Tabacco: If only Leona had kept her trap shut and resisted the urge to brag!
THE HAMARTIA OF
All us “Little People” lust to join the Rich Elite. We watch their Reality Shows, ‘Entertainment Tonight’, Donald Trump’s Show, read and watch all the gossip about the Rich & Famous, see films about their exploits, and worship at the Altar of those, whose Fortunes begin with a “B” as in Billion$.
The French got it right in their Revolution – they put the Royals in the Guillotine! We have not gotten it right since!
If enough “Little People” fork over $1,000 each and purchase one of these “Big People Eliminators”, we can turn Planet Earth back into the Garden of Eden! If we don’t, ‘Capitalism’ will be on our Tombstones & our Death Certificates.
Tuesday, July 31, 2012 Full Show
Exhaustive Study Finds Global Elite Hiding Up to $32 Trillion in Offshore Accounts
A new report reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts. The inquiry was commissioned by the Tax Justice Network and is being touted as the most comprehensive report ever on the “offshore economy.” It also finds that private banks are deeply involved in running offshore havens, with UBS, Credit Suisse and Goldman Sachs handling the most assets. We’re joined by the report’s author, James Henry, a lawyer and former chief economist at McKinsey & Company. [includes rush transcript]
James Henry, economist, lawyer, board member of the Tax Justice Network, and author of the report, “The Price of Offshore Revisited.” He is former chief economist at McKinsey & Company.
- Matt Taibbi Explains Wall Street’s “License to Steal,” Offshore Tax Havens and Private Equity Firms Jul 30, 2012 | Web Exclusive
- Key Figures in Salt Lake Olympic Bribery Scandal Now Backing Romney’s Presidential Campaign Jul 31, 2012 | Story
- Romney Dogged by Questions on Bain Tenure, Tax Returns as Obama Deems Him “Outsourcer-in-Chief” Jul 18, 2012 | Story
- Ralph Nader: 30 Million Workers Would Benefit from Raising Minimum Wage to 1968 Level Jun 15, 2012 | Story
- Romney Blocked Anti-Bullying Guide as Mass. Governor over Mention of “Bisexual,” “Transgender” Jun 12, 2012 | Story
- Read Report: “The Price of Offshore Revisited”
- Tax Justice Network USA
- Film “We’re Not Broke”
- “Where the Money Lives: Vanity Fair Report Reveals Loopholes, Offshore Havens Behind Romney’s Fortune.” (Democracy Now!)
- “Mitt Romney, Bain Capital Profited Through Offshore Tax Havens” (Democracy Now!)
- Democracy Now! Interview with Nicholas Shaxson on How Offshore Banking and Tax Havens Have Become Heart of Global Economy
- “Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens.” By Nicholas Shaxson. (Palgrave Macmillan, 2011)
This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.Donate >
AMYGOODMAN: We turn now to a new report that reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The conservative estimate of $21 trillion—conservative estimate—is as much money as the entire annual economic output of the United States and Japan combined. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts.
The inquiry was commissioned by the Tax Justice Network and is being touted as the most comprehensive report ever on the “offshore economy.” It’s called “The Price of Offshore Revisited.” The study finds private banks are deeply involved in running offshore havens with UBS, Credit Suisse, Goldman Sachs handling the most assets offshore. According to the report, less than 100,000 people worldwide own almost $10 trillion of the wealth held in tax havens.
To talk about the implications of these findings, we’re joined by the report’s author, James Henry, economist, lawyer, board member of the Tax Justice Network, former chief economist at McKinsey & Company.
Welcome to Democracy Now!
JAMESHENRY: Thanks very much, Amy.
AMYGOODMAN: It’s great to have you with us. Tell us what you found.
JAMESHENRY: Well, the $21 trillion figure is the headline story, that’s a shock to a lot of people, actually represents about 10 to 15 percent of global wealth. So, from that standpoint, we think it’s a reasonable number. But the interesting thing is that all of this wealth accrues to the top 10 million people on the planet, and a lot of it just to the top 100,000, people with assets over $30 million per household.
The second thing that’s striking about this is the role of the great international banks that we’ve all come to know and love, the ones you described—UBS, Credit Suisse, HSBC, JPMorgan—all these banks—Goldman—big recipients of bailout money from taxpayers, and also deeply implicated in the financial crisis of 2008 to the current period. These are the same folks that have specialized in helping the wealthiest people on the planet take their money offshore and hide it from tax authorities.
AMYGOODMAN: You talk about pirate banks.
AMYGOODMAN: What do you mean?
JAMESHENRY: Well, I mean that this is the business of taking money and moving it to secret offshore accounts and sheltering it from taxes. For example, if you are a wealthy Mexican investor, you can hold your bank deposits in New York City in Citibank or UBS tax-free. The U.S. government doesn’t collect taxes on bank deposits by nonresident aliens. And it doesn’t tell the Mexican authorities that you’re earning all that money. So, basically, we have designed our tax laws—the United States, the U.K., Switzerland—to become the largest tax havens in the world. The actual offshore islands, like the Caymans, are just conduits to these ultimate destinations.
AMYGOODMAN: People would say, well, we knew that about Swiss banks, but that’s not the same for U.S. banks.
JAMESHENRY: Oh, yeah, absolutely. The leaders in the pack here historically have been U.K. banks, U.S. banks and Swiss banks. And so, you know, we are all upset—our Treasury is trying to get the Swiss private bankers to stop coming to the United States and taking money from wealthy Americans. But our banks have been doing the same thing for decades with respect to Latin America, the Philippines, you know, much of Africa. And that’s a system that the banks have really designed.
AMYGOODMAN: Let’s talk about the continent of Africa and what this means for various countries and, most importantly, the majority of the populations there.
JAMESHENRY: Yeah. Well, for example, Nigeria is supposedly a debtor country. But when you look at all the unrecorded capital outflows that have flowed out of Nigeria, it turns out that Nigeria is actually, like many other developing countries, a net creditor of the richest countries in the world. So if you add up and accumulate all the unrecorded capital flows that have accrued to the Nigerian elite, political as well as private sector, you know, the tiny share of that country’s population owns a vast amount of offshore wealth. So the debt problem is not really a debt problem. It’s a tax problem. Developing countries account for about a third, we estimate, of the $21 to $32 trillion of financial assets that’s offshore.
AMYGOODMAN: Some of the critiques of the report, the investigation you did—this is from CNBC: quote, “The problem, says Dan Mitchell, a senior fellow at the Cato Institute, is that the estimate is based on a series of assumptions aimed at making people ‘believe that much of cross-border investing is all about tax evasion and that all this money should go to government, and that this would be a good thing.’” That’s what he says. “The real problem facing governments, Mitchell says, is spending not revenues.” Your response, James Henry?
JAMESHENRY: Well, my response is that he hasn’t read the report, basically. We’ve been very careful to estimate the size of this black hole using three different methods. We’ve looked individually at the top 50 banks in the world and have detailed numbers for each one of them. We’ve looked at 139 developing countries where we can get data on how much their unrecorded capital flows were, and we’ve built detailed models of those. And we looked at data published by the Bank for International Settlements. So the numbers are the best ever recorded here.
We’re not suggesting that the—you know, there may not be problems on the spending side, but it’s outrageous for the wealthiest people on the planet to pay zero taxes. And what this does to developing countries, in particular, because they can’t tax income, because they can’t tax wealth, they end up taxing low- and middle-income people with VAT taxes and sales taxes that are regressive. So, basically, what you’re seeing is that globalization is driving a big hole through the nation state system that was designed to raise tax revenue.
AMYGOODMAN: Let’s go to Mitt Romney, because that’s why the whole issue of offshore accounts has come into the big consciousness of the overall American population right now, the presumptive Republican presidential nominee, speaking to Radio Iowa earlier this month about his foreign investments.
MITTROMNEY: With regards to any foreign investments, I understand—and you understand, of course—that my investments have been held by a blind trust, have been managed by a trustee. I don’t manage them, don’t even know where they are. Those—that trustee follows all U.S. laws. All the taxes are paid, as appropriate. All of them have been reported to the government. There’s nothing hidden there. There’s nothing—if, for instance, you own shares in, let’s say, Renault or in Fiat, you still have to pay taxes, you still have to disclose that in the United States.
AMYGOODMAN: That’s Mitt Romney. James Henry?
JAMESHENRY: Yeah, well, he’s not alone. That’s one estimate—one indication of our report. You know, basically, you’re looking at behavior that’s engaged in by a lot of Mitt Romneys, and, you know, essentially, the United States is facing kind of a stark choice in this election between the first president in history who, you know, has really had offshore accounts like this. You know, a lot of us who are tax experts—and not necessarily Democrats, by any means—just wonder what the heck is he hiding there. There must be something. You know, John McCain released 23 years of his tax reports, tax returns. Romney is still stopping with 2010. So, if there’s no problem, just release the returns.
AMYGOODMAN: I want to go more to Mitt Romney’s—the issue of his hidden wealth. He was speaking to Face the Nation. Senator Dick Durbin of Illinois challenged Mitt Romney to be more transparent with his finances.
SEN. DICKDURBIN: Mitt Romney has failed to make an economic disclosure that every president and candidate for president has made in the last 36 years. Goes back to his father, who disclosed 12 years of tax returns. He’s disclosed one. Secondly, he is the first and only candidate for president of the United States with a Swiss bank account, with tax shelters, with tax avoidance schemes that involve so many foreign countries. And the third is that when it comes down to his Swiss bank account, there is just no way to explain it. You either get a Swiss bank account to conceal what you’re doing, or you believe the Swiss franc is stronger than the American dollar.
AMYGOODMAN: That’s Senator Durbin. James Henry?
JAMESHENRY: Well, I think that he’s absolutely right. We should demand disclosure. This is a situation where you have essentially representation without taxation, not only for individuals, but also for corporations that are able to move their money offshore, conceal it and then come back to Washington and have enormous political impact on the system, spending their money under Citizens United. You know, Romney is just one kind of stellar example of that.
AMYGOODMAN: Name more names of the banks, which people should be watching for. And what do you think should be done about this?
JAMESHENRY: Good example is HSBC. They’re number three on our list, a big U.K. bank. They recently had a deferred prosecution agreement with the Department of Justice for laundering $14 billion of cartel drug money. They got off with a $1 billion parking ticket, and their profits per year are about $20 billion. So, you know, this is the Obama administration basically deciding not to close this bank, even though investigators that I’ve talked to at the bank—who have looked at the bank closely, say this is like BCCI in the ’90s. The only difference is that that was a Pakistani bank, which we decided to close down.
