by Eric Martin
An open thread with some gratuitous baby Eric mugging for the camera.
PS: That's a pretty silly little body innit.
by Eric Martin
An open thread with some gratuitous baby Eric mugging for the camera.
PS: That's a pretty silly little body innit.
by Eric Martin
Then maybe they would, one-by-one, drop out of their respective races in order to oppose Obama's agenda. After all, he's managed to get the GOP to come out in opposition to tax cuts, paygo, a freeze on discretionary spending, cuts in discretionary spending and a commission dedicated to deficit/debt reduction. From Sam Stein (via Benen)
Some senior Republican strategists and party veterans are beginning to fret that the party's refusal to work with President Obama, even when he crosses onto their own philosophical turf, could ultimately erode some of the political gains they've made this past year.
Over the past two weeks, Republicans in Congress have united in nearly unanimous opposition to a series of ideologically conservative policy suggestions, starting with a commission to reduce the deficit, a pay-go provision that would limit new expenditures, and a spending freeze on non-military programs.
Opposition has usually been based on specific policy concerns or complaints that the measures aren't going far enough. But the message being sent is that the GOP's sole mission is presidential destruction.
Now, some in the party are beginning to worry.
Perhaps, but Mike Pence sure didn't get the memo. Check out the following from the American Conservative's Daniel Larison. First this:
Nestled in the list of small-business initiatives that President Barack Obama announced in the State of the Union address was a measure providing incentives to small firms that hire employees and raise wages.
The details of the initiative, which Mr. Obama is expected to highlight when he visits Baltimore today, include a $5,000 tax credit for every net new employee in 2010 [bold mine-DL]. This credit would be retroactive to the beginning of the calendar year and could be received on a quarterly basis, if the business so chooses. In addition, employers would receive a tax credit to cover Social Security payroll taxes on wage increases. ~The Wall Street Journal
Pence called a White House plan to offer tax credits to small businesses the “Jimmy Carter tax credit,” arguing that it could provide incentives for employers to lay off employees [bold mine-DL]. Although Republicans have criticized Democrats for doing too much too fast, Pence called the plan a continuation of the “small ball” economic policies from Democrats in Congress and the White House.
“I don’t think we should be looking to the economic policies of the Carter administration to get us out of the worst recession in 25 years,” Pence said. ~Politico
Wow. I must admit, I didnt' see that coming. Larison's reaction is rather on target:
Yesterday I said that the GOP remains just as intellectually bankrupt and unimaginative as ever, but I need to amend that in light of Pence’s comments. If possible, the GOP has somehow managed to become even worse than it was in previous years. How else can you explain the desperate bid to reframe tax credits for small business as a job-killing measure? It is tax credits similar to these that the Republicans normally advocate as a matter of course, and it was this sort of thing that Republicans were demanding more of last year during the debate over the stimulus bill. Instead of recognizing this and trying to claim that the administration has adopted one of his party’s solutions, Pence is reduced to the absurdity of claiming that possible tax reduction on businesses that hire new employees is some revival of the dreaded Carter years. [...]
Let’s remember that Pence is not some minor member of the minority. He is the House Republican conference chair, the third highest-ranking Republican in that chamber, and he recently decided not to pursue a Senate bid against Evan Bayh in order to re-build a Republican majority in the House. If this is what he has to offer in his current role, perhaps it would have been better for the GOP if he had tried his luck back home in Indiana.
Rounding out the list, we have the National Review complaining that Obama might cut funding for voyages to Mars and the moon as part of an effort to get spending under control (or redirected to more exigent uses). Apparently, in this instance, Obama's cuts will cause us to lose the space race to China. Because China will beat us to the moon. Or something.
In addition to the China scaremongering, the National Review actually argues that cutting government spending in such a manner will, get this, lead to the loss of jobs. That government spending "creates jobs."
But...I...you...thought, ahh, forget it.
