Five years after bailouts, the rich are even richer

The super-rich are doing super well -- and why not? They deserve it after sending financial markets into a tailspin, plunging the global economy into a deep recession, and bankrupting governments around the world.

Oh wait.

Over the last three years of recovery, income for the top five percent has grown more than five percent while income for the rest of us fell. 

Think Progress reports:

Overall income growth has been paltry since the recession, according to the Census report. After median household income fell for two years, it has leveled off, seeing virtually no growth over the past two. It was $51,017 in 2012, 8.3 percent lower than in 2007. 

But the rich are doing far better. The top 5 percent was making $191,157 or more in 2012, while the bottom fifth made $20,599 or less. 

It’s amazing how little has changed in five years. Economist Dean Baker writes:

As we mark the fifth anniversary of the Wall Street bailouts, it is clear that little has changed in the way they do business. They are still engaging in the same sorts of market manipulation and tax gaming as they did before the crisis.

The weak conditions on the bailout money had no lasting effect in areas like executive compensation. The industry itself is more concentrated than ever as the big banks used the crisis to merge with other banks, making them even bigger. And the Dodd-Frank reforms have been watered down to the extent that many are now pointless.

Five years ago, this seemed impossible. In September of 2008, the world was on the brink of economic meltdown. Governments scrambled to rescue big banks. Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson gave grim reports to the nation. They said unprecedented intervention was needed and they assured us that sweeping regulatory reforms would follow.

That was right after huge debts that piled up in a shadow banking system popped the housing bubble. The iconic investment giant Lehman Brothers collapsed, sending shockwaves through the world financial system and taking down banks and corporations worldwide. There was long overdue rage directed at the greedy CEOs and bankers who made billions off of predatory subprime mortgages and complex financial instruments – literally betting on people losing their homes and lifesavings.

There was even talk of nationalizing the banks. At the very least, a system overhaul was promised, with tighter regulations to stop the reckless gambling of Wall Street’s “casino culture.”

But today the casino is still pulling in huge profits – thanks to taxpayer money that rescued it in the first place. Remember when we were told the taxpayer bailout program called TARP (Troubled Asset Relief Program) was necessary to help underwater homeowners? That didn't happen. It was supposed to help banks start lending again as well, and that didn't happen either. The banks sat on enormous stockpiles of money. Even up to the first three months of 2012, major banks cut lending by $24 million.

All of that free government money that went to Wall Street resulted in an unprecedented transfer of wealth from the middle class to the super-rich. As the government took on the colossal debts of the high finance fraudsters, it led to soaring deficits and the ensuing budget cuts that devastated public services and the social safety net – all in the name of austerity.

It was a grand heist by the rich against middle-class workers and the poor.

Five years after the 2008 crash, 95 percent of gains made since the recovery have gone to the top 1 percent. Meanwhile for the bottom 60 percent wages have been stagnant or declining. And almost 25 percent of homeowners with mortgages are underwater.

So that wonderful recovery we’ve all heard about since the onset of the Great Recession? It’s been a recovery almost exclusively for the Wall Street tycoons who engineered the economic crisis. The rest of us are still paying for it.

According to the Guardian:

Five years after the financial crisis, America's super-rich have recovered all their losses to see their wealth reach an all-time high.

According to Forbes magazine the 400 wealthiest Americans are worth a record $2.02 trillion, up from $1.7tn in 2012, a collective fortune slightly bigger than Russia's economy. In another sign of fizziness at the top of the economy, the cost to enter the billionaires' club has also gone up to levels not seen since the 2008 crash. In 2013, an aspiring plutocrat needs at least $1.3bn to make the Forbes list

In the same five years that the rich have been getting richer and workers’ wages remain stagnant, we’ve seen an all-out war on American workers in the form of “right to work” for less laws and other anti-worker attacks by right-wing groups like ALEC and the Koch Brothers.

Five years is long enough. It’s time to fight back for workers and demand a recovery for the middle class.

