The Party People of Wall Street

January 30, 2012

by Bill Moyers and Michael Winship

 

from the Southern Labor Archives at Georgia State University - American Gilded Age Cir. 1899

A week or so ago, we read in The New York Times about what in the Gilded Age of the Roman Empire was known as a bacchanal – a big blowout at which the imperial swells got together and whooped it up.

This one occurred here in Manhattan at the annual black-tie dinner and induction ceremony for Kappa Beta Phi.  That’s the very exclusive Wall Street fraternity of billionaire bankers, and private equity and hedge fund predators.  People like Wilbur Ross, the  vulture capitalist; Robert Benmosche, the CEO of AIG, the insurance giant that received tens of billions in bailout money; and Alan “Ace” Greenberg, former chairman of Bear Stearns, the failed investment bank bought by JPMorgan Chase.

They got together at the St. Regis Hotel off Fifth Avenue to eat rack of lamb, drink and haze their newest members, who are made to dress in drag, sing and perform skits while braving the insults, wine-soaked napkins and petit fours – those fancy little frosted cakes — hurled at them by the old guard. In other words, a gilt-edged Animal House, food fight and all.

This year, the butt of many a joke were the protesters of Occupy Wall Street. In one of the sketches, the bond specialist James Lebenthal scolded a demonstrator with a face tattoo, “Go home, wash that off your face and get back to work.” And in another, a member — dressed like a protester – was told, “You’re pathetic, you liberal. You need a bath!”

Pretty hilarious stuff. The whole affair’s reminiscent of the wingdings the robber barons used to throw during America’s own Gilded Age a century and a half ago, when great wealth amassed at the top, far from the squalor and misery of working stiffs. Guests would arrive in the glittering mansions for costume balls that rivaled Versailles, reinforcing the sense of superiority and the virtue of a ruling class that depended on the toil and sweat of working people.

That’s consistent  with the attitude expressed by several of these types after Occupy Wall Street sprung up; bankers told the Times on the record that they could understand the anger of the protesters camped on their doorstep;  but privately, a  hedge manager said, “Most… view [it] as ragtag group looking for sex, drugs, and rock ’n’ roll.”

So sayeth the winners in our winner-take all economy.  The very guys who were celebrating at the St. Regis because they were too big to fail. Even when they fell flat on their faces, the government was there to dust them off, bail them out and send them back to fight the class war with nary a harsh word or punishment. Talk about a nanny welfare state.

None of this was by accident. The last three decades have witnessed a carefully calculated heist worthy of Robert Redford and Paul Newman in “The Sting” — but on a massive scale. It was an inside job, politically engineered by Wall Street and Washington working hand-in-hand, sticky fingers with sticky fingers, to turn the legend of Robin Hood on its head – giving to the rich and taking from everybody else. Don’t take our word for it – it’s all on the record.

The biggest of the big boys was Citigroup, at one time the world’s largest financial institution. When the meltdown hit in 2008, the bank cut more than 50,000 jobs and you and other taxpayers shelled out more than $45 billion to save it. And how are Citigroup executives doing? Nicely, thank you. Last year, its CEO, Vikram Pandit, took home $1.75 million in base salary, and was awarded $3.7 million in deferred stock.
According to the Times, “Citigroup is expected to disclose the rest of his pay, cash, be it upfront or deferred, in March. In addition, while not necessarily for work performed in 2011, Mr. Pandit last year was awarded a $16.7 million retention bonus, plus stock options that could add $6.5 million to the package’s overall value.” Makes you want to cry out, “Retain me! Retain me!”

To be fair, Vikram Pandit was at the World Economic Forum in Davos, Switzerland last week, where he told Bloomberg News, “It’s important for the financial system to acknowledge that there’s a great deal of anger directed at it… Trust has been broken. Banks have to serve clients, not serve themselves.” What’s more, he has said that the “sentiments” expressed by Occupy Wall Street demonstrators were “completely understandable.”

This, in contrast to the financial industry official who told a reporter that the protesters’ issues were “a lot of sound and fury, signifying nothing.” Or, as they used to say while partying down at the court of Louis XVI and Marie Antoinette, let them eat petits fours.

~*~*~*~*~*~*~*~*~*
Thank you Bill and Michael, great comparison.

It is amazing that we are repeating history, which means we have forgotten the lessons learned from the Gilded Age and the Roaring Twenties in America, which ultimately led to the "Great Depression." In response to these excesses by the rich and the huge disparity of wealth between the rich and working class, Congress passed the Glass-Steagall Act that keep the investment banks, commercial  banks, mortgage banks and insurance business entirely separate.

Why?