HSBC is just one of the top 10 banks on this list. Collectively, those 10 banks manage about $6.3 trillion of the $12.3 trillion that we located in these top 50 banks. So, you know, the other names on the list, you’ve mentioned—UBS, Credit Suisse, HSBC, JPMorgan, Pictet, Deutsche Bank, BNP Paribas, Barclays. These are the—
AMYGOODMAN: What about large corporations? You talk about intellectual—moving intellectual property offshore—
AMYGOODMAN: —corporations like Google and Pfizer.
JAMESHENRY: Right. Well, in our film, We’re Not Broke, which was a Sundance documentary, we discussed corporate tax evasion. And this is the latest trend in the software industry and also in the healthcare industry, drug industry. Pfizer, Google, Microsoft, companies like General Electric are parking their intellectual property, their brands and software, offshore in places like Bermuda and paying royalties to themselves and essentially parking the profits in these low-tax jurisdictions and not paying any taxes on it. So, Google last year saved about $3 billion by that. So if you have, you know, this core kind of value, intellectual capital, moving offshore to low-tax havens, where it’s never been produced, essentially is a kind of, you know, decapitalization of the U.S. And all of these countries now also parked all these profits abroad to get tax breaks, and then they want a deal when they bring the money back. They want a repatriation tax cut, 5 percent.
AMYGOODMAN: So, what should happen?
JAMESHENRY: Well, we’ve tried this repatriation tax cut in 2004. It didn’t produce any jobs. And we shouldn’t—absolutely shouldn’t get in—the corporate—give in to this lobby. The corporate income taxes and personal income taxes have dropped steadily since the 1980s on high-income corporations. And, you know, at the same time, we’ve seen the growth of this offshore haven. So it isn’t driven by tax rates; it’s driven by greed.
AMYGOODMAN: James Henry, why did you decide to do this report? I mean, you were chief economist at McKinsey, which isn’t so different from Bain, in some ways, a major business consultancy.
JAMESHENRY: Right. Well, I’ve done a few things since then. And I think—you know, I’m on the global board of Tax Justice Network, which is an organization that’s grown up in the last decade to fight offshore havens. And we are dedicated volunteers working on this problem of global tax justice. This is vital to democracy, as well as to the tax system, because if you can’t have fair taxes, you end up having representation without taxation. And I think the poorest countries in the world are forced to rely on very regressive taxes to pay their bills.
AMYGOODMAN: We’re going to link to your report, James Henry, economist, lawyer, board member of Tax Justice Network, former chief economist at McKinsey & Company, author of the report, “The Price of Offshore Revisited.”
Wednesday, July 11, 2012 Full Show
Where the Money Lives: Vanity Fair Report Reveals Loopholes, Offshore Havens Behind Romney’s Fortune
Republican presidential hopeful Mitt Romney is on the hot seat over where he stashes his vast personal fortune, estimated at up to $250 million. We speak with reporter Nick Shaxson, whose new Vanity Fair article, “Where the Money Lives,” delves into the murky world of offshore finance and reveals loopholes that allowed Romney to skirt tax laws and store millions in foreign tax havens. The article has sparked the latest round of questions about Romney’s taxes and offshore accounts, amplified by Romney’s refusal so far to release more than one year’s worth of tax returns. [includes rush transcript]
Nicholas Shaxson, wrote the recent Vanity Fair article about Mitt Romney’s fortune, “Where the Money Lives.” Shaxson is also the author of the book, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens.
- Pulitzer-Winning Reporting Duo Don Barlett and James Steele on “The Betrayal of the American Dream” Jul 30, 2012 | Story
- David Cay Johnston: “Romney’s Tax Plan is George W. Bush on Steroids” Mar 01, 2012 | Story
- Bachmann’s Iowa Straw Poll Win Signals Early Tea Party Role in Shaping GOP Primary Aug 15, 2011 | Story
- Key Figures in Salt Lake Olympic Bribery Scandal Now Backing Romney’s Presidential Campaign Jul 31, 2012 | Story
- Inside Karl Rove’s Secretive Effort to Defeat Obama’s Re-Election With Help of Billionaire Donors Jul 26, 2012 | Story
- “Where the Money Lives.” By Nicholas Shaxson. (Vanity Fair, August 2012)
- “Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens.” By Nicholas Shaxson. (Palgrave Macmillan, 2011)
- Democracy Now! Interview with Nicholas Shaxson on How Offshore Banking and Tax Havens Have Become Heart of Global Economy
- Follow Nicholas Shaxson on Twitter: @nickshaxson
This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.Donate >
NERMEENSHAIKH: We begin today’s show with a look at the fortune of Mitt Romney, one of the richest men to ever run for U.S. president. Where Romney stashes his personal wealth, estimated at up to $250 million, has been the focus of Democrats since Vanity Fair published a new piece called “Where the Money Lives.” It delves into the murky world of offshore finance and reveals loopholes that allowed Romney to skirt tax laws and store millions in foreign tax havens. President Obama has tweeted three times about the article, saying, quote, “I don’t know of any American president who has had a Swiss bank account,” end-quote. That’s originally a comment made by Romney’s former Republican presidential rival, Newt Gingrich.
The Vanity Fair article also draws attention to Romney’s refusal so far to release more than one year’s worth of tax returns. On Tuesday, the Obama campaign and top Democrats took to the airwaves and the Internet with videos like this one.
BRIANROSS: Romney has gone to great lengths to keep secret many important details about his wealth, including whether he uses tax loopholes available only to the super rich.
A.B. STODDARD: This is really something that is not going to appeal to Americans, unless Mitt Romney comes out and says, “We must change our tax code because it is so gameable. I am one of the people who learned how to make an end run around the system. I have my money in other places around the world to avoid taxes. And so, we have to fix this problem.” That’s not what he’s doing, and so people are going to react negatively to this.
JOHNKING: Your father, he released his tax returns, and for not one year, but for 12 years. And when he did that, he said one year could be a fluke, perhaps done for show. Will you follow your father’s example?
AMYGOODMAN: That Obama campaign video includes a clip of Romney from a CNN Republican presidential primary debate in South Carolina in January, responding to the moderator, CNN’s John King. Now such ads have put Romney back on the hot seat. Despite reports of a still struggling economy and high unemployment, a new poll shows Obama has extended his lead over Romney to 6 percentage points. Speaking to Radio Iowa late Monday, Romney answered his critics about his secretive accounting.
MITTROMNEY: I realize that the president’s failure to actually reignite the economy makes it hard for him to discuss his own record, and so he’s going to try and attack me on every personal basis he can come up with. With regards to any foreign investments, I understand—and you understand, of course—that my investments have been held by a blind trust, have been managed by a trustee. I don’t manage them, don’t even know where they are. Those—that trustee follows all U.S. laws. All the taxes are paid, as appropriate. All of them have been reported to the government. There’s nothing hidden there. There’s nothing—if, for instance, you own shares in, let’s say, Renault or in Fiat, you still have to pay taxes, you still have to disclose that in the United States. So, you know, I understand. The president is going to try and do anything he can to divert attention from the fact that his jobs record is weak and he has no plan to make things better.
AMYGOODMAN: Well, for more, we’re joined by investigative reporter Nick Shaxson, whose new article for Vanity Fair magazine is what began this latest round of questions about Romney’s taxes and offshore accounts. It’s called “Where the Money Lives.” Nick Shaxson is also author of Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens. He’s joining us via Democracy Now! video stream from Zurich, Switzerland.
Nick Shaxson, welcome to Democracy Now! OK, tell us, where does the money live?
NICHOLASSHAXSON: Hi, good morning.
Really, what my article explored was a series of questions. I mean, what—what you come out with is a series of questions. This is a very secretive set of investments. I mean, there is a lot of information available. He’s required to make public disclosures. He’s required to—well, he’s released a tax return, one year’s tax return. So there is a certain amount of information out there. But that information, in turn, has generated a lot questions.
There are investments all over the place, in the United States and overseas. There are a number of investments that are routed through tax havens. You have to do a bit of digging to find that, to find out where a lot of those investments are. There was, as you mentioned, a Swiss bank account that came up that didn’t have any particular tax resonance, because it was disclosed. But, you know, it didn’t look good, and it made a big splash.
My article also found some—found some—a corporation, for example, based in Bermuda that had not been disclosed before, that only suddenly popped up in the tax return, the 2010 tax return, which he released under pressure during the Republican primaries. And this Bermuda corporation raises a lot of questions, which journalists before have asked him, and I’ve asked him, and there has been no reasonable answer about this.
So—and there are a number of investments by Bain Capital, the company that he set up and left in—nominally left in 1999, that invests through places such as the Cayman Islands, so that it’s a very, very complex picture. He has—on his tax return, he has page after page after page of foreign entities reported, and it is—you know, it’s been a sort of Byzantine task trying to unravel what’s going on in there.
NERMEENSHAIKH: Nicholas Shaxson, you mentioned Bain Capital, that Romney left Bain Capital in 1999. But as you point out in your piece, as recently as this June, he earned two million—Romney earned $2 million in new income from Bain, despite having left the company 13 years ago. How is that possible?
NICHOLASSHAXSON: Well, he was—he was running Bain Capital from—he set it up in 1984 and ran it ’til 1999, where he left to run the Salt Lake City Olympic program. After he left in ’99, there is some question as to whether or not he left full operation—operational management. The Romney camp said he did. There’s a bit of stuff in the media at the moment questioning that. Until 2001, it appears that he may have had some operational management over the—over the Bain Capital itself.
After that, he did leave—definitely, for sure, left operational management of Bain Capital, but he continues to receive income from it. Bain Capital has a number of—lots of funds, investing in all sorts of different things, many of them routed through the Cayman Islands. And those funds will generate returns. They will generate profits interest, which he receives over time, and he has been receiving—he has been receiving money. And as you mentioned, there’s a new payment, became—came to light fairly recently. So he’s continuing to receive a stream of income.
There has been no release of information about what exactly his severance agreement was with Bain Capital. What is his relationship with the company? He has been asked this. His campaign has been asked this, and they have not come back with any good answer. So it may be that—you know, there was a new entity that appeared on his tax return, new Bain Capital entity, that appears to give him the potential to receive more income for many years to come, but there’s been no clarity about this. So, we just don’t know exactly how long his relationship is going to be with Bain Capital. If he’s elected president, then it may be that he’d continue to receive substantial income from them while he’s president. So, a lot of questions arising.
AMYGOODMAN: I want to play clip of Vice President Biden joking about Romney’s reluctance to release more than two years of tax returns. This is Biden on Tuesday addressing the National Council of La Raza’s annual conference.
