For Whom the Bailout Tolls

This story offers a nice commentary on some of the excesses associated with the bailouts.

AIG, in particular, stands out.  Words like greed and gluttony come to mind.  Excessive greed.  Excessive gluttony.  Why these clowns were bailed out at all is beyond me.

There are "claw back" provisions in the big $700 billion bailout passed by Congress three weeks ago, requiring that financial institutions get money back from their senior executives, if the payments were "based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate."

But the executive pay limits in the legislation apparently have so many loopholes you could fly a fleet of Gulfstream corporate jets through them. Oregon Congressman Peter de Fazio caught at least seven, "that will protect their outrageous paychecks and golden parachutes," he wrote fellow Democratic House members, adding, "Imagine how many more loopholes the Wall Street lawyers will find."

No doubt the nine banks into which the US is planning to inject billions in capital – again, all taxpayer dollars – have their lawyers searching for those escape hatches. Writing in the Seattle Post Intelligencer, Sarah Anderson and Sam Pizzigati of the Institute for Policy Studies calculated that last year the CEO’s of those nine banks took home "on average, $32.2 million each, nearly triple the average CEO pay at the 500 biggest US companies. This is more than $600,000 a week." Apiece.

Bloomberg News columnist Jonathan Weil figures that since the start of fiscal 2004, the once Mighty Five of Wall Street – Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns – lost around $83 billion in stock market value. But they reported employee compensation of around $239 billion. In other words, the engineers who dug this disastrous hole paid themselves almost three dollars for every dollar they lost.

The cost to the taxpayer of all the bailouts, as calculated by the internet investigative newsroom ProPublica.org, is a whopping $8,750 per household, more than two and a half times what lucky us got to fork over 20 years ago during the savings and loan crisis.

But the masters of the universe are just fine, thank you, in no small part due to the tolerance and largesse of their guru, Treasury Secretary Henry Paulson, late of Goldman Sachs, where Forbes magazine reports that during a 32-year-career he accumulated more than $700 million. He said limiting compensation too punitively might prevent some institutions from participating in his plan to save the economy.

…

Testifying before the House Budget Committee this week, Federal Reserve Chairman Ben Bernanke agreed that homeowners in jeopardy of foreclosure need help. "I agree that stopping preventable foreclosures is extremely important," he said. "I hope we continue to look for ways to do that."

But so far the government and the businesses bailed out haven’t looked very hard. They’ve done little or nothing and it’s every man for himself, devil take the hindmost. In his history of the 1929 market crash, John Kenneth Galbraith wrote, "The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil."

In other words, virtually nonexistent, somewhere around zero. In other words, my fellow Americans, look out below. Do not ask for whom the bailout tolls. It tolls for thee.