For Whom the Bailout Tolls

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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 partridges 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 market 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 to the taxpayer of all the bailouts, as calculated by the internet investigative newsroom ProPublica.org, is a whopping $8,750 per household, more than two and a 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 adviser 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. Jocelyn Voltaire, an immigrant from Haiti, was 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 nonexistent, somewhere around zero. In other words, my fellow Americans, look out below. Do not ask for whom the bailout tolls. It tolls for thee.