VICEPRESIDENTJOEBIDEN: When his father was a candidate for president in 1968, his father released 12 years of tax returns, because he said — and I quote — “One year could be a fluke, perhaps done for show,” end of quote. That was his father. His son has released only one year of his tax returns, making a lie of the old adage, “Like father, like son.” He wants you to show your papers, but he won’t show us his. It’s kind of fascinating.
AMYGOODMAN: Vice President Joe Biden. Nick Shaxson, let’s talk about this issue of taxes. As you write in your article, it was Mitt Romney’s father, George Romney, in 1967, ahead of his presidential campaign, who released 12 years of tax returns, saying, when explaining why so many years he released, “One year could be a fluke, perhaps done for show.” That was Mitt’s father, George Romney. Why is releasing tax returns so significant? What do you learn from them, and what don’t we know about Mitt Romney?
NICHOLASSHAXSON: Well, I think that point about releasing only one year is very significant. I mean, for example, the Swiss bank account that pops up on the 2010 tax return, then—it was closed again after that, and it’s now closed. The 2011 estimate that was produced revealed that that had been closed. And so, that was something that just kind of popped up and then went out of existence. So, you know, one year just gives you a snapshot.
But the thing about income and taxes, income is a very flexible thing. When you’re rich and you have wealthy tax advisers, you can massage your income. You can shift it around from year to year. You can play all sorts of games with it. So, unless you have a pattern, unless you’re able to establish a pattern over a number of years to see what is—you know, what is—where the income is going and establish that, you know, as a sort of regular pattern, then it’s very difficult to say anything for sure. I mean, he could have—you know, he could have shoveled a lot of income from one year into another year and made it look a particular way. We just don’t know. So it’s very important to get, you know, a lot more information than has been produced by Mitt Romney.
AMYGOODMAN: We’re going to break and then come back to this discussion. Our guest is Nick Shaxson. He has written a very interesting piece in Vanity Fair called “Where the Money Lives.” We’ll be back with him in just a minute.
AMYGOODMAN: Our guest is Nick Shaxson. His latest piece in Vanity Fair has created quite a firestorm, “Where the Money Lives.” In fact, President Obama has tweeted it several times. And you’ve been accused of being an Obama stooge, just, you know, writing this piece for Obama. Your thoughts about President Obama, Nick?
NICHOLASSHAXSON: Well, personally, I—when Obama was elected, I guess I was quite hopeful. I mean, as a British person, I’m an outside observer to all of this. I must say I’ve been somewhat disappointed in him since he was elected, particularly because of his closeness to Wall Street. I think, you know, he’s done some good things, for sure, but I’m—you know, the sort of high hopes I—and, I know, many others—had of him have been rather, you know, not—he hasn’t followed through. And I think the closeness to Wall Street is a particular problem.
And I think this is very relevant to the debate about Mitt Romney. I think one of the things that Mitt Romney epitomizes is the kind of—the whole financialization of corporations, where corporations, instead of—you know, where managers kind of turn their attention away from producing, you know, better goods and better services and for better prices and, you know, building productivity and long-term growth of companies. There has been a turn toward seeing companies through financial lenses, through Wall Street lenses, where, you know, you can extract—you know, shareholder value is the kind of god of everything, and you view everything through that prism, so it doesn’t matter if you start extracting big loans out of—you know, borrow huge amounts of money out of the companies and pay yourself a special dividend, as Bain Capital and many other private equity companies have done. That is seen to be a good thing. But, you know, this is part of a whole kind of process of financialization, which I think is something that Mitt Romney really epitomizes. And I think, you know, Obama is certainly not—he doesn’t epitomize that, but I think, still, his closeness to the financial sector is a worry for me.
NERMEENSHAIKH: One of the things that you point out, Nicholas Shaxson, in your piece is Romney’s average personal tax rate, which you say is 15 percent, substantially lower than what most middle-income Americans pay. Can you explain how that’s possible?
NICHOLASSHAXSON: Yeah, the main reason for that is the way—this is about the U.S. tax code. This is the way that privileged people like Mitt Romney and other—and hedge fund managers and private equity titans receive their income. They receive it as a thing called carried interest, where—which many people would argue is just like ordinary income. It’s just like a salary earned by anybody else and should earn, you know, the top tax rate, but instead, for historical reasons and reasons of lobbying, it is taxed at a very low rate of 15 percent. Mitt Romney’s tax rate is a little bit lower than that. He has—for various other reasons, he has deductions and earns other kinds of income, as well. But it’s not too far off 15 percent. But carried interest is—the tax treatment of carried interest is the sort of central reason why his tax rate is so much lower than many Americans.
AMYGOODMAN: Let’s play a clip of reporter Ryan Grim on MSNBC saying the deficit Romney opposes is caused in part by the use of offshore tax havens to dodge U.S. taxes.
RYANGRIM: One reason we don’t have that money is that so many rich people can afford sophisticated accountants who can hide the money in offshore tax havens, and then they can hire lobbyists who then write loopholes into the tax code. And now he wants to run for president, complaining about the deficit and saying that the tax code is too complicated. I mean, at some point, you know, you’ve just got to say, “Wait a minute. What you talking about here?”
AMYGOODMAN: How common is Mitt Romney’s use of these tax havens? How does the tax code shape what he and the extremely wealthy pay in taxes and what they’re able to avoid paying, Nick Shaxson?
NICHOLASSHAXSON: Well, it is pretty common, and particularly for financial players. There is this kind of image that has grown up over the years of tax havens as kind of exotic side shows to the global economy. What my research discovered was that tax havens are much, much, much bigger than almost anybody realizes, that the offshore system has grown absolutely enormous. It is now right at the heart of the global economy. If you look at all of the stuff that Wall Street is doing, if you look at the number—you know, which companies have got the biggest number of subsidiaries in offshore tax havens, it’s banks, it’s the financial sector, it’s Wall Street, the city of London.
So, tax havens, if you want to understand the power—if you’re worried about the power of the financial sector, as I and many other people are, then you have to look at tax havens. Tax havens are essentially, in many ways, a kind of escape route. And it’s not just about taxes. There is this—you know, it has been estimated that the United States is losing 100 billion U.S. dollars a year to tax havens, through legal and illegal tax games that are played by individuals and corporations.
But there is much more to it than that. There is this issue of the complexity of the tax code. And essentially, what happens is, is tax havens, what they are is they provide escape routes, escape routes from the responsibilities of society, whether those responsibilities are taxes or financial regulations or criminal laws or disclosure rules or whatever. And so, financial sector players, in particular, are able to take their money offshore and to do things they’re not allowed to do at home.
What happens next is that the supposedly onshore country will then put in place a defense against that, so United States has all sorts of defenses against tax haven erosion. But then the lawyers and the accountants and the financial players will find ways around those new laws, those defenses. And bit-by-bit, the whole game becomes more and more complicated. And these—so these places, such as the Cayman Islands, are zero tax kind of platforms where financial players put their money, and then they start kind of playing this game of trying to find ways through the U.S. tax code.
And, you know, and trying to stop this—trying to stop the erosion of tax haven is like kind of playing—trying to play a game of whack-a-mole. You know, you knock one thing down, and then one pops up elsewhere. So they’re very, very slippery kind of entities to deal with, slippery jurisdiction to deal with. And politically, they’re very difficult to deal with, as well, in countries around the world, because it is generally the wealthiest and most influential members of society who use tax havens, and so they are quite often the biggest supporters of tax havens. So, politically, it’s very difficult to get real change that really cracks down properly on this.
And so, what you have is a reduction of the tax bill and reduction of the regulatory burden on the wealthiest members of society, the biggest corporations. And as a result, other people, you know, smaller companies, small businesses, individuals have to pay higher tax as a result. It’s a great big kind of distortion in the whole economic system. And the fact that Mitt Romney is so kind of steeped in this system and is such a friend to this system is, for me, profoundly worrying.
NERMEENSHAIKH: But, Nicholas Shaxson, is it in fact unclear, then, whether Mitt Romney has broken any laws in paying the tax rate that he has?
NICHOLASSHAXSON: OK, in paying the tax rate that he has, what we get down to—and this is kind of the crux of my article. It has been asserted repeatedly by the Romney camp and by the Republican Party and by many others that Romney, OK, he’s a kind of clever financial acrobat—he can do all these backflips and has fantastic accountants—but he’s never actually broken any laws. That’s the kind of assertion, that’s the mantra, and it has been generally accepted in the U.S. media, that assertion.
What my article—one of the things—the main things my article sought to do was to question that, say, “Is that really true? Is that actually true?” And the answer to that question of whether or not he broke any laws is not completely straightforward. Essentially, in the area of tax and in various other areas, the dividing line between what’s legal and what’s illegal is usually not very clear. There’s usually a kind of fuzzy grey zone between the two. And when you’re talking about offshore tax havens, that grey zone is often quite big. And I think one of the reasons my article has been so widely read is that it kind of establishes a pattern—in the area of tax but in other areas, too—that Mitt Romney appears to be very confident striding into this grey zone, where you can’t directly say, “OK, you’ve broken the law there,” but you can say, you know, “Come on, that’s going a little bit—pushing it a little bit far.” And in some cases, he seems to have been really quite robust, quite even aggressive, in pushing into this grey zone. And I think that’s something that hasn’t really yet—you know, hadn’t really yet been properly appreciated, and I think it is an important pattern to look at.
AMYGOODMAN: Mitt Romney makes more than the median U.S. household income in just five hours. In an average work year, there are 2,080 work hours. He made $21.7 million in 2010. The median household income is about $50,000. It will take the median household 433 years to make what Romney made in 2010. And, Nick Shaxson, now that’s not illegal, by any means. It puts him certainly in a very different category than other Americans. But you end your piece by talking about—saying that “Bain Capital has said it did everything required by the U.S. government … U.S. law doesn’t require Bain to enforce the tax laws of its investors’ home countries, but the presence of Swiss trustees, Bahamas trusts, [and] Panama corporations would raise red flags with any tax authority.” It’s what Mitt Romney says about this, you say, is what’s of concern. Nicholas?
NICHOLASSHAXSON: Yes. This is a very important point. People see offshore tax havens as kind of, you know, shady little islands somewhere, and there’s certain element of truth to that. But one of the things that I explore in my book, Treasure Islands, is that, over the decades, over the past few decades, particularly since the 1970s, the United States has itself been turning itself, quite deliberately, into a tax haven in its own right, a gigantic tax haven, attracting foreign money, a lot of illicit foreign money, from overseas through offering things such as special tax exemptions and secrecy, financial secrecy. The United States is one of the biggest offerers of financial secrecy in the world. Both at a federal level, these facilities are offered, and at a state level, with states such as Delaware and Nevada and Wyoming kind of offering very, very low-cost, but very strong forms of secrecy through corporations. And this is a profoundly difficult thing.
