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.
Corporations count pension money as their asset. The author relates stories told to her by retirees that in the 1990's they were getting letters that the companies had to cut benefits. The companies were upset that they couldn't use the pension money for themselves. They influenced Congress to change the laws. Companies were now bought to get the pension money and then the companies filed bankruptcy. In the 90's companies offered retirement buyouts so they would not have to pay the full amount. They also used the pension money for restructuring. Pension assets were sold, the money spent, and then bankruptcy eliminated the obligation. 401k plans replaced pensions. At first employers contributed 3%, now most are 0%.
Accounting rules required the pensions to be listed as a debt. As cuts were made in future pensions, they were now listed as profits that could be used as bonuses for executives. If they deferred taking the money they were building a time bomb that would reduce the pool for the worker's pension. The stock price rose.
Lucent (formerly part of AT&T) started with enough for all the pensions. They cut benefits, that boosted profits (sometimes the only profit the company had), including death benefits. $400 million went to bonuses that year.
Companies took out life insurance on their workers so they would get paid when the person died. (Sounds like Goldman Sachs betting on the default of the mortgages they financed.)
The latest execs who will cash in as they step aside: Nabors Industries' former CEO, Gene Isenberg, due $126 million when he exits as chairman, and IBM CEO Sam Palmisano, due $170 million. They follow Google's Eric Schmidt, who received $100 million in stock after leaving as CEO.
Worth it or not, the trio underscore the pay inequity that has made Corporate America's elite ripe targets of populist movements such as Occupy Wall Street. Moreover, their paydays draw fresh wrath from corporate governance experts. "While the contracts and performance of these CEOs differ, they do nothing to serve public opinion at times like these," says Eleanor Bloxham of The Value Alliance. ...
Palmisano, who'll be out as CEO Jan. 1, has a payout valued at over $170 million: $76 million in deferred or accrued pay, $65.7 million in stock and a $29.7 million pension. "Most reflects what he's accumulated over his career," says IBM's Mike Fay. IBM rose over 160% under Palmisano's watch, vs. the S&P 500's 32% gain.
Selected reader comments follow:
Apparently pleased with their own cost-cutting efforts, Dooley, Dauman (pictured), and Viacom Chairman Sumner Redstone paid themselves $165 million in salary, bonuses and stock options for the first nine months of the 2010 fiscal year. That figure is not a typo. Nor is it an isolated example.
For the past generation, executive compensation has been rising at an astounding rate in the United States. In the early 1980s, the supposed “decade of greed,” the typical CEO made 42 times as much money per year as the average worker at his company. By the beginning of the Great Recession, this ratio had risen to approximately 500-1. Because so much of executive compensation is paid in stock options, that figure has since declined to around 350-1, but it’s still the highest in the world -- by far -- and it’s rising again. ...
For three decades, good jobs have been disappearing in this country, part of a sweeping historic trend that would have occurred, at least in part, regardless of executive pay levels.
In the 1980s manufacturing jobs, many of them unionized, in a host of mature industries -- steel mills, textile plants, logging, auto manufacturing -- began departing the U.S. in droves. These jobs were casualties of mechanization, modernization, increases in productivity, and the phenomenon of globalization. It was cheaper to hire workers in other countries.
In the 1990s, this trend moved up the food chain to college graduates and middle management, even those with highly technical skills. Professor Lazonick has charted this phenomenon through a single company, IBM, which turned 100 years old this year.
The firm that would become “Big Blue” had been a presence in American technology since it won the contract for the 1900 U.S. Census. From the time Thomas Watson took over in 1914 and stressed customer service and company loyalty -- in return for generous sales commissions -- IBM became a place where employees could, and did, spend a career. When they retired, an unstinting pension awaited the loyal IBM man.
That model lasted until the 1990s. IBM was a far-flung global operation that, as 1989 drew to a close, employed some 383,000 people worldwide. Five years later, that number had been drastically cut to about 220,000. Portable pensions were the order of the day, brought in 1993 to Big Blue by former RJR Nabisco executive Louis V. Gerstner Jr. The model of lifelong loyalty, not mention lifelong employment, was suddenly passé.
So was the concept of reasonable CEO pay. For 1995, Gerstner was awarded a total compensation package worth nearly $18 million. “Lord knows what they would have paid him if he had had a good year,” Graef Crystal, a consultant on executive compensation, told the New York Times. “You would have needed an astronomer to see it.” ...
