There is a glitch in the system. Alan Greenspan famously said after the collapse that he had "found a flaw" in his free market ideology. He added, "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief."
Well now the shock has worn off. And what have we done about it? Absolutely nothing. The flaw Greenspan is referring to is what I call the Cassano loophole in the system. And apparently Greenspan has learned nothing from it because in his testimony this week, he said he did nothing wrong as the Cassanos of the world robbed us blind.
Jospeh Cassano was the head of AIG's Financial Products Unit. They are the ones that made about a trillion dollars worth of bets in credit default swaps. They lost. Except because of the Cassano loophole, they won.
When they lost the bets, their company was devastated. Completely and utterly bankrput. The failure was so large, it promised to drag down the rest of the global economy with it. This forced the government to step in and cover their losses. So far, the United States taxpayers have put in $182 billion to keep AIG afloat.
So, what happened to Cassano? This was all his idea and his team that brought on this collossal collapse. Well, he was fired! Great, justice served.
Oh, did I forget to mention one thing? He received $35 million in bonuses when he was let go. Can anyone in their right mind explain that? Imagine you bankrupt your company and nearly the entire world economy with it - and they give you a $35 million bonus?
So, how do so-called conservatives explain this? They scream that he had a contract. He had a contract!!! What can we do? We had to honor it, otherwise the whole capitalist system falls apart. You know what happens to your contract if your company goes under? Even if it was through no fault of your own, you lose your contract. The company is bankrupt. There is no more money. Those contracts are null and void. Especially if you're the idiot who caused the bankruptcy in the first place.
But regular rules don't apply to financial industry executives. They get paid no matter what. And that is the whole problem. You see, Joe Cassano never gave a damn about AIG (let alone the American taxpayer). Why would he care about the company? It's not his money. His money comes in bonuses and salary for making money in the short run. If he took too much risk to make that money and it winds up costing the company later, who cares???
He gets to keep his money, no matter what. His self-interest dictates that he should take excessive risk for excessive rewards. And that's exactly what happened. And that is the Cassano loophole. That's the flaw in the system. The people who run the companies don't own the companies. They are sucking them dry. And killing capitalism in the process.
Free markets need rules. If a football game doesn't have refs and rules, it becomes a killing zone. So, do markets. It becomes anarchy disguised as freedom. Every man for himself.
So, let's go back to Cassano. Did he ever get punished for bankrupting the company? This week the Wall Street Journal reported that prosecutors will likely not charge him with fraud. They are not going to try for clawbacks to get some of the money back. In the end, he gets away scott-free. But it's better than free, he gets to keep all the money he never really made in the first place (all of those trades that he got rewarded for eventually wound up losing a tremendous amount of money--and we had to pay for those losses, even though he kept the money).
No, in the end, Cassano got rewarded. I told you about his $35 million thank you note for robbing the place clean. But how about the original robbery? How much did he make for himself from 2000 to 2008 by gambling with the company's money? Only $280 million.
In the end, he walked away with over $315 million for destroying the company and maybe the whole economy. So, why wouldn't he do it again? Well, next time it won't be him. We're on to him, so he's going to have spend his retirement on his yacht. It'll be someone else. It'll be another Cassano. And we'll fall for it then as well. And Alan Greenspan will be in a state of "shocked disbelief" all over again.
Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks
When (not if) Americans rise in revolution, it will be for this reason. Either we play by one set of rules or you're out of the game, fellas.
At the behest of his Emanuel, Rubins, Summers, Bernanke, greenspan, paulson, geithner, blankfein, banksters, President Obama is RUNNING a PROTECTION RACKET for these SERIAL SWINDLERS & deceitful financial fraudsters.
Oh - did I mention, Mr. Obama is now reportedly "BEST BUDS!" with... JAMIE DIMON?
The sad fact is, The radical, REACTIONARY Right-Wing HAS TAKEN COMPLETE CONTROL of the "Democratic" Party, including BOTH the Pelosi (110th) and 111th Congress, and the Clinton-Rubin-Summers and now Obama-Summers-Giethner White Houses...
we effectively have ONE PARTY DICTATORSHIP RULE, no matter how much the "major media" tries to play every personality issue as a case of genuine democratic debate.
There are no rules anymore, right?
Be prepared for the new game, fellas.
Obama's only merit in all this, he lets them do as they please, management by neglect, probably.
But that's the fallacy: corporations are not people. They are a front, that limits the liability investors and executives face for their actions.
When a person or small business go bankrupt, it hurts their future economic opportunities.
But failed executives have no trouble getting a job.
And nobody refuses shareholders money because their other investments failed.
- Balzac
It says: "with freedom comes responsibility"
Too many people abuse freedom, and this is one reason that we have so many crimes and all sorts of problems.
Manufacturing in the table I gave you is as defined in the NAICS - http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart_code=31&search=2007%20NAICS%20Search
It includes neither hamburgers made in fast food restaurants or anything to do with mortgages.
Re job losses, I have already shown you how low the unemployment rate was before the completely homegrown recent recession. Not only that, we had millions of illegal immigrants holding down jobs too.
Re pay in manufacturing, the average hourly wage in the education and health services sector in 2008 was $20.52. The average hourly wage in the professional and business services sector was $21.15. The average hourly wage in the construction sector was $21.86. The average hourly wage in the natural resources and mining sector was $22.42. The average hourly wage in the information sector was $24.74. The average hourly wage in the financial activities sector was $20.28. In 2008 there were almost 56m people employed in those sectors. The average hourly wage for the 13.5m people employed in manufacturing in 2008 was $17.72.
I'd rather get twenty-three bucks an hour and buy my applicances from China. What would you rather do?
Thanks Bush and Cheney but what else could we expect from an insider trader and a CEO who got his bonus from sales to Saddam Hussein....?
I would like to submit none of our huge corporations practice capitalism. First, they are all busy buying votes, buying legislators, and jerry-rigging the legal system and commerce laws to favor their own money-stealing systems. Capitalism plays no part in that.
Even if they weren't paving their own way with their own written laws, they use every trick ever conceived to kill competition, force consumers into false and fatal choices, monopolize markets and resources and raw materials. Plundering 401ks and pensions, stealing taxpayer money in defense contracts, state and federal projects, you name it. None of it part of the Capitalist Playbook.
Lastly, they privatize profits and socialize losses. Huge recipients of Corporate Welfare, tax breaks, offshore accounts, loopholes, grants, kickbacks, collusion, payoffs, bribery, corruption of every stripe.
There hasn't been any true capitalism going on for a long long time, if ever. The rules of better mousetraps and working harder, and upgrading your skills, and investment are pure bulltwaddle.
The less regulated the free market is, the more likely it is that industries will be taken over by monopolists or oligopolists. Their whole purpose is to close the market and destroy or acquire any small competitors. No free entry, no free market. They use free market principles to continue to acquire power and destroy the free market for their benefit. Which is one major reason this country is full of oligopolies and monopolies who have destroyed jobs.
The tactics of John D Rockefeller and Standard Oil are the same practices used by many corporations today.
http://www.oligopolywatch.com/stories/2003/04/21/basicPrinciplesOfOligopolies.html
http://www.washingtonmonthly.com//features/2010/1003.lynn-longman.html