Daily Blog

How CEOs Are Robbing America--And Enriching Themselves

    As I talk to workers throughout the country, whether they are in unions or not, I'm struck how much the greed of CEOs has penetrated the public consciousness. But, CEO pay is really only the tip of the financial riches that CEOs are hauling away--it is their pensions and deferred compensation that are truly staggering. And in the coming weeks, we are about to get a torrent of new information, never easily available before, to show the obscene looting of corporate treasuries.

   The Securities and Exchange Commission is now requiring companies, for the first time, to report in more detailed fashion the current value of tops executives' pensions and deferred compensation. It is often true that the real riches showered on CEOs by compliant boards (often stacked with the CEOs corporate buddies) are not in the annual paycheck but in pensions and deferred compensation--amounts that have been hard to uncover because corporate boards have done such a good job at hiding the figures. As companies file their proxy statement to report their 2006 financial results, we are going to learn a lot more about those pensions and deferred compensation. Hold on to your seats, folks, because this stuff is mind-boggling.

    In the current issue of Pensions & Investments (which is the leading newspaper for money management), Barry B. Burr has a story entitled Pension goldmine awaits AT&T, Occidental CEOs. Burr's post child is AT&T CEO Edward E. Whitacre who will take home--drumroll, please--$158.4 million as a pension package when he retires as chairman and CEO of the company.

    Using data compiled by The Corporate Library, Burr also reports on some other "parting gifts" awaiting others CEOs:

The Corporate Library. a research firm focusing on corporate governance and executive and director compensation, ranked the 10 CEOs with the largest combined pension and deferred compensation deals: In addition to Messrs. Whitacre and Irani, they are:

•Kenneth D. Lewis, Bank of America Corp., who is also chairman and president, $83 million;

•H. Edward Hanway, Cigna Corp., also chairman, $73.2 million;

•William C. Weldon, Johnson & Johnson, also chairman, $64.2 million;

•Alexander M. Cutler, Eaton Corp., also chairman and president, $54.6 million;

•Samuel J. Palmi¬sano, International Business Machines Corp., also chairman and president, $53.8 million;

•Harold M. Messmer Jr., Robert Half International Inc., also chairman, $53.1 million;

•Nolan D. Archibald, Black & Decker Corp., also chairman and president, $52 million; and

•Daniel P. Amos, Aflac Inc., also chairman, $50.1 million.

    Just to reassure you that greed does not run rampant in the corporate suite, we learn from this article that the top pension packages are 8 to 25 times greater than the median CEO pension package, which is "only" $6.4 million. And you have to pause for a moment and really reflect: how do those poor folks get by in retirement on a measly $6.4 million? I mean, $6.4 mil just isn't what it used to be.

    So, here are some broad thoughts to consider about the ripping off of such huge sums of money by such a tiny number of people.

    The first real challenge for the rest of us regular people--and bloggers everywhere--is to combat the rhetoric that we get from the corporate spin machine about these obscene amounts of money. To wit, here's what AT&T had to say about Whitacre:

Responding to the size of the retirement package, Butler McCall, AT&T spokeswoman, said, "Ed Whitacre is one of the longest-serving CEOs in U.S. industry. He started with Southwestern Bell in 1963 and became CEO in 1990. During this time, Mr. Whitacre has transformed both AT&T, which is now one of the largest companies in the United States, and the telecommunications industry. As CEO, Mr. Whitacre has also delivered stockholder returns above those of our closest peers, including a 53% total return last year alone. In fact, in 2006, including share price appreciation, dividends paid and share repurchases, AT&T and BellSouth combined created nearly $89 billion in value for our stockholders.

"His pension value and deferred compensation has been building up ... ever since he became an officer in 1984."

   A four-letter word bubbles up to my lips but I try to make it a habit to keep my writing relatively clean. Excuse me, Mr. Whitacre, you did not create the shareholder value for this company ALONE and, arguably, you had far less to do with building the company than the tens of thousands of people who worked for the company--many of whom lost their jobs when AT&T shed lots of workers for the sake of "shareholder value."

   In other words, beyond knocking down the size of these pay packages, we need to instill in the rhetoric of our politicians, the MSM and the broader public the rap that companies are built not by CEOs alone but by the average worker. You may think that to be obvious but it is not--and too many politicians will not take this on directly for, I would guess, one obvious reason--campaign cash--and one less obvious, but more troubling, reason: they believe the rhetoric.

