|The Daily Show With Jon Stewart||M - Th 11p / 10c|
|The Notorious AIG - Outrage|
March 8, 2009
Where, oh where, did AIG's bailout billions go? That question may reverberate even louder through the halls of government in the week ahead now that a partial list of beneficiaries has been published.
The Wall Street Journal reported on Friday that about $50 billion of more than $173 billion that the U.S. government has poured into American International Group Inc since last fall has been paid to at least two dozen U.S. and foreign financial institutions.
Top 20 Banks in the World
The newspaper reported that some of the banks paid by AIG since the insurer started getting taxpayer funds were: Goldman Sachs Group Inc, Deutsche Bank AG, Merrill Lynch, Societe Generale, Calyon, Barclays Plc, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds Banking Group.
Morgan Stanley and Goldman Sachs declined to comment when contacted by Reuters. Bank of America, Calyon, and Wells Fargo, which has absorbed Wachovia, could not be reached for comment.
The U.S. Federal Reserve has refused to publicize a list of AIG's derivative counterparties and what they have been paid since the bailout, riling the U.S. Senate Banking Committee...
Insurance Giant AIG to Pay $165 Million in Executive Bonuses
Treasury to Rework AIG Aid to Recoup Bonuses
Hedge Funds Could Reap Billions from AIG
Blame Game: Dodd Says Treasury “Forced” Him to Add Bonus Provision to Stimulus Package
The Real AIG Conspiracy
February 8, 2009
On Wednesday, President Barack Obama announced measures that purport to restrict executive compensation to $500,000 at financial institutions receiving billions in government assistance. The figure does not include stock options, which could be redeemed after financial firms pay back loans from the federal government. Nor does it apply to the original recipients of tens of billions in TARP (Troubled Asset Relief Program) money.
The measures are essentially a public relations exercise. Their aim is to provide political cover for a new and even larger Wall Street bailout, which Treasury Secretary Timothy Geithner will unveil next week.
Yet the discussion that has emerged in the wake of Obama’s announcement sheds light on the domination of government by a tiny financial elite and the increasingly threadbare pretense of democracy in the U.S. This financial aristocracy, the episode reveals, is a power to be approached on bended knee.
The media have responded to Obama’s proposal of a $500,000 limit on executive compensation, which would affect only a handful of firms, as though this were a severe and astonishing punishment. Yet the figure represents approximately 12 times the annual salary of the typical worker. To the majority of the population, a salary of a half million dollars is a staggering amount of money.
Obama’s servility before the financial aristocracy was summed up by the reassurances he gave it in announcing his limits on executive pay. “This is America,” Obama said. “We don't disparage wealth. We don't begrudge anybody for achieving success.”
Such a vision of America is at odds with both its present circumstances and its history, which has been characterized by deep democratic and egalitarian traditions that date back to before the Jeffersonian democracy of the early Republic. And while liberals are busy attempting to equate Obama to Franklin Roosevelt, the latter, in the midst of the Great Depression, attempted to capitalize on the tremendous contempt for the rich in the population at large by regularly issuing bromides against the “money changers.”
Indeed, Obama’s obsequiousness stands in sharp contrast to the anger of the working masses, who find it incomprehensible that the same executives who are responsible for ruining the economy and squandering trillions in taxpayer money are now presented with pay “limits” of a half million dollars. Workers are wondering why there haven’t been criminal indictments and television scenes of handcuffed executives frog-marched from their offices.
But on Wall Street, $500,000 is considered a pittance. The New York Times reports that executives felt cheated by taking home “only” $18 billion in collective bonuses in 2009. “I feel like I got a doorman’s tip, compared to what I got in previous years,” an investment banker with Citigroup told the Times...
Media and academic figures who have tried to argue that the massive pay packages of the Wall Street executives are somehow legitimate, or even rational, succeed only in revealing the rot that characterizes intellectual life in the U.S. Their central argument—that the same CEOs who have driven their companies and the economy as whole into the ground are worthy of remuneration in the tens of millions—is so absurd it is almost an embarrassment to answer.
