Let them eat cake

January 30, 2009


 Follow the Money: A Rogues Gallery

To follow up on what I touched on in here, let’s take a little tour of bonuses and severance payments since the current credit crises began to explode in early 2007. This list is by no means all-inclusive, and does not include stock sales from options payouts and stock formerly awarded or purchased, but should to serve as an example of the genius of our corporate overlords nonetheless:

Stan O’Neil (Merrill): $250 million

Peter Kraus (Merrill): $25 million

John Thain (Merrill): $83.8 million

Charles Prince (Citi): $40 million

Angelo Mozilo (Countrywide): $110 million ($37.5 million of which was given back)

David Sambol (Countrywide): $38.3 million

Daniel Mudd (Fannie Mae): $8.79 million

Lloyd Blankfein (Goldman Sachs): $54 million

Adding it up

The total take of my partial list of our best and brightest financial wizards totals just over half a billion dollars.  Note that there are only 8 selected individuals on my list.

According to one nice summary, $1.6 billion went to the senior executives of bailed out companies in 2008.  You really owe it to yourself to read this.

In reality, the total cost of state intervention to prop up the failed business models of these and other financial services companies, including TARP; the quasi-nationalization of Fannie Mae and Freddie Mac; and various Federal Reserve loans, discounts, guarantees, purchases and handouts, now exceeds $8 trillion dollars when you include explicit GSE guarantees.  And counting.  This does not include legislation currently in process. 

And none of this includes the obscene sums of money thus far spent to prop up the insolvent AIG.

Hunting for Pheasant

As recently as October of 2008, a group of AIG executives on a company-sponsored $86,000 outing were approached by a reporter. They had these words for the peasantry:

The recession will go on until 2010 – but the shooting was great today and we are relaxing fine.

This material is too rich to make up.  Google it.  Or better, click here.  This is the modern equivalent of “Let them eat cake”.  But I’m happy to know that some of our best and brightest were “relaxing fine”…

Another relaxing vacation

One of my personal favorites was David Sambol, former President of Countrywide Financial who, shortly after the Bank of America takeover, and amidst the laying off of thousands upon thousands of employees, apparently took his family on a three week safari vacation to Africa… on the company jet.

The million dollar look

As Merrill Lynch was burning and its shareholders were losing money, John Thain decided it would be a good idea to remodel his office. To the tune of $1.2 million dollars. Here is a list of purchases:

Area Rug:  $87,784 (c’mon, it was a really nice rug)

Mahogany Pedestal Table:  $25,713
19th Century Credenza:  $68,179
Pendant Light Furniture:  $19,751
4 Pairs of Curtains:  $28,091
Pair of Guest Chairs:  $87,784
George IV Chair:  $28,468
6 Wall Sconces:  $2,741
Parchment Waste Can:  $1,405
Roman Shade Fabric:  $10,967
Roman Shades:  $7,315
Coffee Table:  $5,852
Commode on Legs: $35,115 (can a reader please explain what a ‘commode on legs’ is?)

Recently, Mr. Thain decided to pay back the money. Reduce the total take mentioned above to a mere $82.6 million.

Just Yesterday

AIG announced it was paying $450 million in retention bonuses to – are you ready for this? – employees in its derivatives trading department. Those are the Really Smart Guys who bought all those credit default swaps.

Back at the Ranch

Meanwhile, back on the home front, Americans lost hundreds of thousands of jobs in the fourth quarter and tens of thousands of layoffs were announced this week.

Corporatism: Reverse Leninism

While all citizens are equal, some citizens are clearly more equal than others. And perhaps it should be so. The basic tenets of capitalism tell us that the cream will rise to the top and, based on their superior abilities, earn more money. This is a comforting thought, and clearly one (along with indebtedness) that keeps tens thousands of middle managers toiling away at corporations around the world.

But as I pointed out here, the system we labor under is not capitalism and certainly not a free market. Rather, our economic system is corporatism.  This system may be viewed as Leninism in reverse.  Rather than the pretense of confiscating and reallocating capital to ‘the people’, corporatism, via the state, confiscates and reallocates capital to the corporation, while expanding the role and importance of the state.

– Elite ‘vanguard’ determines strategic direction and capital allocation?  Check

– Rules of game written by small group of insiders with near-instant access to the state?  Check.

– Insiders and their families protected financially and shielded from repercussions of decision-making? Check

– Productive capacity of working citizenry taxed to subsidize state allocation of capital? Check

– Militarized uniformed police, secret plain-clothed police and expanded state apparatus to keep the citizenry in line?  Check

– Increased electronic and physical surveillance powers of the state?  Check

– Military authorized to function domestically in the event of “civil disobedience”? Check.

– Regulation, licensing and subsequent confiscation of privately owned firearms? Half way there.

Those who feel my checklist is merely hyperbole have not been paying attention. The facts behind each bullet-point above are well-documented.  Simply use your search engine to pull up numerous mainstream news links regarding each fact, from opposition to TARP running over 100:1 to the Army units specifically trained to counter civil ‘disobedience’ .

Do your own homework.

The big question

The big question is: to what end is this mess leading? 


2 Responses to “Let them eat cake”

  1. Adam Minson Says:

    This is a great post. And to answer your question, “to what end is this leading?” The same end as communism. Communism had many fooled for a while (and still does to a certain extent) in that people thought that the end result was that everybody had everything in common. In reality the end result was that nobody had any individual liberty and the state had 100% power. “Corporatism”, as you label it, which I sometimes refer to as global elitism, has the end result of no individual liberty.

    Again, by the way, great blog!

  2. […] tuned as I continue to bring you Let-Them-Eat-Cake updates.  See here for the original theme.  Previous updates […]

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