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Michael Winship: For Whom The Bailout Tolls

(Photo by Robin Holland)

Below is an article by JOURNAL senior writer Michael Winship. We welcome your comments below.

For Whom The Bailout Tolls
By Michael Winship

During the Stock Market Crash in 1929, that curtain raising overture to the Great Depression, stories abounded of Wall Street brokers rushing to their office windows and leaping to their deaths. But according to the late John Kenneth Galbraith and other economic historians, those accounts of suicide were, by and large, fairy tales. Perhaps they were more dark-hearted, wishful thinking than reality -- revenge fantasies on the part of those whose real life savings had been wiped out by ravenous speculators.

Nonetheless, the myth of those fatal plunges, like so many urban legends, is hard to shake. With more than a drop of cold blood, some have asked why, during this current fiscal crisis, we haven’t seen similar tragedies in the ranks of high finance.

A close look at the recent government bailouts may explain why. The fat cats at the top had nothing to worry their pretty little whiskers about. Not only have most of their businesses been saved, for now at least, but they’ve already been pretty successful at protecting their high rolling lifestyles, and finding bailout loopholes that allow them to keep hauling in the big bucks.
To that ancient business axiom, “Buy low, sell high,” add this amendment: When you get into trouble, beg for a bailout. Then, new money in hand, continue to act with the rapacious greed of Caligula or the Sun King.

You may already have heard how AIG, the insurance giant, after being saved to the tune of $85 billion, threw a $440,000 shindig at a California spa and then blew another $86,000 on a hunting trip to the English countryside, picking off partridge just as they were asking the Feds for an additional $38 billion. Bit of a sticky wicket, that.

Caught red-handed, AIG canceled plans for another 160 sales and promotion events that would have cost a cool $80 million AND – get this – agreed to stop spending millions of their newly gained tax dollars on lobbying efforts against increased government regulations -- this after being rescued from extinction by that very same government. Talk about biting the hand that feeds you!

New York State Attorney General Andrew Cuomo is demanding that AIG get back from its execs millions of dollars the insurer paid out as the company neared collapse, and on Wednesday, the insurance giant agreed to freeze $600 million worth of deferred compensation and bonuses for its top brass.

There are “claw back” provisions in the big $700 billion bailout passed by Congress three weeks ago, requiring that financial institutions get money back from their senior executives, if the payments were “based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate.”

But the executive pay limits in the legislation apparently have so many loopholes you could fly a fleet of Gulfstream corporate jets through them. Oregon Congressman Peter de Fazio caught at least seven, “that will protect their outrageous paychecks and golden parachutes,” he wrote fellow Democratic House members, adding, “Imagine how many more loopholes the Wall Street lawyers will find.”

No doubt the nine banks into which the US is planning to inject billions in capital – again, all taxpayer dollars – have their lawyers searching for those escape hatches. Writing in the Seattle Post Intelligencer, Sarah Anderson and Sam Pizzigati of the Institute for Policy Studies calculated that last year the CEO’s of those nine banks took home “on average, $32.2 million each, nearly triple the average CEO pay at the 500 biggest US companies. This is more than $600,000 a week.” Apiece.

Bloomberg News columnist Jonathan Weil figures that since the start of fiscal 2004, the once mighty five of Wall Street – Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns – lost around $83 billion in stock marker value. But they reported employee compensation of around $239 billion. In other words, the engineers who dug this disastrous hole paid themselves almost three dollars for every dollar they lost.

The cost of all the bailouts to the taxpayer, as calculated by the internet investigative newsroom, is a whopping $8,750 per household, more than two and half times what lucky us got to fork over 20 years ago during the savings and loan crisis.

But the masters of the universe are just fine, thank you, in no small part due to the tolerance and largesse of their guru Treasury Secretary Henry Paulson, late of Goldman Sachs, where Forbes magazine reports that during a 32-year-career he accumulated more than $700 million. He said limiting compensation too punitively might prevent some institutions from participating in his plan to save the economy.

No, the people suffering are the nearly 800,000 out of work so far this year. More families with children are homeless. Delinquencies and foreclosures are at their highest in nearly three decades, and the Los Angeles Times reported earlier this month that, “Worries about home foreclosures, job losses and plunging stock prices have sparked a surge in mental health problems.”

