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The U.S. Attorney last week confirmed Americans’ fears about Wall Street. The banks, Eric Holder said, were not just too big to fail, they were also too big to jail.

That means bankers operate beyond the pale, outside the historical fence line encircling civil society. Past the pale is where barbarians resided, returning regularly to rampage. These days, bankers operate from beyond the pale, raiding civilization with impunity.

Unlike vulnerable ancient villages, however, the United States has considerable power over these banker barbarians. Banks, after all, are nothing but corporations. Corporations are legal constructs that citizens have the right to rebuild to properly serve society. European countries began doing that last week. Their first steps included limiting banker bonuses and giving shareholders binding say on CEO pay.

It started on Sunday, March 3 when the Swiss voted to grant to those who own corporations – the shareholders – the right to determine executives’ and directors’ pay.  In addition, the referendum outlawed golden handshakes and golden parachutes. These are massive handouts to corporate executives – like the $78 million that Swiss-based healthcare products corporation Novartis proposed as a goodbye gift for CEO Daniel Vasella.

Nationwide outrage scuttled Vasella’s windfall and withered referendum opponents. The measure, called the Minder Initiative after its author Thomas Minder, passed with 68 percent of the vote. Even before Vasella, the Swiss were annoyed that the country’s biggest bank, UBS, had to be bailed out and that another huge bank, Credit Suisse, gave its CEO $76 million in shares in 2010. (more…)

At Citigroup, shareholders had their say on CEO pay — and they yelled, “No damn way!”

Concerted action by shareholders, workers and public interest groups compelled corporate change in several other cases this spring as well.

At least three CEOs resigned. Executives truncated one shareholder meeting to 12 minutes. And across America and Europe, CEOs lamented the end of automatic approval for excessive executive compensation.

A wave of corporate change is rising because the rabble and the stockholders share an interest: decent corporate governance. To shareholders, decent means more long-term corporate vision providing reasonable returns and fewer risky, quick-profit schemes benefiting only executives. To workers, the unemployed, community and environmental groups, decent means operating corporations in the best interest of the nation, including treating workers with dignity and refraining from polluting. Together, the rabble and the shareholders wield power.

They’ll be exercising it inside and outside the ExxonMobil shareholder meeting next week. Some activist stockholders will seek approval of resolutions calling for the corporation to form a task force on climate change and to reduce greenhouse emissions. (more…)

It’s standard practice during the election campaign for presidential candidates to publish an autobiographical account of their rise to stardom or their philosophy of life and politics. However, in keeping with his commitment to innovative business practices, it seems that Mitt Romney has outsourced this task to Ed Conard, one of his former partners at Bain Capital.

In fairness, it is not clear to what extent Romney shares the views of his former partner, but Conard surely understands that his book will get attention because of his proximity to the presumptive Republican nominee. And, on the off chance that Conard does think like the man who likes to be able to fire people, this book should be taken seriously.

There is much in this book to infuriate those who don’t get their kicks from firing people. To start, Conard has a tale of the housing bubble and the ensuing crash that places all the blame on government efforts to promote homeownership.

Making this case requires serious abuse of the facts. In arguing that the banks did not know that they were passing along fraudulent mortgages, Conard asks why they would hold so many mortgages on their own books if they knew they were trash. The obvious answer is that they couldn’t sell them. This was the whole point of the collaterized debt obligations and later the second generation collaterized debt obligations. The goal was to hide the garbage.

This was like a game of musical chairs. At some point the music stops and someone is left holding the trash. It wasn’t by choice that Lehman, Citigroup, and the rest were still holding tens or hundreds of billions of dollars of junk mortgages in 2008. They just couldn’t find enough suckers. (more…)

Last week the country saw one of the fruits of the Dodd-Frank financial reform bill. The bill requires that major corporations offer their shareholders the opportunity to vote on the pay package for their chief executive. The shareholders of Citigroup voted down the $14.9 million pay package for CEO Vikram Pandit by a margin of 55-45 percent.

