Wall Street Greed

Yesterday I watched Capitalism: A Love Story again. It is the production of Michael Moore, the acclaimed conservative film maker. (Yes, I know he is not really an “acclaimed conservative film maker.”) I had watched the movie/documentary when it first came out at a movie theater in Las Vegas. (We don’t have a movie theater here in Pahrump.) I got the DVD of it from NetFlix.

Capitalism: A Love Story is a 2009 American documentary film directed, written by and starring Michael Moore. The film centers on the financial crisis of 2007–2010 and the recovery stimulus, while putting forward an indictment of the current economic order in the United States and capitalism in general.

Topics covered include Wall Street’s “casino mentality”, for-profit prisons, Goldman Sachs‘ influence in Washington, DC, the poverty-level wages of many airline pilots, the large wave of home foreclosures, and the consequences of “runaway greed”.^[2] The film also features a religious component where Moore examines whether or not capitalism is a sin and if Jesus would be a capitalist.^[3] The film was widely released to the public in the United States and Canada on October 2, 2009. It was released on DVD and Blu-ray on March 9th, 2010. [Wikipedia]

The Moore documentary is two hours and seven minutes long. It is fast moving. Funny in places, heart rendering in others.

Some “nuggets” in the film keep sticking in my mind:

• The top 1% of the population controls more financial wealth than the bottom 95% combined.
• The financial meltdown began with Ronald Reagan and the policies of Don Regan which “turned the bull loose” for free enterprises, corporations gained more political power, unions were weakened and socioeconomic gaps widened.
• Exposing “dead peasant insurance” life insurance policies used by corporations such as Wal-Mart to profit upon the death of their employees.
• “Plutonomy” where economic growth is powered by and largely consumed by the wealthy few.

Overall Moore characterizes the capitalistic economic system as greed gone berserk. Even Catholic priests denounces it as “evil.”

Then this morning The Dailey Beast has the following:

A new report offers new insight into how Lehman Brothers fell into mortal peril at the start of the financial crisis, and the details aren’t pretty. The 2,200 page report by a court-appointed examiner describes an accounting trick known as “Repo 105″ that the company used to hide some $50 billion in assets from its balance sheet for two quarters. According to the examiner, the creative accounting could open up Lehman’s executives to lawsuits as shareholders can use them to show they were deceived by the company. Lehman’s collapse is widely credited with helping trigger the financial meltdown in the Fall of 2008 when it declared for bankruptcy.

See Marketwatch for more detail. You might want to read about the bankruptcy of Lehman Brothers here. Even so, Richard Fuld, head of Lehman Brothers, said that he had in fact taken about $300 million in pay and bonuses over the past eight years. Lehman Brothers executive pay was reported to have increased significantly before filing for bankruptcy.

Greed.

Bank of America announced it will end overdraft fees on debit cards this summer, a move that will cost the bank a large amount of revenue and pressure others to follow suit.

Customers who don’t have enough cash in their accounts to make a purchase will simply be declined.

More than 60% of overdraft fees charged by Bank of America come from debit cards.

A new federal law is forcing banks to get permission from customers before allowing overdrafts on debit purchases and ATM withdrawals, fees that earned banks $20 billion last year.

Regulators became concerned by reports of people paying as much as $40 for a cup of coffee thanks to overdraft fees, and Congress is considering even more restrictive rules.

A 2008 study by the FDIC found that while 75% of customers are never charged overdraft fees, a small group—14% of cardholders—generates 93% of the fees.

[Source: New York Times via Daily Beast]

Notice that B of A didn’t end these fees voluntarily. It happened because of the new federal law passed in Congress.

Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, said insurance industry workers “do not deserve to be vilified for political purposes. … For every dollar spent on health care in America, less than one penny goes toward health plan profits. The focus needs to be on the other 99 cents.” AHIP plans to spend more than $1 million to run television ads on cable stations nationwide beginning in the next few days to push back on the attacks on insurers.

As “President Obama makes his final push to get health care reform through Congress, he is “seizing on a report showing that market concentration for health insurance is so monopolized that insurance companies are willing to raise prices and lose customers in an effort to help their bottom line,” HuffPost’s Sam Stein reported.”

[Source: Huffington Post]

Amy Goodman on Democracy Now stated “Republican lawmakers remained staunchly opposed to using the federal government to regulate health insurance.” Republicans want the current health care bill dumped in the trash and to start all over.