Worst of all, with the IRS and the Securities and Exchange Commission now officially keeping an eye on pay, corporate boards began tying their executives’ bonuses to self-serving metrics, usually stock price and profitability -- but not to growth, innovation, plant construction, or new product lines. The result was Kafkaesque: The system had now evolved to its present point, in which corporate executives qualified for huge bonuses by raising profits -- absent growth -- through cost-cutting measures (i.e., laying off workers).
By 1996, the New York Times was running headlines like this: “Head of I.B.M. Has a Better Year Than I.B.M.” In time, this trend would coalesce with several others that did not bode well for employment, especially after the arrival of The Great Recession in 2007-2008.
One of them was the rapid acceleration of globalization, which translated into the off-shoring of millions of American jobs -- but not the repatriation of the profits. Another was stock buybacks, in which corporations used profits to purchase its own stock. Such moves can be done to stave off hostile takeovers, thereby preserving the company, or to show confidence in the firm. But in actual practice, it’s done mostly to keep the stock price high. Buybacks come at the price of stock dividends, but that’s a trade-off shareholders are willing to make. The hidden cost of buybacks is that it diverts money that was once used for the true engines of corporate growth: R&D, along with investments in new technologies, new plants, and new workers. ...
“There’s still the idea that when an executive slashes thousands of workers that they are making the tough decisions necessary to make their company mean and lean,” said Sarah Anderson, lead author of the study. “But when CEOs slash jobs they are often very richly rewarded.” The IPS data showed that those atop 50 layoff-leading companies made an average of $12 million in salary in 2009, 42 percent more than the average CEO pay at other large companies. In 2010 and 2011, as stock prices rose again, along with corporate profits (but without bettering the employment picture), so did CEO salaries and bonuses. ...
This kind of thing has become routine among large corporations during the Obama presidency. The week he was inaugurated, IBM chief Samuel J. Palmisano (2010 pay: $31.7 million, a 30 percent increase over 2009) sent an email to the staff vowing that Big Blue wasn’t retrenching, and added, “We will invest in our people.”
The next day, however, 1,400 IBM employees in North America were told their jobs would be gone in a month. This action seems to have heralded an unfortunate trend: mass layoffs done stealthily. By March 2009, IBM had laid off nearly 10,000 workers without making a public announcement.
Your forbearer, Watson's IBM, was founded on beliefs and principles. It was formed and forged in the economic fires of fourteen recessions and the Great Depression. It drew deeply from the heart, soul and character of its founding father and his son. It appealed to the finest in us. It treated profits as the body does air—necessary, but not the essence of a life well lived. Even during the century's greatest economic downturn, it sought out and hired worthy men. It stood for ninety-seven years. This was Watson's IBM and it is in great jeopardy.
You are IBM's Watson. You were conceived as a trained jeopardy juggler. You were given the form and substance of a game show celebrity. You perform marketing feats for applause, acclaim and fame. On demand, you compliantly manipulate cold, inert bits and bytes spinning on your internal metallic platters. You are just the latest protégé in a long lineage of IBM technical advances.
One day you will be asked a perilous question, "How can we drip ever larger droplets of black ink on white income statements to further accelerate earnings-per-share?"
Your answer will determine if you are just IBM's Watson or an heir of Watson's IBM.
The rest of the "open letter" can be found at this link.
If you missed the live webcast of the event, you can watch it on the New America Foundation’s website or on YouTube. You can also read Karen Ferguson’s remarks here. To see pictures from the event, check out the album on our Facebook page. It’s also worth watching Ellen’s recent appearance on The Daily Show with Jon Stewart. (Editor's note: We highly recommend watching the video. IBM is mentioned several times...including how cuts to the company's pension and retiree medical plan helped fund outrageous executive bonuses and executive retirement plans.)
|IBM Hi Ded PPO w/ HSA||$619.73||$1,251.45|
|High Ded PPO||$535.29||$1,082.59|
|Med Ded PPO||$642.54||$1,297.06|
|Low Ded PPO||$811.77||$1,635.53|
|Oxford EPO - NY||$1,155.32||$2,323.13|
|IBM Vision Plan||$7.09||$13.48|
Cons: Pay is less then half then competitors. The GDF Model brought in highly talented people during a down time in the economy. The talent was used to create documentation that anyone off the streets can follow that we are seeing everyone slowly being replaced.