The vote was non-binding (a very serious problem), but it was nonetheless a huge slap in the face for Pandit and Citigroup’s top management and directors. It is extremely difficult to organize shareholders for this sort of vote. Management controls the flow of information to shareholders in a way that would make incumbent members of Congress green with envy.

When shareholders see a poorly run company, it is far easier for even large investors to just dump their shares rather than try to gain the support needed to change the way the company is managed. That is why this vote was so striking in a huge corporation like Citigroup.

Of course the law is still tilted so much in management’s favor, that even when the shareholders — the actual owners of the company — vote down a pay package, it is still only an advisory vote which the board and top management is free to ignore. But this vote is still a big step forward.

The first question that people should ask is how Pandit managed to get a compensation package that was so out of line with his performance. The fact that executive pay packages bear little relationship to performance is well documented in Lucian Bebchuck and Jesse Fried’s excellent book Pay Without Performance. (more…)

The shareholders of Wall Street giant Citigroup are out to prove that corporate democracy isn’t an oxymoron. They’ve said no to the exorbitant $15 million pay package of Citi’s CEO Vikram Pandit, as well as to the giant pay packages of Citi’s four other top executives.

The vote, at Citigroup’s annual meeting in Dallas Tuesday, isn’t binding on Citigroup. But it’s a warning shot across the bow of every corporate boardroom in America.

Shareholders aren’t happy about executive pay.

And why should they be? CEO pay at large publicly-held corporations is now typically 300 times the pay of the average American worker. It was 40 times average worker pay in the 1960s and has steadily crept upward since then as corporations have morphed into “winner-take-all” contraptions that reward their top executives with boundless beneficence and perks while slicing the jobs, wages, and benefits of almost everyone else.

Meanwhile, too many of these same corporations have failed to deliver for their shareholders. Citigroup, for example, has had the worst stock performance among all large banks for the last decade but ranked among the highest in executive pay. (more…)

Four years ago, Cooper Tire told its workers they’d have to sacrifice to save the company.  With a straight face, Cooper executives said it was essential for the corporation’s survival that workers take tens of millions in pay and benefit cuts.

The workers understood the link between their livelihoods long term and Cooper’s success. Dedicated and loyal, they accepted the cutbacks. Soon afterward, city and state officials granted Cooper millions in subsidies.

Management didn’t share in the workers’ and taxpayers’ pain, though. The top dogs rewarded themselves with millions in pay increases and a shiny new corporate jet.

Cooper punk’d the workers and taxpayers.

This isn’t an aberration. It’s a pattern. Corporate executives, the 1 percenters, slash workers’ wages, then give themselves big bonuses. CEOs tell mayors and governors their businesses are in such dire shape that they may close or move offshore. Government officials dutifully shovel truckloads of taxpayer cash into CEO hands, then the CEOs grant themselves more perks. The television show Punk’d, in which actor Ashton Kutcher humiliates famous people, took a five-year hiatus. The 1 percenters gave workers and taxpayers no such break. Punking the 99 percent for profit has only escalated.

At Cooper, 1,050 members of the United Steelworkers union in Findlay, Ohio agreed in 2008 to give the company $30 million in concessions when executives cried destitute at the negotiation table. The next year, after witnessing the same sad song and dance, Ohio officials began transferring $2.5 million from taxpayer pockets to corporate coffers.

Between 2008 and 2011, though, Cooper awarded its executives two pay hikes and double bonuses. The year after Cooper told workers they had to suffer for the company, Cooper CEO Roy Armes got a 50 percent pay increase. The next year, in the middle of the recession, his bump was 19 percent, giving him a package worth $4.7 million in 2010.

Cooper 1 percenters also bought themselves a corporate jet and, for $17 million, a Serbian tire company. Since January of 2009, Cooper posted $360 million in income before taxes.

The workers who took the cutbacks and taxpayers who subsidized the company got punk’d. (more…)

Hoo, boy, it’s tough in our economy. I know you worry about your own little world, Bucko – whether you’re going to have a job, your shrinking paycheck, no health care, rising prices on everything… stuff like that. But, hey Bucko, it’s not all about you.