Goodman interviewed Trudy Lieberman (no relationship with Joe Lieberman that I know of) a contributing editor and blogger to Columbia Journalism Review. Lieberman noted, “as a country, we are still extremely divided….We have a deep cleavage in this country about how much government should do and how much government should not do.” She referred to the issue of how much regulation of insurance companies should government engage in.

Goodman quoted House Speaker Nancy Pelosi on President Obama: “…a year ago…you (Obama) said ‘The public option is one way to keep the insurance companies honest and to increase competition.’”

Quoting Pelosi further, “the public option, which would save $120 billion, keep the insurance companies honest, and increase competition.” Pelosi continued, referring to Senator’s Enzi, Snowe and Durbin proposing exchanges “because the insurance companies opposed the public option. They couldn’t take the competition.”

So Goodman asked Lieberman “Why did President Obama drop the public option?”

Lieberman didn’t know but speculated that it was because, perhaps, campaign contributors to the Obama campaign, stakeholders such as insurance companies, doctors, hospitals, the business community led by the Chamber of Commerce, didn’t want the public option.

[Read more →]

The following is a letter to the editor that appeared in today’s Las Vegas Sun. It was written by a school teacher, Jeremy Christensen of Las Vegas. I’m running it here because I agree with what Mr. Christensen writes:

“It’s time to stop whining that education in Nevada doesn’t work because of a lack of funding,” Gov. Jim Gibbons said in his State of the State address last week. “We need to quit throwing money at programs that haven’t worked and don’t work for our children.”

What hasn’t worked and doesn’t work for our children is throwing clichés and ideology at problems.

This question is not as complicated as it seems. What is a reasonable cost to educate a child? Most of the other states in our nation believe that it costs more than what we spend in Nevada. How do these other states pay for the generous investments they make to educate their children?

Forty-five states in our country have an effective state-level corporate tax rate of at least 5 percent. How long have zealous ideologues proclaimed that businesses would flee if we even considered any taxes on corporations? These corporations pay taxes almost everywhere else in the United States. How long have our children suffered some of the largest class sizes in the nation and parades of long-term substitutes in vital courses such as mathematics because of this outrageous lie?

The state of Nevada is not making a good-faith effort to provide quality education for its children. Apparently our children have no voice or heroes to stand up for them and say enough is enough. The greatest sins in Sin City are committed against its children.

Governor “No New Taxes” Gibbons has a duty to those school children to see that their education proceeds with quality and unabated. It is his duty as elected governor whether he wants to raise taxes or not. I personally don’t care whether he gets re-elected or not. I didn’t vote for him to start with. I do care about the education of Nevada’s children.

All my kids are now grown with kids of their own. All still in California, which has its own financial problems. My grand daughter, Joan, will graduate from the University of California-Chico in June. She plans to then attend law school. She works and attends college now, has she has done since she started. One of my grand sons, Aaron, is attending college in California with the objective of obtaining a degree for his future as an accountant. He also works to pay for and attend school. But the financial burden of college tuition and expenses for law school are mammoth to a 22 year old.

Cutting the education budget, again, as proposed by Governor Gibbons, may be expedient to him, but not to those kids trying to get a college education.

Nevada maintains one of the lowest commitments in the nation for education. California is slipping fast, losing it’s once high education status.

I read that Nevada’s mining industry has enjoyed a low rate of taxation for 150 years. The implication being that that industry does not pay its fair share of taxes—a tax status that is unfair to ordinary taxpayers in Nevada.

I, frankly, think it is time that Governor Gibbons begin to realize that his obligation to Nevada taxpayers is higher than his adherence to his “no new taxes” creed. It is time to fairly and evenly raise taxes in Nevada, even if it requires applying a fair tax on the mining industry.

Washington launched its biggest offensive yet against runaway Wall Street pay practices Thursday, taking aim at everyone from senior executives to high-flying traders of complex securities.

“The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system,” Fed Chairman Ben Bernanke said in a statement.

Separately, the Obama administration’s “pay czar,” Kenneth Feinberg, is expected to unveil sweeping pay cuts for 175 top executives at the seven biggest bailed-out companies.

Citigroup, AIG, Bank of America, Chrysler, General Motors, GMAC, and Chrysler Financial.

Cuts of compensation packages for its top 25 most highly-compensated employees 50%, on average, a senior administration official told CNN.

These guys are paid obscene amounts. Good move I think.

[CNN]

The Associated Press is reporting this morning that Pfizer’s profits increased 26% over last year’s. Pfizer attributes the increase in profits from cutting costs.

