Did Obscene Executive Pay Spark the Financial Crisis?
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You’ve heard all the reasons given for the economic implosion of 2008: the bursting of the housing bubble, the risky investments of financial firms, the use of incomprehensible financial instruments as get-rich-quick-schemes—all of them the result of a massive agenda of across-the-board deregulation pushed by Republican lawmakers since the 1980s.
But at the root of the behavior that led to the 2008 market crash that nearly took down the economy, according to experts who spoke yesterday at a conference at the AFL-CIO in Washington, D.C., is the soaring level of executive pay at the nation’s giant corporations—a system of salary, stock options and bonuses that is not tied to a company’s long-term performance, but rather to the short-term profits that stand to enrich CEOs via the options and bonuses. Consequently, explained AFL-CIO President Richard Trumka at yesterday’s conference, ”Executive Pay and the Dodd-Frank Act,” excessive executive pay led to excessive risk-taking by CEOs and other top officials in corporations and financial institutions.
In 1980, Trumka said, executives at the nation’s largest companies earned about 42 times the level paid the average factory worker, according to an estimate by BusinessWeek magazine at the time. Today, he said, the average CEO at a corporation in the Standard & Poor’s 500 collects a payout that is some 343 times larger than the median paycheck received by the average worker.
As an example of the kind of chaos such extreme pay gaps can create, Trumka cited the case of Angelo Mozilo, the former CEO of subprime mortgage giant Countrywide, who cashed out $400 million in stock options while the housing bubble was building, yielding him a windfall before his company collapsed under the weight of the bad loans that fueled the bubble—the very bubble that filled his coffers, while ultimately robbing regular Americans of their homes once it burst.
Wall St. Run Wild—Here’s How It Happened
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Here’s a great video that shows in part how the nation got to the point where inequality is so rampant, CEO greed so unrepentent and Wall Street so not held accountable that people across the nation have taken to the streets—and are staying there.
As Harvard professor Elizabeth Warren says here:
We go with this idea of “Let’s get rid of regulation” and what happens? Late 1980s, savings and loan crisis—should have been a warning. Late 1990s, remember long-term capital management, hedge funds? Should have been a warning. Early 2000s, Enron—should have been a warning. But we let it go and where did we end up? In the biggest crisis since the Great Depression.
H/T to MoveOn.org for featuring this clip from Lance Baxter’s YouTube channel.
‘Time for Working Class to Have A Voice’ in Budget Debate
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AFL-CIO Field Communications staffer Cathy Sherwin sends us this report.
Fed up with inaction and partisan-political game playing in Washington, Kentuckians gathered in Louisville to call upon Republican Sen. Mitch McConnell to stop the partisan politics and pass a budget that works for all working families, not just millionaire CEOs. They called out their senator for putting the 2012 elections ahead of the needs of his own constituents who would be impacted by deep cuts to Medicare, Medicaid and Social Security.
A delegation that included Rev. Charles Elliott, local voters and United Mine Workers (UMWA) President Cecil Roberts attempted to visit McConnell’s office, but when all but two were turned away by security, Roberts joined the crowd marching around the federal building while Rev. Elliott and a local senior citizen met with staff.
In nearly 100 degree heat, the crowd prayed and sang, marched and rallied for a humane federal budget with sane priorities while the pair met with Sen. McConnell’s staff. Roberts said “It is time for the working class to have a voice in this debate.” He called upon McConnell as well as Kentucky Sen. Rand Paul to stop holding the economy hostage. Even as the rally was coming to a close, another round began arriving on their lunch hour, with signs calling for no cuts to the critical programs that Kentucky families need. Read the rest of this entry »
Union Values: Made In America
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Dave Johnson writes for the Campaign for America’s Future and adapted this post for us.
Our country was born out of a fight to cast off colonial rule by a wealthy elite and govern ourselves as We, the People. This fight continues, and nothing more clearly represents this American effort to lift each other up than organized labor. On July 4, as we celebrate our independence I encourage people to recognize our ongoing battle by buying Made in USA goods, and by working for democracy and the rights of workers everywhere. Read the rest of this entry »
The Assault on Public Employees
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In this cross-post from the Huffington Post and Seminal, AFSCME President Gerald McEntee writes that attacks focusing on public employees are misdirected: the real culprits for the nation’s economic mess are Big Banks and Wall Street.
For more than a generation, America’s working families have been under a constant assault from the CEO’s and extraordinarily wealthy members of our society. While median incomes in the U.S. have stagnated since the mid-1970′s, incomes for those in the top five percent have more than doubled. Since the beginning of our new century—and aided by record-breaking tax cuts—incomes for the top 1 percent have tripled, while working families scrape by, working harder and longer and taking home less than they deserve in pay and benefits.
