Wall Street won the political battle after the 2008 economic meltdown. Will Wall Street now win the battle over how that meltdown goes down in history?
We’ll have a better sense of that after this week’s premiere of the new HBO movie, Too Big to Fail, a “mesmerizing” epic, says one previewer, a “fly-on-the-wall account,” says another, “of the various meetings between politicians and bankers that eventually pulled the economy back from the brink.”
This first blockbuster popular culture treatment of the meltdown, in other words, turns power suits like treasury secretary — and former Goldman Sachs CEO — Henry Paulson into “sympathetic” characters. Paulson comes across as a man “trying to solve an immense problem, not simply bail out his Wall Street pals.”
The problem here: Paulson did simply bail out his Wall Street pals. Who’s going to tell that story? Maybe New York attorney general Eric Schneiderman. He’s now investigating, we learned last week, the “vast lawbreaking” in Wall Street’s pre-meltdown behavior. That sounds like material for what could be a real good movie. This week in Too Much, as always, we do our best to offer up some more.
|GREED AT A GLANCE|
|may have been the most ornery. Burt never hired single men because married men, he felt, couldn’t afford to strike. And he once fired a manager who refused to starve company horses to save money. His last nasty gesture? The will for Burt's fortune, worth upwards of $90 million at his 1919 death, denied his family anything substantial until 21 years after the death of his last grandchild. That last grandchild died in 1989. The end of this month, Burt’s 12 great-to great-great-great-grandchildren will divide his estate’s remaining $100 million. Says Burt great-great-great granddaughter Christina Cameron: “I’m pretty sure he didn’t like his family back then.” A century ago, in America’s first plutocratic age, Michigan lumber baron Wellington Burt didn’t rate as the wealthiest rich man in the United States. But he |
California state officials had some good news to deliver last week. The budget-squeezed state is actually collecting more tax revenue than originally predicted. California's “upper-income taxpayers,” explains state budget director Ana Matosantos, are simply “having a greater gain in their income” than anyone projected. No such luck for average Californians, notes the California Budget Project’s Jean Ross. Their hourly wage growth “has been almost nonexistent” — and the state still faces billions in shortfalls. To narrow that gap, state assemblywoman Nancy Skinner is proposing legislation that would up taxes on California’s top 1 percent by one percentage point. Last Monday, an Assembly panel gave a green light to Skinner’s bill. Californians making over $500,000 a year, says Skinner, are saving an average $90,000 a year from the Bush tax cuts Congress extended last December. Her bill would hike taxes on most of these taxpayers by no more than $2,000 and raise $2.3 billion . . .
California lawmaker Linda Halderman, an opponent of Skinner's bill, last week charged that taxes already levied on California’s rich have the state's “greatest wage earners” exiting for greener pastures. Not to worry. The evidence doesn't show that rich people in America are fleeing anywhere — and, in any case, the rich from China are coming our way. Many Chinese affluent, the Global Times reports, are planning moves to the United States. Confided one, whose household currently includes a chauffeur and three nannies: “I know a lot of wealthy people like me who don't feel secure because they think there could be stability issues in China.” One reason for that insecurity: Only 5 percent of Chinese adults, notes a new Renmin University survey, believe their nation’s rich have “obtained their wealth legally.” About 27 percent of Chinese worth over $150 million, adds China's Merchants Bank, have “already emigrated to wealthier countries.”Wall Street's most penitent bailed-out big bank doesn’t care what we think any more. Citigroup last week awarded CEO Vikram Pandit a $23.2 million “retention package” that he’ll pocket over the next four years — on top of his regular salary and bonus. Pandit had been receiving, since 2009, just $1 a year before Citi hiked his base pay to $1.75 million this past January. Pandit’s “leadership,” says Citi chairman Richard Parsons, has now “returned Citi to profitability” and set the stage “for sustainable growth.” Taxpayers may have helped a bit, too. Citi collected $45 billion in bailout aid after the 2008 meltdown. What thanks have taxpayers received in return? Higher checking fees. A new Pew Charitable Trust report says Citi and the rest of the nation’s top ten banks will rake in $38 billion in overdraft charges this year, an all-time record . . .
The best way to capture the outrageousness of contemporary CEO pay? That remains, MSN Money analyst Michael Brush believes, the pay ratio. Last year, Brush details in his latest executive pay overview, McKesson drug company CEO John Hammergren walked off with $54.4 million, or 732 times “the $74,590 that a medical scientist earns in a full year.” Corporate lobbyists are now lobbying to render toothless a new provision in the Dodd-Frank financial reform passed last summer that requires all major firms to reveal the multiple between their CEO and median worker paychecks. The corporate lobby is claiming that calculating median pay would be too burdensome. But Brush notes that one major national company, Whole Foods, is already making those calculations — and limiting CEO compensation to 19 times the pay its average workers are receiving.
|INEQUALITY BY THE NUMBERS|
How Did We Ever Get Higher Ed Backwards?