By Lindsay Beyerstein
Osama bin Laden is speaking out against climate change:
"The effects of global warming have touched every continent. Drought and deserts are spreading, while from the other floods and hurricanes unseen before the previous decades have now become frequent," bin Laden said in the audiotape, aired on the Arab TV network Al-Jazeera.
The terror leader noted Washington's rejection of the Kyoto Protocol aimed at reducing greenhouse gases and painted the United States as in the thrall of major corporations that he said "are the true criminals against the global climate" and are to blame for the , driving "tens of millions into poverty and unemployment."
What a devilishly clever plan to destroy the world.
Bin Laden surely knows that if he rails against climate change, Americans will reflexively champion global warming. Temperatures will soar, decadent Western civilizations will bake and crumble and their parched ruins will be swept away by rising seas. The earth will be scourged by famine, pestilence, war, and plagues too numerous to name. At last, Bin Laden will seize his chance to usher in the medieval Caliphate of his dreams.
Don't let the bearded villain get away with it. Call your member of congress today and demand action on climate change.
by Eric Martin
Listening to critics of Obama's decision to try certain terrorist suspects in civilian courts, one gets the impression that Obama is taking a big risk, and that civilian courts are either ill-equipped to handle such cases, or the rules governing the proceedings in those venues create too big an advantage for defendants. Obama's critics argue that military commissions should be used instead - presumably because they are better suited for adjudicating such matters.
Here's the problem, though: civilian courts have a much better track record of convicting terrorists than military commissions - and the sentences tend to be longer when a conviction is handed down. Patrick Barry explains by way of Ken Gude:
Ken Gude, of the Center for American Progress, writes, “The facts are clear: Criminal courts are a far tougher and more reliable forum for prosecuting terrorists than military commissions.”
The record of federal courts for trying terrorists, particularly since 9/11 is formidable. Former Republican Congressman from Oklahoma Mickey Edwards writes: “[Critics] scowl and declare that our American courts will not, or can not, convict terrorists. They seem pretty damned certain of that. Which is weird since nearly 200 terrorists have been convicted in our federal courts in the last nine years (that's 65 times as many as have been convicted by military commissions).” A 2009 report by Human Rights First written by a team of former federal prosecutors found that terror trials in civilian courts had “a conviction rate of 91.121%.” And for those still think the NYC issue somehow stems from the courts effectiveness at prosecuting extremists, a study by NYU’s center on Law and Security, found that NYC courts have a zero acquittal rate for terrorism cases. [...]
Support for military commissions might make sense, if the commissions themselves weren't so ineffective and soft. Gude explains, “military commissions have never handled a single case of murder or attempted murder and have doled out shockingly short sentences to terrorists—even to a close associate of Osama bin Laden.” Moreover, “since their formation in November 2001, military commissions have only had one trial, negotiated one plea bargain, and convicted one defendant after he boycotted the proceedings,” while sustaining multiple supreme court challenges. Of the three individuals convicted in military commissions, two received sentences less than a year long.
Meanwhile, Adam Blickstein attempts to shoot down some of the miranda warning/right to counsel/interrogation nonsense flowing from the Obama administration's handling of the underwear bomber's arrest and interrogation. First, quoting Spencer Ackerman:
Collins said in a statement that the fact that the FBI read Abdulmutallab his Miranda rights “likely foreclosed the collection of additional intelligence information.” But over the weekend, The Associated Press published the most comprehensive account to date of Abdulmutallab’s interrogation and found no evidence that Mirandization inhibited interrogators’ access to valuable information. FBI interrogators, to the contrary, read him his Miranda rights after they were satisfied that he had no further information about any further attacks.
And, again, quoting Ken Gude:
These conservatives clearly believe that the criminal system impedes intelligence collection because defendants get lawyers in the criminal system who always tell their clients to stop talking to the government. The only problem with this argument is that their recommended solution to this apparent problem—charging detainees in military commissions or holding them without charge in military detention—doesn’t change a defendant’s access to an attorney...Military commissions also have procedures prohibiting self-incrimination and ensuring that statements from the defendant are made voluntarily. There is virtually no difference between military commissions and criminal courts in the provision and availability of defense counsel.