The immense power of the financial elite is revealed by the case of Bernard Madoff, the investor who squandered more than $50 billion in wealth in a giant Ponzi scheme. While working class Americans are arrested and spend years in prison for far lesser offenses, Madoff remains ensconced in his Manhattan penthouse.
For nearly a decade, a whistleblower named Harry Markopolos, who had uncovered Madoff’s scheme, attempted to draw the attention of the Securities and Exchange Commission (SEC), the federal regulatory agency ostensibly tasked with policing the securities and stock industries. Instead, the SEC ran interference for Madoff. Rather than being applauded for his efforts, Markopolos feared for his safety. “We knew that he was one of the most powerful men on Wall Street and in a position to easily end our careers or worse,” he said.
The social psychology and physiognomy of the financial elite—with its wealth, special privileges and its control over the organs of public opinion—resembles nothing so much as a modern aristocracy.
Any discussion of a rational attempt to find a solution to the economic crisis runs immediately into the ferocious opposition of this elite... The odious subjective characteristics of the U.S. financial aristocracy—its greed, arrogance, stupidity and decadence—are themselves deeply rooted in objective historical developments, the social expression of an underlying economic process. The rise of this narrow social layer with its obscene levels of accumulation is inextricably bound up with the decline of American capitalism in the world market and the gutting of its domestic industrial base. Indeed, what makes the whole process so filthy, what imparts to it such a decadent and repulsive character, is the degree to which this wealth is unconnected to any progressive economic process. It is in every sense destructive and reactionary.
In an earlier period of history the U.S. had its “robber barons,” such as Cornelius Vanderbilt, Andrew Carnegie and John D. Rockefeller. As brutal and greedy as these men were, their wealth was bound up with the creation of enormous industrial empires. The latter-day robber barons of Wall Street, on the other hand, have made their billions from the destruction of the industry and productive capacity built up over decades.
The staggering wealth accumulated in the top one percent of American society over the last 25 years is directly bound up with the deterioration of the economy, the decline of industry, and the impoverishment of the working class. The enormous personal fortunes of the elite have been built up on hedge funds, the leveraging of debt, and other forms of financial speculation. This has entailed an enormous transfer of resources out of manufacturing (and out of the working class) and into finance and the pockets of those who have played the critical role not only in destroying living standards, but in setting the stage for the present disaster...
The American political elite, Obama included, is tied by a thousand strings to the financial aristocracy. The Obama administration is populated by individuals who have parlayed their political positions into lucrative positions in finance. Virtually the entire cabinet fits this billing—not only Tom Daschle, the former senator who withdrew his nomination for the Secretary of Health and Human Services amidst revelations that he had withheld tens of thousands in taxes owed on payments he received from his corporate sponsors.
Yesterday it came to light that Leon Panetta, Obama’s nominee for chief of the Central Intelligence Agency, took home more than $1 million last year through payments from corporations for consulting, speaking appearances and through his membership on corporate boards. He was paid handsomely for speeches by financial firms that have since collapsed, including $56,000 by Merrill Lynch and $28,000 by Wachovia. Chief of Staff Rahm Emanuel and Secretary of State Hillary Clinton have also used their political connections to make millions from the same financial elite that would ostensibly be targeted by Obama’s rules on executive pay.
Obama knows very well that when he leaves office he will be able to make millions of dollars, as Bill Clinton, the last Democratic president, and countless other leading politicians have done. Nor would this be a departure for Obama, whose career was taken into hand early on by leading financial and political figures in Chicago.
The subordination of the whole of society to the financial aristocracy is most clearly expressed in the massive bailout of Wall Street. Its political representatives, Democrats and Republican alike, hand over trillions to the biggest banks, while providing no provisions for the masses of people who have lost their jobs and homes.
