AIG execs display contempt again, so a-hunting we will go…
Those top banking and insurance execs just bailed out by the public for $700 billion are incorrigible–and we should be grateful.
Their greed creates such irresistible urges for "More!" that they can’t help themselves from continually grasping for yet more luxuries. Progressives should be thankful, because these uncontrollable displays of contempt for the public will keep the bailout issue alive when the new Congress convenes. It will provide the opportunity to re-shape the bailout so that the purpose is to protect and advance the public interest, not shield reckless pirates like those at the five major investment banks who gave themselves $39 billion in bonuses for the fine job they did in 2007
Just when word of an expensive weekend at a California spa for AIG execs was reaching the ears of taxpayers who shelled out $123 billion to keep the too-big-to-fail firm afloat, the boys at AIG decided it was time for another stress-relieving getaway. As Maureen Dowd of the NY Times recounted in a brilliant column Sunday (I often find politics scattershot and her tone snarky, but here she was dead-on) about an AIG hunting trip to England "London‘s News of the World sent undercover reporters to hunt down the feckless financiers on their $86,000 partridge hunt as they tromped through the countryside in tweed knickers, and then later as they "slurped fine wine" and feasted on pigeon breast and halibut.
"The paper reported that the A.I.G. revelers stayed at Plumber Manor — not the ancestral home of Joe the Plumber, a 17th-century country house in Dorset — and spent $17,500 for food and rooms. The private jet to get there cost another $17,500, and the limos added up to $8,000 more.
"In an astonishing let-them-eat-cake moment, the A.I.G. big shot Sebastian Preil held court at the bar and told an undercover reporter, "The recession will go on until about 2011, but the shooting was great today and we are relaxing fine."
Ms. Dowd’s blood is boiling, and she claims that the spirit of Madame DeFarge (from Dickens’ Tale of Two Cities about the French revolution) has been re-awakened in her. Hopefully, that outrage will spread rapidly and force a re-writing of the bail-out as the second order of business (after starting to end the occupation of Iraq).
We don’t need guillotines for the executives who brought down the temples of capitalism with their insatiable greed, however tempting the idea. What we need instead is a very specific and stringent set of conditions to impose on the bailout:
Democratizing the planning process:The bailout strategy must no longer be dominated by "Government Sachs"–that is, Goldman Sachs execs on loan to the government who have clear conflicts of interest. While knowledge of Wall Street’s operations is essential, we desperately need sophisticated, public-minded economists (Robert Kuttner, Robert Reich, Dean Baker, and William Tabb come to mind).
Tight enforceable clamps on executive compensation: If bankers and insurers wish to accept public money to keep their corporations alive, then they should accept a ceiling of $2 million on total compensation. If they are unwilling to accept that amount, it shows where their true loyalties lie and shareholders will surely find eager, competent replacements.
Repeal of the Commodities Futures Modernization Act. which John McCain’s economics guru former Sen. Phil Gramm authored to de-regulate banking and insurance.
Reinstating the Glass-Steagall Act, with appropriate updates, which was enacted during the Great Depression to regulate banks and was repealed in the late 1990’s.
Strong protections for homeowners, including a moratorium on home foreclosures and court-overseen re-negotiation of mortgage payments for victims of the sub-prime loan vultures. This will help to keep families from being evicted, prevent neighborhood decay, and stabilize falling home values.
Closing down the use of tax havens (e.g., Bermuda and the Cayman Islands) by any firm participating in the bailout. The American taxpayer deserves a full accounting of all the assets which these corporations and top executives possess.
Shutting down private equity funds: private equity and hedge funds represent what some call "termite capitalism," growing fat through "asset-stripping" profitable firms: raiding pension funds, slicing wages and benefits, and selling off machinery rather than operating it to produce what society needs. These funds are scandalous in several other critical ways: they use debt and special tax breaks to gain a substantial 60% advantage over other firms; virtually no disclosure is required of them, as is the case with publicly-owned firms with stockholders; and private equity executives reward themselves with salaries and bonuses that are staggering. For example, Stanley Feinberg raked in $330 million last year, but was only the 15th highest-paid exec in the private equity/hedge-fund industry.
Establish the re-industrialization of the US as a priority of banks and insurers benefiting from the bailout. If public money is being used to stabilize our economy by propping up these banks and insurers, a crucial ingredient in stabilizing the economy for all–not just the top executives–then this taxpayer funding should help to put US taxpayers back to work at family-supporting wages.Why should we passively public money funneled through a bailed-out bank to help Corporate America enlarge its off-shore sweatshops in China, Mexico, and elsewhere while we endure a tidal wave of plant closings in the US?
If some bank and insurance CEOs don’t want to play by these rules in return for a publicly-funded lifeline, let them face a guillotine built by their own shareholders.