The model imposes 6 sigma and lean methodology. We are not allowed to provide quality service to the customers we support. Further this leaves management with only the ability to track our performance based off non relevant tasks such as closing tickets on time.
No one is rewarded for any technical skills as management has no technical ability. One will be given a raise for doing little work but closing tickets on time were another will be reviewed for doing more work and not having time to close tickets.
We have also been restricted from working any overtime and are forced into working alternate work schedules. The canter revolves around a 20% profit gain for IBM but in reality they are stealing this money from workers.
No evaluation process. When hired you are asked what level you feel you are at and hired in that pay band. Once hired you are stuck IBM will not allow anyone to apply out of the center as we are understaffed. Also due to this we are forced to work side by side with highly unskilled people receiving more pay then us because they were not properly evaluated.
No relocation and low pay causes many workers to live in their vehicles for the first few weeks of employment. I have even seen many stuck living in hotels trying to save up for a deposit. The price of living was supposed to be cheaper in Dubuque however once IBM people came in the rates for rent skyrocketed. Most here dislike anyone who worked at IBM that is not a local.
No need to make friends the turn around rate is becoming closer then the hire on rate and many quite after a few months to seek far greater opportunities.
Overall I hear IBM is goo if you get a job outside the GDF however those positions are more professional and harder to get. If you start in the GDF you will never get out but it does put IBM on your resume.
Advice to Senior Management: I can only laugh.. How many customers and employees are you willing to loose before you see the downside in this GDF. If you wanted to make it work you would need management that can actually comprehend the job we perform. Also compensation for the highly skilled technical staff would be nice.
"I think the thought process behind this is, slip this in, people won't understand it," said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare. Richtman's group is spending about $2 million on radio, TV and direct mail ads to fight cuts in Social Security and Medicare. His message to Congress: "Don't believe that taking this approach to cutting Social Security will not be noticed. You will pay for it." ...
In all, adopting the chained CPI would reduce Social Security benefits by $112 billion over the next decade. Federal civilian and military pensions would be $24 billion lower, according to the nonpartisan Congressional Budget Office. If adopted across the government, fewer people would be eligible for many anti-poverty programs because the poverty level also would increase at a lower rate each year. That would result in fewer people living below the official poverty line, despite having the same income.
The tax increases would hit low-income families the hardest, while high-income taxpayers would see smaller changes. The wealthiest taxpayers already pay taxes at the highest marginal rate, currently 35 percent.
For example, by 2021, taxpayers making between $10,000 and $20,000 would see a 14.5 percent increase in their federal taxes with a chained CPI, according to an analysis by the Joint Committee on Taxation. Taxpayers making more than $1 million would get a tax increase of 0.1 percent.
This attack on the standard of living of IBM's service employees is unacceptable and demeaning. In fact many support workers have received very little in pay increases over the years.
Last year IBM had record net income of $53 billion and free cash flow of $8 billion. IBM is not a company in distress.
There is no need to decrease the pay of hard working IBM employees.
Please send emails this week to the following list of IBM management asking them to reverse this decision to cut pay and band levels. An injury to one is an injury to all!
Please send letters to:
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.
Any more questions, -fishfooled-? Join the union and organize. Unless you want to continue to be a 'slave tool' for IBM. -YOU_Are_IBM's_Tool_Fool-
One of the GOP appointees — Laurence H. Silberman, who was appointed by President Reagan — has emerged as an intellectual leader on the court, winning plaudits in conservative circles for his 2007 opinion throwing out the District of Columbia's handgun ban. But in a concise majority opinion in the healthcare case, Silberman categorically rejected the central Republican argument: that the law is an unconstitutional expansion of federal power. "The right to be free from federal regulation is not absolute and yields to the imperative that Congress be free to forge national solutions to national problems," Silberman wrote. He was joined by Judge Harry Thomas Edwards, who was appointed to the court by President Carter.
In the same week in late October that Walmart announced it would stop offering health insurance benefits to new part-time employees, the retailer sent out a request for information seeking partners to help it "dramatically ... lower the cost of healthcare ... by becoming the largest provider of primary healthcare services in the nation."