How unions took the fall for NJ's pension scandals

New Jersey's bombastic governor Chris Christie doesn't like to point fingers at the real perps behind the state's pension fund problems. He prefers to blame government workers instead of bankers and governors. Christie is taking a page from New York Post publisher Rupert Murdoch, who wrongly accused New York City's sanitation workers for slow snow removal over Christmas instead of the city's vacationing (in Bermuda) billionaire mayor.

Here's Christie talking to the Wall Street Journal recently about reforming pensions:

The ultimate reform is to move to a 401(k)-style [public pension] plan that provides transparency to taxpayers while allowing government employees -- not politicians or union bosses -- to control their retirement savings with individual accounts. How to enact such reform in New Jersey? You get a Republican legislature, that's how you do it. I'm dealing in a context where the Democratic Party in my state has been ruled by the public-sector unions.

Christie tipped his hand here, revealing that his fight over pensions is really a fight to eliminate his political enemies -- government unions. And it's nonsense because the government unions weren't the ones with their hands in the state's pension kitty for the last 15 years.

New Jersey's pension problems result from theft, fraud and mismanagement by banks and government officials.  The incomparable Bob Herbert says it all began with former Gov. Christie Todd Whitman's "buy-now, pay-later" economic policy. Fifteen years ago, Herbert predicted that New Jersey would pay the price for Whitman's pension shenanigans.

The pension obligations at some point will come due and future generations will have to meet them. Not only will the money have to be made up, but future taxpayers will be deprived of the income that the money -- if properly invested now -- would be expected to generate.

New Jersey is now at that point. Here's how it got there: Whitman diverted billions of dollars that should have gone into the pension funds to the state budget. Christie did that again last year, by the way. He called the $3.1 billion diversion a "reform."


There was also mismanagement and fraud. Fortune reported on a brilliant move by Whitman that was supposed to save taxpayers $45 billion. It cost them instead. Under Whitman, New Jersey in 1997 sold $2.75 billion of bonds that it paid 7.6 percent interest on. It invested that $2.75 billion in a fund that earned less than 6 percent annually. Banks, not government unions, received income from those transactions. Those transactions wouldn't have happened in the first place if the books hadn't been cooked. (Note: it wasn't the unions that cooked the books.)


firedoglake reported on yet another scandal that cost union retirees $115 million. A New Jersey pension fund overseer named Orin Kramer in 2006

...successfully pushed to shift a huge chunk of the state’s $72 billion pension fund to private money managers rather than state employees. Kramer was the "prime architect of the diversification strategy"  that saw union retirees pick up the tab for $115 million in Lehman Brothers losses on money invested shortly before the firm’s collapse.  (Lehman Brothers, you will recall, is the firm that Ohio's new union-busting governor John Kasich worked for.)

Last year, the SEC accused New Jersey of lying about its pension fund assets. The New York Times reported that the state had diverted billions of dollars from its pension fund for teachers, using "unorthodox transactions authorized by the Legislature and governors from both political parties."

New Jersey settled the case last year without admitting wrongdoing. There was no fine, no accountability. As the Times reported in August, the SEC issued a "cease and desist" order but didn't name

...any individual state officials, nor the bond underwriters and other professionals whose job it was to vouch for the state's financial statements. New Jersey's largest bond underwriters during the period in question include Citigroup, J. P. Morgan Securities, Morgan Stanley, Bank of America, Merrill Lynch, Goldman Sachs and Barclays Capital...

Actually, it's the unions that are wrongly being held accountable for New Jersey's mess. The Naked Capitalist has some good advice for the Garden State's unions:

...the unions need to find a way to regain the moral high ground. New Jersey, one of the richest states in the US, has mismanaged its way into this mess. That fact needs to be hammered hard, and the unions also need to put forward a realistic plan in which they make concessions provided upper income earners do their part to address the budget shortfalls...

Don't look now, but Christie will probably again veto a proposed tax on the millionaires who benefited from the looting of the state's pension funds.