Thu August 20, 2009
Bill Knight - August 20
Macomb, IL – The love of money is the root of all evil, the Bible says, but most folks don't think being rich makes you a villain. But, dang.
Sure, we don't begrudge highly paid people such as Major League Baseball all-star Jim Thome, who hails from Peoria County, Grammy-nominated singer Suzy Bogguss of Kewanee, or Emmy-nominated actor John Mahoney, who went to school at WIU in Macomb. They're celebrities, but they perform. Like some businesspeople and other entrepreneurs, they produce; they create.
Not so on Wall Street, where so many of the nation's richest make out like, well, bandits that there should be a billboard: "What happens on Wall Street stays on Wall Street."
Such business executives now receive more than a third of all pay in the country, according to the Wall Street Journal. Highly paid employees got almost $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available, writes reporter Ellen Schultz.
Besides threatening Social Security - since no annual income above $106,800 pays in to Social Security - this colossal disparity is a shameful sign that the economy has become most of us working hard to benefit a tiny handful. A tiny handful that need not even perform to cash in.
The $2.1 trillion figure actually understates executive pay, Schultz concedes because it does not include unvested employer contributions or unvested interest credited to deferred-pay accounts, nor unexercised stock options, unvested restricted stock nor incentive stock options, etc.
Meanwhile, 40,000 U.S. factories were shut down between 2001 and 2007, according to the Alliance for American Manufacturing; joblessness in Illinois is above 10%, according to the Bureau of Labor Statistics, which also reported wages rising a meager 1% between December 2007 and December 2008.
Nobel-winning economist Paul Krugman says, "Ever since the banking deregulation of the Reagan years, the U.S. economy has been financialized.' "The business of moving money around - of slicing, dicing and repackaging financial claims - has soared in importance compared with the actual production of useful stuff."
Wall Street seems to seek big, short-term paper profits, even if their schemes are unethical - like taking government bailout money and returning little or nothing; execs' pay benefits. One of the worst has been the investment bank Goldman Sachs (maybe better dubbed "Gold in Sacks"), one of the Wall Street gangs that acts entitled to enrich itself at taxpayers' expense.
Krugman adds, "Goldman Sachs is very good at what it does. Unfortunately, what it does is bad for America,"
Goldman Sachs apparently didn't believe its own claims about flimsy mortgage-based securities. It made a lot of dough selling securities backed by subprime mortgages, then made more by selling mortgage-backed securities short, just before their paper value crashed.
Their reported second-quarter profit of $3.4 billion puts them on track to pay billions more in executive bonuses.
Goldman Sachs' influence is staggering (perhaps best put into context by the pop-culture magazine Rolling Stone, whose Matt Taibbi this month recounted its manipulations of markets, oil prices, the '90s tech bubble and the recent mortgage meltdown, and its ties to the World Bank, the Federal Reserve, the New York Stock Exchange, and administrations from Obama and Bush to the Great Depression).
Taibbi writes, "The market was no longer a rationally managed place to grow real, profitable businesses. It was a huge ocean of Someone Else's Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible."
This has happened before, of course, recalled in another Bible passage about the prophet Amos scolding King Jeroboam of Israel's northern kingdom: "You lie on beds inlaid with ivory and sprawl on your couches. You eat lamb from the flock and veal from calves, fattened in the stall. You drink wine by the bowlful and anoint yourselves with the finest of oil. But you do not grieve over the ruins."
Today, Americans don't begrudge the wealthy; we grieve over the ruins.