Gude also undercuts Jindal's argument by describing the litany of valuable and actionable intelligence America has obtained from terrorists with lawyers present. This intelligence gathered in the presence of legal counsel has, in fact, kept America safe...And, my god, all that information without torture!
Right, don't let the facts get in the way of a good talking point. It would be nice if the Republican Party decided to take a principled stand, embrace the facts and stop demagoguing these issues, which political opportunism serves to erode this nation's commitment to the rule of law and basic human rights - whether it be increased affinity for torture amongst the population, or willingness to detain suspects indefinitely without recourse. These cheap shots can be quite expensive in the long run.
by Eric Martin
Coming on the heels of the Senate's passage of a bill authorizing President Obama to impose a new round of sanctions against Iran (a truly counterproductive policy), Flynt and Hillary Mann Leverett diagnose a drift in Obama's Iran policy that, sadly, rings true:
Obama has moved, during just one year in office, from relatively forward-leaning expressions of interest in engaging Iran on the basis of “mutual interests” and in an atmosphere of “mutual respect” to rhetoric reminiscent of President George W. Bush’s description of an “axis of evil” (North Korea, Saddam Husayn’s Iraq, and the Islamic Republic of Iran) in his 2002 State of the Union address. Last night, Obama equated Iran’s nuclear activities with North Korea’s nuclear weapons program—even though there is no doubt that North Korea has built nuclear weapons and no evidence that the Islamic Republic has done so or even tried to do so. (For good measure, the President effectively put the status of Iranian women in the same category as that of their Afghan sisters. While one can take issue with restrictions still in place on Iranian women, the educational, professional, and social standing of women in the Islamic Republic is among the highest in the greater Middle East and clearly superior to the status of women in Afghanistan.)
There was no mention of engaging Tehran in last night’s speech. Instead, the emphasis—as during George W. Bush’s administration—was on isolating and punishing Iran. With regard to the nuclear issue, in particular, Obama said that “as Iran’s leaders continue to ignore their obligations, there should be no doubt: They, too, will face growing consequences.” (Departing from his prepared text at this point in the speech, the President added starkly: “That is a promise.”)
To the extent that there is room left in Obama’s Iran policy for diplomacy, it is diplomacy of the sort pursued by the George W. Bush administration during its second term in office—engagement with America’s regional and international allies, to marshal support for intensified multilateral pressure on Iran, not engagement with the Islamic Republic with the aim of resolving differences and realigning U.S.-Iranian relations. One could accurately characterize this as diplomacy about Iran, rather than diplomacy with Iran. It certainly does not amount to “change we can believe in”.
As if tacking with the prevailing winds, Richard Haass recently penned an article explaining why he has abandoned engagement in favor of regime change in Iran. The rationale is dubious: unlike prior gambles by the Bush administration that the Iranian regime was on the verge of collapse, this time it really is, and so it's worth a stand-off. Consequently, the means Haass sets forth to instigate the impending regime change amount to little more than reheated Bush administration leftovers - a meal that failed to satisfy the first go round.
Haass would have US leaders espouse more vocal anti-regime rhetoric, heighten the focus on regime human rights abuses, loosen the flow of Internet-based information to Iran, increase funding of the "opposition" via the Iranian diaspora (one wonders if such funding would be welcomed by many in the Green movement), refuse to meet with the regime in any capacity and, presumably, sprinkle a cup of pixie dust on the whole endeavor to make the lead balloon fly.
Regime's do not fall from such pin pricks (Reagan didn't actually tear down that wall with a speech), but the consequences will harm US interests regardless. The Iranian regime will grow more adversarial in posture, correctly perceiving the United States as intent on usurping its rule. As a result, it will have even more incentive to develop nuclear weapons, and on an accelerated timeline. In the process of raising the temperature between Washington and Tehran, hardliners in Iran will be strengthened, the population will rally around the flag and the reform movement will be more plausibly linked to foreign powers that are working to manipulate foundational Iranian political institutions. Suffice to say, this association will not bolster the popularity of the reformers.