The maker of cholesterol fighter Lipitor, impotence treatment Viagra and smoking cessation drug Chantix slashed costs on everything from manufacturing and marketing to research and development to produce a profit of $2.88 billion.

The $68 billion acquisition of Wyeth last Thursday cements Pfizer’s position atop the industry, and the combined company is expected to eliminate nearly 20,000 jobs by the time integration is complete.

The CEO of Pfizer is Jeff Kindler. He is also Chairman of the Board of Directors. While CEO of Pfizer in 2008, Kindler earned a total compensation of $14,788,302, which included a base salary of $1,575,000, a cash bonus of $3,000,000, stocks granted of $7,553,015, and options granted of $2,222,026.

[Read more →]

The following story appeared in the St. Petersburg Times:

Monique Zimmerman-Stein and her husband, Gary Stein, have Blue Cross/Blue Shield insurance through Stein’s job at the Hillsborough County Health Department. They pay $90 a week for coverage. But the insurance isn’t nearly enough.

Monique tries to picture what her girls must look like now that they’re 10 and 13. She hasn’t been able to see their faces in two years. Her days are long and dark and quiet

“I know I won’t ever see again. I’m not even asking for that,” Zimmerman-Stein said. “I just don’t think we should have to deal with constantly being harassed.”

Monique is 48. She and her two youngest daughters have Stickler’s syndrome [Wikipedia], a rare genetic disorder that causes joints to dissolve and retinas to detach. Monique lost her right eye at 16 and now sees only enough light through her left eye to tell night from day. She and her children are constantly in and out of doctors’ offices.

[Read more →]

Being a member of the peasant class and having watched Michael Moore’s Capitalism: A Love Story wherein the phrase “dead peasant insurance” was used my interest was piqued. The widow of a man who worked in a bank in Texas died. Turned out the bank had bought and owned a life insurance policy on the woman’s husband. The bank was the sole beneficiary of the insurance policy. The widow, unaware of the policy, received nothing, the bank got it all. The proceeds of the policy added to the banks profits, apparently tax free. Moore’s movie declared that many more corporations engage in the “dead peasant” practice.

Then last night watching Keith Olbermann’s hour long special comment he referred to the “dead peasant” matter again.

So I decided to see if I could learn some more. I start with Wikipedia.

Corporate-owned life insurance (COLI) is life insurance on employees’ lives that is owned by the employer corporation, with benefits payable to the corporation. COLI was originally purchased on the lives of key employees and executives by a company to hedge against the financial cost of losing key employees to unexpected death, the risk of recruiting and training replacements of necessary or highly-trained personnel, or to fund corporate obligations to redeem stock upon the death of an owner. This use is commonly known as “key man” or “key person” insurance. Once, COLI was used for masses of non-key employees in order to get tax benefits, a practice known as “janitor insurance” or “dead peasant insurance”.

Congress and the IRS set some guidelines and limits on this practice. Today, COLI is most common for senior executives of a firm, but its use for general employees is still practiced. Recouping the cost of losing an employee versus actually profiting from their death at a level higher than their earning potential in particular raises questions. Estimating the value of an employee to a company is difficult. Recent questions have been raised in Michael Moore’s 2009 film Capitalism: A Love Story.

Under the Internal Revenue Code (“IRC”) dealing with life insurance benefits paid due to the death of the insured, the benefits are usually excluded from the taxable income of the beneficiary.

Because of the tax-free nature of death benefits, the IRC prohibits the deduction of the premiums paid for life insurance when the premium payor is also the owner of the insurance. In addition, loans from insurers secured by policy values are not income and earnings credited to an owner’s policy values (known as “inside buildup”) by the insurance company are not currently taxed (and may escape taxation altogether if such earnings are not distributed other than as part of the death benefits paid upon the death of the insured).

[Read more →]

Domestic Violence

Health insurance companies are in the business of taking in premium payments and paying out a little as possible for health care. That is the way they make profits and satisfy their shareholders and Wall Street.

In 2006, attorney Jody Neal-Post tried to get health insurance but was rejected because of treatment — counseling and Valium — she received following a domestic-abuse incident. She says the insurer told her that her medical history made her a high risk, more likely to end up in the emergency room or require additional care.

“While the majority of states have barred insurance companies from using abuse as grounds for denying coverage, eight states and the District of Columbia don’t prohibit denying coverage for that reason.”

[Source: MSNBC]