And one of the—one of many vehicles through which this illicit money can come in is the private equity business. There is no requirement on private equity companies to enforce the tax laws of other countries. A filing that I uncovered during my research was—showed exactly these strange entities in the Bahamas and in, you know, Swiss trustees and Panama. All of these places are renowned tax havens, renowned places where—which offer—one of their big selling points is secrecy. And these investors that came in, we don’t know exactly who they are. We have some ideas. We know that some of them came from El Salvador, a country, which at the time was suffering a terrible civil war. We don’t know if these investors were evading their home countries’ taxes, but it’s possible. And the presence of these, you know, Panama, Swiss and Bahamas entities certainly does raise red flags, and it is profoundly worrying.
AMYGOODMAN: Nick Shaxson, we want to thank you very much for being with us. His latest piece in Vanity Fair about Romney’s fortune is called “Where the Money Lives.” Nicholas Shaxson is also author of the book, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens_. You can go to our website at democracynow.org to see our have”>interview with him about this. He was joining us from Zurich, Switzerland. Thanks so much for being with us.
When we come back, we’re going to look at the secretive organization called ALEC and how more and more corporations are leaving it, and then we’re going to have a debate on a new Israel government report that says the settlements are legal. Stay with us.
July 30, 2012
Matt Taibbi Explains Wall Street’s “License to Steal,” Offshore Tax Havens and Private Equity Firms
In part two of our interview with Matt Taibbi, he describes recent Wall Street scandals — including a decade-long Wall Street scandal that drained money from every county and state in the United States — and notes not a single bank executive has faced individual consequences. He also explains how Republican presidential nominee Mitt Romney’s former firm, Bain Capital, and others have used private equity to raise money to conduct corporate raids. “It’s just a scheme to take a cash-rich company and move all that cash to a few actors — typically it’s the executives of the target company and the executives in the private equity firm — and then you force everybody else to pay,” Taibbi says. “The workers pay by either losing their jobs or taking reductions in salary, and the guys at the top win.” Click here to watch part one of this interview.
AMYGOODMAN: This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman, with Juan González. Matt Taibbi is our guest, contributing editor for Rolling Stone magazine. His most recent in-depth piece is “The Scam Wall Street Learned from the Mafia: How America’s Biggest Banks Took Part in a Nationwide Bid-Rigging Conspiracy—Until They Were Caught on Tape.” He’s author of Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History.
OK, explain what this scam Wall Street learned from the Mafia, how America’s biggest banks took part in a nationwide bid-rigging scheme.
MATTTAIBBI: Well, this is actually somewhat similar to the Libor situation, because what we’re dealing with is a kind of a cartel-style corruption scheme. In Libor, it was 16 banks acting in concert to rig the international interest rates. What this one was was a number of the world’s biggest banks colluding to artificially suppress the amount of money that cities and towns earned on their municipal bond service. So this is—it’s very complicated inside baseball stuff, but when a town or city wants to borrow money, it goes to Wall Street. It issues a bond. Let’s say it borrows $50 million. It doesn’t spend all that money right away, so it doesn’t build the school right away, it doesn’t build the baseball field. It keeps that money in an account somewhere, and banks are supposed to compete with each other at auction for how much that money is going to earn. That money is going to be invested, and they’re supposed to out bids against each other for how much they’re going to pay the towns and the cities on that investment income. And what they’ve been doing is they’ve been getting together secretly and parceling out business. So the banks—one bank will say, you get to do the bond service for the school in this town, you get to do the bond service for the—you know, the hospital over here, a third gets to do the bridge or the highway in another state. And essentially, this was every state—every county in every state in the United States was affected by this scandal over a period of about 10 years. We just recently had a trial for a few of the participants here in New York, but it extends far beyond those individual defendants
AMYGOODMAN: Give names. Give examples.
MATTTAIBBI: Well, the particular—the particular defendants in that trial, which was two months ago here in New York City, they were three guys who worked for a subsidiary of GE Capital, but GE was really the fifth big bank to be caught up in this scandal. JPMorgan Chase has already paid a $228 million settlement. Bank of America, UBS, Wachovia, which is now Wells Fargo, they’ve all paid settlements in excess of $100 million. This all came out last year, although surprisingly there was no real coverage about it. It was also—this is actually the scandal that helped submarine the appointment of the—I’m blanking—the New Mexico governor who was nominated by Barack Obama.
JUAN GONZÁLEZ: Bill Richardson.
MATTTAIBBI: Bill Richardson, excuse me, yes. His commerce secretary appointment was submarined by this scandal indirectly, because he was taking money from a middleman company called CDR, which was arranging these rigged auctions. So this—the conspiracy extends to probably a dozen or two-dozen of the biggest banks in the world. And we have criminal cases now that are just wrapping up for 18 of the defendants in this conspiracy, but it extends beyond that.
AMYGOODMAN: Talk about JPMorgan Chase and JB—Jamie Dimon, not to mix their names together.
AMYGOODMAN: The appearance before the Senate Banking Committee, the kinds of questions that were asked, or instead, the kinds of advice that was asked for by senators on both sides of the aisle—
AMYGOODMAN: —who were receiving millions of dollars from him?
MATTTAIBBI: Right, right. So, Jamie Dimon gets summoned before the Congress, and he’s there to answer questions about how it could possibly happen that a bank could suddenly have a $3 or $4 billion loss overnight. And the reason we ask these questions is that—because there’s an implicit federal guarantee. This is a—you know, a commercial bank like Chase is FDIC guaranteed. And so, when it gambles and it risks enormous sums of money, it’s essentially all of our problem because if JPMorgan Chase were to go under for any reason, then all of us would have to pay for it. Jamie Dimon and a lot of people on Wall Street don’t really see it that way. And so, when he was hauled up before Congress to answer questions about how this loss could possibly happen after everything that happened in 2008, why wasn’t there better risk assessment, how could there not be controls that prevented this sort of thing from happening, he really acted very put out that he even had to answer any questions. And most of the questions actually weren’t that tough, to begin with. They ended up really more asking him advice on how to better regulate the economy. It was a comical kind of situation where there’s sort of a widespread misunderstanding of what the dangers are here.
JUAN GONZÁLEZ: And to get back to this point of the level of scandal that we have seen continually exposed, one after another, with the banks continuing just to pay hundreds of millions of dollars in fines and billions of dollars in settlements, then just keep on—keep on keeping on. You know, there seems to be no sense of total outrage or shame, or at least among government officials, there’s no sense of the outrage that is felt among the public—
JUAN GONZÁLEZ: —about these banks continuing to rig the financial system.
MATTTAIBBI: Right. Yeah, no, this is—I think this is the key thing that people don’t understand, is that in the law enforcement community there’s an incredible amount of enthusiasm, for some reason, among people in law enforcement for doing things like catching undocumented aliens. You know, I was down in Georgia last week. I heard about a case where a guy was deported for fishing without a license. You know, it’s incredibly easy to start a criminal case everywhere outside of Wall Street, but in Wall Street, we’ve had one scandal after another involving enormous sums of money, you know, not just billions of dollars but, with the Libor thing, trillions of dollars, and not a single person has had to have any individual consequence. So you talk about all those settlements. Those are all paid by the company and by the shareholders. Not a single person since 2008 has gone to—has been indicted, has gone to jail, has spent a day in jail, or has paid any kind of money out of his own pocket. And until there’s any individual consequence, it’s really a license to steal. I think the Libor thing is really going to be a litmus test for all regulators, because if you can’t go to jail for rigging an $800 trillion market, what can you go to jail for?
AMYGOODMAN: Who do you think should be tried first, jailed first?
MATTTAIBBI: Well, all the traders and all of these—the Libor submitters all have to be indicted, clearly. But it has to go higher than that, because this can’t happen without the consent of the senior executives in the companies, so they all have to go, too. And I think the British acted appropriately in immediately, you know, making sure that the Barclays chief stepped down. But that’s just for starters. I think, you know, we have to do that. We have to remove all the executives who are responsible for this.
JUAN GONZÁLEZ: And, of course, all the sports fans now who go to these stadiums, renamed after banks—
MATTTAIBBI: Right, right.
JUAN GONZÁLEZ: —including now the new New York Nets in the Barclays Arena in Brooklyn—
MATTTAIBBI: Right, right, exactly. And then—
JUAN GONZÁLEZ: —are facing having to walk into these stadiums for these thieves, being named after them.
MATTTAIBBI: Exactly, and then think about another—here’s another sports thing. The Justice Department assigned 93 agents to the Rogers Clemens case. Think about that. Ninety-three guys assigned to the case of injecting Roger Clemens with steroids. How many people are investigating the mortgage-backed—or who are on the mortgage-backed task force that Obama allegedly started a few months ago? It’s less than that, from what I understand. So here you have this massive criminal conspiracy that involves all the biggest companies in America, and we’re spending less resources investigating that than we do on a single baseball player—who’s retired, incidentally.
AMYGOODMAN: On the stadium issue, speaking about sports—
AMYGOODMAN: —right, President Obama going to speak in Bank of America Stadium—whoops! I mean Panthers Stadium.
MATTTAIBBI: Right, Panthers Stadium, yeah.
AMYGOODMAN: So, Bank of America bought the rights in 2004.
AMYGOODMAN: And now, as the Democrats do their fundraising, they’ve stopped calling it “Bank of America Stadium.”
MATTTAIBBI: Right, right.
AMYGOODMAN: And they’re calling it Panthers Stadium, which is interesting in itself, but—for lots of reasons, but your response?
MATTTAIBBI: Well, first of all, I did a big exposé on Bank of America a few months ago, and so I hope I had a tiny, tiny part in this. I think the Occupy movement has done a lot of work with Bank of America, and I think that has a much bigger part to do with this.
AMYGOODMAN: Recap what you found in what you—your investigation.
MATTTAIBBI: Well, Bank of America, they were a—they’re sort of a poster child for everything that’s wrong with “too big to fail,” but most importantly, in 2008, they were really the most aggressive actor in the whole—in the sort of scheme to sell toxic, explosive mortgage-backed securities to public funds like pension funds and unions. And that was really just a gigantic fraud scheme. And Bank of America, along with its subsidiaries, Countrywide and the investment bank—my god, I’m losing my mind—
JUAN GONZÁLEZ: Merrill Lynch.