Snow? Oh, No. It’s Still the Economy
Here are a few tidbits worth noting from around the nation’s economic scene.
Bob Herbert at the New York Times puts the sorry U.S. unemployment rate in clearer–and more painful–perspective today, pointing out how the workers losing jobs are those who had almost no income to begin with.
The highest group, with household incomes of $150,000 or more, had an unemployment rate during that quarter of 3.2 percent. The next highest, with incomes of $100,000 to 149,999, had an unemployment rate of 4 percent.
Contrast those figures with the unemployment rate of the lowest group, which had annual household incomes of $12,499 or less. The unemployment rate of that group during the fourth quarter of last year was a staggering 30.8 percent. That’s more than five points higher than the overall jobless rate at the height of the Depression.
Big Bankers Howl—and Other Tidbits
Finally, some good news on the jobs front. The Council of Economic Advisers announced that the American Recovery and Reinvestment Act has now created or saved between 1.5 million and 2 million jobs. The economic recovery package also added several percentage points to the growth of the nation’s gross domestic product (GDP). Other tidbits:
• President Obama yesterday announced his intention to propose a Financial Crisis Responsibility Fee that would require the largest and most highly levered Wall Street firms to pay back taxpayers for the extraordinary assistance provided so that the TARP program does not add to the deficit. Even before the announcement, Big Bankers were squealing like stuck pigs. From Think Progress:
Edward Yingling, president and chief executive, American Bankers Association: “To impose yet another burden on the industry would obviously decrease their ability to lend.”
Showdown in Chicago: Thousands Protest Bankers
UPDATE: Check out photos and a video from today’s rally.
More than 5,000 people are packing the streets of downtown Chicago this morning, chanting, marching and rallying against Big Bankers and financial institutions that have taken taxpayer money and are using it to give big bonuses to CEOs and to lobby against financial reforms that would ensure they don’t go back on the public dole.
The crowd is marching to the Sheraton Chicago Hotel & Towers, site of the American Bankers Association meeting, to protest the banking industry’s greed and irresponsibility that crippled our economy, leaving millions of workers behind.
After the house of cards they built collapsed, bankers and the financial industry took $700 billion in taxpayer funds for a bailout. But rather than reform their failed practices, they want to go back to business as usual—with the chance of again precipitating another financial collapse and need for taxpayer bailout in coming years.
AFL-CIO President Richard Trumka, who is joining union members and allies at today’s events, has a clear message to bankers: You work for us.
Showdown in Chicago
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I’m in Chicago for the American Bankers Association meeting. Oddly, I haven’t been invited to the Roaring ’20s dance party I hear they’re having.
Why wouldn’t they celebrate the era of wild money and hot times (which slid into the Great Depression)? After all, the bankers are doing well these days.
They’re doing well because after financial institutions caused the global economic crisis, we bailed them out, to the tune of some $700 billion.
Now they’re in good enough shape to pay the suits $7 billion in bonuses for driving working families and our economy to our knees—to the verge of a second full-fledged depression.
Things might be turning around for the bankers, but for the rest of us, unemployment heads toward 10 percent and home foreclosures continue to devastate families and communities. Working families have lost health care, pensions and savings—and in exchange we’ve gotten predatory lending, outrageous overdraft fees and sky-high credit card interest rates.
Dancing with Jay and Daisy
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When you’re a member of the American Bankers Association (ABA) meeting in Chicago amid the worst U.S. jobless crisis and most disastrous economy since the 1930s Depression, what’s the logical move to make?
Dress up in a Roaring ’20s costume and party like it’s 1929.
Proving yet again that not only do taxpayer-bailed-out CEOs have no shame, word has it that they plan to flaunt their taxpayer-fueled wealth in our faces, the ABA is sponsoring its Roaring ’20s party in conjunction with its Oct. 27–29 meeting.
AFL-CIO President Richard Trumka will lead thousands of mad-as-hell Americans in a rally outside the ABA meeting on Oct. 27, demanding financial reform and re-regulation that will allow us to rebuild our communities, our lives and our economy.
(If you’re in Chicago, join us Oct. 27 at 10:30 a.m. CST. The march departs from the corner of East Wacker Drive and Stetson Avenue. After about a 15-minute march, the rally will be outside the Sheraton Chicago Hotel & Towers at 301 E. North Water St.)
Because when they’re not stocking up on Jay and Daisy attire, Big Bankers and financial institutions are using the $700 billion in taxpayer bailout money to attack proposals like the Consumer Financial Protection Agency that would actually help working people while decreasing the chance of another Big Bank-fueled financial meltdown. Of course, they’re not using all of our money to fight reform. Some of it—about $7 billion—is going to bonuses for top CEOs.