   The outrage, of course, is that this legal raiding of the corporate treasury by a few people who take tens of millions of dollars out of a company, leaves no money for decent real pensions for hard-working Americans and, actually, puts many companies in financial peril. Last year, I pointed out how rich executives, not workers, are the cause of the pension crunch and financial troubles facing many big companies. Almost daily, we read about the crisis facing private pensions in many industries--but the truth is that it is often the top CEOs who are creating that very crisis because of their personal greed.

   Coupled with the attack on public pensions (where pension woes are mainly a result of the obliteration of a progressive taxation system), we, then, have a narrative that repeats itself: real pensions (by which I mean a defined benefit that you can count on in your retirement years) are a thing of the past and workers should not expect a secure retirement beyond Social Security and whatever they can make in the stock market through their own investments or contributions made to 401k plans. In this narrative, however, CEOs are, of course, exempt from that gamble about the future.

   We should be even more infuriated by this because of a couple of related trends. A couple of years ago, I pointed out that, while productivity had been increasing for many years (though it may be leveling off now), workers were not sharing in those productivity gains. Taking into account productivity, the minimum wage should be $19.12—-which would make it almost 50 percent above today’s median wage.  No matter how hard people have worked, they don't get a fair return on your labor. Beyond the unfairness, it also tears at the country’s social fabric because an economic system cannot endure if it is perceived to be unfair and fails to deliver a rising standard of living.

  Put another way in English: Mr. Whiteacre and his cronies have succeeded because of the hard work of a lot of people but he and his ilk have pocketed the gains and left nothing for the rest.

  The second trend is the insistence on the part of Republicans and too many Democrats that workers would be much better off in retirement if they practiced more "personal responsibility," meaning that they should save more and stop living so high off the hog. Over the weekend, I pointed out an article in The New York Times that described the plight of auto workers who are leaving their jobs. What caught my eye was this fact:

Across America, more than 30 million people have been forced out of jobs since the early 1980s, the Bureau of Labor Statistics reports, and regaining lost incomes has not been easy. Nearly 50 million new jobs have been created over that same period, according to the bureau, so there are always new opportunities but more often than not at lower pay. Among those who have lost work, only a third held new jobs two years later that paid as well as those that were lost, according to the bureau’s surveys of displaced workers. Another third of those displaced were in jobs that paid, on average, 15 to 20 percent less than their previous employment — while the final third had dropped out of the labor force entirely.

  People can't save and they are in debt because they don't have jobs that pay a decent wage--and they work for corporations headed by folks like Whitacre who are unwilling to shortchange themselves a few million for the sake of the workers who make a company successful.

  Real pensions--defined benefit pensions--are not a thing of the past IF we have a set of rules in the economic system that values those pensions, protects those pensions, requires that companies provide those pensions and, last but not least, makes unacceptable the kind of legal robbery that Whitacre and his ilk get away with.

   One of the things I detest about politicians and think-tanks who claim to represent the "middle class" is that few of them will speak forthrightly about corporate greed. Until they start calling out the Whitacres of the world, they don't deserve the support of the workers who are facing a very scary future.

  I always try to end these types of ruminations with suggestions. So, here are three:

1. There outta be a law...that penalizes companies for granting pensions and deferred compensation to its executives beyond a certain multiple of what the average worker gets. You pay your CEO a Whitacre pension, fine--you get hit with a huge tax penalty and those revenues are then put in a fund to strengthen Social Security or fund national health care (hey, we have targeted taxes for highway construction).

2. Change the bankruptcy laws. I'm really sick and tired of reading about companies that have used bankruptcy laws to terminate pensions--yet they continue to give executives hundreds of millions of dollars even at companies in financial distress. We should push for changes that essentially impose a proportional hit on executives to whatever hit workers take--and I would say, given the level of pensions granted executives, it should not be a one-to-one hit but a ratio that significantly scales back executive pensions in comparison to the rank-and-file worker.

3. On a positive note, companies that agree to create defined benefit pensions and limit CEO pensions would be treated far more favorably because they would be investing in the long-term health of their workers and the company.

  Well, I can dream, right?

GDP Up, But Class Warfare Continues

Thank god, I said--finally, a great juxtaposition of an argument I've made for lo these many years (and, not to great success, admittedly) that the Gross Domestic Product tells us very little about the general welfare of most people.

    The Bureau of Economic Analysis just dropped an e-mail to report that:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the fourth quarter of 2006,according to final estimates.

