A storm is brewing, a political storm. Earlier this month, a new national poll found that nearly two-thirds of Americans believe that government policies since last fall have significantly helped “large banks.” Only 10 percent of Americans, notes this same Hart Research Associates poll, believe they themselves have received any meaningful help.

These poll numbers reveal a staggeringly deep frustration among Americans, and frustrations this deep can evolve, politically, in two completely different directions. On the one hand, this sort of frustration can help generate support for progressive action that directly challenges concentrated wealth and power.

On the other hand, this frustration could translate into a politics of ugliness and create “fertile ground,“ as former Labor Secretary Robert Reich recently warned, for demagogic attacks on society’s least powerful and most vulnerable.

In this week’s Too Much, we look at an innovative new grassroots effort that’s working to challenge that ugliness — and the inequality that breeds it.

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In 2007, amid the frenzied climax of the housing bubble, the CEOs of Fannie and Freddie Mac, the government-backed mortgage loan giants, took home $12.2 million and $19.8 million respectively. Last fall, Fannie and Freddie crashed, and, as part of the subsequent federal bailout, these two execs were ushered out the door. The top fed regulator for Fannie and Freddie proceeded to solemnly pronounce that their successors would be taking home “significantly lower” paychecks. But that pronouncement apparently doesn’t apply to executives just below the CEO level. Freddie’s new chief financial officer, Ross Kari, started work earlier this month with a $2 million cash “signing bonus” and a total annual pay package worth $5.5 million. The federal government, after pumping $51 billion into Freddie, now holds a 80 percent ownership stake . . .

How could the CFO of a taxpayer-owned company like Freddie Mac make 14 times more than the President of the United States? Turns out that the new federal pay czar, Kenneth Feinberg, doesn’t have jurisdiction over Freddie. But if he did, nothing likely would be different. Feinberg has already okayed a $10.5 million annual pay plan for the new CEO of AIG, the bailed-out insurance powerhouse. And Feinberg, according to news reports, will soon be announcing an overall pay czar strategy that figures to be equally generous to other top execs. To discourage reckless “risk taking,” he’s going to insist that banks shift executive salary dollars from cash to stock that has to sit on a shelf for several years. The Feinberg plan, the New York Times reports, strikingly resembles a pay plan “that Merrill Lynch adopted voluntarily in 2006.” Merrill’s plan didn't prevent reckless risks — or executive windfalls. Some Merrill execs, despite their company’s collapse, “still stand to collect millions of dollars in stock.”

By global standards, CEOs in India come cheap. India’s 30 top-paid execs last year, all together, made just $100 million. Chesapeake Energy’s Audrey McClendon, last year’s fifth highest-paid U.S. CEO, made $114 million all by himself. Last week, India’s corporate affairs minister politely urged his nation’s corporate elite to avoid such “vulgar” paydays and try, a la Mahatma Gandhi, to lead a “life with much simplicity.” Indian corporate leaders, in response, urged minister Salman Khurshid to mind his own business. Indian union leaders, meanwhile, blasted Khurshid for his unwillingness to back specific limits on executive pay. India already has a minimum wage, noted All India Trade Union Congress secretary D. L. Sachdev. The nation, he added, now needs a “maximum remuneration.”

Out with the opulent! Neiman Marcus, the Dallas-based luxury retailer, is going whimsical. The iconic chain has just released its annual Christmas catalog — without a single multi-million-dollar fantasy. This year’s most-hyped catalog entry: a $25,000 electric car in the shape of a cupcake. The most expensive: a $250,000 “his and her” two-seater airplane, a far cry from the $3.5 million “skycar” in the 2005 catalog. Seven-figure catalog fantasies used to guarantee Neiman Marcus millions in free publicity. Now other retailers are playing the same game — Victoria’s Secret last year offered a jeweled bra for $5 million — and Neiman Marcus is stumbling. Sales have sunk “by double-digit percentages for 12 straight months,” and the retailer's total losses, in fiscal 2009, hit $668 million. This year’s catalog whimsy may actually be desperation . . .