MATTTAIBBI: Merrill Lynch, exactly—they were all probably the most aggressive in their respective fields in pushing those toxic mortgage-backed securities. So, it would be, I think, bad for the Democrats to associate themselves with that company, heading into the campaign.
AMYGOODMAN: OK, speaking about the elections, explain Bain, private equity. I think the reason so many get away with so much, or so few, you know, at the top get away with so much, people just cannot understand it. It’s like going to a surgeon, and he starts explaining what he’s going to do to you. In fact, it affects all of us, or in that case, it affects you, right? The surgeon. But you have no idea what he or she just said.
MATTTAIBBI: Right, right, exactly. Yeah, I know, private equity is difficult to understand. I think what’s funny is, it’s really not that much different from what we saw in the 1980s when we—when corporate raiders and leverage buyout specialists like, you know, Carl Icahn became these sort of Gordon Gekko-style public villains. That’s really all that public equity—private equity is. It’s just that the mechanism has changed. Back in the ’80s, what these guys were doing is they were using junk bonds to create the financing they needed to take over companies. Nowadays they’re using securitization and what are called CLOs, collateralized loan obligations. It’s the same mechanism that banks used to create mortgage privatizations.
And so, what they’re doing is, you take a company like Bain. It has a small amount of cash. Let’s say it wants to acquire a company for $500 million. It might have $40 million. It will go to a big bank, like a Goldman or a JPMorgan Chase, and it will say, “We want to raise $300 million so that we can go in and buy a majority of the shares in this company.” The big bank will go out. It will issue a securitized bond, like the mortgage bonds that they were issuing, and raise a whole bunch of money. The Bain-like company then goes and buys a majority of the shares, and when they do that, when they take over the company, the critical thing is, all that debt, all that borrowed money, that when they borrowed all that money to take over the company, the company now, the taken-over company, now assumes that debt. So, when you take over the company, they now have this additional burden that they have to meet. And in order to meet that burden, they often have to streamline themselves and lay off people. The private equity firm will also typically charge a reorganization fee to the target company. So they’ll say, “We’ve come over. We’ve taken over your company. And in order to restructure, you have to pay us x amount of money.” So now the target company has two new obligations that it has to meet: it has to pay the reorganization fee, and it has to pay all that debt service, which is why they have to lay off people, because they don’t have as much money as they did before.
AMYGOODMAN: And the biggest crime around how this all affects everyday people?
MATTTAIBBI: Well, the biggest crime is that you’re taking functioning, healthy companies, and you’re larding them with debt, forcing them to lay people off. And it’s just a scheme to take a cash-rich company and move all that cash to a few actors—typically it’s the executives of the target company and the executives in the private equity firm—and then they—you force everybody else to pay. The workers pay by either losing their jobs or taking reductions in salary, and the guys at the top win. And that’s kind of the direction—that’s really what Mitt Romney represents. He represents this economics that sees massive compensation heading upward and tightening of the belt everywhere else. And we’ve seen this trend develop over two decades or so here in America, and a lot of it has to do with financial maneuvers like this.
AMYGOODMAN: Matt Taibbi, I want to thank you very much for being with us, contributing editor for Rolling Stone magazine. His most recent in-depth piece is “The Scam Wall Street Learned from the Mafia: How America’s Biggest Banks Took Part in a Nationwide Bid-Rigging Conspiracy—Until They Were Caught on Tape.” His latest book, Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History.
Matt Taibbi, contributing editor for Rolling Stone magazine. His most recent in-depth article is called “The Scam Wall Street Learned from the Mafia: How America’s Biggest Banks Took Part in a Nationwide Bid-Rigging Conspiracy — Until They Were Caught on Tape.” He’s author of the book Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History.
Monday, July 30, 2012 Full Show
Pulitzer-Winning Reporting Duo Don Barlett and James Steele on “The Betrayal of the American Dream” (Part 1)
The famed award-winning investigative reporting team of Donald Barlett and James Steele have just published a new book, “The Betrayal of the American Dream,” a follow-up to their landmark bestseller, “America: What Went Wrong?” As Republicans and Democrats continue disputing who should bear the brunt of the tax burden, Barlett and Steele argue that America’s middle class has been decimated over the years due to policies governing not only taxes but also bank regulations, trade deficits and pension funds. Their book chronicles how the American middle class has been systematically impoverished and its prospects thwarted in favor of a new ruling elite. Barlett and Steele have worked together for more than 40 years, sharing two Pulitzer Prizes and two National Magazine Awards. The duo join us for the hour to discuss the assault on the middle class, the great tax heist, deregulation, the outsourcing of U.S. jobs by companies like Boeing and Apple, and the end of retirement. “People are going to have to work forever, and yet what are those jobs going to be? What are they going to pay? And it also puts pressure then on people coming into the workforce. How are they going to get a job if people are having to work between 65 and 75 years old?”, Steele says. The duo also discuss their past reporting on the 2002 Olympics in Salt Lake City, headed by the Republican presidential candidate, Mitt Romney, and note he headed “an Olympic committee where that entire operation raided the federal Treasury like no other Olympics in history.” Click here to see part two of this interview. [includes rush transcript]
James Steele, contributing editor at Vanity Fair. Steele and his reporting partner Donald Barlett have won virtually every major national journalism award, including two Pulitzer Prizes and two National Magazine Awards. Their latest book is The Betrayal of the American Dream.
Donald Barlett, contributing editor at Vanity Fair. Barlett and his reporting partner James Steele have won virtually every major national journalism award, including two Pulitzer Prizes and two National Magazine Awards. Their latest book is The Betrayal of the American Dream.
- Author Ron Suskind on Obama’s Evolution amidst Unprecedented Economic and International Challenges Sep 23, 2011 | Web Exclusive
- Twilight of the Elites: Chris Hayes on How the Powerful Rig the System, from Penn State to Wall St. Jul 17, 2012 | Story
- “Inside Job” Director Charles Ferguson: Wall Street Has Turned the U.S. into a “Predatory Nation” May 29, 2012 | Story
- “We Need to Make a Ruckus”: Robert Reich Hails Occupy for Exposing Concentration of Wealth and Power May 08, 2012 | Story
- Fmr. Obama Adviser: Focus on U.S. Inequality in Election-Year SOTU Has Occupy Wall Street’s Imprint Jan 25, 2012 | Story
- Part 2: Barlett and Steele on Media, Govt. Failure to Hold Wall St. Accountable for Financial Crimes
- “The Betrayal of the American Dream.” By Donald Barlett and James Steele. (Public Affairs, 2012)
- Donald Barlett and James Steele’s Official Website
- Read Donald Barlett and James Steele’s latest articles for Vanity Fair
- “America: What Went Wrong?” By Donald Barlett and James Steele. (Andrews McMeel Publishing, 1992)
- See additional Democracy Now! interviews with Barlett & Steele
- Deadly Medicine: FDA Fails to Regulate Rapidly Growing Industry of Overseas Drug Testing Dec 17, 2010 | Story
- “Good Billions After Bad”–One Year After Wall Street Bailout, Pulitzer Winners Barlett and Steele Investigate Where All the Money Went Sep 10, 2009 | Story
- Pulitzer Winners Jim Steele and Don Barlett: Geithner Tax Troubles Far More Egregious Than Daschle’s Feb 06, 2009 | Story
This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.Donate >
AMYGOODMAN: Democrats and Republican lawmakers are in a deadlock over whether to extend the politically decisive Bush-era tax cuts. The Republican-controlled House of Representatives is planning to vote this week to extend all the cuts, but Obama says those Americans making above $250,000 a year should return to the tax levels they paid before Bush took office. Pointing to the Senate’s passage of the White House-backed proposal, Obama called on House Republicans to support the bill in his weekly address on Saturday.
PRESIDENTBARACKOBAMA: This week, the Senate passed a plan that I proposed a few weeks ago to protect middle-class Americans and virtually every small business owner from getting hit with a big tax hike next year—a tax hike of $2,200 for the typical family. Now it comes down to this. If 218 members of the House vote the right way, 98 percent of American families and 97 percent of small business owners will have the certainty of knowing that their income taxes will not go up next year. That certainly means something to a middle-class family who has already stretched the budget as far as it can go.
AMYGOODMAN: In an interview on Fox News, Republican House Speaker John Boehner countered that Obama’s tax plan would destroy hundreds of thousands of jobs.
SPEAKERJOHNBOEHNER: President’s plan would cost about 700,000 new jobs that wouldn’t be created or could be lost by taxing small businesses. The House will not do that. The House will extend all of the existing tax rates. We’ve got 8 percent unemployment; we’ve got 41 months of it. This is not to be time—the time to be raising taxes on American small businesses.
Tabacco: OK, I admit President Obama gave few details in his paragraph above. But that legislation is easy enough to check. However, Boehner’s follow up validates that the “Plan Exists”! Speaker Boehner’s assertion “President’s plan would cost about 700,000 new jobs” is NOT so easy to check – in fact it may be impossible to check. We want to know ‘who, what, when, where, why and how’ – and without that information, what Boehner says is nothing more than unsubstantiated, uncorroborated assertions, the sort of stuff that would be banned from ‘Tabacco’.
AMYGOODMAN: As Republicans and Democrats continue disputing who should bare the brunt of the tax burden, our next guests argue America’s middle class has been decimated over the years due to policies governing not only taxes but also bank regulations, trade deficits and pension funds. Their new book chronicles how the American middle class has been systematically impoverished and its prospects thwarted in favor of a new ruling elite.
We’re joined now for the hour by Don Barlett and James Steele, the award-winning investigative reporters. They have worked together for over 40 years, first at the Philadelphia Inquirer, then at Time magazine, most recently at Vanity Fair. They’ve also written seven books. Their first book, America: What Went Wrong?, was a New York Times bestseller. They share two Pulitzer Prizes, two National Magazine Awards. Their new book is called The Betrayal of the American Dream.
Jim Steele, Don Barlett, we welcome you both to Democracy Now! Start off by laying out your thesis, Don. Start off by talking about the betrayal of the American dream.
DONALDBARLETT: It really goes back to when we did America: What Went Wrong?, which was in ’91. And at that time, people were upset around the country. They knew something was happening, but they didn’t know what. And what made that book so successful was that we pulled everything together in terms of pensions and pay and union membership—and just everything economics. And you could see that there was a systematic attack going on on the middle class.
At that time, it was still kind of—you know, could have gone either way if there had been a political response, which there should have been, but there wasn’t. And as a result, when—we received just literally hundreds and hundreds and hundreds of letters of emails over the last several years saying, “Would you go back and look at this in terms of what you wrote the first time?” And if we made one mistake the first time, it was we grossly underestimated how fast this country was going to go down the tubes. And we really did.