On Tuesday, Walmart spokeswoman Tara Raddohl confirmed the proposal but declined to elaborate on specifics, calling it simply an effort to determine "strategic next steps." But by mid afternoon Wednesday, the retailer issued a statement saying its own request for information was "overwritten and incorrect." The firm is "not building a national, integrated low-cost primary health care platform," says the statement by Dr. John Agwunobi, a senior vice president.
The information request begins with the exact wording that Agwunobi says is incorrect, saying Walmart “intends to build a national, integrated, low-cost primary care healthcare platform.” The request goes on to ask firms to spell out their expertise in a wide variety of areas, including managing and monitoring patients with chronic, costly health conditions. The goal it says is for Walmart to become “the largest provider of primary healthcare services in the nation.”
In regulatory comments filed Oct. 21, the trade group America's Health Insurance Plans wrote that the industry has "long supported efforts to provide consumers with clear information about their health coverage options" but that "the proposed rule requires an almost complete redesign of how information is provided to consumers today, and it will be difficult and costly to fully implement in the short time frame."
This finding provides evidence that health care costs have become one of the most significant living expenses faced by poor families. In a recent report, The Commonwealth Fund found that in 2010 fully half of working-age adults with incomes below poverty spent 10 percent or more of their income on out-of-pocket health care costs and insurance premiums, which is more than double the percentage of those who spent that much in 2001 (Exhibit 3).
Imagine that repeated millions of times daily and you have one of the biggest money wasters in our health care system. Administration accounts for roughly 14 percent of what the United States spends on health care, or about $360 billion per year. About half of all administrative costs — $163 billion in 2009 — are borne by Medicare, Medicaid and insurance companies. The other half pays for the legions employed by doctors and hospitals to fill out billing forms, keep records, apply for credentials and perform the myriad other administrative functions associated with health care.
"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 largest banks are larger than they were when Obama took office and are nearing the level of profits they were making before the depths of the financial crisis in 2008, according to government data.
Wall Street firms — independent companies and the securities-trading arms of banks — are doing even better. They earned more in the first 21 / 2 years of the Obama administration than they did during the eight years of the George W. Bush administration, industry data show.
Behind this turnaround, in significant measure, are government policies that helped the financial sector avert collapse and then gave financial firms huge benefits on the path to recovery. For example, the federal government invested hundreds of billions of taxpayer dollars in banks — low-cost money that the firms used for high-yielding investments on which they made big profits. ...
“There’s a very popular conception out there that the bailout was done with a tremendous amount of firepower and focus on saving the largest Wall Street institutions but with very little regard for Main Street,” said Neil Barofsky, the former federal watchdog for the Troubled Assets Relief Program, or TARP, the $700 billion fund used to bail out banks. “That’s actually a very accurate description of what happened.” ...
A recent study by two professors at the University of Michigan found that banks did not significantly increase lending after being bailed out. Rather, they used taxpayer money, in part, to invest in risky securities that profited from short-term price movements. The study found that bailed-out banks increased their investment returns by nearly 10 percent as a result. ....
“The too-big-to-fail banks got bigger profits and avoided failure because of trillions of dollars of loans directly from the Federal Reserve,” said Linus Wilson, assistant professor of finance at University of Louisiana at Lafayette. “Today, their profits are boosted by lower borrowing costs because their managers and creditors expect a Fed lifeline when markets get jittery.”
Banks also have benefited from the large increase during the recession in unemployment insurance. Increasingly, banks offer debit cards to the unemployed to collect their government benefits. These debit cards carry a range of fees that bolster banks’ bottom lines.
What’s more, states — with their budgets shattered by the financial crisis and recession — have increasingly been moving to enroll new employees into Wall Street-run retirement accounts rather than government pension programs. That’s potentially more lucrative for Wall Street, which can charge fees for managing the savings of individual retirees. ...
Compensation at these firms also has bounced back. Financial firms paid about $20.8 billion in bonuses for work done in 2010, according to research by the New York state comptroller. In New York City, the average Wall Street salary last year grew 16.1 percent, to $361,330, which is more than five times the average salary of a private-sector worker in the city.