    That number is revised up slightly than previously estimated. Overall, GDP growth last year was 3.3 percent--a number the president and many Republicans are using to run around the country claiming that the economy is doing just fine and so why are people whining?

    And in to that debate falls David Cay Johnston's piece today in The New York Times entitled "Income Gap Is Widening, Data Shows." Johnston has long been one of the best reporters in the MSM keeping tracking of the on-going class warfare in the country. Here are the killer first grafs:

Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.

The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.

While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent.

The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.

The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

   So, the bottom line is this: the economy may be growing--that is, alot of stuff is being made and sold--but the GDP growth is telling us very little about what that means for the average person. Income distribution is a much better barometer--and the facts there are quite astounding. It's pretty clear why workers are feeling anxious about the future. They are strapped, while the top one  percent are not.

   Which brings me to another point I've made: with these figures making clear that the top one percent of income earners are continuing to reap an  unconscionable slice of the nation's income, why is the Democratic Party not making the rolling back of the Bush tax cuts a top priority? Yes, Bush will veto any such attempt. But, the public will be with us.

A Fight Over Tax Cut Rollback

    I can't tell whether there is a rift here but Democrats seem to be giving mixed messages--shocking!--on what the party's plans are regarding the immoral Bush tax cuts. In today's New York Times, Charlie Rangel, the new chair of the House Ways and Means Committee (and, as an aside, my congressperson) seems to say that raising taxes on the wealthiest people in the country is not on the table:

Now, he is trying hard to be restrained, about Mr. Bush, his administration and his tax cuts. When asked about Mr. Bush’s renewed insistence last week that Congress extend those tax provisions, Mr. Rangel paused and said, with almost visible effort, “Part of what I think is my responsibility is not to be critical of the president.”

He brushes off speculation about his party’s plans for the Bush tax cuts, many of which have been criticized by Democrats for years as a giveaway to the richest Americans; it is simply premature, he argues, since their expiration date is three years off. Stan Collender, a longtime budget analyst, says it makes no political sense for Congress to “deal with tax cuts before you have to, certainly not before the 2008 election.”

    That's just idiotic.  The tax cuts were irresponsible.  Why wait? As I argued recently, the Democrats should push for the immediate rolling back of tax cuts for the wealthiest Americans--the top ONE percent of Americans who make more than $1.3 million--and say to the Republicans: are you for giving the richest people more yachts and mansions or are you for making sure every American has health care?

    On the brighter side, Nancy Pelosi was quoted, in a story moved by the Associated Press covering her appearance on CBS' "Face The Nation", that tax hikes for the wealthy should be on the table.

"As we review what we get from ... collecting our taxes and reducing waste, fraud and abuse, investing in education and in initiatives which will bring money into the Treasury, it may be that (repealing) tax cuts for those making over a certain amount of money, $500,000 a year, might be more important to the American people than ignoring the educational and health needs of America's children," Pelosi, D-Calif., said in an interview aired Sunday.

    Let's hope Pelosi follows through on her intention to have some control of the committee chairs and directs Rangel to stop coddling the rich.

The Stock Option Scam

    See, i just can't tear myself away from keeping you'all informed...I read this article several times yesterday and managed to keep from posting, so i could keep a promise to myself to finish a pile of other work...but...I digress.

    Yesterday's Wall Street Journal had an amazing article, co-written by Mark Maremont, who I worked with some years ago at Business Week (yes, I toiled away in the belly of the capitalist publishing beast...it beat unemployment). Maremont and his co-writer Charles Forelle wrote a very long article digging into the abuse of stock options. Because this piece is for subscribers only, I'll try to give you a flavor:

Eugene Isenberg is the little-known chief executive of a modest-sized oil-services company in Houston. But he stands out in one way: He is among the highest-paid corporate executives in history. In the past 19 years, he has pocketed more than $450 million.

The key to this wealth: stock options, in abundance. His employer, Nabors Industries Ltd., has lavished more than 25 million options on him over the years.

They became lucrative partly because of Nabors's generally rising stock price, but also because of some controversial moves that gave the options more punch. When Nabors's stock fell below the price at which the options could be exercised, temporarily making them worthless, Nabors let him trade in some of his options for new ones with lower exercise prices. And when Mr. Isenberg cashed some options in, Nabors "reloaded" him, replacing those he'd exercised with the same number of new ones.

