Thursday, March 26, 2009

Wealth in America : Who Has the Money? : Wealth Income and Power in U.S. Society : Owners and Top-Level Managers Dominate : The Average American Loses

Who holds America's riches?

Professor G. William Domhoff of the University of California at Santa Cruz is the author of Who Rules America?, a book which he describes online as follows:
"My book, Who Rules America?, presents detailed original information on how power and politics operate in the United States. The first edition came out in 1967 and is ranked 12th on the list of 50 best sellers in sociology between 1950 and 1995. A second edition, Who Rules America Now?, arrived in 1983 and landed at #43 on the same list. Third and fourth editions followed in 1998 and 2002, and the fifth edition, upon which most of this web site is based, came out in 2006. Keep an eye out for the sixth edition, due in summer of 2009, which updates the story to include the rise of Barack Obama and the nature of his administration." [emphasis added by LawPundit]
The description of the book is enlightening about the subject matter:
"Drawing from a power elite perspective and the latest empirical data, Domhoff's classic text is an invaluable tool for teaching students about how power operates in U.S. society. Domhoff argues that the owners and top-level managers in large income-producing properties are far and away the dominant figures in the U.S. Their corporations, banks, and agribusinesses come together as a corporate community that dominates the federal government in Washington and their real estate, construction, and land development companies form growth coalitions that dominate most local governments. By providing empirical evidence for his argument, Domhoff encourages students to think critically about the power structure in American society and its implications for our democracy. . ."
The current financial credit crisis in America can only be properly understood with a good background of knowledge about the wealth figures that Domhoff presents. Many important facts can be viewed at Who Rules America? online at Wealth, Income and Power, illustrative of which is the following graphic of the development of income in the United States between 1982 and 2000:

Distribution of income in the United States, 1982-2000
YearTop 1 percentNext 19 percentBottom 80 percent
From Wolff (2004).

These statistics will of course have gotten much worse during the Bush administration. Essentially, the top 1% of the population already in the year 2000 earned nearly double as much income as it did in 1982, while the bottom 80% of the population earned 16% less than it did 20 years previous.

This pattern of wealth misappropriation by the upper classes in America has been going on for quite some time now and the current financial credit crisis can in a Franz Kafka like way be viewed as the point in time when the paying public had been bled so bone dry that the entire mercenary system of income in America became its own exploiting impediment - the small guys ran out of money and could no longer make their mortgage payments to finance the money-grab of the big guys.

Things have gotten so bad that the United States, according to Domhoff, ranks 2nd in the world after Switzerland, a nation of banks, for God sake, in terms of the total national wealth held by 10% of the population:

Percentage of wealth held by the Top 10% of the adult population in various Western countries
countrywealth owned by top 10%
United States69.8%

The result of this increasing concentration of wealth is power and corruption -- under the motto that power corrupts and absolute power corrupts absolutely.

The only available solutions to keeping the United States from dropping further and further into its present near-status as a 3rd world country are: 1) rigorous, indeed draconic controls of its financial institutions, and 2) quick and speedy redistribution of the nation's wealth to the broad mass of America.

Indicative of the giant divide between reality and what you read in the newspapers is Domhoff's graphic comparing the development from 1990 to 2005 of CEO pay (up ca. 300%), the S&P 500 (up ca. 140%), corporate profits (up ca. 100%), production workers' pay (up ca. 4%), and the Federal minimum wage (down nearly 10%).

The papers are constantly full of overfed executives ranting about the minimum wage, but in reality, that is not the issue. A nation running its economy as a vast system of worker exploitation will not long endure and America must get its act together quickly if it is to survive the present financial crisis and move forward, or - perhaps forever - fall behind. Heed the warning signs.

AIG Financial Products Corp. : Financial Crisis CBS Video re AIG : 2008 Employee Retention Plan posted at Scribd

The monies paid out by A.I.G. to members of its financial products group - who are most answerable for the financial collapse of AIG prior to the bailout - were clearly the result of irregularities even prior to the current bailout. The members of this group plundered AIG by gigantic amounts for a small circle of recipients.

As Robert Lenzner writes at The Croesus Chronicles in Why Wasn't AIG Hedged?

"By AIG's own description, about $379 billion of the $527 billion in AIG's default swap portfolio "represents derivatives written for financial institutions, principally in Europe, for the purpose of providing them with regulatory capital relief rather than risk mitigation."

AIG's financial products unit, run by Joseph Cassano since 1988, was a veritable money machine, pouring $6 billion of riches into AIG's coffers from 1988 until 2005. Croesus has been told [former Chairman Hank] Greenberg gave Cassano and his group a share of the profits from this operation.

According to The Times, compensation ranged from $423 million to $616 million for Cassano's group. That would be about 20% of the unit's revenue, meaning Cassano was being paid like a hedge fund manager.
" [links added by LawPundit]

In fact, it was not 20% but 30%. As Workers' Comp Insider writes:

"Keep in mind that his salary and bonus were based on the scale of business generated by his virtually unmonitored unit. Cassano and his colleagues siphoned off 30 percent of every dollar generated in his (non insurance) division. The more they wrote, the more they made. And because AIG was so well collateralized, the company did not have to back up the risks with outside capital. Sweet. Like stealing candy from a blind man, right?"

With those kinds of bonuses, employees at AIG had every incentive to insure everything in the universe, the more the better, regardless of the risks involved, since the employees then ransacked the resulting pot for their percentage share of whatever they sold.

Michael Daly at the Daily News writes:

"Before he was finally fired last March, Cassano pocketed $280 million in cash and an additional $34 million in bonuses.

Under a "retirement" agreement marked "confidential," Cassano also got a $1 million-a-month "consulting fee."

AIG subsequently cut off these payments, but Cassano still walked away with more than $315 million while the company staggered under $440 billion in liabilities. Taxpayers had to pour in $170 billion in bailout money."

In this regard, the staff of Representative Barney Frank, the chairman of the House Financial Services Committee, has, according to the Deal Book at the New York Times, posted the AIG Financial Products Corp. 2008 Employee Retention Plan to Scribd.

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