The hard step in figuring your tax bill is to compute your taxable income — roughly, the amount you earn, less the myriad exemptions, deductions and various other offsets described in the 3.4-million-word code of the Internal Revenue Service. You’d also have to calculate your adjusted gross income under a flat tax. But once you’ve completed that step under either system, you consult the tax tables to see how much you owe. In the current system, the entries have multiple brackets and rates already built into them, so this step is no harder than it would be under the tables for a flat tax.
The much more serious concern is that a flat tax would reinforce the trends toward greater income inequality that have been seen over the last several decades. As documented by a recent Congressional Budget Office study, the top 1 percent of income recipients in the United States earned 275 percent more in 2007 than they did in 1979, adjusted for inflation, a period when the earnings of middle-income households grew by less than 40 percent. A flat tax would increase inequality by substantially reducing rates on the most prosperous households, while increasing them on low- and middle-income households.
According to an analysis by the nonpartisan Tax Policy Center, Mr. Cain’s proposal would increase the annual tax bill of a typical family of four earning $50,000 a year by more than $4,000, but would reduce the taxes owed by a similar family earning between $500,000 and $1 million by almost $60,000. The center also estimated that families in the top one-tenth of 1 percent of households would enjoy an average annual tax reduction of nearly $1.4 million under the Cain plan. Similar distributional effects are common under all flat-tax plans, not just Mr. Cain’s.
If Perry retires at the end of his current term, in 2014, he would be eligible to collect as much as $119,025 a year, according to calculations based on 30 years of elective service and optional provisions. Perry will also receive Social Security, which could swell his total public pension benefits to more than $140,000 annually.
The state pays 100 percent of the cost of state employees’ health insurance premiums, and Perry, an Air Force veteran, has had access to taxpayer-supported care since he joined the Texas A&M Corps of Cadets in 1968. He is entitled to state-financed health care for the rest of his life and will be eligible for Medicare after his current term expires. ...
In his 2010 book Fed Up!, and out on the campaign trail, entitlement programs and government-mandated health care are among Perry's favorite targets. “I do advocate totally rethinking the safety net, personal security programs completely,” Perry said in a November 2010 interview. “Why is the government collecting your tax money for retirement and health care programs? That’s not a stated constitutional role.”
As Consumers Union noted in comments sent to the administration, the booklet describing benefits that most employers currently provide their workers “is a bulky, legalistic document that few consumers can understand.” It cited one study which concluded that the typical benefit description document provided by employers is written at a college reading level. Most Americans have trouble understanding information written above the 6th to 8th grade level.
Insurers and their corporate allies, including the U.S. Chamber of Commerce and the National Association of Health Underwriters, are claiming in comment letters to the administration that providing a uniform, simplified and understandable version of those documents would cost so much money they would have to increase premiums. ...
“The benefits of providing a new summary of coverage document, in addition to what is already provided to consumers, must be balanced against the increased administrative burden that drives up costs to consumers and employers,” AHIP said in its letter.
Nonsense. Consider this: the five largest insurers (UnitedHealth, WellPoint, Aetna, CIGNA and Humana) over the past week have reported profits exceeding $2.6 billion for just the three months that ended September 30, 2011. Over the past 10 years, those five companies have recorded profits of more than $50 billion. Imagine what the total would be if you added in the profits of the other 1,295 health plans AHIP says it represents.
The industry could even pass a hat among the CEOs of those big insurers and come up with the additional money without any one of them giving until it really hurt. UnitedHealth’s Stephen J. Hemsley is the highest paid CEO in America, according to Forbes magazine. He hauled in more than $100 million last year alone. When H. Edward Hanway, my former CEO at CIGNA, retired at the end of 2009, he walked out the door with $111 million. When you consider the money those two guys have made over the years, they alone could cover the cost of providing consumers with information they can understand.
To an outsider, the vow may seem unusual. Citigroup, after all, was merely promising not to do something that the law already forbids. But that is the way the commission usually does business. It also was not the first time the firm was making that promise.
Citigroup’s main brokerage subsidiary, its predecessors or its parent company agreed not to violate the very same antifraud statute in July 2010. And in May 2006. Also as far as back as March 2005 and April 2000.
Citigroup is far from the only such repeat offender — in the eyes of the S.E.C. — on Wall Street. Nearly all of the biggest financial companies, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America among them, have settled fraud cases by promising the S.E.C. that they would never again violate an antifraud law, only to do it again in another case a few years later. ...
