In the last few weeks, anger at Wall Street bankers and other bailed-out executives has reached fever pitch in the U.S. The latest bonus scandal involving executives at AIG has become the last straw. AIG paid out $165 million in bonuses this past week after receiving more than $170 billion in handouts and government backing.
By Patrick Ayers, Socialist Alternative (CWI in the US)
For what? Just a few weeks back AIG posted the single worst quarterly loss by a corporation in U.S. history, losing more than $60 billion over three months. Days later, the U.S. Treasury and Federal Reserve gave AIG another $30 billion in public funds, money that could have bailed out the state of New York’s budget crisis – twice.
The politicians say they were “shocked” by the bonuses. But a Congressional investigation last fall revealed these same AIG executives spent $440,000 at the upscale St. Regis Resort in Monarch Beach, California a week after receiving their first $85 billion handout.
While media reports talk of “employees” at AIG getting bonuses as if they are average workers, in reality huge bonuses were paid out to AIG’s executives and top brokers, including their “talented” traders in the unit chiefly responsible for their stunning collapse.
73 executives got more than $1 million each, ten got a combined $42 million, four executives got more than $4 million, and one executive got over $6 million in bonus pay. Have AIG executives decided to rob Peter (U.S. taxpayers) to pay Paul (themselves)?
Widespread anger at the bailouts and bonuses has forced the politicians to speak out against AIG. On March 19, just days after the scandal broke, the House of Representatives passed a 90 percent tax on bonuses for employees with incomes exceeding $250,000 at companies that receive $5 billion or more in bailout dollars. The Senate is considering a similar bill though there is still the question of the legality of such a bill, and it may end up being no more than a symbolic measure without real teeth.
In the meantime, the House bill overwhelmingly passed with bi-partisan support from many Republicans who temporarily dropped their hard-line opposition to the Democrats in the face of widespread public outrage. A Gallup poll released on March 18 showed only 11 percent of the population were “not bothered” by the AIG bonuses, while 59 percent were “outraged” and 76 percent wanted the government to block the bonuses.
Anger at Wall Street and executive bonuses has been building up in U.S. society over the past few months. In January, the New York state Comptroller’s office reported that bailed-out Wall Street banks paid out an estimated $18.4 billion in bonuses to executives and their most prized professional speculators at the end of 2008. Why didn’t Congress pass a 90 percent tax on those bonuses then?
As these scandals build up, they expose more and more the rotten nature of the political and economic system. While the bankers got trillions of dollars in bailouts and billions in bonuses in 2008, the Federal Reserve recently reported that household net wealth fell by a record 9 percent in 2008. More than $11 trillion just vanished (Business Week, 3/17/09). People lost their homes, their jobs, their healthcare, and their retirement savings.
With the economy continuing to plunge, the politicians are trying to avoid blame by pointing the finger at the greed and excess of corporate executives. But these are essentially the same politicians that voted to hand over $700 billion in public funds with virtually no conditions last October, and the same political parties that got us into this mess in the first place.
Obama and Bank Bailouts
President Obama is viewed much differently by the public than his Democratic Party allies in Congress. Breaking with thirty years of neo-liberal norms in the U.S., Obama’s federal budget proposal (http://www.socialistalternative.org/news/article12.php?id=1056) includes huge increases for spending on the poor, the unemployed, education and the environment.
He’s currently pushing to raise taxes on the wealthiest Americans to pay for increased healthcare spending. He also pushed through a $787 billion stimulus bill that will create jobs, provide relief to the unemployed, and give tax breaks to the public.
But at the same time, he has continued with the policy of propping up financial companies deemed “too big to fail” with public dollars, including AIG who got $30 billion at the beginning of March. Also included in Obama’s $3.6 trillion budget proposal is $250 billion for future bailouts. In his address to Congress at the end of February, Obama warned that the banking crisis “will require significant resources from the federal government – and yes, probably more than we’ve already set aside” (NY Times, 2/25/09).
The AIG scandal shows Obama may not find it so easy balancing between anger of the public and the demands of Wall Street for government bailouts.
After the AIG scandal first made headlines, Lawrence Summers, Director of the White House National Economic Council, told Meet The Press “you can’t govern out of anger.” While denouncing the bonuses as “outrageous” he argued the administration could not do anything about them. “We are a country of law. There are contracts. The government cannot just abrogate contracts.”
Yet, the next day, Obama ordered Treasury Secretary Timothy Geithner to use “every single legal avenue available to block” bonus payments at AIG. So far, the best Geithner has come up with is a plan to recoup the bonuses from the latest government bailout payment. Does this mean that instead of $30 billion, AIG will only get $29,835,000,000?
Obama is attempting to balance his overriding policy of saving the system, with the fact that saving the system automatically takes money away from the kind of programs that would protect workers and their families.
Without challenging the capitalist system, Obama will not be able to end the suffering. Official unemployment has reached 8.1 percent nationally. When you take into account those cut out of the system or forced to work part-time, the real level of unemployment is closer to 15%. Millions of jobs will need to be created. All the money thrown at the banks has not stopped the system falling.
Obama still has a reservoir of good will and has ramped up his populist rhetoric in recent weeks in the face of growing anger. We should expect more measures from his administration aimed at easing the suffering of working people during this crisis. This will be welcomed.
Nor will Obama be able check the demands from Wall Street and Corporate America that we pay for the crisis of their system. With no end in sight to the economic meltdown, we should expect more banks and companies demanding bailouts from Obama, undermining his support. Where is the bailout for working families that have seen their savings and retirement shattered, and who suffered declining real wages for the last 30 years?
The reality is that Obama’s main priority in this crisis is to help save the capitalist system from collapse. While millions of ordinary Americans have hopes that Obama will be able to reverse the economic pain, Wall Street is counting on Obama to help restore the profitability of their system.
To find a way forward, we must recognize that Wall Street and Corporate America are organized and have access to the politicians and the administration. We can’t rely on the Democrats and Obama.
The only way working people will be able to avoid paying for the crisis of this system is by independently organizing ourselves and fighting back with our massive numbers, our own unions and organizations, and ultimately our own political party.
The System is the Problem
The bonus scandals show this system is rotten to the core. In fact, it’s so rotten, that the financial speculators have even found a way, using a technique called “shorting,” to profit off the stock market’s COLLAPSE!
CNBC buffoon Jim Cramer was recently exposed for doing this by Daily Show host Jon Stewart. By shorting the market, investors make a bet that a stock will fall. The more it falls, the more they make. They do this by borrowing a stock they do not own and selling it, and then actually buying the stock later when its value is down.
Cramer went as far as to advise those shorting the market to spread rumors that a company is doing bad to drive down the stock value. While speculators who short make money off falling stocks, workers get laid off when companies fail – and shorting is legal. It’s rooted in a system that rewards profit-making rather than long term planning and the needs of the majority. What kind of system rewards “investors” for helping destroy jobs?
Why should working people pay for this crisis? We didn’t create this system. It’s time to fight back. We need to immediately launch campaigns in every community across this country to demand a bailout for working people. We need to build a mass movement demanding:
* No bonuses for bailed-out executives!
* Bail out jobs, healthcare, housing, education, and retirement plans – not Wall Street.
* For a massive public works program to rebuild the country and create millions of living wage jobs.
* No evictions or foreclosures. All residents and needy homeowners should be allowed to live in their homes at an affordable rent.
* For public ownership of failing banks and companies under democratic control and management by a governing board made up of representatives of workers and the wider public, including home owners and small businesses.
* For a democratic socialist alternative to the rotten, corrupt system of capitalism.