Keeping your Friends Close: Everybody I know has money and I intend to keep it that way (updated)

Posted: December 16, 2010 in Uncategorized

(Update I, II, III ,IV,  V,  VI, VII,  VIII and IX below)

To dispel any notion that he was anti-business President Obama had a closed door meeting with 20 CEO’s yesterday morning.  As a source reported, Obama told the meeting members, who are in line to reap the largest bonuses imaginable:

“I want to dispel any notion we want to inhibit your success. We want to be boosters because when you do well, America does well.”

While asking for a tax break for these individuals who were instrumental in the collapse of Economic markets worldwide, the facts remain that these institutions, through the nonproductive instruments of finance and the government bailouts (which were necessary to keep these institutions afloat in the capital freefall that the misuse of instruments caused and the concurrent over leverage applied to these empty risk packages) are in actuality:

“On pace to pay out some $144 billion in compensation for 2010, just shy of their record year of 2007. But given the widespread layoffs of mid-level employees as a result of the financial crisis, average compensation set a record. At the top six banks, compensation rose 10 percent over 2007.”

Bridget Riley Metamorphosis 1964

And what about the income packages for these CEO’S themselves:

“Chief executives at the nation’s largest corporations received $9.25 million in average total compensation in 2009, according to the AFL-CIO’s analysis of available pay data from 292 companies in the Standard & Poor’s 500 index. Although average total compensation for these CEOs declined 9 percent from the previous year, executive retirement benefits increased 23 percent.

Take a look at the newly released US Census Bureau’s Report on Income (it’s a pdf) and what it details about the Average Households income for the same year which sees a drastic drop in money brought in with the median household income falling to $50,303 income from the 2007 levels of $52,163.

These median households are the same segments of the society who are being called upon to face Austerity measures to bring in line deficits, while those who are set government allotments of cash and no-interest loans (which they in turn re-lend to the government with interest.  Free money, yeah) are requesting privileged treatment with lower taxes and non-regulation of the same markets which triggered the collapse (see Glass–Steagall repeal as the foremost deregulation which contributed to the groundwork of the crisis, and is a good case study to the fantasy of the invisible hand of the market).

M C Escher Relativity, 1953

Sadly, also detailed in this report, is the rise in poverty in the World’s Leading Democracy:

“The nation’s official poverty rate in 2009 was 14.3 percent, up from 13.2 percent in 2008 — the second statistically significant annual increase in the poverty rate since 2004. There were 43.6 million people in poverty in 2009, up from 39.8 million in 2008 — the third consecutive annual increase.”

What is good for the upper echelons of power and the majority constituents of a democracy are hard press to be seen as in line give the above facts.

government in July 2008 changes accounting regulations so banks and financial institutions would not have to reflect their true market value

But there are cheerleaders for the wealthy who reaped the rewards the bailouts and the ensuing demands that we not make them the brunt of the collapse they negotiated in the heady field of the “free market”, as Roger Simon tells us the real means to solve the conundrum of Socialization for the Money-movers  and Free Capitalism Austerity for the Masses:

“Don’t like the way wealth is distributed? Then you can join congressional Democrats and grump about it, or you can get some wealth for yourself.”

Lastly, like torture, which could be confidently defined away through the Orwellian application of the term “Enhanced Interrogation” (see no International Crime here, says John Yoo), as opposed to bringing the markets in check through desperately needed measures, it is best to just rewrite the language of the collapse and the financial instrument markets:

“The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission’s work.”

The Crisis according to the panel was caused by average home owners “over borrowing” and not by the “surprised Firms”

But how to make the argument work when obviously overleveraging and risky betting of the alternative economies of financial instruments finally brought the markets crashing down?

During a meeting of this commission last week, and to rewrite the language system for thinking about the 2008-9 crisis,“all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.”

Is the Financial Fix in?  Some signs of hope in the case of Ireland, but how will the 1% reply? (See update on AIB in this post)

Marcel Duchamp’s Anemic Cinema (1926) .  Making sense of the Senseless.