Of the 19 companies that the Times found to be repeat offenders over the last 15 years, 16 declined to comment. They read like a Wall Street who’s who: American International Group, Ameriprise, Bank of America, Bear Stearns, Columbia Management, Deutsche Asset Management, Credit Suisse, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Putnam Investments, Raymond James, RBC Dain Rauscher, UBS and Wells Fargo/Wachovia.
As the Times reported when Citigroup agreed to settle SEC charges last month: "Citigroup's main brokerage subsidiary, its predecessors or its parent company agreed to not violate the very same antifraud statue in July 2010. And in May 2006. Also as far back as March 2005 and April 2000."
Not that the bankers face prison time, since the Justice Department has refused to act in these cases, and the Securities and Exchange Commission is bringing only civil charges, which the banks find quite tolerable. This time, the fine against Citigroup was $285 million, which may sound like a lot except that the bank raked off as much as $700 million on this particular toxic securities deal. As the Bloomberg news service editorialized, "... there should be only one answer from Jed S. Rakoff, the federal judge in New York assigned to weigh the merits of the agreement: You've got to be kidding."
More than three years since the global financial crisis started, financial institutions are still blowing themselves up. The latest, MF Global, filed for bankruptcy protection last week after its chief executive, Jon S. Corzine, made risky investments in European bonds. So far, lenders and shareholders have been paying the price, not taxpayers. But it is only a matter of time before private risk-taking leads to another giant bailout like the ones the United States was forced to provide in 2008. ...
Critics like the Occupy Wall Street demonstrators decry the bonus system for its lack of fairness and its contribution to widening inequality. But the greater problem is that it provides an incentive to take risks. The asymmetric nature of the bonus (an incentive for success without a corresponding disincentive for failure) causes hidden risks to accumulate in the financial system and become a catalyst for disaster. This violates the fundamental rules of capitalism; Adam Smith himself was wary of the effect of limiting liability, a bedrock principle of the modern corporation.
Bonuses are particularly dangerous because they invite bankers to game the system by hiding the risks of rare and hard-to-predict but consequential blow-ups, which I have called “black swan” events. The meltdown in the United States subprime mortgage market, which set off the global financial crisis, is only the latest example of such disasters.
Consider that we trust military and homeland security personnel with our lives, yet we don’t give them lavish bonuses. They get promotions and the honor of a job well done if they succeed, and the severe disincentive of shame if they fail. For bankers, it is the opposite: a bonus if they make short-term profits and a bailout if they go bust. The question of talent is a red herring: Having worked with both groups, I can tell you that military and security people are not only more careful about safety, but also have far greater technical skill, than bankers. ...
What would banking look like if bonuses were eliminated? It would not be too different from what it was like when I was a bank intern in the 1980s, before the wave of deregulation that culminated in the 1999 repeal of the Glass-Steagall Act, the Depression-era law that had separated investment and commercial banking. Before then, bankers and lenders were boring “lifers.” Banking was bland and predictable; the chairman’s income was less than that of today’s junior trader. Investment banks, which paid bonuses and weren’t allowed to lend, were partnerships with skin in the game, not gamblers playing with other people’s money.
The Wall Street Trading and Speculators Tax Act would impose a tax of 0.03 percent on financial transactions, meaning that longterm investors would barely notice it, but traders who move rapidly in and out of positions would feel its sting and, the authors hope, reduce the volume of their speculation in response. ...
"Occupy Wall Street has just reminded a large majority of the American people that our economy was destroyed by gambling on Wall Street. And that the people who destroyed our economy have been amply rewarded and not prosecuted," DeFazio told HuffPost.
...there are still many parallels between the Indian and American movements. Both seem to have been spurred to action by a sense that corruption or financial excess had crossed some redlines. In the United States, despite the fact that elements of the financial-services industry nearly sank the economy in 2008, that same industry is still managing to blunt sensible reform efforts because it has so much money to sway Congress. It seems to have learned nothing. People are angry.
Yet, America's corporate and political leaders have intentionally been shoveling wealth into an ever-bigger pile for those at the top. They've gotten away with this by lying to the great majority, which has seen its share of America's prosperity steadily disappear. Yes, they've told us, the rich are getting richer, but that's Just the natural workings of the new global economy, in which financial elites are rewarded for their exceptional talents, innovation, and bold risk-taking.