Millions of workers who voted for Obama are now coming face to face with the fact that his administration will defend the interests of the financial elite every bit as ruthlessly, if with a slightly different presentation, as the Bush administration.
The solution to the economic crisis is not a technical question but a social, political and revolutionary settling of accounts and a historical necessity. At a certain point in the late 18th century, it became necessary for the oppressed classes of France to rise up and destroy the power and privileges of the nobility. In the America of the 1860s, the only resolution to the “irrepressible conflict” was the destruction of the “slave power” in the South.
At this point it is necessary to destroy the political and economic power of the financial aristocracy. A resolution to the economic crisis can only begin with an independent mass movement of the working class that aims to break the political stranglehold of the financial elite over society - the development, to be blunt, of a revolutionary movement.
February 21, 2009
U.S. President Barack Obama's Homeowner Affordability and Stability Plan (HASP), announced Wednesday, will do little to alleviate the enormous financial pressures on working class families caused by plummeting home prices.
It does not reduce the outstanding debt, or principal, that homeowners owe the banks, which for millions of Americans now surpasses the value of their homes. Even in its modest stated aims—to reduce monthly mortgage loan payments for a portion of embattled homeowners—HASP will in most cases depend on the voluntary participation of private banks. It does nothing for the hundreds of thousands of renters thrown out onto the streets by evictions and foreclosures against their landlords.
While complete details of the plan for loan modifications from private banks will not be released until next month, it is already clear that there will be innumerable hurdles designed to make it very difficult for homeowners to qualify. Anyone who is deemed able to "afford" their present rates will not qualify. If a mortgage company decides that refinancing a loan will cost them more than sending the house into foreclosure, moreover, they will be free to deny refinancing.
The haphazard and ineffectual character of Obama's proposal for the housing crisis, like his stimulus bill, does not arise from mere technical deficiencies. Rather, it is conditioned by the demands of the financial elite that Obama represents, which will brook no limit—no matter how mild—to its power and prerogatives.
Thus, HASP—which the Obama administration crafted in close consultation with the banks—is loaded with measures designed to win the support of financiers and investors. For the financial elite, the bill sets aside the lion's share of a $75 billion appropriation. The banks will not be required to write down the values of vastly overpriced loans, much less relinquish control over the securities built up through the home lending industry.
The proposal on housing, moreover, is part of an overall plan being developed by the Obama administration to funnel trillions of dollars into the hands and accounts of the financial institutions and investors who precipitated the crisis.
The New York Times on Friday ran a front-page analysis of the Term Asset-Backed Securities Loan Facility, or TALF, which is set to hand over more than $1 trillion in low-cost loans to major hedge funds and other holders of debt-based securities. Securities investors in the credit card and auto loan markets, among others, will be able to borrow against as much as 95 percent of the face value of their overpriced securities, and would be liable for as little as 5 percent of any losses.
Commenting on the program, the Times noted that the administration would be "effectively subsidizing the profits of big private investment firms in the bond markets." TALF is part of the massive bank bailout proposal outlined by Treasury Secretary Timothy Geithner earlier this month.
Wall Street's varying reactions to HASP and TALF are revealing. In spite of the fact that HASP, like TALF, is tailored to appease the finance industry, it has been met with hostility from sections of the elite who view the program as a "bailout" for "irresponsible" homeowners. Of course, Wall Street offers no such protestation when it comes to the ongoing bailout of irresponsible and incompetent banking executives and investors to the tune of trillions.
A moment on CNBC, which has since been widely broadcast in the American media, graphically captured the perspective of the financial elite. An animatedly angry correspondent, Rick Santelli, denounced Obama's tepid mortgage reform from the floor of the Chicago Board of Trade. Speaking on behalf of the traders, Santelli yelled, "We really [don't] want to subsidize the losers' mortgages... and reward people that should carry the water instead of drink the water." Santelli continued, "This is America! How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills?" As he spoke, the traders cheered him on and interjected insults toward those facing foreclosure. America, indeed.