Update I:

Passage of the Obama and Republican tax-cut deal sailed through the House by a vote of 277-148, today in the early morning. The bill  slashes the estate tax for the upper brackets (In 2010, the estate tax rate drops to zero percent; if you die in that year, your heirs would not pay taxes, even if you passed on $20 billion) , extends all the Bush tax cuts (which include the resented tax break to millionaires) and reauthorizes unemployment insurance for 13 months (exludes those who have been out of work for a long period, the “99”’s and will expire for all in about one year). The bill will now go to the president for his signature.

Roy Sekoff said about Obama backing the tax cuts for the rich:

“Sometimes the simplest answer is the right answer,[Obama] is just not that into forcing the wealthy to pay their fair share.”

And here is the wonderfully effusive Matt Taibbi At the Rolling Stone Magazine, comparing Obama to Bernie Saunders (who had just spoken on the Senate floor for 8 plus hours about this issue) and the tax deal for the Wealthy:

“While everyone else in Washington was debating the political efficacy of the deal – the Hill actually published a piece talking cheerfully about how CEOs found a “new friend” in Obama, while the New York Times shamelessly ran a front-page “analysis” talking up the deal’s supposed benefits to the middle class and the political benefits from same that Obama would enjoy – Sanders blew all of that off and just looked at the deal’s moral implications. Which are these: this tax deal, frankly and unequivocally, is the result of a relatively small group of already-filthy rich people successfully lobbying an even smaller group of morally spineless politicians to shift an ever-bigger share of society’s burdens to the lower and (what’s left of the) middle classes. This is people who already have lots of shit just demanding more shit, for the sheer rotten sake of it. Here’s how Bernie put it:

“How can I get by on one house? I need five houses, ten houses! I need three jet planes to take me all over the world! Sorry, American people. We’ve got the money, we’ve got the power, we’ve got the lobbyists here and on Wall Street. Tough luck. That’s the world, get used to it. Rich get richer. Middle class shrinks.”

Update II

Nobel Prize winning economist Paul Krugman wonders about willful ignorance caused by the rewriting of language of the markets and how it may make change of the financial impossible.

And Check out the link at the end of the brief essay, it explains this graph of worldwide real housing prices, post and pre bubble-burst of the housing market.

Update III

Again the Nobel prize winning economist Paul Krugman wonders at the audacity of those wanting to have cut backs implemented unsparingly to the social body while keeping in place the low tax give aways (and low regulation in market activity and tax havens) to the corporate institutions.  Talking about the Republicans in the US desiring a massive and exclusionary rewrite of the history of the economic collapse in order to shift the blame on the general public and the government (and away from the banks and financial institutions) Krugman notes:

“But the G.O.P. commissioners are just doing their job, which is to sustain the conservative narrative. And a narrative that absolves the banks of any wrongdoing, that places all the blame on meddling politicians, is especially important now that Republicans are about to take over the House.”

But those who wish to make the public pay for the errors of the moneyed class made a slight mistake in publically proclaiming who they actually were “serving” and Krugman lets us know that:

“Last week, Spencer Bachus, the incoming G.O.P. chairman of the House Financial Services Committee, told The Birmingham News that “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

He later tried to walk the remark back, but there’s no question that he and his colleagues will do everything they can to block effective regulation of the people and institutions responsible for the economic nightmare of recent years. So they need a cover story saying that it was all the government’s fault. “

Or at the least ours, and according to them, we now have to pay for it with obliteration of social programs and the infrastructures of the public world.

Update IV

How the upper class tax shelter just passed in the US actually works:

“On Friday, the House approved the $801 billion “compromise” tax bill, sending it on to the White House for President Obama’s signature. Over the next two years, that budget-busting, gilded class giveaway will cost the Treasury $70 billion in revenue lost from the top 2% of taxpayers and another $25 billion uncollected from the richest estates in America. But sooner or later (sooner, if born-again deficit hawks get their way), that bill will come due and it will be paid by everyone else.

