Britney Spears on Wall Street? AIG Bonuses and the End of Trickle Down Economics
Dr Mark Naison
The revelation that AIG has paid out more that 185 million dollars in bonuses after receiving 170 billion in bailout money, much of it to going to employees of the London Unit whose credit default swaps helped created the world financial crisis, has aroused outrage and disbelief among millions of America, from the President and Congress down to the press and ordinary citizens
So great has been the outrage that in less than two days after the bonuses were made public, the House of Representatives passed a bill slapping a 90% tax on bonuses given to employees making over $250,000 in any financial institution that has received more than 5 billion dollars in bailout funds
What is most amazing to me is that executives of AIG, and officials in the Treasury Department in both the Bush and Obama administrations, didn't anticipate the level of public revulsion these bonuses would inspire. They were more worried about lawsuits by AIG employees and defections of AIG financial
"wizards" ( even though they were the very people who contributed most to the crisis) than they were about the political fallout of using taxpayer money to reward executives of a failing companies.
Wall Street insiders all, they did not understand that the world they had lived in for the last twenty years, where the accumulation of enormous wealth was not only viewed as just compensation for talent and hard work, but the best way to assure prosperity for all, had suddenly come crashing down. Not only did Americans no longer see Wall Street "Masters of the Universe" as people who assured full employment and economic growth, they increasingly saw them as unfeeling, self interested predators who continued to enrich themselves while people lost their jobs, their homes, and their savings.
Because the new executive AIG, Edward Libby, and Treasury Secretary Timothy Geithner, both were products of an extraordinarily insular Wall Street culture, they could not imagine how much people like them were hated, and how much they were under a scrutiny once reserved for entertainers athletes and politicians Since they lived, worked, went on vacation, and served on boards of corporations and on profit organizations with other Wall Street people, they viewed bonuses as an excellent way to reward and motivate talented, civic minded people. To them, bonus money was not only necessary to fuel the expensive Wall Street lifestyle, needed to pay mortgages on homes and apartments, and keep kids in private school, it was a critical ingredient of New York's financial health, creating employment for an army of nannies, house cleaners, restaurant workers and personal trainers, while funneling much needed contributions to museums, hospitals, universities and a host of other non profits providing critical services to the city's poor and needy
For years, media figures, heads of non profit organizations and political leaders in both parties had welcomed the explosion of Wall Street bonus money and had hailed it as a critical engine of New York's revival . It was impossible to imagine that in six short months, those receiving bonus money would go from objects of public admiration, even heroes of a sort, to objects of suspicion, derision and contempt, their every move scrutinized, and their every misstep publicized, as if they were Lindsay Lohan or Britney Spears
But that is exactly what has happened. As bank after bank has collapsed, requiring enormous infusions of government money to keep them afloat, and the economy has plunged into the
worst economic crisis since the Great Depression, the American people have lost their faith in Trickle Down Economics
What has trickled down to them, as some of the largest corporations in the nation have collapsed, is unemployment, lost savings, plunging house values and shattered dreams of a secure retirement. As they struggle to buy food, keep the electricity on, stay in their homes and their apartments, pay medical bills and make sure their kids stay in school, the last thing they want to hear about is brokers and executives in companies kept alive by government funding, flying in private jets, buying expensive furniture, or getting bonuses for activities that drove their companies to the brink of failure.
As ordinary Americans make unprecedented sacrifices just to keep themselves housed and clothed and fed, they want to see comparable sacrifices from people in positions of leadership, especially those who getting subsidized by their hard earned tax money.
They understand something that their counterparts understood 70 years ago, during the heart of the Great Depression- that there is no way of getting out of an economic crisis this severe unless we are all in this together and that the wealth of the society must be shared, not hoarded at the top
An economy is more than a set of mechanical processes that assure the distribution of goods and services, it is also a moral framework for human interaction that people must accept if it is to work
properly Right now, the moral framework of our economy is broken, and people have lost their faith that its normal functioning will produce just outcomes or assure them a minimum of economic security In this very dangerous time, it would serve people in positions of leadership well to make sure that if they are asking sacrifices by ordinary citizens, they will be asking comparable, or greater sacrifices of economic elites.
The AIG bonus debacle ought to put wealthy Americas, especially those working for companies receiving government subsidies, on notice- everything they do is being watched!
They would be wise to comport themselves accordingly and set a standard of frugality in their private lives that fairness and generosity in their public lives, that would elicit admiration rather than contempt.