Including suicide. In California, recently, where professionals say mental health referrals have tripled in the last year, unemployed financial advisor Karthik Rajaram killed himself and four members of his family, including his wife, children and mother-in-law. In two suicide notes, he said he was broke and had run out of options. Variations of his story are appearing all over the country, from Colorado to Tennessee.

There are some happier stories. Tom Dart, the sheriff of Cook County, Illinois, suspended all foreclosure evictions because they were throwing into the street tenants of buildings who had nothing to do with their landlords’ inability to make payments. Or Jocelyn Voltaire, an immigrant from Haiti, about to lose her home after the death of her eldest son, a Marine in Iraq who had been sending her money to help meet the mortgage. After seeing a report produced by the American News Project, members of the antiwar group CodePink raised $30,000 to save Voltaire’s house.

Testifying before the House Budget Committee this week, Federal Reserve Chairman Ben Bernanke agreed that homeowners in jeopardy of foreclosure need help. “I agree that stopping preventable foreclosures is extremely important,” he said. “I hope we continue to look for ways to do that.”

But so far the government and the businesses bailed out haven’t looked very hard. They’ve done little or nothing and it’s every man for himself, devil take the hindmost.

In his history of the 1929 market crash, John Kenneth Galbraith wrote, “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.”

In other words, virtually non-existent, somewhere around zero. In other words, my fellow Americans, look out below. Do not ask for whom the bailout tolls. It tolls for thee.

Please note that the views and opinions expressed by Michael Winship are not necessarily the views and opinions held by Bill Moyers or BILL MOYERS JOURNAL.


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Hmmm... A "Bonus" is a reward, additional or special compensation for a job well done, outstanding performance, etc. Have they earned "Bonuses"? Do they qualify for "Bonuses"? Why should any "Bonuses" be paid with Borrowed Bailout Taxpayer Money?

I think that top executives should not be paid more than 10 times that of the lowest paid full-time worker. That way the pay of all workers could be increased, thereby helping the entire economy. Why can't his be instituted?

Annie: [quote]We're a banana republic with nukes.[/quote]

I have a new signature to add to all my forums - I hope you don't mind, but that sums it up.

Let's see, the American people are the rich people's carpet, and they truly resent the carpet deciding to get up. America is not a democracy but trying to push democracy on others when our own is failed. Now - let's all sing "Kumbaya".

Yep - that about sums up my feelings.

"Playing for Change" with Mark Johnson was music for my soul. It is very refreshing to bring to the foreground works that strive to bring the world together rather than the political tirades intended to divide. Thank you.

With all the bubbles going on in our economy, I have not heard any mention of the Private Mortgage Insurance's role concerning the recent housing crisis.

Prompted to search this topic after a converation with a co-worker, I turned to the internet for information. According to the below site, PMI did not fully participate in the excess before the crash. Thus a Piggyback loan arrangement was devised to allow the borrower a first mortgage, and a second mortgage to cover the 20% needed for a conventional loan, by-passing PMI and the protection that might have helped so many lenders who were blinded by greed.

I have no personal connection to the site and have not completed any in-depth research. However this seems to address some of my basic questions so I decided to share. Perhaps this will be a future topic for The Journal.
The article was authored by Jack Guttentag, in 2008.

I wonder that no one here is mentioning the possible alternatives to the bailout. Obama and McCain sat down in a room with Bush, and suddenly this ill-conceived, ill-planned, and hastily-passed plan was a fait-accompli. It reminder me of the press conference in the Rose Garden in the run-up to the Iraq war, with Gephardt the symbol of the Democratic Party caving in to the Neo-cons.

Did anyone in the national media even consider the fact that Nader, McKinney, Baldwin and Barr, four presidential candidates with as diverse opinions as you can get, two with much more congressional experience than the vaunted Obama, ALL opposed this bailout?

We should be taking a close look at how many millions the Obama and McCain campains took from these firms to see the real story or corruption going on.

McKinney had a cohesive, comprehensive 14 point plan to fix the credit and mortgage crisis that was a bottom up approach that helped those most in need of help with their mortgages first, but did any news outlet, including PBS or NPR, even care to consider it? Of course not. Since McKinney turned her back on the party that turned it's back on her, she has been anathema to the MSM, who only want to see a 2-way horserace that drives up their market share.

I never thought a program highlighting the economic debacle could end with a feeling of hope for our world.

The analysis Mr. Galbraith offered was insightful, and the music Mr. Johnson produced was transcendent.