Back in the mid 20th century, colleges and universities helped America beat down economic inequality. Now they reinforce it.
The American Dream isn’t quite unfolding the way Richard Silva expected. The 20-year-old Silva is currently studying at Cerritos College, a two-year school south of Los Angeles. He graduated from high school in 2009 and anticipated, back then, that he'd be transferring to a four-year school this coming fall.
No way. Cerritos is not offering the courses students like Silva need to graduate. In 2008, the college's summer session offered 1,352 courses. This summer’s course roster totals about 200. A two-year course of study, protesting Cerritos students charged last week, now takes three to five, even six, years.
“At this rate,” Silva said last week, “I won’t be able to transfer to a four year university until 2013.”
Richard Silva hardly stands alone. Less than half U.S. high school grads today who go on to postsecondary education receive any degree within six years.
American higher ed clearly isn’t working particularly well for students — and it’s not working for faculty either. Colleges and universities, over recent years, have been steadily replacing regular full-time professors with cheaper part-timers, grad students, and full-timers not eligible for tenure.
Part-timers now represent nearly half the nation's higher ed faculty.
Meanwhile, top college officials are pulling in pay packages that can trip into the seven digits. According to the most recent Chronicle of Higher Education stats, 30 private college presidents are now making over $1 million a year, and 59 presidents at public institutions are collecting at least $500,000.
In effect, observes former Yale faculty member William Deresiewicz in a powerful new Nation analysis, we’ve replicated inside higher ed “a microcosm of the American economy as a whole: a self-enriching aristocracy, a swelling and increasingly immiserated proletariat, and a shrinking middle class.”
We have more than mirror images here. We have interactive images. Inequality in society at large has nurtured the gaping inequality we now see in higher ed — and this inequality in higher ed is driving society at large ever more unequal.
American higher education, in effect, is essentially working only for the rich.
Media coverage of higher ed, ironically, treats the concentration of income and wealth at America’s summit as the answer to the woes that afflict our colleges and universities, not their cause. We read regularly about America’s generous deep pockets and the mega millions they contribute to their dear alma maters.
The University of Pennsylvania, for instance, has been crowing about a $225 million gift — the “largest single contribution in the institution’s 246-year history” — just in from the parents of billionaire private equity kingpin Ronald Perelman.
Overall, six colleges so far this year have received an individual donation of at least $100 million. Yale, in March alone, collected $270 million from its elite alumni, another all-time school record.
All these donations help define our deeply unequal higher ed status quo: Our elite institutions of higher education — the alma maters of America’s economic and political elite — have become fantastically richer. Harvard ended 2010 sitting on a $27.6 billion endowment, Yale on $16.7 billion, Princeton on $14.4 billion.
By contrast, the median American college endowment stands at just $72.9million. To put these numbers in a sharper perspective: Harvard holds nearly $380 for every $1 that belongs to the typical American college.
In 2007, just before the 2008 financial industry meltdown, the 22 richest U.S. higher ed institutions held more wealth than the entire rest of the 785 institutions the national college business officer association spends time tracking.
No surprise why: The more that wealth in the United States concentrates in elite pockets, the more the wealthy contribute to the nation’s elite universities.
Decades ago, in the mid 20th century, dollars from elite pockets helped bankroll America’s public universities. In those years, states and the federal government taxed the nation’s wealthiest at near triple the tax rate those wealthy face today.
Those tax dollars from the rich made possible an enormous expansion of public higher education in the 1950s and 1960s. For the first time in world history, attending college became a viable option for students from working families.
Now that viable option is disappearing — at Cerritos College and across the United States — as lower tax revenues from wealthy taxpayers translate into state and federal budget cutbacks for two- and four-year public colleges.
Particularly hard hit: Student aid. Thirty years ago, notes analyst Bryce Covert, two-thirds of college student aid came from government grants. Two-thirds currently come from loans, and that means ever greater debt burdens.
This spring’s graduating seniors will march off into the world with $22,900 in average debt. Total student debt hit $530 billion this past December, one reason, Bryce Covert adds, why one-third of all adults under age 33 have no savings.
A half century ago, the United States literally “invented” higher education as a mass phenomenon. For years, the United States sported more college grads than any other nation. The United States, on college grads, now ranks ninth.
Americans who’ve devoted their careers to higher ed have always sought to create an educated nation. To reach that goal, we need a much more equal one.
A Disappointing Report Card on 'Say on Pay'
More for Less: what has happened to pay at the top and does it matter?Interim report of the High Pay Commission. London, May 2011.
Only one other nation in the world has CEOs nearly as overpaid as the United States. In that one nation, the UK, basic salaries for top corporate executives last year increased 30 times faster than the average national wage.
