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Posts Tagged ‘financial reform’

Time For More Executive Hard Time?

Monday, November 1st, 2010

Image: Bob RosnerAngelo Mozilo, co-founder of Countrywide Financial, a.k.a. No-Income-is-too-Small-For-Us-to-Give-You-a-Mortgage, agreed to pay $67.5 million dollars to avoid a federal civil fraud suit about to go to trial.

I know what you’re thinking, let’s hold a bake sale for Angelo. He clearly must be hurting. But chances are slim that you’ll see him at any soup kitchen, because he pocketed many times that amount of money in salary and perks before he drove his company into the ditch.

But it does raise an interesting question: Why isn’t the government going after Lehman, WAMU and other high flying executives from corporations that went into the toilet over the past few years? Especially when top executives pocketed so much cash from the deception and fake profits?

We’re not talking Salem Witch Trials. I’m simply suggesting that we start skimming off some of the cash that these executives skimmed off of all of us. I know this sounds drastic, but the top guys from Enron actually went to jail for their misdeeds.

Why are we suddenly so timid when it comes to the billions that these fat cats are sitting on?

This is especially confusing to me because of the rush by State Attorney’s General to sue over the recently enacted health care reform bill. Why aren’t our public officials going after the banking swindlers for the huge stockpiles of money that they extracted from all of us?

I would have thought that Attorneys General would at least understand the Willie Sutton rule. Mr. Sutton, the famous bank robber was asked why he robbed banks. He replied, “Because that is where the money is.”

Isn’t it time that we went where the money went? Anything short of a major offensive here sends a simple message to all that crime pays. That would be the worst message to come out of the pain of the past few years.

About The Author: Bob Rosner is a best-selling author and award-winning journalist. For free job and work advice, check out the award-winning workplace911.com. Check the revised edition of his Wall Street Journal best seller, “The Boss’s Survival Guide.” If you have a question for Bob, contact him via bob@workplace911.com.

Unfinished business of executive pay reform

Thursday, September 2nd, 2010

Sarah AndersonMost analysts of the high-finance meltdown that ushered in the Great Recession have concluded that excessive compensation was a key causal factor. Outrageously high rewards gave executives an incentive to behave outrageously, to take the sorts of reckless risks that would eventually endanger our entire economy. Our nation’s leading political players have sought, sometimes with grand fanfare, to confront this reality. The financial reform package enacted this July, for instance, codifies several long-term goals of executive pay reformers, most notably a “say on pay” provision that hands shareholders the right to take nonbinding advisory votes on executive compensation.

This reform could become a valuable tool for shareholder activists, particularly if such votes are required on an annual basis. However, there is little evidence that “say on pay” has had an impact on overall compensation levels in nations where it has already been in practice.

To bring executive pay back down to mid-20th century levels, we need reforms that cut to the quick, which recognize the dangers banks and major corporations create when they dangle oversized rewards for executive “performance.” Some reforms that would move us in this direction are now pending in Congress.

One of the most promising would eliminate a perverse incentive for excessive pay in our tax code. Under current rules, there are no meaningful limits on how much a firm can deduct for the expense of executive comp. Thus, the more a firm pays its CEO, the more that firm can deduct from its taxes. The rest of us bear the brunt of this loophole, either through increased taxes needed to fill the revenue gaps or through cutbacks in public spending.

The Income Equity Act, introduced by Rep. Barbara Lee (D-Calif.), would deny all firms tax deductions on any executive pay (including stock options) that runs over 25 times the pay of a firm’s lowest-paid employee or $500,000, whichever is higher.

The Troubled Asset Relief Program (TARP) and the 2010 health care reform bill set important precedents for this reform by applying $500,000 deductibility caps on pay for bailout recipients and health insurance firms. Treasury Secretary Timothy Geithner has said he would consider extending the tax deductibility cap in TARP to U.S. companies generally.

Another practical proposal would use the power of the public purse to encourage more rational pay levels. Rep. Jan Schakowsky (D-Illin.) has introduced the Patriot Corporations Act to extend tax breaks and federal contracting preferences to companies that meet benchmarks for good corporate behavior. Among the benchmarks: not compensating any executive at more than 100 times the income of the company’s lowest-paid worker.

By law, the U.S. government denies contracts to companies that discriminate in their employment practices, by race or gender. This reflects clear public policy that our tax dollars should not subsidize racial or gender inequality. In a similar way, this reform would discourage extreme economic inequality.

Congress should also revisit the proposal that passed the Senate last year which would’ve capped total pay for employees of bailout companies at no more than $400,000, the salary of the U.S. President. Such a restriction could be enacted today for application in the event of future bailouts. Given a clear warning about the consequences for their own paychecks, executives might think twice about taking actions that endanger their future – and ours.

Congress should not shy away from bolder action on executive pay. Lawmakers mandate limits on other types of corporate behavior all the time. They limit how much pollution corporations can spew out. They limit the chemicals companies can sneak into their products. They limit the hours they can force employees to labor. They set these limits because they recognize that irresponsible corporate behaviors threaten our communities.