• So that the commercial banks, those banks that took in deposits from ordinary citizens to hold for them and to loan that money to low risk borrowers, could not take your savings deposits and use them on very speculative and high risk investments for the bank that have a high risk of loss of your money, not theirs, but they kept all the gains when they performed well, which occurred in the 1920s. 
• Investment banks and brokerage firms took peoples money who wanted to invest in all levels of risk investment, like company stock trading, government and corporate bond trading, currency trading, foreign stocks & bond trading, commodities trading, and so on and so on...  
• Insurance companies were mainly what was called mutuals, that meaning the policy holders were the share holders and received the benefits of any gains on the premium money they had paid, but not used, thus the insurance company invested that money in safe to moderate risk investments, like real estate loans for large commercial projects, like office building, shopping centers, etc. 
• And up until the 1980s, there were what was called Savings and Loans that did nothing more than accept deposits from ordinary citizens as certificates of deposits or pass-book savings (no checking or other services were allowed) and with that money they loaned it to home buyers as mortgages. The buyer had to have good credit and sizable down payment to receive a mortgage from them. The interest they received from these mortgages, they used to pay operating costs pay the interest on the CDs and Pass-book savings accounts depositors had with them. They didn't have access to the "discount window" at the Federal Reserve. They were completely dependent on depositors for money to loan. Many of these Saving and Loans operated like Mutuals and Credit Unions, in which the depositors were the share holders of these companies. Most of these were small local saving and loan companies, a few national ones were publicly traded companies.

Ronald Reagan deregulated Savings and Loans, "So they could become competitive with commercial banks and commercial banks could capture more of the residential mortgage business. In the end, the cooruption that followed the deregulation led to the financial ruin of these savings and loans, having the government bail them out in billions of dollars of tax payer money.

This in turn taught a lesson to the banking industry, the nanny state will take care of them and they will be covered for any losses from risky practices.

So in the 1990 Citibank and Travlers who wanted to merge, went after Congress with big, big money and lobbied to repeal Glass-Steagall, which by law kept them apart. Congress of both parties said yes and Bill Clinton signed the repeal act.

Now the race was on to hype their investments with all sorts of derivatives, as they called them, such as the "Mortgage Back Security" that had been created because these banks were giving out mortgages to any willing borrower, regardless of their ability to repay them. 

These were the interest only for the first 10 years and then a big balloon payment of the principal, or variable interest loans that start out very low and grow over time with a big balloon at the end. Then these banks went to AIG and purchased default insurance because they knew in time they would go bad and just be junk. They paid the investment rating companies to give them AAA rating, but should have been rated as EE junk investments.

Lehman Brothers, Citicorp, Goldman Sachs, all sold them around the world, knowing full well they were to about bust into junk. In September of 2008, that is exactly what happened and the deepest recession since the Great Depression hit the entire world. G.W. Bush with the help of Treasury Secretary Henry Paulson, who came from Goldman Sachs, came up with trillions of dollars to bail out these banks because they were "Too Large To Fail." Henry Paulson convinced Congress to authorize this money, as well as G.W. Bush. There was no strings attached, no required pay it back, unless you want to.

This is exactly what the banks knew would happen after seeing what the Treasury did for the Savings and Loan collapse. However, this time, these large banks submitted claims to AIG to cover their loss from these bad derivatives. AIG didn't have enough reserves to pay these billions of dollars, so they got bailed out by Sec. Paulson to the tune of tens of billions of dollars to pay these policies to the very banks that got bailed out by Paulson also. So you the tax payer were paying twice for this reckless behavior of the banks.

So these banks, plus Wells Fargo, Chase, and other used the billions they got from Congress to buy other banks and companies that were in weaker position, because they didn't have a connection to Sec. Paulson. The mega mergers then completed the restructuring of the entire banking and financial industry into the hand of just a few very large companies that are now even more too big to fail.

The banks and Wall Street titans are now in control of everything in America. If it doesn't benefit them in any way, then don't bother with it, is the attitude of them and that is how Congress is behaving, on both sides of the isle.

Now do you understand what's happening during this election cycle and the prior ones as well? They are wanting to finally eliminate any variables that you the citizen might cause in their quest to obtain as much wealth as possible, regardless of the long term consequences to the rest of the world population.

So for those who vote Republican, you are speeding this process along for them because the candidate are all bought and paid for by these titans. For those who vote Democratic, you are slowing the process, because there is still some resistance in that party to what is happening and are more willing to pass a constitutional amendment and laws to change thing back to the power of the people. But the longer this is delayed and the more power given to Republicans, the more likely the reversal can ever happen.

That is what is at stake, in addition to who is in the White House that will appoint the next couple of Supreme Court justices. If they are in line with the Robert's court, then whatever these banking titans want will be approved by the Supreme Court, as was Citizens United case was.

Once the three branches of power are bought and paid for by these people, they have absolute control over everyone. Any glimmer of democracy will be gone totally. Any public elections, like in the old Soviet Union, will be for show and nothing else. The outcome will be predetermined by this oligarchy.