Combining their perspective on the show was inspired.

please do a show based on the the article "for whom the bailout tolls". I want to know more, who are these people, what are their names, how do we bring light to this outrage? Literially Morgan stanley, Lehman bros. ect. CEOs are getting away w/ the biggest robbery in history. These people are thieves and crimals, who are walking arounds as self diserving citzens. They need to be publicly humilated, exposed, and have all their money taken away to pay for this bailout. Please investigate and tell us more. Thank you!

Bravo Mr. outstanding program.

The "Playing for Change" segment left me almost breathless. I have heard many renditions of "Stand By Me" but this one was far and away the best. I salute Mark Johnson and Co.

Paired with Mr Galbraith's absloutely spot on description of the economic mess in which we find ourselves it made for a very thought provoking contrast.

By the way, why don't our elected leaders sound more like this guy(Mr Galbraith) when they talk about where we are and how to fix it?Upon further consideration, perhaps they should sound a little more like Mark Johnson too.

Anyway, an outstanding program.


We must be STUPID as a nation. We are so many thousands and thousands of people and we are letting these 9 fat cats run away with our money and the money of future generations. We are also letting our government do with our money as they please. Our government has failed us Americans. WE MUST BE STUPID!!

The other day I heard "Ace Greenburg" of Bear Stearns say in an interview by Charlie Rose that he was mad because "we" the nation were saying: "the fat cats of Wall Street", but he couldn't answer some important questions from Charlie that would otherwise prove the opposite. He is right, there are not fat cats in Wall Street, they are now super fat cats after the bailout...

Paulson spins coverup!

Bernkie & Greenspan at the FED knew loose money would eventually hit our economy hard!

SEC's Cox, Barnie Franks, & the rest of Congress had to know Wallstreet was gambling with non exsistant money! IOUs were placed without any money to back them up!

How would this go over in Vegas? Are bets allowed when a loss can not be paid? Wallstreet GAMBLED!

WHY are those RESPONSIBLE for this CRISIS STILL around?

Jim Baker should, temporarily, be placed in charge of dealing with this very critical crisis, which will give the next president time to select permanant, RESPONSIBLE, COMPETANT, people.

Prison for many is appropriate & top executives in the FINANCIAL world should be barred from any related work--ever!

No pain
It will happen A-GAIN!

Billy Bob, Florida
Where few care our rights were deniged by the DNP & OBAMA

Thank you Bill Moyer!
I also have a comment about the bail-out. Why could we not stop paying taxes for All American for a year. That would bring money into the economy right away and we would not have the crooks hands in the cookie jar? We always seem to lose money when it gets to the goverment.
Also, we could make basic health care available to All Americans immediatly by putting a percentage into medicare on all wages with matching percentage from employers like social security. We have the system set up.

Thanks to all at the Journal.
The pairing of Galbraith and Johnson, and every other feature of the show added up to sublime television.
I’ve already sent my respectful comments to the EPA on the Environmental Impact Statement mentioned in your story about Mountain Mining.
I would just like to give a shout out to all the people in the Appalachian Basin and say… I’m Black, I’m Gay, I live in California, and I Care. Let’s all get together and feel alright!
Bill Moyers, I’m so glad the American people forced you out of retirement.

Another great show !
Prof. Galbrith has it correctly..he seems to have covered all the necessary steps. But will they listen, could he and Geo. Soros be advisers for Obama,...please.

Your comments about wall street are so true and CRIMINAL !
The take our $$ and $239 Billon of an $83B loss ! WoW!
But you closed the show with a beautiful and uplifting presentation that fills the spirit !
That is why, I have a 'date' w/this program on Friday nites.
One more comment, about voter fraud. I think the comments of last week are now shown to be WRONG.
Two days into voting and complaints of fraudulent voting machines are popping up everywhere. Scary, but, this time I think the entire country will least I hope so.
Thanx again for your show.

IOKIYAR (It's OK if you are a Republican.)

The actions of the banking/investment community are those of domestic enemies. That Congress didn't write in strict regulations, restrictions on use and substantive oversight is another treasonous act.

The citiznry is being robbed outright.

We may be heading for a Bastille Day as more and more people are literally shoved to the curb and winter is approaching.

The only two areas of employment growth are in the nursing and medicine aspects of healthcare, of whose services one third of Americans can't access, and in the prison industry.

That speaks volumes.

We're a banana republic with nukes.

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