Excessive executive pay, the Wall Street meltdown has demonstrated ever so vividly, endangers our public well-being as surely as any other pollutants.

Sarah Anderson is a co-author of the new Institute for Policy Studies report, Executive Excess 2010: CEO Pay and the Great Recession.

About The Author: Sarah Anderson is the Institute for Policy Studies Global Economy Project Director. He work  includes research, writing, and networking on issues related to the impact of international trade, finance, and investment policies on inequality, sustainability, and human rights. Sarah is also a well-known expert on executive compensation, as the lead author of 16 annual “Executive Excess” reports that have received extensive media coverage.

Wall Street Bonuses For Haiti

Thursday, January 14th, 2010

The president is going to announce today a tax on the big banks and financial institutions:

The tax on banks, insurance companies and brokerages with more than $50 billion in assets would start after June 30 and seek to collect $90 billion over 10 years, according to a senior administration official who briefed reporters late Wednesday.

The Administration is calling the tax a “financial crisis responsibility fee”. I like that handle. But, there are two problems. First, the bankers themselves still don’t get it:

“Using tax policy to punish people is a bad idea,” J.P. Morgan Chase Chief Executive James Dimon told reporters after a hearing in Washington. Mr. Dimon said it would be unfair for banks to be left shouldering the cost of the auto bailout.

This isn’t punishment, Mr. Dimon. This is about responsibility. To your country. To the people whose hard-earned money you used to save your institution.

Second, frankly, the projected $90 billion to be collected over ten years is a pittance–and that cost is being shouldered by the shareholders of the banks and financial institutions and I’m guessing its customers who will end up paying for the tax in higher fees that the institutions slip into their “cost of doing business”.

The tax avoids any personal responsibility on the part of the individuals who created the economic crisis.

Here is another idea: demand that the Wall Street bonuses go to pay for the recovery efforts in Haiti, and to make taxpayers here whole. After all, the very economic system that Dimon and his peers created over the past several decades is the system that impoverished countries around the world, leaving them with a weak infrastructure to be able to deal with natural disasters. Putting the Wall Street bonuses towards Hait relief will perhaps make Dimon and his peers feel virtuous and not punished–but I would not count on it.

*This post originally appeared in Working Life on January 14, 2010. Reprinted with permission from the author.

About the Author Jonathan Tasini: is the executive director of Labor Research Association. Tasini ran for the Democratic nomination for the U.S. Senate in New York. For the past 25 years, Jonathan has been a union leader and organizer, a social activist, and a commentator and writer on work, labor and the economy. From 1990 to April 2003, he served as president of the National Writers Union (United Auto Workers Local 1981).He was the lead plaintiff in Tasini vs. The New York Times, the landmark electronic rights case that took on the corporate media’s assault on the rights of thousands of freelance authors.

Unions, Progressives To Launch Wall St. Reform Drives This Week

Monday, September 21st, 2009

Unions and progressive coalitions are seeking to add grass-roots organizing power to President Obama’s calls for financial reform, with stepped up activism from the AFL-CIO, Jobs for Justice and the progressive Americans for Financial Reform coalition all starting this week.

Following last week’s AFL-CIO convention that aimed to jump-start reform drives and the union movement, new president Richard Trumka and other leaders will be taking their case for economic reform to Wall Street and the  public. As the AFL-CIO Now blog reported:

The team’s tour continues Sunday and Monday in Atlanta, including a rally outside Wachovia, where Trumka will condemn its predatory financial practices, such as foreclosures. On Monday night and Tuesday, the team travels to New York City where Trumka will issue a strong warning to Wall Street at a press conference outside the New York Stock Exchange.

The goal: create a fairer economy that works for everyone, not just the wealthy.

On Thursday, the Jobs for Justice Coalition plans an action—one of many protests scheduled for over 20 cities over the next week—outside a meeting of the pro-banking Financial Services Roundtable in Washington, D.C., a key lobbying coalition opposed to the Administration’s proposed consumer financial protection agency, as well as other reforms.

As a Jobs for Justice press release proclaimed:

Thousands expected to participate in over a dozen cities to mark the one-year anniversary of the bank bailouts.

Nearly a year after Congress authorized hundreds of billions of dollars to bail out the financial industry, major banks continue to pay outrageous salaries and bonuses, drive layoffs and foreclosures, and spend millions lobbying against the interests working people.

Rallies across the country will condemn the “bailout bandits” and “corporate criminals” at Bank of America, JP Morgan Chase, Citigroup and Wells Fargo.

Actions will take place in at least 21 cities, and new cities are being added every week. See below for local contacts and find an up to day list of actions at www.jwj.org/recovery.

There are good reasons for all the anger. But it has has yet to lead to a massive public outpouring for progressive reform, as opposed to the corporate-abetted “Tea Party” events that also decry bailouts along with healthcare reform, while leaving the current toothless oversight of the financial industry in place.

Even though federal officials allowed a free-spending set of bailouts with no requirements and little oversight, virtually nothing has been done to make sure the money isn’t wasted and is spent in ways that benefit the economy. Indeed, nobody really knows how the $700 billion in bailout funds was actually spent.