Stock options were hailed two decades ago as a remedy for runaway executive pay. Academics, politicians and investors, tired of seeing CEOs pocket big money for a so-so job, pushed to have stock options become a primary method of compensating executives. Options -- granting the right to buy stock tomorrow at today's price -- would pay off only if the company's stock went up. To advocates they were the ideal carrot, an incentive for good work that aligned executives' interests with those of shareholders.

That happened -- sometimes. But at many companies, options morphed into the biggest executive bonanza yet, pouring out cash like a stuck ATM, and sorely disappointing those who thought options would moderate executive pay.

Instead of replacing big bonuses, options became an additional form of pay slathered on top of already-generous packages. Employers doled out options in ever-growing numbers, in part because, until recently, accounting rules meant companies didn't have to treat this largess to executives as an expense. And like Nabors, some used repricing, reloading and other tactics that made it even easier for executives to score huge hauls.

    Essentially, Isenberg and others gamed the system.

    There is a chart that goes along with the article that is truly mindboggling (if you click on the chart, you can get a bigger, more readable, version). It looks at the 25 executives who cashed in the highest profits in stock options from 1992-2005. Some of them are recognizable names like Oracle's Larry Ellison and Dell's Michael Dell. But, others are probably people you never heard of like Dwight Shar of NVR and William Greehey of Valero Energy. What all these people have in common is a complaint board of directors willing to shower these executives with compensation without question. Here's some more perspective from the Journal's writers:

The backdating scandal at scores of companies shows one way stock options, once seen as an executive-pay reform, have often been distorted by corporate officials and their consultants. Nell Minow, a longtime corporate-governance advocate, calls backdating "just another in an endless and unstoppable series of mechanisms to subvert the purpose of stock options." A vocal proponent of options in the early 1990s, Ms. Minow now regrets that stance. "Options became completely disconnected from shareholder interests," she says. "I grossly underestimated the capacity of corporate boards and corporate managers to circumvent the principles we established."

From 1992 to 2001, the average value of option grants to CEOs of S&P 500 companies soared nearly tenfold, according to data compiled by Kevin J. Murphy of the University of Southern California. The result was that options, which in 1992 made up less than a quarter of the average CEO's pay, by 2001 provided more than half of pay packages -- packages that were much larger. Companies have started doling out fewer options in the past few years, but grants remain far more generous than a decade ago.

In 1985, Miami financier Victor Posner pulled down $12.7 million, putting him atop lists of best-paid CEOs that year. Last year, 393 executives earned more than that, thanks largely to gains from exercising options, according to Standard & Poor's ExecuComp, which tracks executive pay at about 1,800 public companies. The top 2005 earner was Barry Diller of IAC/InterActiveCorp., with $295 million, nearly all from options.

    So, those top 25 executives in the graphic above pocketed $9.6 billion--just from money reaped from stock options. Twenty-five people.

    In Isenberg's' instance, he benefitted from something called "reloading':

In the late '80s and early '90s, companies found another way to goose stock-option grants: "Reload" them.

Normally, options disappear when exercised. But with a reload plan, a person who exercises options automatically gets replacements. Typically the replacements number fewer than the options exercised. They carry the same expiration date but a different exercise price -- the current market price.

Reload plans are supposed to encourage executives to hold stock in their company, says Mr. Cook, the pay consultant, who invented them. To get a reload, executives exercising options generally must do so not with cash, but with stock. That is, they must hand in existing shares whose value equals the cost of exercising the options. Since executives can't do that unless they own shares, they have an incentive to be shareholders of the company and to hold onto new shares obtained when they exercise options.

Critics decried reloads as abusive, a kind of option replication machine that enriched top managers -- while diluting other stockholders' ownership as the number of shares outstanding rose.

    By giving Isenberg a "reload," and he cashed those in 2000 (reloaded, repriced and repriced) for a nice cool $54 million. There is also a suspicion that the company backdated the options--pricing the options earlier than they really were given, at doing so at a price that was more favorable to the CEO. That would be illegal. The Journal article says that 60 executives and director of public companies have been ousted because of the growing backdating scandal. We will see what happens with Mr. Isenberg.

The Disgusting Greed Continues

    The New York Times can't get enough out of the riches pouring into Wall Street and the consumption that follows. Today, more on what those newly rich or even more rich will do with their bonuses:

That is serious money. And the serious luxury goods markets are feeling the impact.