What Haass’ article reminds us is that predictions of major political upheaval in Iran are becoming very much like the consistently wrong string of warnings that Iran is just a few years away from a nuclear weapon. An Iranian bomb is always just over the horizon, and it has been just over the horizon for almost twenty years. It seems that the next Iranian revolution is also always just around the corner, and this always seems to be an excuse for delaying diplomatic engagement that ought to have started years ago. Obviously, opponents of meaningful engagement exploit prospects for internal political change Iran to kill off a policy option they reject anyway. That’s to be expected. What doesn’t make sense is why so many supporters of engagement have begun abandoning a policy that was scarcely tried and has been given no time to work. [...]
Fundamental Iranian state interests have not changed in the last seven months, nor has the compelling logic of engagement with Tehran become any less so. In 2008, the bankruptcy of demonizing and isolating Iran was obvious, and it was associated with a deeply unpopular administration, and so for a time it became unfashionable. For all of six months, engagement was trendy when Obama was widely liked and the policy involved sending Nowruz messages and doing nothing meaningful. It has taken much less time for pro-Green advocacy to displace engagement as the preferred fashion. Incredibly, the impulse to isolate Iran has regained much of its former strength despite its record of abject failure. Politically, pro-Green sympathizers are making it much easier for hawks to advance measures designed to isolate and punish Iran, because they are resisting the one alternative course of action that will avoid the imposition of more sanctions or military action. Sanctions will, of course, mainly harm the Green movement and do nothing to change regime behavior, and scrapping engagement will ensure that Washington continues to have zero influence over what Tehran does inside or outside of the country.
I'm reminded of the conservative critique of Obama's purported affinity for diplomatic solutions. The insinuation was that Obama was hopelessly naive in his belief that simply extending a hand, and then talking to adversarial regimes, will achieve results. While tautological, the criticism seemed shallow at the time. I would have argued then that of course Obama realizes that diplomacy is more than a meet and greet, or a clever speech; that engagement is a substantive process involving meaningful negotiations, with significant give and take and sometimes painful compromise, all facilitated by a gradual move toward normalized relations.
From the vantage point of one year passed, I'm not so certain anymore.
by Eric Martin
Dexter Filkins' story about the recent flipping of one large and powerful tribe in Afghanistan is generating a lot of buzz - with some touting the conversion as the first stage in a recreation of the Sons of Iraq program which established alliances with Sunni elements against al-Qaeda in Iraq. However, there are concerns raised that the alliance is more short-lived and opportunistic than durable, that it will be hard to replicate, that the concessions were won at the expense of the authority and legitimacy of the central government and that there are moral issues raised by the tactics employed by our putative allies. From the Filkins article - emphasis added:
The leaders of one of the largest Pashtun tribes in a Taliban stronghold said Wednesday that they had agreed to support the American-backed government, battle insurgents and burn down the home of any Afghan who harbored Taliban guerrillas.
Elders from the Shinwari tribe, which represents about 400,000 people in eastern Afghanistan, also pledged to send at least one military-age male in each family to the Afghan Army or the police in the event of a Taliban attack.
In exchange for their support, American commanders agreed to channel $1 million in development projects directly to the tribal leaders and bypass the local Afghan government, which is widely seen as corrupt.
Joshua Foust is appropriately snarky:
Ahh, so the U.S. is undermining the Afghan government and encouraging mob violence, all in the name of supporting the Afghan government and deligitimizing the Taliban. Get it? [...]
What does America do when it ends up funding the arson of [Taliban-]supporting civilians, since technically communal punishment is a war crime? [...]