In the meantime, here’s a picture of your tax dollars at work – for the rich and famous”  read on
Update V:

Regarding the Bonus Culture, CEO’s would, along with packages, receive Bonuses per the traffic of bought and sold “packages” and Bets on these packages.  Whether or not the Company made money on the item the CEO’ would receive a percentage of the moved item.  This meant both “good” and “toxic” things were brought in and sent out.  But what if you get the Bonus for only buying “toxic” items? And the Bonus is given to you by the seller?  Check it out,

“Two years before the financial crisis hit, Merrill Lynch confronted a serious problem. No one, not even the bank’s own traders, wanted to buy the supposedly safe portions of the mortgage-backed securities Merrill was creating.

Bank executives came up with a fix that had short-term benefits and long-term consequences. They formed a new group within Merrill, which took on the bank’s money-losing securities. But how to get the group to accept deals that were otherwise unprofitable? They paid them. The division creating the securities passed portions of their bonuses to the new group, according to two former Merrill executives with detailed knowledge of the arrangement.

The executives said this group, which earned millions in bonuses, played a crucial role in keeping the money machine moving long after it should have ground to a halt.

“It was uneconomic for the traders”—that is, buyers at Merrill—“to take these things,” says one former Merrill executive with knowledge of how it worked.

Within Merrill Lynch, some traders called it a “million for a billion”—meaning a million dollars in bonus money for every billion taken on in Merrill mortgage securities. Others referred to it as “the subsidy.” One former executive called it bribery. The group was being compensated for how much it took, not whether it made money.

The group, created in 2006, accepted tens of billions of dollars of Merrill’s Triple A-rated mortgage-backed assets, with disastrous results. The value of the securities fell to pennies on the dollar and helped to sink the iconic firm. Merrill was sold to Bank of America, which was in turn bailed out by taxpayers.

What became of the bankers who created this arrangement and the traders who took the now-toxic assets? They walked away with millions. Some still hold senior positions at prominent financial firms.”

Once again, these guys are still in charge and they just got a 700 billion dollar tax break.

Update VI

And after all of this we get the wall streeters still complaining about Obama not being ”deferential” enough to the ”Masters of the Universe” (a term coined by Tom Wolfe in “Bonfires of the Vanities” to describe the sense of power, and entitlement (and a fat paycheck to go along with this), the financial manipulators wielded and was considered by them as deserved by them as they say themselves as “controlling” the world through “cash manipulation”).

Here is some of their new complaints:  This comes at the heels of the Bailouts, record bonuses (for incompetence), meetings with all administrations worldwide which will give them austerity measures for the general populations, but leave them in peace:

“He whipped everyone into a frenzy against us,” said one banker.

“It’s a bunch of academic lefties down there,” said another. ‘

“You say something to them and it just goes into a black hole,” said a lobbyist.

(and maybe the funniest, and bizarre inadvertent supidity)

There’s a precedent for this kind of antagonism – former President Franklin D. Roosevelt.

And the article notes after these quotes:

On the mental list of slights and outrages that just about every major figure on Wall Street is believed to keep on President Barack Obama, add this one: When he met recently with a group of CEOs at Blair House, there was no representative from any of the six biggest banks in America.

Not one!

“If they don’t hate us anymore, why weren’t any of us there?” a senior executive at one of the Big Six banks said recently in trying to explain his hostility toward the president.

“It’s not so much just this one thing,” he said. “Who cares about one event? It’s just the pattern where they tell you things are going to change, that they appreciate what we do, that capital markets are important, but then the actions are different and they continue to want to score political points on us.”

Still, the executive understands that it makes political sense for the White House to stiff-arm Wall Street, if not bash it with a massive sledge hammer.”

