The Hightower Report
A Knee-Jerk Attack on Poor People; and Why Are We Bailing Out Extravagant Executive Pay?
A Knee-Jerk Attack on Poor People
Guess who caused the financial crash.
Greed-head bankers and Wall Street speculators? Nope. How about those boneheaded laissez-faire ideologues in Washington? Uh-uh. Instead – get ready for this – the culprits are poor people!
This is the latest load of bunkum being fired at us by right-wing politicos and pundits. Trying to stop Congress from regulating Wall Street's razzle-dazzle, Ponzi-style investment schemes that have wrecked the housing market, banks, jobs, and so much more – the goober-heads of the far right are pointing fingers of blame at low-income homeowners.
The particular target of this nutty, right-wing campaign is the Community Reinvestment Act. Passed 30-something years ago, this law simply requires bankers to do a better job than they had been doing of giving home loans to lower-income folks. But Wall Street's frenzied apologists are claiming that banks were bullied by the CRA into giving risky loans to borrowers who couldn't afford them.
Horse doodle. Until the Bushites took power and deregulated Wall Street speculators so they could essentially play casino games with poor people's mortgages, the law worked beautifully! Loans were made, repaid, and bankers made profits. So don't blame the CRA. The damage came from money-grubbing interests having no relationship to that law. In fact, 75% of the high-risk home loans that were made under Bush's anything-goes regime came from unregulated mortgage outfits, not from banks covered by the CRA. They were working closely with such mortgage profiteers as Bear Stearns and Lehman Bros., which also are not covered by the CRA.
Experience shows that lending to poor people can be less risky than lending to the wealthy, including to Wall Street bankers. The idea that poor people caused Wall Street to crash is not an idea at all – it's an ideological, knee-jerk smear.
Why Are We Bailing Out Extravagant Executive Pay?
Well, isn't this special? Despite Washington's assurance to us angry commoners that its Wall Street bailout scheme would, by golly, include a crackdown on excessive pay to top executives – there seem to be a few loopholes.
The Guardian newspaper in London analyzed corporate pay plans that were recently drawn up by Citigroup, Goldman Sachs, Merrill Lynch, Morgan Stanley, JPMorgan Chase, and Lehman Bros. The highest-ranking executives of these banks are to split a total of $70 billion in salaries and bonuses this year.
Bonuses? The stock prices of the firms have plummeted in the past year, Lehman Bros. has collapsed completely, the bungling executives have caused a global financial crisis, and the five remaining banks are now down in Washington loading up their shares of a $700 billion taxpayer bailout. They get bonuses for that?
The math is infuriatingly easy here: This $70 billion executive payout means that honchos in these firms will siphon off 10% of the bailout funds that were supposed to shore up our economy – not reward executive failure.
Meanwhile, there's the loudly ballyhooed effort by Congress to restrict future pay for the big shots at banks getting bailout money. Congress' bark was ferocious, but its bite turns out to be harmless. The banks are limited to a tax deduction of only $500,000 for each executive's pay. But there's no limit on how much total money is doled out to the execs – meaning they can still be paid $5 million or even $50 million a year. The banks wouldn't get a tax break on the big sum, but – hey – they're already getting billions of our tax dollars from the bailout, and that money can be used to maintain the extravagant paydays of those at the top.
These are not merely loopholes in the bailout scheme – they amount to blatant frauds.