Just remember kids, we're in Afghanistan to liberate and protect the Afghan people, and to leave would be to abandon the Afghan people. At least those who aren't turned to charcoal by our allies, perhaps with the incindiery devices purchased with our money. Gotta burn down a house to save it and all.
by Eric Martin
Bernard Finel argues against knee-jerk resort to the use of military force in places like Yemen - or rather, argues that the full implications of such involvement should be subject to a more rigorous strategic analysis before the bullets fly. Finel points out that military involvement creates reinforcing loops of circular reasoning that tend to deepen the level of commitment and partnership beyond the extent originally intended. When the ties being bolstered are with unsavory regimes and other elements, the alliance can be more trouble than it's worth. Further, when getting involved in such a manner makes you a player in a complex, often inscrutable web of local conflicts and combatants, you usually end up a loser because you can't win someone else's civil war.
I would love to know how the discussions about Yemen strategy have developed inside the administration because this deepening involvement is a prime example of the challenge I have tried to highlight. There are al Qaeda operatives working in Yemen. Killing them may, in the short-run, disrupt their operations. That is a worthwhile goal.
But what are the long-term consequences of a deepening U.S. involvement?
This is not a trivial question. Once you begin to use force — with or without the consent of a local government — you become deeply embedded into the security environment in that country. From there it becomes logical to further deepen the involvement over time. Recall the argument over Afghanistan policy. Many proponents of escalation argued (paraphrasing): “Well, maybe it wasn’t a good idea to get so deeply involved, but we are there now and how to deal with things as they are, not as we would wish them to be.”
In Yemen, our use of force now is creating the antecedent conditions that will later on justify more and deeper intervention, in part because by allying ourselves with the Saleh government we both make all of his enemies our enemies and we are also extending a tacit offer of protection because at some point, someone will argue, “we have to back Saleh, otherwise other Muslim leaders won’t be willing to side with us.”
But if we step back and think about end states — i.e. begin a process of strategic assessment — isn’t it obvious that the goal for the United States ought to be disentangle itself from politics in a place like Yemen and seek to insulate ourselves from disorder that may arise there? There is no coherent U.S. interest in support of mediating the various internecine disputes on the Arabian peninsula, is there?
As a consequence, this deepening involvement, even though it satisfies a visceral urge to whack some bad guys does not necessarily contribute to any long-term desire national security goal. Which isn’t to say that in striking al Qaeda operatives we are not gaining some measure of security in the short-term.
But without a sound strategic framework in place, how can we weigh the long-term costs against the short-term benefits?
In the parlance of our times, I believe that is referred to as "dithering." Or perhaps the evergreen, "appeasement." Either way, Very Serious people shoot first, questions be damned.
by Eric Martin
In the aftermath of the recent earthquake that devastated the already beleaguered people of Haiti, the impoverished condition of that nation - which greatly exacerbated the lethality of the quake - has received sudden heightened scrutiny. Unsurprisingly, various factions have simply plugged Haiti's current condition into their preferred framework to reach their desired explanation.
In some cases, the results were bizarre. Pat Robertson chalked up Haiti's hardships to a prior pact with the devil (without clarifying how one Haitian, or even a small group of Haitians, could bind an entire nation, for centuries). Mark Kirkorian suggests that Haiti was too quick to throw off the shackles of slavery and colonialism:
My guess is that Haiti’s so screwed up because it wasn’t colonized long enough…But, unlike Jamaicans and Bajans and Guadeloupeans, et al., after experiencing the worst of tropical colonial slavery, the Haitians didn’t stick around long enough to benefit from it. (Haiti became independent in 1804.). And by benefit I mean develop a local culture significantly shaped by the more-advanced civilization of the colonizers.
Kirkorian's allusion to "cultural" factors is more fully expounded on by both Jonah Goldberg and David Brooks (although Brooks leavens his thesis with some blame for those groups that have provided aid to Haiti in the past and present). Each columnist seeks to bolster his theory of cultural determinism by pointing out that Haiti and the Dominican Republic reside on two sides of the same island and share a similar colonial history, therefore, the difference in their respective historical trajectories must be attributed to some cultural factor. Goldberg:
Haiti's poverty stems from its lack of intangible capital. It shares the island of Hispaniola with the Dominican Republic, and yet the Dominicans have six times the GDP (and are far better stewards of their environment).
