Morning Must Reads: Bailouts for the Banks and Cake for the 99%

What is good for the financial sector is good for the 99% 1%.

For the financialization of America wasn’t dictated by the invisible hand of the market. What caused the financial industry to grow much faster than the rest of the economy starting around 1980 was a series of deliberate policy choices, in particular a process of deregulation that continued right up to the eve of the 2008 crisis. Not coincidentally, the era of an ever-growing financial industry was also an era of ever-growing inequality of income and wealth. Wall Street made a large direct contribution to economic polarization, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 percent (and the top 0.1 percent, which accounts for most of the top 1 percent’s gains) in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the 'outrage constraint' that used to limit executive paychecks, and more.

The Pittsburgh Post-Gazette reviews employment law in Pennsylvania and notes that there are two sets of rules, the rules for the rest of us (we are employed at will and rarely get a severance) and the rules for top executives.

A severance package is typically offered to executives in exchange for a promise not to sue over anything that happened during the time of employment. Of course, the severance package has a much-maligned cousin in the 'golden parachute,' which can send fat-cat executives on their way with multi-million-dollar paydays and the ill will of the masses. Earlier this month, Bank of America Corp. announced it would send wealth-management division head Sallie Krawcheck off with $6 million. And when Hewlett-Packard CEO Mark Hurd resigned after allegations he had an inappropriate affair with a contractor, the news that he'd leave with millions wasn't exactly a public relations coup.

Speaking of top executives, Nancy Folbre, after walking us through what we know about the rise in inequality, spots a curious new consumer product, let's just call it the Louis Vuitton of commodes.

Another, more discursive poster described the ideals of the 'solidarity economy,' starting with: 'I don’t have a boss. I’m a worker-owner in a cooperative business,' and ending with, 'I joined a credit union so my money stays in the community.' What seems to be emerging is what the historian Gar Alperowitz described as a process of 'evolutionary reconstruction.' It might start by making capitalism more distinct from feudalism. This idea came to me while reading about a great new product that just hit the market: a $6,400 toilet with its own remote control for water spray and drying fan. Marie Antoinette would have loved it for Versailles.

Who would pay $6,400 for a toilet with a remote control, you ask?

Before it was the bankers turn to wreck the economy, you might remember there were some scandals at companies like Enron, Arthur Andersen and Tyco International.

Here is a story from 2002. 

You might wonder how former Tyco CEO Dennis Kozlowski could have spent thousands of dollars on stuff most of us could get at Bed, Bath & Beyond for, at most, a few hundred. Interior designers to the rich and famous say it's easy. But really, it's in awfully bad taste. An SEC filing last week from Tyco alleges that Kozlowski spent company funds on unauthorized purchases including $15,000 for a dog-shaped umbrella stand, $6,300 for a sewing basket, $17,000 for a traveling toilette box, $2,200 for a gold-plated wastebasket, $2,900 on coat hangers, $1,650 for an appointment book, $5,900 for sheets, $445 for a pincushion, and $6,000 on a shower curtain.

Speaking of Marie Antoinette, let me introduce you to her long lost German cousin Andreas Schmitz.

But some bankers and others in the protesters’ sights sought to spread the blame. Andreas Schmitz, head of the German banking federation and chief executive of HSBC Trinkaus, told the Financial Times on Sunday that protests against banks were 'a diversion from the fundamental problem: that we can no longer finance our welfare states.'

One of the factors that is widely thought to have hurt job growth around the world in the past few months is the continued instability in financial markets from the sovereign debt crisis in Europe. Andreas Schmitz fails to note that it was German and French banks that made what turned out to be really bad loans to the Greek government. Those same banks are about to get a big bailout. Socialism for you bad, socialism for the banks good.

There is an upside to all of this, we all are probably gonna get some cake!


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