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Okay, as we all know now that almost everything about Joe the Plumber is a lie. He doesn’t own a plumbing business and apparently is not even licensed as a plumber, but he does raise a legitimate concern about “spreading the wealth around.” The only problem is that in this country, when the government spreads the wealth around it usually means redistributing it upward.
That is certainly the case with the hundreds of billions of dollars being used to bail out the banks. The public has a real interest in keeping the banking system functioning. It has zero interest in subsidized the pay checks of wealthy bank executives or enriching the bank’s shareholders, which Secretary Paulson is now doing.
There is no question about what is going on here. The public is providing massive subsidies to the country’s major banks. The terms of the bailout were far more generous than what the banks could get from the private market. As a result, banks that might not have survived otherwise, or at least would have been forced to make serious cutbacks, can now keep operating as they had been.
This means that their high level executives will continue to draw salaries in the millions or tens of millions of dollars. It also means that the shareholders will continue to receive dividends.
This was not inevitable. Paulson could have imposed serious pay caps on executive compensation. In Germany, the banks that are getting government money can’t pay their executives more than 500,000 euros, about $680,000. The United Kingdom also limited executive compensation as part of its bailout.
In addition, the banks in the UK are prohibited from paying dividends as long as they have public capital. This makes sense not only as a punitive measure, but it will also help them to build up the capital they need to stay in business.
It has sometimes been argued that the healthy banks would not take part in a bailout under such conditions. Let’s see.
Suppose we apply the compensation limits/no dividend bailout rules, and then give everyone the option to opt in or out. Those taking the opt-out route will not benefit from the government’s extension of deposit insurance nor will they be able to count on access to the Fed’s discount window. My bet is that no banks go this route, but if any do, there will be plenty of investors happy to short their stock, assuming the government allows it.
But, Paulson went the bank welfare route. Joe the Plumber and everyone else should be very upset about this method spreading around the wealth. The top executives at the big banks will be getting the equivalent of several thousand years of TANF checks for a mother with two kids. And, unlike the mother receiving a TANF check, the bank honchos inflicted serious damage on the economy.
The big question is, which candidate is opposed to this sort of spreading around the wealth?
27 Comments
nader? mckinney?
Joe the Plumber is McCain’s lame attempt to divert attention from never having mentioned the middle class in three debates.
Symbolism over substance; i.e. par for the course.
http://oxdown.firedoglake.com/diary/898
One consequence of having the public bail-out Wall Street banks should be that top executives and board directors, the guys with the keys to the executive washroom, should have to accept minimum wage. On Wall Street, that “minimum” is about $10,000/month, about what a VP has in his budget every month to pay to helicopter to his pad in the Hamptons the documents he’s supposed to read by Monday.
Heavens, you say, those execs would quit. Answer. Great. They “managed” their companies into bankruptcy, so good riddance.
[That applies to pretty much every corporate bankruptcy, where the one thing management tries to insulate from its consequences is not labor or health care costs or commitments to customers or suppliers, it’s management comp and benefits. That’s one of the things a new bankruptcy reform bill needs to address.]
Second answer, where they gonna go? Their peers are in bankruptcy, too. We pay more than that to our new hires fresh out of B school hire. Short answer. Tough. If you hadn’t trashed an entire industry, and the lives of hundreds of thousands of Americans, and had any recourse but a taxpayer bail-out, you’d take it. You don’t. So like it or lump it. Give them stock in a recapitalized/reorganized company in which taxpayers hold the golden shares, other investors the silver, and management gets only the bronze. Give them an equity kicker, but one that kicks in only after everyone else gets paid. They’ll appreciate the irony, since the way they rigged the game, only they got paid when shit hit the fan. Sauce for the goose, boys…
The bottom line, here, President Obama and Democratic Party leadersheep, is that I don’t see anyone fighting for the interests of the creditor here. That’s us, the US taxpayers. How are you going to change that, Mr. Obama?
“Unless not only the existing shareholders of the banks benefiting from these capital injections but also the holders of the banks’ unsecured debt (junior and senior) and all other creditors of the bank (with the possible exception of retail depositors up to some appropriate limit) are made to pay a painful penalty for investing in excessively risky if not outright dodgy ventures, we are laying the foundations of the next systemic crisis, even as we are struggling to escape from the current one.”
From
Willem Buiter: “We are laying the foundations of the next systemic crisis“
I’m really confused…… if someone is legally working (not getting paid under the table) doesn’t everyone who files a W4 and is paid through a payroll system pay taxes?
My son when he worked wait staff for $5.15/hr paid taxes……. 87% of businesses do not pay income tax……. Warren Buffet pays less tax than his assistant by quite a bit……
I am so sick of this negative throw the porta-potty campaign that McCain is running…. Thanks John McCain for painting Arizona with your sh*t……
hate to go O/T so soon but i just got in from the Barack/Hillary rally here in the City Beautiful. Was great@! Barack was the usual. great. Told the pie story again. Enough of that one, Barack. But Hillary was smokin’!!! She was great! i have to run this down, but i thought i heard one of the warm-up speakers say we’ll have more early voters in orange County (FL) today than in the whole early voting period in 2004. Sounds incredible and it should help us. But don’t forget there is an anti-gay marriage ballot question, so we expect the Jesus Freaks to come out. But still. If we surpassed all of 2004 early voting in one day, that’s gotta be good. I’m psyched. anybody know the crowd estimate? It was supposed to be in the arena but then they were expecting 30-40,000 so they moved it outside.
yep. and from your link, this reflects my current mood:
why so little outrage?