Miller Motorcars, in Greenwich, Conn., is fielding more requests for the $250,000 Ferrari 599 GTB Fiorano than it can possibly fill. One real estate broker laments a dearth of listings for two clients trying to spend $20 million on Manhattan properties. Financiers already comfortably settled in multimillion-dollar apartments and town houses are buying $5 million apartments for their children. Vacation homes, usually bought and sold in the spring, are now hot this winter, including ones in private resorts like the Yellowstone Club in Montana near Yellowstone National Park.

    And...

Then came bonus day. Last week, Michele Kleier, president of Gumley Haft Kleier, received a call from a hedge fund manager in his late 30s. He had spent $6 million on an apartment two years ago and, with his bonus, wanted to upgrade. His new price range? “Not more than $20 million.”

Ed Petrie, a broker at Sotheby’s in East Hampton, N.Y., is now fielding two bids for $8 million to $10 million properties in exclusive Georgica Pond — properties that have been on the market since the spring. “The fall was relatively slow and then suddenly, with news on bonuses, there has been quite a bit of activity,” he said.

    And...

Private planes, or shares of them, are also on the rise, with demand for charter planes at one company up 40 percent to 50 percent among financial services executives. “There is a noticeable difference this year compared to the past, especially in the financial sector,” said Jeffrey Menaged, founder and head of Chief Executive Air, the company that hired Ms. Clark for the day. A typical price for a charter flight is $30,000.

Sales of “jet cards,” a sort of debit card for private flying, increase during bonus season, Mr. Menaged said, as executives lock in last year’s gains with guaranteed comfort for the new year.

Exotic destinations are also being pitched to the Wall Street ultrarich. Unlimited Speed started Victory Lane in November, a 3,000-acre development in Georgia for motor racing aficionados. Along with a 4.5 mile racetrack, the development also has a 1,600-acre nature preserve, equestrian facilities, a golf course and spa. It already has 27 reservations, a quarter of them coming from Wall Street, said Andrew Goggin, president of Unlimited Speed.

    No mention in the article about what the 48 million Americans without health care are going to do with their bonuses...

I Can Top That

    And here I thought the CEO of Goldman Sachs should take the annual award for being the biggest pig at the trough. Silly me. With a deep apology to Lloyd Blankfein, may I introduce you to Hank McKinnell, the former chief executive of Pfizer, who is going to get a nice gift of $200 million from the company's board. In a harsh column today by Gretchen Morgenson of The New York Times, we learn that:

Since Pfizer dumped Mr. McKinnell last July, we have been awaiting the details of his severance arrangement. We guessed it would be dizzying — his pension alone had been estimated at $83 million.

But after the company said late last Thursday that the terms of the package would soon emerge — on a day when shareholders, distracted by holiday shopping, might not notice — we knew the amount would be odious.

Here’s how Mr. McKinnell’s $200 million package adds up. First is his pension of about $6.65 million a year for as long as he lives. The company estimates its value at $82.3 million. Sweet.

Next comes $78 million in deferred compensation, which includes $67 million in pay that Mr. McKinnell has set aside over the years. Then there is an estimated $18.3 million in performance-based shares. Given Pfizer’s recent results, perhaps it would be more accurate if these were identified as failure-based shares.

Tack on $12 million in severance, vested stock grants worth $5.8 million and a $2.15 million bonus and Mr. McKinnell has all the makings of a very, merry Christmas. But that’s not all.

Mr. McKinnell, 63, also received $576,573 worth of medical, dental and life insurance as well as the unspecified value of continued medical and dental coverage under Pfizer’s retiree plans for him and his partner, Joanna Slonecka. Included in this pot is the cost of financial counseling programs. (Maybe he can dip into that amount to help line up some therapy for Pfizer’s board.)

The most curious figure of all, though, is $305,644 — rounded up to the nearest dollar, presumably — that represents the value of Mr. McKinnell’s unused vacation days.

    You would think this guy earned the money for doing such a great job for the company. Well, we know better:

Mr. McKinnell’s $200 million is even more disturbing when put next to the roughly $137 billion in market value that vaporized on his watch. That Mr. McKinnell forced his shareholders to pay $305,644 for his unused days off after draining them of $137 billion is downright stupefying.

But this is how too many leaders behave in 2006. They give large numbers of pink slips to employees. They create really big losses for their shareholders. But they make sure they chisel the company’s owners for every nickel and dime, including dental coverage, unused vacation days and financial counseling programs.