Third, it is time to put the thorny issue of culture at the center of efforts to tackle global poverty. Why is Haiti so poor? Well, it has a history of oppression, slavery and colonialism. But so does Barbados, and Barbados is doing pretty well. Haiti has endured ruthless dictators, corruption and foreign invasions. But so has the Dominican Republic, and the D.R. is in much better shape. Haiti and the Dominican Republic share the same island and the same basic environment, yet the border between the two societies offers one of the starkest contrasts on earth — with trees and progress on one side, and deforestation and poverty and early death on the other.
As Lawrence E. Harrison explained in his book “The Central Liberal Truth,” Haiti, like most of the world’s poorest nations, suffers from a complex web of progress-resistant cultural influences. There is the influence of the voodoo religion, which spreads the message that life is capricious and planning futile. There are high levels of social mistrust. Responsibility is often not internalized. Child-rearing practices often involve neglect in the early years and harsh retribution when kids hit 9 or 10.
However, geographical proximity does not always mean parity in terms of agricultural prospects and the ability of a given ecosystem to sustain its population, and, beyond that, to enable its population to thrive.
Jared Diamond's masterpiece, Guns, Germs and Steel, does much to undermine so-called "cultural" explanations for why some societies thrive and others fail by pointing out that, in actuality, geographical happenstance (and the availability of certain plants suitable for mass agriculture and animals capable of domestication) have been the central drivers of disparity in development.
In essence (and apologies to Professor Diamond for the oversimplification), the reason that England was establishing an empire while Papua New Guineans were still hunting and gathering had very little to do with culture, but rather how one region's environment allowed for excess food supplies that supported a non-laboring class, while the others' didn't. The cultural differences, to a large extent, grew out of these conditions, rather than the other way around (with certain variations within like geographic regions/ecosystems, and across dissimilar strata, due to human ingenuity and other cultural factors).
Diamond discusses the disparate fortunes of Haiti and the Dominican Republic in a recent piece. The causes primarily stem from a bifurcation of the Island's habitat, which led to different quantities of arable land - with the geographically inferior Haitian habitat exacerbated by colonial influence (contra Kirkorian et al).
Why did the political, economic and ecological histories of these two countries — the Dominican Republic and Haiti — sharing the same island unfold so differently?
Part of the answer involves environmental differences. The island of Hispaniola’s rains come mainly from the east. Hence the Dominican (eastern) part of the island receives more rain and thus supports higher rates of plant growth.
Hispaniola’s highest mountains (over 10,000 feet high) are on the Dominican side, and the rivers from those high mountains mainly flow eastwards into the Dominican side.
The Dominican side has broad valleys, plains and plateaus and much thicker soils. In particular, the Cibao Valley in the north is one of the richest agricultural areas in the world.
In contrast, the Haitian side is drier because of that barrier of high mountains blocking rains from the east.
Compared to the Dominican Republic, the area of flat land good for intensive agriculture in Haiti is much smaller, as a higher percentage of Haiti’s area is mountainous. There is more limestone terrain, and the soils are thinner and less fertile and have a lower capacity for recovery.
Note the paradox: The Haitian side of the island was less well endowed environmentally but developed a rich agricultural economy before the Dominican side. The explanation of this paradox is that Haiti’s burst of agricultural wealth came at the expense of its environmental capital of forests and soils. [...]
While those environmental differences did contribute to the different economic trajectories of the two countries, a larger part of the explanation involved social and political differences — of which there were many that eventually penalized the Haitian economy relative to the Dominican economy.
In that sense, the differing developments of the two countries were over-determined. Numerous separate factors coincided in tipping the result in the same direction.
One of those social and political differences involved the accident that Haiti was a colony of rich France and became the most valuable colony in France’s overseas empire. The Dominican Republic was a colony of Spain, which by the late 1500s was neglecting Hispaniola and was in economic and political decline itself.
Hence, France was able to invest in developing intensive slave-based plantation agriculture in Haiti, which the Spanish could not or chose not to develop in their side of the island. France imported far more slaves into its colony than did Spain.