As it has been picked up in the media, the incident has been presented as an example of widespread popular opposition to the aiding homeowners. The ranting of the cable news commentator on a channel that functions as a mouthpiece for Wall Street, was the lead news item on NBC that evening. Santelli himself declared that the stock traders represented a "cross section of America." This places reality on its head. While the media sought to smother or downplay the enormous popular hatred for the bank bailouts, it is seeking to manufacture public opposition to aid for homeowners.
Such comments are part of an attempt to place the blame for the economic crisis on the supposedly profligate American consumer. This sentiment was in fact echoed by Obama himself, who spoke in his inaugural address of the "collective failure to make hard choices."
The crisis in the American housing market in fact represents the intersection of powerful objective processes that have been ripening for more than 30 years.
One has been the long-term erosion in the living standards of the working class. Since the 1970s, social inequality has increased and wages have stagnated, in spite of increased worker productivity. To counteract their declining social position, workers were compelled to seek out individualistic "coping mechanisms." They have labored for more hours at more jobs, wives and mothers have entered the workforce by the millions, and, most important, workers have increasingly relied upon credit to support consumer spending, tuition payments, cars, and even major health procedures.
This latter tendency, the turn toward credit debt, was promoted by American capitalism as a critical component in the financialization of the economy, a process set into motion by the historic decline of American capitalism in the latter half of the twentieth century. In the 1970s, American industry was weakened by powerful rivals in Japan and Germany, relentless downward pressures on the rate of profit, and a combative working class.
Financialization was the bourgeoisie's response to these crises. A landmark in this development came in 1980, when Federal Reserve Chief Paul Volcker—currently a top economic advisor to Obama—introduced interest rate "shock therapy" to the economy. By laying waste to basic industry and creating mass unemployment, Volcker aimed to break the resistance of the working class. But the American bourgeoisie had also learned that enormous fortunes could be made through the transfer of social wealth from industry and the working class into various forms of financial speculation, including the manipulation of debt.
These interconnected processes came to a head in the collapse of the U.S. housing market. In order to maintain themselves and their families, workers were compelled to build up ever greater levels of debt. The bubble in the housing market became the final means by which many workers offset declining living standards, leveraging their homes against rapidly rising values in order to make ends meet.
American banks, investors, real estate firms, mortgage companies and politicians relentlessly promoted this through sub-prime and other adjustable rate mortgages. The resulting loans were then sold, bundled, and resold, drawing the entire world financial system atop a profoundly unstable system. The process fueled a massive bubble in home prices.
New layers of billionaires and multi-millionaires were created on the basis of speculation in mortgage securities, stocks, and various forms of derivatives. The American capitalist class as a whole was enriched beyond comprehension. In the process, a modern aristocracy consolidated its control over every aspect of official political, cultural and economic life.
The immediate cause of the economic crisis was the bursting of the bubble in the housing market, as growing numbers of impoverished workers could no longer afford their home loans. After the collapse of the housing market bubble, the exotic securities instruments built up on the basis of the housing market turned out to be scarcely worth the paper upon which they were printed. This spread through the entire financial system. It soon became clear that the incalculably large quantities of paper value built up in the stock market, the hedge funds, mortgage financing concerns, and the banks, represented claims on precious little of value.
The American financial aristocracy, however, will not politely acknowledge its culpability and allow for the amelioration of the conditions of the working masses the world over. With the breakdown of the mechanisms by which it defrauded the working class of vast social wealth, the capitalist class is ruthlessly utilizing its control over the state to seize for itself new resources at home and abroad.
Barack Obama, who was elected by appealing to a popular rejection of the Bush administration's economic and military policies, is the new political frontman for the financial aristocracy. His mortgage plan aims to lend the appearance of "change," but his overriding concern is the defense of finance capital...