Corporate execs currently make up about 34 percent of Britain’s most highly paid 0.1 percent, those 47,000 financially favored souls who annually take home over £350,000, the equivalent of just over $565,000.
But here’s the particularly distressing news — for Americans — in these figures: Britain already has in place shareholder “say on pay,” the CEO pay reform that U.S. pay reformers have long considered the key to stopping CEO pay excess.
In Britain, where “say on pay” has been on the books since 2002, that stopping hasn't happened. And no one has seen much slowing either, as a new report — from a blue-ribbon UK panel called the High Pay Commission — has just detailed.
“Existing attempts to rein in top pay,” the new Commission report noted earlier this month, “have not worked.”
The UK’s High Pay Commission launched last November, as a project of the London think tank Compass and the Joseph Rowntree Charitable Trust. Its chair, Deborah Hargreaves, formerly served as the business editor at the Guardian, one of the UK’s top dailies, and the news editor at the influential Financial Times.
Among her fellow commissioners: an executive at a major British pension fund, a leading financial expert in the House of Lords, a big-time asset manager, a top theologian, and the deputy general secretary of the British labor movement.
These commissioners are billing their new paper — More for Less: what has happened to pay at the top and does it matter? — as an “interim report” that “acts as an audit” on the ongoing debate over the reality and the impact of “high pay,” wherever in Britain this excess may appear.
And this excess, the Commission’s interim report makes clear, has become incredibly pronounced, over recent years, in the UK’s executive suites. Between 1949 and 1979, British executive pay increased by just a 0.8 percent annual rate. The average rate over the last ten years: nearly 7 percent.
For most of those ten years, UK shareholders have had the right to take advisory votes on CEO pay packages, a right that U.S. shareholders also now enjoy, thanks to last year's Dodd-Frank financial reform law.
In the UK, the High Pay Commission points out, shareholder say on pay “has led to a greater involvement of the larger investors in remuneration decisions and has resulted in a number of embarrassing votes for companies.”
But shareholder “say on pay” has not prevented a growing greed grab at the UK’s corporate summit. Top UK execs have essentially spit in shareholder faces. They’ve collected super rewards while delivering less than super “performance.”
One telling statistical contrast: Among the UK’s top 100 companies, earnings per share — a prime yardstick of the “performance” shareholders prize — dropped an average annual 1 percent between 1998 and 2009. Yet the chief execs of these 100 firms saw their pay, over this same span, jump 6.7 percent a year.
The new High Pay Commission interim report explores a variety of reasons that may explain why “say on pay” has so far proved ineffectual. What reforms might make more of an impact? This High Pay Commission report doesn’t say.
The next — and final — High Pay Commission report, due in November, will. Reformers, on both sides of the Atlantic, will be paying close attention.
Quote of the Week
“I don't hate the rich. The rich hate me. They hole themselves up in gated communities. They join exclusive clubs. They buy their own planes so they don't have to sit next to me in coach.”
Al Lewis, Dow Jones columnist, More for Millionaires, Wall Street Journal, May 2011
Stat of the Week
Average household wealth in the United States increased 40.3 percent between 1983 and 2009, Economic Policy Institute analyst Larry Mishel noted last week. But the wealth of the median, or most typical, U.S. household actually fell. Behind this discrepancy: Since 1979, two-thirds of income gains in the United States have gone to the top 10 percent of income-earners — and 38.7 percent has gone to the top 1 percent alone.
On the video front: We're Not Broke, Just Twisted, an intro to the newInequality.Org Web site, and Koch-Blocked, a new jingle for the campaign to derail the political manipulations of the billionaire Koch brothers.
Robert Reich, The Great Switch by the Super Rich, May 17, 2011. The former U.S. secretary of labor explores the biggest fiscal shift of our time: “Forty years ago, wealthy Americans financed the U.S. government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money.”
Peter Wilby, Anxiety keeps the super-rich safe from middle-class rage,Guardian, May 18, 2011. The squeezed middle class, to end the squeeze, must first learn to look up.
Citizens for Tax Justice,People Who Make $250,000 Should Stop Worrying, May 19, 2011. Recent stories about the difficulties making ends meet on $250,000 a year show how out of touch the American media have become.
Nan Markel, Grandfather knew: The rich can afford higher taxes, Stamford Advocate, May 19, 2011. Even a steeply graduated progressive income tax, says this granddaughter of a wealthy businessman, leaves the rich amply able to enjoy life and ensure their loved ones' future.
Matt Witt, Wall Street has us fighting over the leftovers, Mail Tribune(Medford, Oregon), May 20, 2011. The ongoing deterioration of America's quality of life will only end when “our communities stop fighting over the scraps and insist that deadbeat corporations and billionaires start contributing their share.”