Nice Bonus, Lloyd

    I admit to having this fascination with the huge bonuses being doled out to Wall Street executives. Each day brings a new record. And it rings so Marie Antionette--48 million people without health care, pensions disappearing, wage growth puny if at all...and, in the face of all that, a few folks are just piling up gargantuan rewards. It's bizarre, weird, sick and disturbing.

    A few days ago, when I wrote about the $16 billion bonus money Goldman Sachs was going to dole out, no one yet had any firm figure on what the individual hauls might look like. Well, take a bow, Lloyd Blankfein--you just went into the record books:

Goldman Sachs paid Lloyd C. Blankfein, its chairman and chief executive, a bonus of $53.4 million in 2006, the highest ever for a Wall Street chief executive.

Added to his $600,000 salary, the bonus means that Mr. Blankfein will make $54 million this year, up from $38 million last year. The bank’s compensation committee awarded him $27.3 million in cash, $15.7 million in restricted stock and options to buy Goldman stock valued at $10.5 million.

The payout comes a week after Goldman reported a record profit of $9.5 billion, or $19.69 per diluted share, in 2006. Its stock price is up almost 60 percent for the year, and the firm’s market capitalization is nearly $90 billion, more than triple its value when it went public in May 1999.

    No word on how much Lloyd is turning over to charity.

Goldman Sachs Owes You

    As a New York City taxpayer, I want a refund from Goldman Sachs. And you deserve one, too, before the company cuts checks to shower $16 billion in bonuses throughout its executive suites. We are all paying for the enrichment of the investment bankers and rainmakers who are going to pocket tens of millions of dollars. It might be one of the more subtle corporate rip-offs of taxpayers, and, most troubling, it’s all legal.

    In the summer of 2005, Goldman Sachs successfully extorted money from New York, threatening to leave the city unless it received tax breaks and low-interest bonds. It did so in a fairly ugly way. Using the specter of September 11th as a club, the company pocketed an unbelievable deal: $1.65 billion in low-interest, triple-tax-exempt Liberty Bonds, enabling the firm to save as much as $9 million a year in financing costs, which would save Goldman about $250 million over the life of the bonds. If that wasn’t enough, the city also threw $115 million in sales and utility tax breaks at the company, in return for a commitment to maintain its headquarters in Lower Manhattan and employ more than 9,000 people through 2028; those breaks could rise to as much as $150 million if Goldman adds 4,000 new jobs by 2019.

    Like too many cities and states in the country, New York rolled over, succumbing to the kind of corporate blackmail that has been draining cities and states nationwide of badly needed revenues for things like schools, affordable housing and infrastructure (this corporate blackmail is expertly documented by Good Jobs First). The fact is that, in my opinion, this give-away was unnecessary. The company was more likely to be persuaded to stay in New York by the closeness to other financial institutions, New York’s infrastructure and the trained workforce that existed.

    Goldman’s executives simply took advantage of a city and government still desperate to create new jobs and took the money that was laying on the table. By the way, it wasn’t the high-fliers at Goldman who took the hardest hit from the economic effects of the 9/11 attacks. It was the working-class and middle-income people: 60 percent of the 100,000 people who were displaced by the attacks were making less than $11 an hour, according to a study by the Fiscal Policy Institute.

    So, here we are now: a company that is taking money out of my pocket and yours is setting aside $16.5 billion in cash to pay out as bonuses—an average pay day of $622,000 per worker. Of course, average really is misleading—the top dogs at the company will reap the big windfalls (CEO Lloyd Blankfein is reportedly in line to cash a check of up to $50 million), with the support staff probably getting a free Metro Card or maybe a nice holiday gift basket, at best.

    Why shouldn’t Goldman give some of that money back to the city, or the federal government (the low-interest Liberty Bonds are backed by the faith and credit of the feds)? Sure, some of the money will come back in tax revenues. But, why should a company that chooses to devote $16 billion to bonuses continue to be underwritten by the average person? Here’s the cruel irony: New York’s residential real estate market is out of control, with the city increasingly becoming a place for the rich. Blankfein and his high-rollers will likely spend a huge chunk of their new riches to buy multi-million digs in the city, further pushing up prices and making housing even more unaffordable for millions of people—the very people who are paying taxes that are supporting the tax-breaks Goldman Sachs is enjoying so it can rake in even larger profits. Isn’t capitalism great?