Back then, there were still defined benefit pensions, and people still had a hope of getting them. They’re gone. There was one wage structure. Now there are two-tiered wage systems all over the country. The one wage is gone. Income has been flat, for the most part, since then. You go down the list, and everything has gotten incredibly worse than it was then.
And one of the arguments that was raised by critics back then was because this—that series ran right at the tail end of one of the recessions, and people said, “Well, what’s happening now is really related to the recession, and once we’re out of the recession, everything will be fine.” And we made the point this was not true, that what was happening was totally unrelated to the recession. It was the result of structural defects in the American economy, and it was going to continue unless they were dealt with. Well, they weren’t dealt with, and now everything is—you couldn’t even go back now to the 2000 level and give people what they had then. It would be impossible, given the attitudes in Congress, the hardening lines in Washington.
AMYGOODMAN: I wanted to talk about specifics and also go general. Jim Steele, the story of corporations tells a very major story about the United States, corporations like Apple and Boeing. Apple doesn’t manufacture one product in the United States?
JAMESSTEELE: That’s correct. That’s correct. I think some of the parts—some of the parts are made here, but basically the essential products aren’t. And we made the point in the book—we actually wrote about this before a lot of the news surfaced this year—that what was significant about what Apple has done is not just their working conditions in China, which were horrendous by the subcontractors over there, but what they did, they completely closed down manufacturing in this country after really less than a generation. The historic pattern in this country was a product would be invented here, a company would go into business, they would start making it. Up and down the line, you had a broad-based workforce for that product, from folks on the factory floor to the designers, to the salesmen, so on, to the stockholders who might be part of that company. But ultimately, you had this broad-based situation. Apple originally had some manufacturing in this country but very quickly, in less than a generation, just closed that down and shipped most things to China and other countries. And it’s just part of that pattern where jobs that once middle-class people had in this country are now gone.
You see a similar kind of thing now going on with Boeing. Boeing has outsourced all kinds of parts of the new Dreamliner, its great new aircraft, which of course has recently run into some problems with parts of their engines falling off, apparently. But Boeing, as part of getting into the Chinese market, which everybody agrees will be a huge market, has manufactured all sorts of things over there. Basically, what Boeing is doing, which a lot of companies are doing, they are basically showing the Chinese how to make airplanes. And what have the Chinese done? They’re creating their own civilian aircraft industry, where we were told, I think, in this country the idea was have some presence there so we can sell them airplanes. But where is that going to lead down the line if we are turning over to them some of the technology that will let them build airplanes that are our principal export in this country?
AMYGOODMAN: And how much of that information, that knowledge, is taxpayer-financed?
JAMESSTEELE: Boeing has of course been a major defense contractor over time, and many of those contracts have led to all sorts of technology that have worked their way into both civilian and military planes. Taxpayers have supported that. So now you have a situation where some of the technology that taxpayers have paid for—through Boeing and of course other contractors, as well, not just them—is now going to be handed over to the Chinese to build airplanes to compete against us. And civil aircraft is the only significant export this country has.
AMYGOODMAN: And the number of jobs Boeing has moved to China?
JAMESSTEELE: The number of jobs is, I think, 20,000 to 30,000 by Boeing’s own statement. I should correct one thing: we have other exports, but in civilian aircraft is the only thing where we have a surplus of exports. We export a lot of things, but—and most of those products, like auto parts and things of that sort, the imports vastly overwhelm our exports.
AMYGOODMAN: Back on Apple, earlier this year Democracy Now! spoke to Charles Duhigg, a staff reporter for the New York Times. I asked him about President Obama’s meeting with the late Steve Jobs of Apple in February of 2011 to see what it would take to make iPhones in the United States. This is what Charles Duhigg said.
CHARLESDUHIGG: One of the things that President Obama asked was, is it ever possible to bring back those jobs to the United States, to make iPhones in the U.S.? And what Steve Jobs said was—I think accurately—those jobs are never coming back. And the reason why isn’t just because workers are cheaper in China, although that—they are cheaper in China; it’s because China has established a huge competitive advantage over the U.S. There are supply chains that exist in China and Asia now, which the U.S. simply can’t replicate.
AMYGOODMAN: I also asked the New York Times reporter, Charles Duhigg, about the human costs of Apple products for workers in China.
CHARLESDUHIGG: What Apple says—and you have to take Apple at their word, because this is a major corporation, they usually don’t lie about stuff like this—is that they say every single time they find a violation inside a supplier, that they mandate that a change is made and a management system is put in place in order to prevent that from occurring again. The difficulty is, when you look at the aggregate statistics that Apple publishes every year, we see the same violations occurring again and again and again.
AMYGOODMAN: New York Times reporter Charles Duhigg about the human costs of Apple products. James Steele?
JAMESSTEELE: I think he’s right that these Apple products are not going to be coming back here. But the issue isn’t that they’d be coming back here; the issue is what happened that let them go over there, to begin with. And I think the point could easily have been made, Apple could still certainly have kept some manufacturing in this country—doesn’t mean you couldn’t also have some manufacturing elsewhere. Nobody has said that. But the point is, they made a conscious decision to go over there.
And the reason a lot of companies do that, it’s not just the cheap labor. The Chinese have a system in place that subsidizes companies—land, low-interest loans, a whole range of things—the kinds of things that a company in this country cannot compete with. So it goes way beyond the labor. We talk about free trade in this country, but other countries don’t really practice free trade. And China is a perfect example of that. I mean, how is a company over here expected to compete with a company that has that kind of support, that can then bring its product back here duty-free? I mean, it’s almost impossible. And this is true of dozens of products, not just computers and iPhones.
AMYGOODMAN: Why couldn’t Apple build factories here now?
JAMESSTEELE: Well, I mean, they could if they wanted to, but I’m just saying it’s just not going to happen, because they don’t want to. And the problem was—
AMYGOODMAN: But consumers can also make a statement.
AMYGOODMAN: And make demands.
JAMESSTEELE: And make demands, exactly. And maybe enough heat will be exerted on them. And we got so much mail after our piece on Apple last year. People who thought Apple products were more expensive because they were built in this country, that was one of the most common themes we heard from people. And people were astonished to find out, no, they’re not. And yet they still cost you more than things that might be made here.
AMYGOODMAN: Don Barlett?
DONALDBARLETT: Well, the only thing to add to that is if—you need to put controls on corporations. Somewhere along the line, we’ve reached this point where there can be no—you know, no tariffs, no—nothing on corporations. They are free to do whatever they want. And look no further than fracking everywhere, but especially in Pennsylvania, where we’re both from. I mean, you grew up in Pennsylvania, you remember what it was like—well, I do. I’m a lot older than Jim. You went out of the house in the morning, it was covered with orange dust from the blast furnaces. That was a way of life. Was that healthy? No. Should it have been allowed? No. But now, that kind of behavior is tolerated—not only tolerated, encouraged, because nothing is done to prevent it.
I mean, there’s—you have all of this talk on the far right about the regulations that are, you know, stifling creativity and all this. That’s utter and complete nonsense. When it’s put in historical terms, it is just mind-numbing that we’ve allowed this, because—Jim made the distinction: we’re talking about civilian aircraft now. The Chinese have just been given the keys to the U.S. attack helicopter. What does this say? I mean, back—as an old Cold Warrior, in which I spent a few years in counterintelligence, security clearances would have been killed then automatically for the corporation. And this is just mind-numbing that nobody says anything in Washington. They like to pretend they’re in charge of something. They’re not. They are just there to do whatever the corporations want them to do.
AMYGOODMAN: Interesting, on that—
DONALDBARLETT: And let me qualify this. This is—and this is my mistake more often, when I say “corporations.” We need to distinguish between global corporations and domestic corporations, which truly are being screwed in Washington. The domestic companies, who—the ones that employ the people in this country, have really taken it in the ear, and only because Washington is—gives a free pass to the international, the global corporations.
AMYGOODMAN: And, Jim Steele, the statement on Apple products, “designed by Apple in California”?
JAMESSTEELE: Right, but manufactured elsewhere. And in the past—I mean, this is the point I was trying to make earlier. In the past, you had a whole chain of people: you had the inventors, you had the designers, you had the people who manufactured, you had the people who sold it, and then, of course, at the end of that you had the consumers that bought that product. And this doesn’t mean that you can’t have factories elsewhere, but the idea that we do not have the capability of building these products in this country, that we do not have all the engineers to do that, I mean, we just totally reject that. I mean, too many people have told us—too many people in manufacturing in this country are very—who are very upset by this whole trend, because they say separating the design from the actual manufacturing floor is a huge mistake. That’s the way so many great things were done in the past.
DONALDBARLETT: That’s where you got your new products from. That’s where you got your innovations from. And if you’re not making it on the floor, doesn’t come.
AMYGOODMAN: We’re going to come back to this discussion. Don Barlett and Jim Steele are our guests, the authors of The Betrayal of the American Dream, the Pulitzer Prize-winning dynamic duo.
And just before break, a clarification for an earlier headline: police in Burlington, Vermont, are being accused of firing rubber bullets at activists protesting a meeting of New England governors and eastern Canadian premiers. Police said pellets were fired but have denied firing rubber bullets. This is Democracy Now! We’ll be back with Jim Steele and Don Barlett in a minute.
AMYGOODMAN: We are joined by Don Barlett and Jim Steele. They are the authors of the new book, The Betrayal of the American Dream. I want to go to the issue of the Olympics since they’re happening in London right now. In 2001, you wrote a story called “Snow Job” about the 2002 Olympics in Salt Lake City, headed by none other than the Republican presidential candidate, Mitt Romney. In your investigation, “Snow Job,” about these Olympics, which you published in Sports Illustrated, you reported, quote, “The $1.5 billion in taxpayer [dollars] that Congress is pouring into Utah is 1.5 times the amount spent by lawmakers to support all seven Olympic Games held in the U.S. since 1904—combined.” Jim Steele?
JAMESSTEELE: Well, it’s an interesting position for somebody who’s against new taxes and wants to cut the deficit, that here you had somebody heading an Olympic committee where that entire operation raided the federal Treasury like no other Olympics in history. And they got everything: Salt Lake—infrastructure around Salt Lake, sewer lines, land exchanges that transformed the average snow resort, ski resorts into world-class resorts. All of these things happened one way or another under Romney’s watch. And that’s what astonished us about this comment he made where he was dissing the London Olympics, I mean, because—that they’re not operating right, they’re not doing this right. I mean, the whole—I think he’s so vulnerable on that issue, and everybody who had anything to do with the Salt Lake Olympics is very vulnerable on that. The thing that struck us so much—and here was Utah, a state famously with a great antipathy to paying any kind of taxes, but they had absolutely no qualms whatsoever about raiding the federal Treasury to take care of all of their needs for really the next generation. So, the fact that he would make this point in London just, frankly, astonished us.
