That was 1890. Those agrarian populists boiled over with anger that corporations, banks, and government were ganging up to deprive every day people of their livelihood.
She should see us now.
John Boehner calls on the bankers, holds out his cup, and offers them total obeisance from the House majority if only they fill it.
That’s now the norm, and they get away with it. GOP once again means Guardians of Privilege.
Barack Obama criticizes bankers as “fat cats”, then invites them to dine at a pricey New York restaurant where the tasting menu runs to $195 a person.
That’s now the norm, and they get away with it. The President has raised more money from banks, hedge funds, and private equity managers than any Republican candidate, including Mitt Romney. Inch by inch he has conceded ground to them while espousing populist rhetoric that his very actions betray. ...
Why New York’s Zuccotti Park is filled with people is no mystery. Reporters keep scratching their heads and asking: “Why are you here?” But it’s clear they are occupying Wall Street because Wall Street has occupied the country. And that’s why in public places across the country workaday Americans are standing up in solidarity. Did you see the sign a woman was carrying at a fraternal march in Iowa the other day? It read: “I can’t afford to buy a politician so I bought this sign.”
We know what all this money buys. Americans have learned the hard way that when rich organizations and wealthy individuals shower Washington with millions in campaign contributions, they get what they want. They know that if you don’t contribute to their campaigns or spend generously on lobbying,
…you pick up a disproportionate share of America’s tax bill. You pay higher prices for a broad range of products from peanuts to prescriptions. You pay taxes that others in a similar situation have been excused from paying. You’re compelled to abide by laws while others are granted immunity from them. You must pay debts that you incur while others do not. You’re barred from writing off on your tax returns some of the money spent on necessities while others deduct the cost of their entertainment. You must run your business by one set of rules, while the government creates another set for your competitors… In contrast the fortunate few who contribute to the right politicians and hire the right lobbyists enjoy all the benefits of their special status. Make a bad business deal; the government bails them out. If they want to hire workers at below market wages, the government provides the means to do so. If they want more time to pay their debts, the government gives them an extension. If they want immunity from certain laws, the government gives it. If they want to ignore rules their competition must comply with, the government gives it approval. If they want to kill legislation that is intended for the public, it gets killed. ...
But let me call another witness from the pro-business and capitalist- friendly press. In the middle of the last decade – four years before the Great Collapse of 2008 – the editors of The Economist warned:
A growing body of evidence suggests that the meritocratic ideal is in trouble in America. Income inequality is growing to levels not seen since the (first) Gilded Age. But social mobility is not increasing at anything like the same pace….Everywhere you look in modern America – in the Hollywood Hills or the canyons of Wall Street, in the Nashville recording studios or the clapboard houses of Cambridge, Massachusetts – you see elites mastering the art of perpetuating themselves. America is increasingly looking like imperial Britain, with dynastic ties proliferating, social circles interlocking, mechanisms of social exclusion strengthening, and a gap widening between the people who make decisions and shape the culture and the vast majority of working stiffs.
Hear the editors of The Economist: “The United States is on its way to becoming a European-style class-based society.”
Can you imagine what would happen if I had said that on PBS? Mitch McConnell and John Boehner would put Elmo and Big Bird under house arrest. Come to think of it, I did say it on PBS back when Karl Rove was president, and there was indeed hell to pay. You would have thought Che Guevara had run his motorcycle across the White House lawn. But I wasn’t quoting from a radical or even liberal manifesto. I was quoting – to repeat – one of the business world’s most respected journals. It is the editors of the The Economist who are warning us that “ The United States is on its way to becoming a European-style class-based society.” ...
And so it came to pass; came to pass despite your heroic efforts and those of other kindred citizens; came to pass because those “men of action in the capitalist world” were not content with their wealth just to buy more homes, more cars, more planes, more vacations and more gizmos than anyone else. They were determined to buy more democracy than anyone else. And they succeeded beyond their own expectations. After their 40-year “veritable crusade” against our institutions, laws and regulations – against the ideas, norms and beliefs that helped to create America’s iconic middle class – the Gilded Age is back with a vengeance.
You know these things, of course, because you’ve been up against that “veritable crusade” all these years. But if you want to see the story pulled together in one compelling narrative, read this – perhaps the best book on politics of the last two years: Winner Take All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class. Two accomplished political scientists wrote it: Jacob Hacker and Paul Pierson – the Sherlock Holmes and Dr. Watson of political science, who wanted to know how America had turned into a society starkly divided into winners and losers.
That’s because the bill would pay for itself with a 0.7 percent surtax on people making more than $1 million. That would affect about 345,000 taxpayers, according to Citizens for Tax Justice, adding an average of $13,457 to their annual tax bills. Protecting that elite group — and hewing to their rigid antitax vows — was more important to Senate Republicans than the thousands of construction jobs the bill would have helped create, or the millions of people who would have used the rebuilt roads, bridges and airports.
So, Rick Perry.
This week in The Times, Mike McIntire reported that as governor, Perry had received $1.3 million worth of free flights in private jets from corporate executives and wealthy donors. Some of them involved trips to Washington to lobby on behalf of matters of interest to the plane owners. This is the same Rick Perry who recently told The San Francisco Chronicle that he was the sort of leader who could go to Washington and “take a wrecking ball, a sledgehammer — whatever it takes to break up the good-old-boy corporate lobbyist mentality that is putting this country’s future in jeopardy.”
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