And, insult to injury, how are CEO’s like the put-upon, and much maligned, slave-owners of past (though we may see a similarity)?:

“Jamie Dimon, chairman and chief executive officer of JPMorgan Chase and a supporter of Obama in 2008, has been among the more outspoken critics of the White House’s anti-Wall Street rhetoric. “It’s harmful, it’s unfair and it leads to bad policy,” Dimon recently told The New York Times Magazine, adding that he told Obama: Former “President [Abraham] Lincoln could have denigrated all Southerners. He didn’t.”

Guess the idea is exactly how Blankenfeld, CEO of Goldman Sachs summed it up (when called in to explain how they possibly could have crashed the system and now wanted money to keep them in business):

“We do God’s Work”

Update VII

And in England per the Guardian the same is happening : the financial sector manipulators have won yet another battle.        Britain’s banks have been given the go-ahead to pay unlimited bonuses, drawing to a close a two-year political battle to rein in the City.”We’ve made a broad statement which is about the need to see some restraint and some responsibility from the banks, but we are not going to set bonus pools for individual banks,” the prime minister’s spokesman said.
Labour accused the government of capitulation and letting the bankers off the hook,… Ed Miliband, the Labour leader, said this was, in effect, a tax cut for bankers

Update VIII,

Glen Greenwald has an analysis of why Obama would forgo pressure from the left to but always seems to play nice with the rich 1%, the financial industry, and the corporations.  His thinking is obvious but has to be said:

“Why, angry progressives seem to be asking, would Obama ignore the views of his so-called “progressive base” while seeking to please those who are his political adversaries?

But it’s perfectly rational for Obama to do exactly that.  There’s a fundamental distinction between progressives and groups that wield actual power in Washington:  namely, the latter are willing (by definition) to use their resources and energies to punish politicians who do not accommodate their views, while the former unconditionally support the Democratic Party and their leaders no matter what they do.  The groups which Obama cares about pleasing — Wall Street, corporate interests, conservative Democrats, the establishment media, independent voters — all have one thing in common:  they will support only those politicians who advance their agenda, but will vigorously oppose those who do not.  Similarly, the GOP began caring about the Tea Party only once that movement proved it will bring down GOP incumbents even if it means losing a few elections to Democrats.

That is exactly what progressives will never do.  They do the opposite; they proudly announce:  we’ll probably be angry a lot, and we’ll be over here doing a lot complaining, but don’t worry:  no matter what, when you need us to stay in power (or to acquire it), we’re going to be there to give you our full and cheering support.

Given the posture of progressives, why would the White House possibly do anything other than ignore them (except when they’re deliberately attacking them in order to appear more centrist)? What motive does the White House have for doing anything other than that?  None that I can see”.

Update IX:

For a rundown of the financial crisis and the call for the”masses” to face austerity programs due the banking and financial markets hording of money see:

“The gambling known as business looks with austere disfavor upon the business known as gambling” : The Zero-Sum Game and the Vocabulary of Austerity

  1. maaretta says:

    Ouch. How Painful.
    Nowadays it seems that the rich are getting everything and the rest have to struggle to get any kind of help. What especially makes me mad is that Obama agreed to give a tax cut to the wealthy – only the wealthy, 1% of Americans – while questions like health care for 9/11 responders have to be on hold. Nobody else gets anything until the wealthy get to hold onto their precious, useless money. Argh!

    • hapstance says:

      Right, the withholding of health care for the 9/11 responders was a horribly egregious act and was voted against specifically because, no joke, “we won’t do it until the 1% upper income bracket gets a tax cut”. Can’t be much more terrible than that.

      And this is where Obama knows that he sits. The more liberal base will not vote against him and let the likes of this take the control of government and the presidency. Therefore the political gamble pays off. Reject your base, and have them vote for you anyway. But will it work?

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  3. […] bring the general class back to pre-crisis levels of employment and net income, has been instead to attack social programs which benefit mostly these in need of the social safety […]

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