Tuesday, November 25, 2008

Excessive Avarice

As the late great Senator Everett Dirksen (R-IL) so famously observed, “A billion here, a billion there, and pretty soon you’re talking real money.” Well there sure is a lot of real taxpayer money being thrown around these days in an effort to stop the U.S. economy from crashing. I haven’t had the courage to tell my 12 year-old daughter that her share of the national deficit is already $20,000 and it will likely double very soon.

Yes, Congress must pass a stimulus package to “jump start” the U.S. economy. Yes, Uncle Sam must inject another $25 billion into Citibank and back $306 billion of its residential and commercial real estate loans. Yes, other banks will need help too. Yes, the U.S. had to pump $154 billion into AIG. It could not let Fannie Mae and Freddie Mac fail. And it is likely to give the U.S. automakers a bailout when they present Congress revised business plans.

It is going to take more than a $750 billion TARP (Troubled Assets Relief Program) for the newly established “Office of Financial Stability” to right the ship. Members of the Bush and incoming Obama administrations are working feverishly to set the economy on the road to recovery. This task is made more complicated because of the complexity of many of these failed transactions and by the fact that we live in a global economy. Alarmingly, we still don’t know the full extent of the financial exposure. We do know, regretfully, that hundreds of thousands of Americans are losing their jobs; that tens of thousands of citizens are losing their homes; and that thousands upon thousands of seniors are spending the last few dollars of their life's savings.

I visited a neighborhood store that is usually packed during the holiday season. Not so today. “No one is spending money,” said my friend the owner, “I am dying.” My neighborhood is one of the wealthiest in the country yet several of its stores have closed in just the past few weeks. All anyone talks about is the economy (although talk of a possible “Jet-Giant” Superbowl represents a welcome diversion). Soberly President-elect Obama says, “it’s going to get worse before it gets better.” And a Russian political analyst is predicting the United States will “collapse and break apart.”

American has overcome great difficulties in its history and emerged stronger than ever. The Civil War, The Depression and World War II are examples of its unmatched spirit, resilience, ingenuity and tenacity. I am confident that my daughter’s children will be born into the greatest nation in the history of the world.

But let us not lose sight of the fact that excessive avarice is largely responsible for the nightmare we are living through today. Our democratic capitalist system makes it possible for just about anyone to become wealthy. On the other hand, it permitted a few greedy corporate executives to exploit the system for enormous personal gain by setting up a Ponzi scheme involving risky real estate loans and complicated securities. The regulations were few, checks and balances were minimized, controls were scant, CEO appointed boards co-conspired, and salaries, bonuses and fees were outrageously high.

Here is one thing I, a U.S. taxpayer, am going to insist on: go after the people who profited while bringing this country to its knees. Citibank’s former CEO, Charles O. Prince, made tens of millions of dollars along with the head of its trading division, Thomas Maheras, its senior “risk” officer, David C. Bushnell, and many other top executives, all based on the bank’s surging performance. But many of these deals were unreasonably risky and they have nearly bankrupted the institution. Take Stanley O’Neal, formerly CEO of Merrill Lynch. His golden parachute, the one he got for destroying his company, is in excess of $160 million dollars. The board stacked with O’Neal loyalists approved the package. These are just a few names of executives who have gotten rich and gotten the hell out of town.

Here’s a proposal. Until recently the national debt was nearly $6 trillion and it is likely to more than double during America’s economic recovery. So the increase is about 50% of the new total. The IRS should take back 50% of Stan O’Neal’s golden parachute, or $80 million, and re-allocate it to the TARP. My name for this program is the “Excessive Avarice & Total Incompetence Tax.” That’s "EAT IT" for short. A million here and a million there and pretty soon we're talking real money.

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