DONALDBARLETT: Jim’s right. I mean, Utah got out of this anything they wanted. The states—other states would have had to have paid for on their own, Utah got from the federal government. And so, it’s—the other thing is this hypocrisy of people like Romney who want everyone in the middle and the bottom to pay their own way, but they themselves have no trouble grabbing as much money as they can get out of Washington. And they do it all the time. And it’s just—it’s just astonishing. But people generally don’t know it. The news media does not do what it should do on this area—never has. And so, there—part of the problem here is because most people today get their news from TV, and it’s not public TV, as you well know, it’s commercial TV. And commercial TV is not about to do this kind of work. It just isn’t.
AMYGOODMAN: It’s interesting, with NBC covering the Olympics around the clock, we’re not seeing any of the protests that are taking place and the increasing anger of the small businessmen in East London who are getting wiped out, the whole issue of not criticizing the corporate sponsors, the corporate sponsors—
DONALDBARLETT: Right, right.
AMYGOODMAN: —getting huge numbers of seats, yet they don’t fill them. These arenas are now empty, and so the British government is trying to get soldiers in there, their families, school kids—someone.
AMYGOODMAN: But it shows that these seats—and these arenas, these stadiums were sold out years in advance, and now no one’s there, because the corporations aren’t people.
JAMESSTEELE: Yeah, the Olympics, like so many—
DONALDBARLETT: Oh, well, yeah. Yeah, wait a minute.
JAMESSTEELE: Like so many of these other issues. I mean, like Don said, I mean, Romney and so many of the policies that he advocates will benefit very few. I mean, his tax structure, the tax structure of the wealthy in this country—the tax structure of the whole country is now geared just solely to benefiting the wealthy. I mean, some of the statistics are amazing. I mean, the wealth of the top 1 percent in this country is greater than the wealth of the bottom 90 percent. That is a staggering figure.
And one of the things that has made that possible has been a whole series of tax changes over a long period of time, mainly in the last 10 years. I mean, one of the things they’ve done in the last 10 years that we just cannot get over was in 2003 when they made dividend income taxable at 15 percent. This was the first time ever that dividend income was treated differently than somebody earning a wage or salary. And the idea that that somehow should be more favored than somebody working in the sweat of their brow is absolutely ridiculous and appalling.
DONALDBARLETT: There’s going to be, you know, in the coming weeks—you know better than anyone—just a constant, you know—I don’t know what you call it. But out of Washington on taxes and how we’re penalizing entrepreneurs and all of that garbage—and I say “garbage” for this reason: if people focus on two numbers—that’s all you need to do—in 1955, the top 400 households in this country, they paid 51.2 percent of their income in taxes. That’s 1955. In 2007, they paid 16.6. And everybody’s talking about a deficit. Of course there’s a deficit, and there’s going to always be a deficit until they impose the tax system that had existed in this country in the ’40s, the ’50s, the ’60s and the ’70s, in which people at the top who had money paid serious taxes. No one—but no one at the top pays serious taxes today remotely close to what their, you know, peers would have paid back in the ’60s and ’70s.
AMYGOODMAN: Journalist Nick Shaxson of your magazine, of Vanity Fair , wrote about Mitt Romney’s fortune, called “Where the Money Lives.” We spoke to Nick Shaxson about how someone as wealthy as Romney has an average personal tax rate, as you were saying, of less than 15 percent.
NICHOLASSHAXSON: This is about the U.S. tax code. This is the way that privileged people like Mitt Romney and other—and hedge fund managers and private equity titans receive their income. They receive it as a thing called carried interest, where—which many people would argue is just like ordinary income. It’s just like a salary earned by anybody else and should earn, you know, the top tax rate, but instead, for historical reasons and reasons of lobbying, it is taxed at a very low rate of 15 percent. Mitt Romney’s tax rate is a little bit lower than that. He has—for various other reasons, he has deductions and earns other kinds of income, as well. But it’s not too far off 15 percent. But carried interest is—the tax treatment of carried interest is the sort of central reason why his tax rate is so much lower than many Americans.
AMYGOODMAN: I want to go to his role—oh, go ahead, Don.
DONALDBARLETT: Well, just, we need to point out, you know, all these pleas for him to release the rest of his tax returns, which every candidate has always done. And he’s, “That’s it. You’re not getting any more from me.” And people wondering—
AMYGOODMAN: And his father, George Romney, set the precedent by doing it for 12 years when he ran for president.
DONALDBARLETT: Yeah, yeah, 12 years, exactly. Well, his father was kind of a straight arrow compared to Mitt. I mean, but we wondered, in the back of our minds—there may not be anything in those returns, but he may be amending them furiously. And this is what candidates do once they reach a point where, “Oh, my god, this is going to become public. We’ve got to go back and clean up the returns.”
AMYGOODMAN: How do you clean it up?
DONALDBARLETT: Well, you file an amended return. And that’s not uncommon. “Aw, gee, we had a mistake here. We need to correct that.”
AMYGOODMAN: And so it completely replaces the one that was there.
DONALDBARLETT: Exactly, exactly. And in our minds, we think, you know, that’s the more likely thing that’s going on here. It’s not that they’re afraid of something in those returns; it’s that they are being sanitized.
AMYGOODMAN: Earlier this month, Mitt Romney gave a series of television interviews defending his role at Bain Capital. This is Romney speaking to CNN’s Jim Acosta.
MITTROMNEY: There’s nothing wrong with being associated with Bain Capital, of course, but the truth is that I left any role at Bain Capital in February of ’99. And that’s known and said by the people at the firm. It’s said by the documents, offering documents that the firm made subsequently about people investing in the firm. And I think anybody who knows that I was out full-time running the Olympics would understand that’s where I was. I spent three years running the Olympic Games. And after that was over, we worked out our retirement program, our departure official program from Bain Capital and handed over the shares I had. But there’s a difference between being a shareholder, an owner, if you will, and being a person who’s running an entity. And I had no role whatsoever in managing Bain Capital after February of 1999.
AMYGOODMAN: That’s Mitt Romney speaking on CNN. James Steele?
JAMESSTEELE: I think that that whole story is still probably evolving and developing, exactly where he was at that time. It’s just one of the reasons it would be nice to see the tax returns, to see exactly what some of that material said at the time. But I think the most significant thing about Bain isn’t just that period of time. Bain, like every one of the private hedge funds, the private equity funds, very much involved in basically killing jobs one way or another, and—because when they take over a company, people are jettisoned, let loose, streamed down. Sometimes the work is sent offshore. And that’s just the way they work, and they’ve always worked that way, whether it was when he was there or after. It’s just the common way all those private equity funds function.
And I think that’s why so much of a furor has built up about this, because people know this. I mean, that’s the thing we found out when we went around the country and we talked to people here and there. People know what’s going on in this country. They know a lot of the deck is being stacked against them. They know that they’re almost powerless when one of those companies buys a company. I mean, some very famous companies, like Birds Eye, were bought by another private equity firm, Blackstone—all kinds of people let go, the company is supposedly streamlined. You see that sort of thing across industries—food, computers, technology, so forth. That’s just the way that process works, and that’s just how the deck is so stacked against the average person and in favor of the equity companies.
Nick was talking about the carried interest. We have a whole section in the book about carried interest. And it’s a complex concept that people sometimes have trouble getting their mind around.
AMYGOODMAN: And if you could explain it simply.
JAMESSTEELE: But it is just an outrageous thing. The idea is, if you are heading one of those private equity funds, you take a portion of the interest of one of these companies that you are theoretically managing. Part of your salary comes in a—part of your money comes in a salary, a direct salary, which is paid in normal rates. But part of it is supposedly an interest in this company. But you haven’t bought that interest. You’ve just been given it as the manager. And then, when you cash out on that, because it’s supposedly you were an investor, you pay the 15 percent. And that, as much as anything, as Nick was talking about, is why somebody like Romney and other private equity moguls pay 15 percent.
Now, there was a big boomlet to try to get rid of this a few years ago. And there were hearings in the Senate and the House. And a lot of people thought, “Oh, boy, this thing is going to change.” But once again, people do not seem to realize how powerful those interests are in Washington. And they trotted out all kinds of people to lobby against it, mainly the private equity funds. I mean, Henry Kravis on down the line, all of those people actually paid visits to Capitol Hill.
AMYGOODMAN: It’s called “vampire capitalism”?
JAMESSTEELE: “Vampire capitalism”, that’s—excellent word. That’s exactly what it is. And they defeated the effort to try to change that. I mean, this Congress, you couldn’t do it at all, but back then there was a little bit more common sense that some people had. But even then, they couldn’t get that thing changed. And it, as much as anything, illustrates how this system is totally geared against the average person. There is no defensible—no defense for that tax break. And it’s something that was not basically used years ago, but it’s typical how folks in power figure out a way to bring the code to their advantage. And when it happens, Congress should amend it and change it. But because of that interest and that lobbying, that’s frustrated.
AMYGOODMAN: I want to turn to President Obama’s recent attack on Mitt Romney’s record at Bain Capital.
PRESIDENTBARACKOBAMA: I have said, let’s stop giving tax breaks to companies that are shipping jobs overseas, let’s give tax breaks to companies that are investing right here in the United States of America and investing in American workers, so we can make American products stamped with those three proud words: “Made in America.” That’s how we build an economy that lasts, and that’s why I’m running for a second term as president. Now, Mr. Romney has got a different idea. You know, he invested in companies that have been called pioneers of outsourcing. I don’t want to pioneer in outsourcing. I want some insourcing. I want to bring companies back.
AMYGOODMAN: That’s President Obama. By the way, he is in New York tonight at the NoMad Hotel at a fundraising dinner, 60 guests spending $40,000 each at a hotel near the Gramercy Park.
JAMESSTEELE: We won’t be there.
AMYGOODMAN: But his idea?
JAMESSTEELE: Well, his idea, I mean, is a very valid idea, because one of the things that’s been happening with the multinationals is a lot of the money they earn offshore, they keep offshore. The estimates of the amount of money that companies like Apple, the technology companies, the pharmaceutical companies, some of the big manufacturing companies—their estimates are $2 trillion is sitting in foreign accounts that they will not bring back to this country. And the reason they will not bring it back, they say, is because of this onerous U.S. tax rate.