So while inside-the-beltway analysts claim that Obama has an uphill fight in Congress, out-of-control banks and  Wall Street firms are now squandering taxpayers’ funds while returning to trading in risky investments. And credit is still largely frozen, worsening the “jobless recovery.”

As the Media Consortium summed up in its year-later review of the Wall Street collapse:

While workers experienced increasing pressure on their pocketbooks, Wall Street gambled away their retirement investments. Lehman Brothers filed for bankruptcy one year ago today, a move which created chaos in the financial sector and heavy damage in the rest of the economy. Things were looking bad for the economy before Wall Street imploded, but the financial crisis made those problems a lot worse.

“In a modern society, a credit freeze means instant death to the real economy, since virtually every enterprise, big and small, runs on credit,” Les Leopold explains for In These Times. “When the financial sector froze, it pushed the real economy off a cliff.”

But incredibly, after a year marked by massive financial bailouts, not one new law has been signed to protect our economy–and taxpayers–from Wall Street. Not one.

Even the modest plans to rein in executive pay for taxpayer-supported companies have proved toothless. Leopold notes that President Barack Obama’s refusal to crack down on the banks has left both the financial regulatory process and other important progressive plans–like overhauling the broken health care system–in a precarious political state. The largesse we have shown for bailed-out bankers gives conservatives ammunition against other, more productive activities.

Read more at: http://www.huffingtonpost.com/the-media-consortium/weekly-audit-one-year-aft_b_287290.html

Perhaps the biggest promoter of refom, outside of the president himself, is the potentially influential coalition of 200 labor, consumer and  progressive groups, Americans for Financial Reform. It is planning grassroots actions while working with federal and state government officials to promote greater oversight of the financial system.

Indeed, to shore up support for administration proposals to rein in risky  investments, limit pay and offer a new consumer protection agency — all facing stiff industry opposition — the Treasury Department is reaching out to likely consumer allies, including the AFR organization.

So while some progressives and experts, including former Labor Secretary Robert Reich, remain skeptical about how committed this administration is to truly reforming a broken financial system, Bloomberg News reports that

Treasury Department officials are meeting with consumer allies to build support for a regulations overhaul for Wall Street as President Barack Obama ramps up a campaign to win legislation by year’s end.

The Treasury roundtables have been largely unpublicized, by invitation only and billed by some Democratic lawmakers as consumer-protection forums. The audiences are drawn in part from the rolls of a consumer-advocacy coalition that is pushing the legislation. They are designed to channel public anger at Wall Street and sidestep the financial industry, which is fighting to block the measure…

Audiences for the events are drawn largely from the membership of Americans for Financial Reform, a coalition of more than 12 dozen consumer, labor and civil rights groups that joined this year to push for oversight. The coalition includes the Service Employees International Union and the National Community Reinvestment Coalition.

Illinois Roundtable

The group will hold its next roundtable in Aurora, Illinois, on Sept. 21. State Attorney General Lisa Madigan will lead the session, and the group has invited Representative Bill Foster, an Illinois Democrat on the House Financial Services Committee.

Another non-profit group, Boston-based American Business Leaders for Financial Reform, is recruiting corporate executives to make the case for legislation. Tim Duncan, a Republican and founder of advisory firm Cambridge, Massachusetts-based Story Street Investment Management, created the organization after a conversation with Elizabeth Warren, the Harvard Law School professor who oversees the Troubled Asset Relief Program.

“There are a lot of people in the industry who realize reform is needed,” Duncan said in a telephone interview. “I’m surprised at the knee-jerk reaction industry is taking.”

But long-time observers of the financial industry aren’t suprised that a major battle lies ahead—and unions hope to play a leading role in pushing for reform.

And yet if this drive for reform falters, the fate of the entire economy is at stake. As Robert Reich described the risks we’re now facing:

Put simply, the Street has been given too many opportunities to play too many games with other peoples’ money.

But, like the health care industry, Wall Street has platoons of lobbyists and an almost unlimited war chest to protect its interests and prevent change. And with the Dow Jones Industrial Average trending upward again — and the public’s and the media’s attention focused elsewhere, especially on health care — it will be difficult to summon the same sense of urgency financial reform commanded six months ago.

Yet without substantial reform, the nation and the world will almost certainly be plunged into the same crisis or worse at some point in the not-too-distant future. Wall Street’s major banks are already en route to their old, dangerous ways — now made more dangerous by their sure knowledge that they are too big to fail.

About the Author: Art Levine is a contributing editor of The Washington Monthly who has also written for The American Prospect, Alternet, In These Times, Salon, The New Republic, The Atlantic and numerous other publications. He’s written investigative articles on unionbusting and other corporate abuses, and recently completed Cornell University’s Strategic Corporate Research summer program. He blogs regularly for Huffington Post, and co-hosts a weekly Blog Talk Radio show, “The D’Antoni and Levine Show,” every Thursday at 5:30 p.m. ET.

This article originally appeared in Working In These Times on September 20, 2009. Re-printed with permission from the author.

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