The payment of upwards of $200 million in bonuses to employees of one-time insurance giant AIG, after said company was bailed out to the tune of $180 billion with hard-earned taxpayer money, has rightly led to a firestorm of indignation from the public and clearly vulnerable politicians and administration officials, including President Obama, with their fingerprints all over the odious bailout legislation and policies. Apparently, AIG execs paid out "retention" bonuses, some to the tune of more than $5 million, to individuals in its financial products unit, the very division responsible for bringing the company to its knees. The ostensible argument given by AIG generalissimo Edward Liddy was that these employees needed to be persuaded to stay with the company because they were the only ones with sufficient knowledge of all the murky "deals"--bets would be a more honest description--to allow the company to "unwind" the deals and extricate itself with a minimum of additional losses. That the AIG execs felt this was a proper decision shows us the depths to which our so called financial masters and their defenders and supporters in the government have fallen. And, go figure, a significant fraction of the "bonused" just took the money and ran. While a herd of politicians and current and former administration officials had initially sworn they had no prior knowledge of the bonuses, it is now clear that both the relevant Congressional leaders and Treasury officials knew that the payments would be made and acquiesced. Read, for example, the eloquent summary of current affairs by Alexander Cockburn at Counterpunch.
Let's get a few numbers out in the open that will let us gauge the level of greed and corruption which is now being evidenced. According to the Census Bureau, the median household income in the United States for 2007 was just about $50,000. That is, half of all households made less than this, and the other half made more. Since about the mid '70s average incomes for most American workers have remained flat or actually fallen. The only reason median household incomes have risen modestly is because more people are working per household, and generally working longer. Now, consider that some of the bonuses paid by AIG execs were in excess of $5,000,000, a sum 100 times greater than half the families in the US earn in a whole year. Next, consider that these sums were paid AFTER the company was near failure and was rescued by 10's of billions of taxpayer dollars, and with the tacit approval of government officials, and one begins to see that Americans have a right to be boiling mad over this intolerable state of affairs.
I've often wondered what it is that a corporate CEO does in each 8 hour day that would justify the incredible sums they are paid in compensation, often in the region of many millions of dollars per year, not even considering so-called bonuses! From recent events one can only conclude that the ability to run a company into the ground doesn't come cheap. Ironic how a chief argument of many corporate and Wall Street apologists has been the professed need to maintain exorbitant compensation and bonuses in order to keep the "best and brightest" at these firms. With talent like that Wall Street could afford some mediocrity, or better yet, downright incompetence! One of the more "creative" recent arguments put forth in support of the bonus payments has to be that of CNBC anchor Mark Haines who suggested that, "It’s just like when the Allies were victorious over Nazi Germany in World War II, when we occupied the country, we left a lot of Nazis in place because they were the ones who made the trains run on time and the bureaucracy function properly, etc. And it was distasteful, but you needed them." Like I said, creative. Insane, but creative.
While mainstream media attention on "bonus-gate" has shed some important light on the issue, as usual the more important story lies elsewhere, and serves to show the truly massive scale of the corruption on Wall Street and in the government as well. While AIG was "bailed-out" with more than $100 billion in public funds it now appears clear that a large fraction of this money was then funneled to the very same financial institutions--most notoriously Goldman Sachs, which received almost $13 billion--and that have been at the heart of the financial scandal and who themselves had to be rescued with billions of dollars of taxpayer funds. Democracy Now has an excellent story on this so-called "back-door bailout."
The dealing around Goldman in particular reeks of corruption. As Robert Scheer has ably discussed, the decision to save AIG, only days after Lehman Brothers had been allowed to fail, was reached after a meeting that included a host of former Goldman execs and proteges as well as the CEO of Goldman, the only CEO at the meeting. Participants at the meeting included then head of the NY Federal Reserve bank, and current Treasury secretary, Timothy Geithner; and former CEO of Goldman and then Treasury secretary (in the Bush administration) Hank Paulson. All of these parties need to be subpoenaed to testify before Congress, if not a court of law, to answer some very serious questions. Principle among these is why the CEO of Goldman would even be permitted at such a meeting, with the company having upwards of $20 billion in toxic "bets" insured by AIG? If that's not a conflict of interest then I don't know the meaning of the phrase. Moreover, the fact that President Obama has moved a number of these people into his administration, including Geithner and Lawrence Summers, the protege of one-time Goldman CEO and Clinton administration Treasury secretary Robert Rubin, is deeply troubling. Recall that is was Rubin who led the Clinton administration's support for the Financial Services Modernization and Commodity Futures Modernization Acts, both of which became law and did anything but modernize the financial industry, and in fact paved the way to unregulated credit default swaps and other financial instruments of mass destruction, in the prophetic words of Warren Buffet. Given the magnitude of the plunder, and the degree of public outrage it is hard to see how Obama can continue to support Geithner. Indeed, if Obama wishes to maintain support from working people, then he should do an about-face and start fresh with a new economic team comprised of reputable Main-street economists and not a pack of Wall Street re-treads.
Or perhaps the whole scandal is simply revealing who is really in charge of our economy and government. Wall Street financial institutions, and other corporate interests generally, have been among the largest contributors to both major political parties for decades now. Moreover, the revolving door from government to Wall Street has been operating at full speed during this time. Little wonder then that government decisions on financial deregulation and the use of public money, have so often favored these financial robber barons.
In the world of organized crime the boss has the last say, and his lieutenants and foot soldiers have to go "upstairs" to get tacit approval for their deals and to keep the boss up to speed on what's going down. Or, at least, that's how the bosses would like it to go. OK, I confess to having watched a certain trilogy of Francis Ford Coppola films more than a few times! Another key aspect of the criminal underworld is that the junior guys have to "kick up" a decent percentage of proceeds from their dealing, and of course, everybody eventually kicks up to the boss. Maybe we're just seeing the "foot soldiers," our own elected representatives, kicking up to the real bosses, the financial oligarchs who seem increasingly to have the final say in decisions which impact all Americans. Moreover, the boss always holds the fear of reprisal over the heads of his underlings. Don't let the boss find out you've been holding out on a particular deal, that's a good way to get yourself whacked. It would seem that our real economic masters are now holding the whole country hostage with a similar kind of fear, "better pay up or we'll just whack the whole economy." While undoubtedly these analogies are not perfect, they seem to hold more than a grain of truth. Chiefly, that corruption is much more endemic to "free market" capitalism than is ever admitted in our supposedly free corporate media. We love to talk about the corruption present in other countries economies and governments, but nothing can compare to the levels of corruption we have seen on Wall Street recently, and which have had devastating consequences here and around the world.