But the fact of the matter is, once, a few years ago, Congress waived that and let a number of them bring money back—and my memory is they brought back $3.3 billion in some of the assets that were there—with the understanding that they would create jobs here. But you know what they did? Those same—the leading companies that brought their money back actually killed 20-some thousand jobs, did not create jobs. I mean, it just gets back to what Don was saying earlier in terms of the power of these multinational corporations. They’re beyond our control theoretically. And even when they get a right like that, it’s not enforced. And as a result of that, no jobs are created.
AMYGOODMAN: I want to talk about breaking up the mega banks with you, pensions, what’s happening to them, retirement and more. Don Barlett and Jim Steele, authors of the new book, The Betrayal of the American Dream. Twenty years ago, they wrote America: What Went Wrong? While they were accused of exaggerating, they now say they didn’t go far enough. Stay with us.
AMYGOODMAN: Our guests for the hour are Don Barlett and Jim Steele. They are the Pulitzer Prize-winning dynamic writing duo, who are writing most recently for Vanity Fair. Their latest book, out tomorrow, The Betrayal of the American Dream.
The former CEO of the banking giant Citigroup is drawing headlines for publicly calling for the breaking up of the nation’s largest banks and for restoring the separation of commercial and investment banking. Sandy Weill made the comments last week in an interview on CNBC.
SANFORDWEILL: What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, and have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.
BECKYQUICK: That’s a pretty radical idea, though, the idea of breaking up the investment banks and the banks. Are you suggesting going back and really breaking these companies up?
SANFORDWEILL: That’s exactly what I’m suggesting. I want to see the United States be the leader. I mean, and I really believe in our country. And we’re not going to be a leader if we keep on trashing our institutions.
AMYGOODMAN: Former head of Citigroup, Sandy Weill, very significant, because he was a major lobbying force—
AMYGOODMAN: —to end Glass-Steagall. Of course, President Clinton signed off on it. And now this is what he’s saying. Don Barlett, Jim Steele?
DONALDBARLETT: Well, we’ll both take a shot at this. But there was a reason that this law went into—Glass-Steagall went into place after the Great Depression. There was no reason whatsoever to change it. And everybody who recommended that was flat wrong. Now, I don’t know where Weill is coming from now—has some terminal disease and he wants to clear his conscience or what. It never should have been repealed. That served to benefit only one tiny slice of the population: the people at the top. And it did enormous harm to broad middle-class America. It’s one reason, in part, why people lost their homes.
JAMESSTEELE: I mean, one of the things that happened after the removal of that firewall is it then became—the whole mortgage industry—
AMYGOODMAN: The commercial banks and the investment banks.
JAMESSTEELE: Commercial banks and investment banks—the whole mortgage industry was transformed by this. If you go back a few years and you were buying a house or a co-op or a condo or whatever it was, you almost had to mortgage your first-born child in order to get a mortgage. I mean, you had to go through a very dramatic process. But because selling the mortgages, the fees and so forth, was more important than whether—the person’s ability to pay and so forth, led to all kinds of abuses. It wasn’t just they put people in houses who shouldn’t have been there. They actually tricked an awful lot of people who had been in their house but who had been misled about the provisions of those instruments, because the fees up front were so important and so significant.
So, if he’s now—if Weill is now finally getting religion, that’s wonderful. It’s hard to imagine what has provoked this. But the fact is, he’s absolutely right, and it never should have happened. The fact that—I think Clinton signed it because it was part of the whole deregulatory mindset that has gripped this country for really the last two or three decades. Before that, it was true in airlines, it was true in the trucking industry—two industries where the wages have been driven down, the earnings driven down tremendously for the people who are in those fields. And the profits of many of the companies in those fields have not been borne out. Both those industries have just been in total chaos for 20 to 30 years. And they extended that. Even with that record in 1999, they further repealed Glass-Steagall, which then further added to that chaos in financial services.
DONALDBARLETT: The other thing that runs along with this is that the jobs—everybody talks about creating jobs. Nobody looks at the kind of jobs that are being created. They at the bottom end of the wage scale, which also, you know, fuels this ripple effect, really, on tax revenue and Social Security revenue, because under the old system in which people had jobs that paid solid middle-class wages, now you’ve got jobs in which people pay little or no taxes because they don’t make enough money to pay the taxes. And that, in turn, impacts the deficit. And so, people who are talking about, “Well, we’re going to—we’ve got to fix this deficit overnight,” are just people who want to take care of the tiny 1 percent at the top. There is no other reason to do that.
AMYGOODMAN: You write, “Deregulation is one of the greatest triumphs of America’s ruling class, but [for] middle-class workers and their families the fallout has been devastating.” What about retirement and pensions?
JAMESSTEELE: One of the most astonishing statistics that we think we have in the book, because we were not aware of this statistic: since 1985, almost 85,000 pension plans have been killed. In the ’50s, the ’60s, the ’70s, even into the early ’80s, more and more people were eligible for pensions, defined benefit plans where you got a specific benefit when you did retire. But since the mid-’80s, corporations, with the great assistance of Congress, have been shifting people out of pensions into 401(k) plans. Now, there’s nothing wrong with 401(k) plans, but originally they were viewed just as a supplement to a pension. They were not viewed as a pension. But corporations saw this would be a lot cheaper for them. It would shift the responsibility totally to the employees and the workers. But it would also not contribute enough to really take care of their retirement needs.
So, what’s happened in—this is one of the greatest title shifts in the country, because we were going in a certain direction for decades, middle-class people—I mean, not everybody had a pension. We know that. But more and more did over time. But since the ’80s, this has now been totally reversed. And it raises all kinds of questions about what retirement is going to be like for people. The main question is, people are going to have to work forever, and yet what are those jobs going to be? What are they going to pay? And it also puts pressure then on people coming into the workforce. How are they going to get a job if people are having to work between 65 and 75 years old? That’s going to put even more pressure on the jobs that are left.
DONALDBARLETT: And the other irony of this is—this is almost another Sandy Weill incident. You have the current head of AIG, who was not there during the collapse. He had nothing to do with it. He worked for another global insurance company. He was brought in after AIG collapsed, and the taxpayers bailed them out, and they still haven’t paid everything back yet. He was quoted as saying earlier this year that people are just going to have to get used to the idea of working until they are 70 or 80. Now, he made that pronouncement from his villa in Dubrovnik in Croatia.
You’re going to work ’til you’re 80? We have a friend down who, you know, is a job recruiter, basically. And she said, “Look”, she said, “if you’re over 50 now, you’re going to have trouble getting a job.” She said, “I hate to say it, but I tell people, ‘You can’t look your age anymore. You really can’t.’” And she’s talking about somebody in their fifties and maybe 60. Eighty? You’ve got to be kidding me. I mean, we have Betty.
JAMESSTEELE: Yeah, there’s a woman in the book—
DONALDBARLETT: A woman in the book.
JAMESSTEELE: —who is solely dependent on Social Security, as millions of Americans are, who had to continue to work well beyond 65. She actually for a long time delivered meals, Meals on Wheels, to people in some cases younger than herself. She worked for a tax preparation company for another 20 years until she was laid off in her late eighties. Still looking for work at this point. That’s very true of many people. So, even if you get a job, though, you’re going to be putting pressure on the other end of the workforce.
AMYGOODMAN: Very quickly—
DONALDBARLETT: And the one job I was counting on was being a greeter at Walmart. Now Wal-Mart has killed their greeter program. I mean, so, what are you going to do?
AMYGOODMAN: Veterans, what they used to face, what they face today?
JAMESSTEELE: One of the places we visited was a veterans’ center outside of Fort Myers, Florida. And this is what brought the mortgage crisis home to really us. It isn’t the story of people who just are buying a house who maybe should not own a house. Many of the veterans in that center had owned houses for many years. But some of them had been tricked by the circumstances of their mortgage. Some had lost their home. Some were on the verge of losing their home. These are after people—some of these people, their service went back, a couple of them to World War II, many to the Korean War, Vietnam, and so forth. Beyond that, the young veterans coming into this center, some of whom have done all the right things—they had served multiple tours of duty. One, in particular, had gone back to college, gotten his degree, but then began to look at what was available out there and was thinking about re-enlisting, then in his mid-thirties, because he saw no real job opportunities.
This is one of the underlying things of the book. We make the point, yeah, manufacturing got hammered and continues to be get hammered over time, but our jobs are supposed to be these knowledge-based jobs, the smart jobs, the service jobs. These are now—the whole process that began eliminating the blue-collar jobs has now moved into the white-collar field, with a real vengeance. Even the Labor Department is finally sensing this. And they had a study a couple years ago. It said 160 service occupations, 25 percent of the entire service workforce, is susceptible to offshore.
AMYGOODMAN: We only have a few minutes. You have a whole chapter, the last chapter, “Restoring the American Dream,” which is devoted to solutions. Lay them out.
JAMESSTEELE: Well, one of what—the most obvious thing to us and the thing we put first is the tax code. The tax code needs to be amended. The folks who can afford to pay more should. Almost every poll out there shows widespread American support for this. I mean, this is what’s so bizarre about Boehner’s comment about raising taxes on people who make money. It’s just totally ridiculous. People can afford—in fact, many rich people say that and have come forth to say that, so—and putting in multiple brackets. And brackets mean the more you pay—the more you earn, the more you pay. That’s the way things used to be, and the country thrived under that system, and it didn’t penalize anybody and didn’t create class warfare, had actually created a very broad-based society.
Trade policy is another that needs to be amended. Don’t just have our door open, let everybody send their stuff in, unless they’re going to do the same with us, which has never happened. We’ve never had the guts to enforce the proper trade policy.
A significant thing we also talk about is, we really need to invest in the country, because corporations aren’t. So many of them are going abroad. A true broad-based investment infrastructure and many other things. The largest peacetime infrastructure investment program in this country was under Dwight Eisenhower in the ’50s: the interstate highway program. And that was with broad, bipartisan support. I mean, that’s what we need to get back to in this country. Obama’s rather anemic stimulus program was roundly condemned by conservatives, when in fact it’s things like that that are part of the solution to the problem.
AMYGOODMAN: We’re going to end the conversation here. We’re going to continue it offline, post it at democracynow.org. Don Barlett, James Steele, the Pulitzer Prize-winning dynamic reporting duo. Their latest book is called The Betrayal of the American Dream. They are authors, 20 years ago, of the number one bestseller, America: What Went Wrong?
Things like “our politicians are looking out for our best interests and national security” – phooey!
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