    I know this is unrealistic—after all, as dumb as the deal was, supported by our mayor, governor and two United States Senators, it was legal—but why shouldn’t our political leaders ask for a refund? And if Goldman Sachs says no, New Yorkers and taxpayers everywhere should demand that their city, state or the federal government boycott its services and refuse to use the company in any investment of pension funds or other financial instruments (By the way, if you want to call Blankfein and tell him what you think, he’s ready to take your calls at 212-902-1000).

   Yeah. Not going to happen. But, maybe this is a lesson for the future. The corporate raids of the public till have got to stop.

Selling Candy--Jobs Of The Future

    More than a month ago, I posted a short item about the mad scrum that erupted in Times Square when a few thousands people lined up for 65 jobs--at M&M's new store. Well, actually, it turns out I underestimated the insanity. According to the Daily News yesterday, 12,800 people filled out applications for the 198 jobs (beats me why the difference in numbers on the jobs...I'll chalk it up to bad reporting but I also didn't check up on this independently so bad on me, too).

    Anyway, these jobs pay $10.75 an hour "plus health and other benefits," according to the article--but there's no description of the health benefits. Mark me down as skeptical that the benefits are anything more than a bare-bones plan with high deductibles and skimpy coverage. As for the store:

M&M's World offers themed clothing, dishware, piggy banks, watches and of course, chocolate. New York's largest candy store has a two-story wall of M&M's with 22 different color choices.

    Hey, I have a real bad sweet tooth so I'm not dissing the great societal benefit that M&M represents. But, these are the jobs that thousands of people are going bonkers to grab. youThis is the great economic miracle we can look forward to.

Ben Is Right Again

    We know something is wrong in this country. The facts are all around us. Most of the time I find the progressive/left rants about class war and inequality completely predictable and boring--even if I agree with the substance.

    So, I keep finding the comments by Ben Stein quite worth reading. Stein writes a regular column in the Sunday New York Times Business Section. He's an avowed capitalist and, as he points out, quite well off himself. But, he is regularly disturbed by the excesses of the system. As he was today:

A puzzle: we have all heard corporate executives say that American workers are paid too much; that our industries cannot compete with foreign makers because our labor costs are so high that if we used American union labor, we would see profits evaporate.

And yet, hourly wages in this country, adjusted for inflation, are below what they were in 1972 (when my pal, Richard Nixon, was president) by a substantial amount. But to hear corporate leaders tell it, this is still far too high to allow competition with foreign entities.

Now, you would think that if this high-priced American labor were in fact pressing corporate backs to the wall, profits would be stagnant or falling. But in fact, in the last several years — and especially the last few quarters — corporate profits as a percentage of sales were the highest they have been since 1965 — roughly 9.6 percent before tax and roughly 7.4 percent after tax.

In total, profits are by far the highest they have ever been, running at a rate of very roughly $1.38 trillion in the first quarter of 2006. As a percentage of gross domestic product, profits are also the highest they have been since the statistics began being kept in 1959 — roughly 12.7 percent.

Don’t get me wrong. I like profits, a lot. They are what the capitalist society is all about. But why are we outsourcing, why are we moving our work overseas, if our corporations are so profitable? And if our corporate world is so profitable, how come so little of the growth goes to workers’ wages? How come — as an average number — basically none of the growth goes to the ordinary worker’s wages? I am not saying this to encourage strikes. I am genuinely puzzled about it.

Could it be that just the threat of moving jobs overseas (very few have in fact actually been moved as yet) keeps labor cowed? Is the vast labor force of Asia and the Third World in fact something like “the reserve army of the unemployed” that Karl Marx described in his critique of capitalism?

    Ah, and, yes, he has some thoughts about the absurdity of the attempt to repeal the estate tax:

Next mystery: in a nation with stupendous deficits even at the peak of the business cycle, with forecast deficits of nuclear-disaster status, how can it be important to repeal the estate tax? Isn’t there enough income and wealth inequality in America? Don’t we need the revenue? How on earth can any social good come from making taxes on the rich even lower than they are? How does this bind the nation together in time of war?...

Why should the very rich not pay their fair share of the burdens of government? I could see a different argument if we were not hundreds of billions in the red, but in the real world, how can repeal or a drastic cut in the estate tax make social, moral or fiscal policy sense?

    I don't go so far as to agree with him that there would be an argument of the deficit was smaller.  But, still, it strikes me that when the Ben Steins of the world are worried, the situation is quite bad.