As a result, Haiti had a population seven times higher than its neighbor during colonial times — and it still has a somewhat larger population today, about ten million versus 8.8 million.
But Haiti’s area is only slightly more than half of that of the Dominican Republic. As a result, Haiti, with a larger population and smaller area, has double the Republic’s population density.
The combination of that higher population density and lower rainfall was the main factor behind the more rapid deforestation and loss of soil fertility on the Haitian side.
In addition, all of those French ships that brought slaves to Haiti returned to Europe with cargos of Haitian timber, so that Haiti’s lowlands and mid- mountain slopes had been largely stripped of timber by the mid-19th century.
It's not that social and political factors are irrelevant - Diamond himself lists a few contributing factors. But to put the lion's share of the onus for Haiti's current predicament relative to the Dominican Republic and other regional states on cultural quirks like voodoo or a lax work ethic (that for Goldberg, magically stiffens when you "cross theborder" into U.S. territory), or to lament the short duration of colonization (which itself was a major factor in Haiti's crushing deforestation), misses the true story by a wide mark, while perpetuating ill-informed race-tinged theories.
by Eric Martin
Giving in to popular demand, I hereby decree this post to be used for State of the Union haranguing and other related commentary.
The million dollar question: which Republican lawmaker coarsely interrupts the proceedings this time? My money's on Steve King.
by Eric Martin
A microcosm of how warped the incentives, practices and ethics are on Wall Street and in the country's major financial institutions:
[Today the] New York Times [has a] story on ailing banks that are nevertheless doling out huge bonus packages. This is a throwback to 2008, when failing banks like Merrill Lynch paid out huge bonuses at the same time that they were incurring catastrophic losses.
But one bank in particular stood out in the Times article: Citigroup. According to the Times, “Citigroup paid its employees so much in 2009 — $24.9 billion — that the company more than wiped out every penny of profit”:
[T]o keep up with the Goldmans, laggards like Citigroup are handing out fat slices of their profits, leaving little left over for their shareholders. Citigroup is, in effect, paying its employees $1.45 for every dollar the company took in last year. On average, its workers stand to earn $94,000 each.
Just pause and let that sink in. Their compensation packages exceed the company's
revenue profits. At a time when the company is propped up on the taxpayer's dime(s). Unconscionable. Hand me a pitchfork, and grab ye a torch.
This month, former Citigroup CEO John Reed slammed Wall Street’s return to stratospheric pay, saying “they just don’t get it. They are off in a different world.” And when Citigroup goes this route, “leaving little left over for shareholders,” that means leaving little for taxpayers, who still own the failed institution. I still can’t understand the hesitancy of Treasury to rein in Citigroup, considering the large stake that the government has in the company.
In the wider sense, this comes back to the inability (or reluctance, when it comes to investment banking) of shareholders to influence pay at the companies which they own. As James Kwak wrote, compensation ratios in the financial services industry should be closer to 30-40 percent (30 to 40 cents of each dollar earned going to compensation), and “shareholders should apply pressure to make this happen; basically, they should try to squeeze labor.”
And there are things the government can do to improve corporate governance and make things easier for shareholders, who often face a herculean task trying to influence anything, including institutionalizing shareholder votes on pay packages.
“The investor in America sits at the bottom of the food chain,” said John Bogle, the founder and former chairman of the Vanguard Group mutual fund. “The financial industry gets paid before their clients, and we get paid whether times are good or bad.” Oh, and Citi will also be hosting a cocktail party at the World Economic Forum in Davos, Switzerland, this week. Can every taxpayer, then, crash it?
And to think, some people are complaining that the meager restrictions placed on the institutions that received TARP money - and those that received unrealistic dollar for dollar payouts from AIG after the U.S. government piped in billions - go too far. Right. Like that would even be remotely possible in today's political environment, which will surely get better now that the caps are off on corporate spending circa election time.
This will not end well.
UPDATE: See, also, Kevin Drum on the financial industry's gaming of the mortgage relief effort. Turns out, it's less about relief than it is about further jamming borrowers who are already struggling to pay off debts. Lovely.