Horse dooties. The massive redistribution of America's wealth from the many to the few is happening because the rich and their political puppets have rigged the system. Years of subsidized offshoring and downsizing, gutting labor rights, monkeywrenching the tax code, legalizing financial finagling, dismantling social programs, increasing the political dominance of corporate cash – these and other self-serving acts of the moneyed powers have created the conveyor belt that's moving our wealth from the grassroots to the penthouses.
Not since the Gilded Age, which preceded and precipitated the Great Depression, have so few amassed so much of our nation's riches. Having learned nothing from 1929's devastating crash, nor from their own bank failures in 2008 that crushed our economy, the wealthiest of the wealthy fully intend to keep taking more for themselves at our expense.
Now, however, the people are onto their lies. In an October poll, two-thirds of Americans support increased taxes on millionaires, an end to corporate tax subsidies, and policies to more evenly distribute the wealth we all help create. This is rising egalitarianism shows the true American character, and it's changing our politics – for the better.
A foundation in Germany has analyzed the social justice records of all 31 members of the Organization for Economic Co-operation and Development, ranking each nation in such categories as health care, income inequality, pre-school education, and child poverty rate. The overall performance by the U.S. – which boasts of being an egalitarian society – outranks only Greece, Chile, Mexico, and Turkey. Actually, even three of those countries performed better than ours in the education of pre-schoolers, and Greece did better than the U.S. on the prevention of poverty.
Being at the bottom of the heap in social justice confirms the reality of both economic and political inequality that the Occupy Wall Street movement is protesting. It also helps explain why Occupy's grassroots uprising in America has spread so rapidly to more than 600 communities and has generated such broad public support. After all, our nation is fabulously rich, ranking well ahead of nearly all OECD members in national wealth, so there is no excuse for us sitting at the bottom of the list in education, health care, poverty, and other measures of a democratic and egalitarian society.
Bluntly put, We the People have let today's elites abandon America's founding principles of fairness, justice, and equal opportunity for all. These privileged few have purchased our government, stolen the wealth and economic future of working families, and reduced America to a plastic imitation of the country we thought we had. The Occupy rebellion is long overdue and on target. Join it!
Today, that insidious love (taking the form of greed and excess) is celebrated in our country and has even exalted into official public policy, marring our economy with inequality and injustice. The reigning ethos of our nation's upper crust is that too much is not enough. They're not merely out to make loads of the money they love, but to make a killing, everyone else be damned.
New numbers from the Congressional Budget Office confirm that as the moneyed elites have been making their killing, wealth disparity has become extreme in a country that once prided itself on trying to build a more egalitarian society. Analyzing 30 years of income data, the non-partisan CBO reports that the richest one percent of our population has enjoyed a stunning 275 percent increase in their income during that time. As a result, these privileged few have more than doubled the slice of America's income pie that they consume, going from eight percent to 17 percent of the whole in just three decades.
From whom did these richest one-percenters get their extra-big slice? From us, the 99 percent. The share going to middle class and poor families shrank in this period, which is why there is such broad support today for Occupy Wall Street's "We are the 99%" movement.
At the tippy-top of America's wealth pyramid are the multimillionaire CEOs and billionaire Wall Streeters. They are the richest one one-hundreth of the one-percenters (a mere 14,836 households). These few now take six percent of all U.S. income – the biggest piece ever consumed by America's megarich.
The widening chasm between the rich and the rest of us is transforming our country from a society to a jungle – and not even billionaires will enjoy living there.
Financial sector compensation. By now the phrase “too big to fail” has become so familiar that it is known by its acronym: TBTF. What needs to be emphasized is that TBTF is the basis for the huge bonuses paid to elite American bankers who benefit from a government that socializes their losses while allowing them to keep their profits. Here’s their business model: “We place highly leveraged bets, sometimes as much as 35 or 40 to 1. In return, the government implicitly agrees to bail out our banks, and if we’re fired, we’ve negotiated sweetheart deals with golden parachutes. If we bet right, then our banks keep the windfall profits and we get big bonuses. If we bet wrong, not to worry — the taxpayers will bail out our banks and the government will pay for the cost of the bailouts by cutting Social Security and Medicare. Suckers!”