Show a little concern for those who’re taking a real hard hit in this lean year. Like Wall Street bankers.

Did you know that top executives at Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America and so forth are facing up to 30 percent cuts in their bonus money? Some of them are looking at a bleak, Dickensian end-of-year holiday season with no more than maybe a $5 million dollar bonus stuffed in their stockings. I’ll pause here for a second so you can reach for a tissue to dry those tears. (more…)

The Occupy Wall Street protests that began in New York City more than three weeks ago have now spread across the country. The choice of Wall Street as the focal point for the protests — as even Federal Reserve Chairman Ben Bernanke said — makes sense due to the big bank malfeasance that led to the Great Recession.

While the Dodd-Frank financial reform law did a lot to ensure that a repeat of the 2008 financial crisis won’t occur — through regulation of derivatives, a new consumer protection agency, and new powers for the government to dismantle failing banks — the biggest banks still have a firm grip on the financial system, even more so than before the 2008 financial crisis. Here are eleven facts that you need to know about the nation’s biggest banks:

– Bank profits are highest since before the recession…: According to the Federal Deposit Insurance Corp., bank profits in the first quarter of this year were “the best for the industry since the $36.8 billion earned in the second quarter of 2007.” JP Morgan Chase is currently pulling in record profits.

(more…)

By Dean Baker
Co-Director, Center for Economic and Policy Research

With the recent spate of attacks on climate science and evolution it should not be a surprise that traditional defined benefit pensions in the public sector are now also under attack. There are powerful political actors in this country who are anxious to build a bridge back to the 19th century; taking us to a time where working people enjoyed few protections and could not count on sharing in the gains of economic growth.

The effort to weaken or destroy public sector unions and take away their pensions is the latest battle in this larger war. As usual, the right has been busy making things up to push its agenda, confident that the media will not expose untrue claims.

At the center of the right’s story is the view that governments are somehow being reckless or irresponsible when they provide guaranteed pensions for their workers. They tell us that these guaranteed benefits will bankrupt state and local governments, imposing impossible burdens on future taxpayers.

This story can be easily shown to be untrue. While the right has been scaring the public with talk of a trillion dollars in unfunded liability in state pensions, this sum can also be expressed as about 0.2 percent of state income over the time-frame in which the liabilities will have to be paid. (more…)

Les Leopold

By Les Leopold
Author, “The Looting of America”

What a great year for Wall Street: profits up, bonuses up and, best of all, criticism down, especially from Washington. Somehow Wall Street has much of America believing its lies and rationalizations. We’re even beginning to forget that Wall Street is largely responsible for the economic mess we’re in.

So before we’re completely overtaken by financial Alzheimer’s, let’s revisit Wall Street’s greatest fabrications for 2010. (For the full story, please see The Looting of America.)

1.”Honest, we didn’t do it!”
Two years ago Wall Street’s colossal greed crashed our economy. Our financial elites created and spewed highly leveraged toxic assets around the globe. These poisonous “innovations” pumped up the housing bubble and Wall Street grew insanely rich in the process. When it all burst, we learned that the big Wall Street institutions that had caused the crash were far too big to fail — and too connected. High government officials came to their rescue with trillions in cash and guarantees — underwritten, of course, by we taxpayers. Everyone knew this at the time. But if you asked just about anyone on “The Street” they denied all culpability and pointed the finger everywhere else: Fannie, Freddie, the Fed, the Community Reinvestment Act, tax deductions for home buying, bad regulations, not enough regulations, too many regulations, too much consumer debt, the rating agencies, the Chinese — and on and on. Sadly, their blame-shifting strategy worked, bamboozling the media and people across the political spectrum. The GOP members of the Financial Crisis Commission are so drunk with this Kool-Aid that in their minority report, they refuse even to use the words “Wall Street” or “speculation” in assessing the causes of the crash. Hypocrites? Crooks? Morons? Take your pick. (more…)