1st line should be just plain “great”. I put in a @ by mistake and it turned into a link. i have no idea what that link is.
glad you enjoyed it and thrilled that you shared it with us here
I read somewhere that it was 50,000. Haven’t seen any pictures yet.
glad you had a good time.
just sitting here wondering about something….
Moody Blues “question”
But in the grey of the morning
My mind becomes confused
Between the dead and the sleeping
And the road that I must choose
The numbers of sleeping and dead is the only answer I can come up with;
From a link in my diary(#3), “The Idiots Who Rule America” , people just want to believe even when the facts refute such belief.
watertiger up over at the mothership
great on topic diary: Ranting for Reality
some bits from your hedges link:
i keep hoping that it’s me who can’t see…
I just saw the 50,000 figure but Orlando PD is saying closer to 40,000 and I think OPD had helicopters. Still, over 40,000. Not bad. What is bad is that Rasmussen has FL as McCain +1.
The mystery of having to wait until right on top of November 2008 election for the next WH regime to open this American/Wall Streeter bailout political time bomb rests squarely on Bush WH.
Did they expect to help the GOPer team somehow? Was the idea to push this pile of bad risk/bad due diligence bailout through a political hothouse of late election year theatrics and false urgency?
American Militarism and American Corporatism do not get much talk time or take apart from one American election to the next. Both are certainly not getting much in way of serious take apart or truth/consequence in this election.
American Corporatism has just been bailed out with a first installment of around one trillion $$ and it is certain more installments will follow.
It was said that only Nixon could go to Red China.
It can equally be said only a GOPer run Bush WH could produce this blatant example of big government helping the well to do but evidently not too smart well off with a big dose of socialized cost offset.
When the profits were blooming like dandelions in spring on the lawn these profits were “private” and off limits to meaningful taxation capture rates. These obscene downward “asset resets” however now become the domain of WashingtonDC/taxpayers money pour ins.
It would be edifying to see some “leadership” figureheads somewhere in this rats maze we call WashingtonDC who would clearly denounce anyone who now wants to pick political fights over imagined threats of American Socialism and income redistribution thinking and practices. The Pentagon and American Big Money and Corporatism do socialism everyday as is. The costs are socialized. The profits are privatized. Any shame over this rapacious ongoing conduct not to be seen,heard or found.
Edifying but not likely.
We are led by sheep and denizens of the chicken coop rather than lions or eagles in this WashingtonDC of this early 21st century America.
the timing was most definitely the doing of bushco.
the fact that nothing was done before to head it off, however, was not only bushco.
This is one thing and one thing only “Welfare” for the Rich Influential Bankers and their cronies!! We need to change the direction of our Government and It’s policies to reflect the fact that the Government was meant to be for the people by the people and thusly to benefit the people. Not the Rich and Powerful. A sea change is needed in both regulations of the market as a whole and the direction government the Government Tax policies are written. The only way to fix our country is for the taxes to be used for the good of the country and its people. By having universal Health care and the dismantling of HEALTH for profit then guaranteeing quality heath care for every citizen as a right and not just what you can buy. Health is and individual thing and as such you cannot project costs and because of that projecting the costs is nothing but a crap shoot! Millions can be saved by having proactive health care . Other benefits are that individual’s genome can’t be used against a patient but would be used to help individuals.
No, you CAN see, it’s just the disgust that makes you hope. See it here all the time. It’s why I wrote “So put aside your hope and face reality and save yourself and those you care about”.
Shootthatarrow, you probably are aware that the Corporatism goes back into the 19th century; I find it ironic that Teddy Roosevelt was referenced re ’socialism’ today yet his anti corporate perspectives went nowhere and weren’t discussed.
NOBODY has asked if this clown was working for McCain. Operative, employee, relative or lobbyist, or donor, or supporter? NOBODY. Why not?
“Paulson could have imposed serious pay caps on executive compensation. In Germany, the banks that are getting government money can’t pay their executives more than 500,000 euros, about $680,000. The United Kingdom also limited executive compensation as part of its bailout.”
If the NBA and the NFL can impose salary caps in the interest of “competitive balance”, certainly Wall Street can while the people of the USA are their largest shareholder/angel/white knight. After all, to echo Babe Ruth, Tom Brady and Kobe Bryant had much better years than the Masters of the Universe!
I’d take it in another direction. Replace the top executives with high school kids. They are going to be paying back this bail out. Might as well put the students in charge of their own futures.
And they will gladly work for minimum wage at this point in their lives!
re: “save yourself”
i think we’re all in this together.
re: hope.
human nature i suppose to want to have hope.
lol. i like it!
What the hell is TANF? Please don’t use little-known acronyms so freely, without using the full spelling at least once first.