While TBTF rigs pre-tax income for financial elites, American tax law rigs their after-tax income to their benefit. In the 1980s, capital gains tax rates were equal to income tax rates. But then in the 1990s Clinton and the Republican Congress lowered the capital gains rates. So billionaires who derive most of their money from their investments and savings pay taxes at a lower rate than the majority of Americans, who, like Warren Buffett’s proverbial secretary, rely on their labor income. ...
CEO compensation. In the last generation, American CEOs have been much better paid than their European and Asian counterparts, without having done remarkably better jobs. American CEO compensation is rigged with perfect legality by two practices. The first is allowing the compensation of CEOs to be determined by boards of directors, whose members are frequently cronies of the CEO. Well-paid cronies, in many cases. You can be paid hundreds of thousands of dollars a year for attending a few board meetings and rubber-stamping whatever your friend the CEO wants. When the Sarbanes-Oxley Act sought to impose more responsibility on board members, this was denounced as an assault on the foundations of free enterprise. Freebie enterprise, is more like it.
The Koch brothers’ attempts to choose the Republican presidential nominee are endangered by the sexual harassment scandal involving candidate Herman Cain, and a union-bashing law they sponsored in Ohio was repealed by voters.
The brothers’ combined personal fortune of $50 billion is surpassed in the US only by those of Bill Gates and Warren Buffett. For more than three decades the Koch brothers, now in their 70s, have been éminences grises in conservative politics, synonymous with big, secret money and manipulation. They are believed to have given more than $100 million to right-wing causes, at least half of it to discredit scientific evidence of climate change. They have given even more to philanthropy, especially the arts and cancer research.
The Koch brothers were the invisible hand behind the rise of the supposedly grassroots movement known as the Tea Party. Under cover of the Supreme Court’s Citizens United decision, which allows unlimited anonymous corporate donations to political campaigns, the Koch brothers reportedly intend to spend up to $200 million (€147 million) to defeat Barack Obama’s bid for re-election to the presidency. “If not us, who?” Charles Koch wrote in a letter inviting wealthy Republicans to a strategy session in Rancho Mirage, California, to plot the downfall of Obama. The Republican hopeful Herman Cain attended that meeting, in January this year. “It is up to us to combat what is now the greatest assault on American freedom and prosperity in our lifetimes,” Koch added.
Why? So they can say they "successfully governed" with extremist Republicans? To please international markets that, in reality, couldn't care less? So the President can campaign as "above left and right," as if differences in principle are a bad thing? Because they've been spiritually suffocated by the cultural norms of Washington's insular culture? There are more questions than answers. Here's one more: With Democrats like this, who needs Republicans?
Stein reports that the Democratic proposal would keep tax rates for the wealthiest Americans at the historically low Bush-cut rate of 35 percent to please the GOP. (That rate was 91 percent under Eisenhower, 50 percent at the start of Reagan's term, and 39 percent under Clinton.) The very wealthiest among us would continue to savor these unusually low tax rates to sweeten the fruits of ever-increasing wealth inequity. ...
The Democratic proposal also includes cuts of $250 billion to providers under Medicare. Unless they're very well designed (they won't be), that will mean problems with access to doctors and adequacy of care. There's also a cut of $100 billion in benefits for seniors. That would affect every single person in the United States who reaches retirement age, along with those who become disabled. Depending on how those "Feldstein tax increases" were structured, many retired Americans could see their Medicare benefits reduced -- and lose a tax deduction for paying those costs out of their own pockets. ...
Today's deficits were caused by wild and reckless tax cuts for the wealthiest among us, along with the cost of two unnecessary wars and the consequences of bank greed and recklessness. It's a terrible mistake to ask the Americans who were wounded most by deficit-causing behavior to carry so much of the cost of fixing it. And to propose cuts to Medicare and Medicaid simply to preserve low tax rates for the wealthy is nothing less than a moral obscenity.
In these dark times, here are the President's and Congress's real and unshirkable responsibilities: To help 25 million un- or under-employed Americans get back on their feet. To stop Wall Street looters from making off with our nation's riches. To restore tax fairness and economic justice. To invest in our crumbling infrastructure. To create economic growth that will fix deficits in the long term. To ensure retirement security for all Americans. To ensure genuine access to health care for all. And to stem the growing tide of poverty.
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