Welcome to the brave new world of post-bailout capitalism. The Commerce Department announced Tuesday that corporate profits are at their highest level in U.S. history, and the Fed released minutes of an early November meeting in which officials predicted a stagnant economy and continued high unemployment.
The lead on the New York Times story read like a line from a Dickens novel: "The nation's workers may be struggling, but American companies just had their best quarter ever." What the Times story neglected to mention is that the bulk of the increase in corporate profits was nabbed by the financial industry rather than manufacturing and other productive sectors. A whopping $33.3 billion out of the total corporate profits increase of $44.4 billion went to the banks and investment houses that those same workers had bailed out with their tax dollars.
Much of the rest of the corporate profit, in the non-financial sector, was also taken out of the hides of workers through increased "productivity" growth -- meaning they had produced more for less personal income. Case in point: the plant that GM is reopening in Orion Township, Mich., where, under a deal negotiated with the beleaguered UAW union, 40 percent of the workers crawling through cars on the assembly line will be paid 15 bucks an hour. That's about half the traditional UAW wage.
The Obama administration now feels totally vindicated for bailing out GM. Such a deal. Let's offer up half a clap for the news that GM came back from bankruptcy to mount a successful IPO and pay something back to the taxpayers, which is better than nothing. Some jobs were saved, and that prospect was why folks like me supported this bailout in the first place.
Don't call it a success story: The government unloaded some of its GM stock holdings at a $10.67 loss over the average per-share price it paid for its $49.5 billion investment. As the Bloomberg news service noted, "The Treasury, which is taking a loss on its portion of the sale, will break even only if the shares climb more than 60%," referring to the GM shares the Treasury still holds.
Nor should we ignore the fact that GM is a shadow of its former self and its rosier prospects for long-term survival depend primarily on job creation in China, where GM is already a major presence. Or that GMAC, the car maker's former credit operation, is still majority-owned by the U.S. government and is busily foreclosing on the homes of people they hustled into subprime and otherwise dubious mortgages.
GMAC was no different from others in the financial industry in securitizing mortgages that it should have known were toxic. Restructured as Ally Financial, the company was split off from GM, taking along its burdened debt obligations and benefiting from $17.2 billion in bailout money. Like the other financial outfits, Ally has enjoyed a range of government support through the Federal Reserve and Treasury. Not so the folks to whom GMAC sold crappy mortgages that are being foreclosed at an alarming rate.
The assumption of both the Bush and Obama administrations was that what was good for the banks would be good for the general economy, but just the opposite has happened. While the financial sector flourishes, the economy stagnates. As The Wall Street Journal reported in its story on the release of the Fed minutes: "Federal Reserve officials downgraded their outlook for the U.S. economy ... projecting that the jobless rate could exceed 8% for two more years and that it won't return to its former vitality for five years or more."
Guess what? The financial benefits are not trickling down. Throwing money at the banks has been as effective as pushing on a string, and the result has been what former Fed Chairman Paul Volcker has excoriated as a "liquidity trap." No serious government pressure has been brought to bear on the banks to help homeowners stay in their homes through mortgage payment adjustments.
What has occurred is what former International Monetary Fund chief economist Simon Johnson referred in The Atlantic back in May of 2009 as "The Quiet Coup," in which the financial industry is fully in charge of the government's response to our economic problems. The result, he noted, is "the reemergence of an American financial oligarchy" that had been broken by the banking regulations imposed during the New Deal in response to the Great Depression. Franklin Delano Roosevelt's sensible regulations were gutted by Bill Clinton and George W. Bush, and tragically Obama has failed to restore them. The Wall Street lobbyists got their way and unfettered greed prevails. How else to explain last quarter's outrageous profit figures?
When will the Tea Party followers wake up? And what about the rest of us, what are we going to do about it?
If Slaughter (or Cohen) had consulted the Bureau of Labor Statistics nonfarm payroll jobs data, he would have been unable to locate the 5.5 million jobs that were allegedly created. In my columns I have reported for about a decade the details of new jobs creation in the U.S. as revealed by the BLS data, as has Washington economist Charles McMillion. Over the last decade, the net new jobs created in the U.S. have nothing to do with multinational corporations. The jobs consist of waitresses and bartenders, health care and social services (largely ambulatory health care), retail clerks, and while the bubble lasted, construction.
http://www.counterpunch.org/roberts10282010.html”
Bankruptcy was not humiliating to these guys, it was just a way to wipe the slate clean and start again! Too bad for you if you invested with them!
The one question we should be forcing them to answer is 'NOW WHAT"? Where will millions of jobs come from, how will families eat and keep a roof over their heads until those jobs come back?
How many millions of hungry children will be added to the rolls next week?
Seems as though the only people who haven't any worries are those upper 2%......you know, the ones that need that huge tax cut.....
This sort of statement fails to recognize where the bulk of tax dollars actually come from in the first place. Google: "Distribution of Federal Taxes by Cash Income Percentiles". The top 20% of 2008 earners generated 69 cents of every dollar of tax revenue (87 cents of each income tax dollar, 40 cents of each payroll tax dollar, 85 cents of each corporate income tax dollar, and 93 cents of each estate tax dollar). The rest of the population doesn't even generate enough tax revenue to pay for the government services that it consumes itself - let alone bailouts. The average US per capita Federal tax revenue is over $8,500 - that would be $36k Federal taxes for a family of four just to pay the average amount of taxes. The median US family income is about $45k (however that family size is less than 4).
Everyone pays taxes- everyone. Sales taxes, gas taxes, and many other taxes. The same people you say pay most of the taxes also own most of the resources and earn the vast majority of the wages in this country. The top 20% of earners own more than 80% of the resources.
Your point is moot.
What an inspirational story!
We don't need liberals they are bankrupt; we need a resurgence of the left!!
Our last hope is effective education of these facts to the people and a third grass root party by the so educated to take control, before a blood revolution become inevitable.
Now let's see some leadership from bloggers, like yourself, to help the American public to DISENGAGE the system.
- Go local
- Bank local
- Support only local retailers and grocers
- Take out your 401(k) and pensions early; use the business to start a local handmade manufacturing operation
- Travel local or go by car, bus or sea vessel (refuse air-travel)
- Refuse to watch commercials on television (turn volume down)
- Refuse to go to the cinema on the first weekend.
- Google search only topics relating to bank bail out fraud and TSA pat-downs (to drive media)
Whatever we can to DISENGAGE the system we must do in order to brind down this bankrupt system ourselves.
Refuse to go to the cinema on the first weekend."
Whoa...! That's, like, totally radical, WM! I can see the system crumbling already. ;)
No wonder America is in such a big trouble if this is the best our revolutionaries can come up with. We don't even realize the extent of our enslavement, do we.
(Forgive my sarcasm. Your first three ideas are pretty decent, but the remaining ones, well... somewhat less so.)
Rgds, beebee-Z
enjoy football or whatever. I hope that Congress sees the need for regulating
the financial industry. And I hope all of you have a wonderful holiday.
market control rather than via investments in the other industries. How long this can continue remains to be seen but it certainly does not bode well for the economy in the long run. The general economy is dependent on the financial industry but not the other way around. And yet, if the financial industry is nothing more than
a huge casino, sooner or later it will collapse and drag the entire conntry down with it.