That desperation seems to be spreading throughout America's retail sector. The reason? The recession, of course, is depressing sales. But even more blame may lie with the private equity firms that have borrowed heavily to buy up retailers and dumped the cost of paying back those loans on the companies they acquire. This payback burden, Retail Traffic noted earlier this year, “can destroy the acquired firm.” Neiman Marcus, a private equity pick-up in 2006, hasn’t yet gone under. But other firms have. The New York Times last week documented how two decades of serial private equity takeovers have driven one top American mattress maker, Simmons Bedding, into bankruptcy. The company’s various private equity owners, the Times notes, “have made around $750 million in profits from Simmons over the years” — and left the company $1.3 billion in debt. Private equity kingpins, says Leo Girard, the president of the union that represents Simmons workers, “stuck their greedy hands under the mattress and pulled out money.”

Quote of the Week

“Huge gap, rich to poor. This is unhealthy."
The Dalai Lama, accepting a U.S. foundation human rights award in Washington, D.C., October 6, 2009

New Wisdom
on Wealth

Zinta Lundborg, Harvard’s Sandel Says Free Markets, Bonuses, Are Not Sacrosanct, Bloomberg, October 5, 2009. A leading philosopher discusses why we need to question outsized bonuses in the good times as well as bad.

Jeremy Deller, Tracey skips the levy, Guardian, October 5, 2009. Some more reasons to call the bluff of rich folk who say they'll flee their native shores if taxes on the wealthy start climbing.

Robert Frank, What if Only the Rich Recover? Wall Street Journal, October 6, 2009. Why the wealthy are staging a much faster recession recovery than anyone else.

Les Leopold, Dwight D. Eisenhower vs. Andrew J. Hall, Huffington Post, October 10, 2009. The $100 million that's going to Citigroup's top trader “demonstrates clearly why we need to return to the 91 percent top bracket income taxes of the Eisenhower years.”

Mending America's Torn Social Fabric

In closely knit communities, people care about each other and help each other, too. But healthy “social fabrics,” as the expression goes, can tear. Inequality can tear them. The wider the income gaps between us, the less we share in common, the less we care about those around us.

Over time, in a deeply unequal society, we come to feel almost totally on our own — and unprotected. Our society becomes a place where people don’t help each. They fear each other.

This past summer, many Americans saw that fear — in TV footage of angry protestors at congressional “town hall” meetings — and wondered whether our deeply divided society is sliding toward a future where hateful demagogues are essentially calling the shots.

But small bands of other Americans weren’t wondering and worrying. They were busily building an infrastructure for an alternate future. The building block for this infrastructure: the “Common Security Club.”

This fledgling Common Security Club organizing, after spending the last nine months pilot-testing and fine-tuning mobilizing materials and strategies, is now ratcheting up to a new and higher level of activity.

Local Common Security Clubs have already started up in over four dozen communities. The clubs typically bring from 15 to 20 people together for face-to-face sessions where they can grapple with their personal financial stresses, learn more about why our economy isn't working, and explore what people can do, through mutual aid and shared action, to increase our economic security.

“It’s important we learn together,” says Chuck Collins, the director of the Institute for Policy Studies Program on Inequality and the Common Good and an organizer of the Common Security Club network. “We ceded too much power to the experts — and now it's time for us to think for ourselves.”

Common Security Clubs are drawing participants from a variety of sources. Some have formed out of church congregations or union locals, others from neighborhoods.

To help all these groups get up and running, a small national staff, assembled by the Institute for Policy Studies and the Massachusetts-based Grassroots Policy Project, has prepared a facilitator’s manual and made all sorts of other resource materials available.

What are the clubs doing? Their efforts vary.

In the spirit of mutual aid, clubs are helping people deal with immediate personal crises — like foreclosures. They're also raising issues around long-term family financial planning, through a club network relationship with Vicki Robin and Monique Tilford, co-authors of Your Money or Your Life, a widely respected program that helps people rethink how they relate to money matters.

These mutual-aid activities, says club organizer Andrée Collier Zaleska, are helping create “tremendous energy for local and community responses.”

But the clubs take that energy further.

“We can’t ignore,” says Zaleska, “how larger economic policy failures wrecked the economy — and the need for ordinary citizens to weigh in on the direction of future economic policy.”

Local Common Security Clubs are starting to do that weighing in. They’re campaigning, for instance, to beat back the Wall Street blitz against the proposed national Consumer Financial Protection Agency.

The club network currently extends from Massachusetts, where the first club formed in Boston, to Washington State, and the press is just beginning to take notice. Organizers see a steady expansion ahead. Want to learn more — and maybe start a Common Security Club within your neighborhood or organization? The Common Security Club Web site covers all the basics.

The current recession, club organizers note, will eventually fade. But the economic ground beneath us has shifted. We can’t return, they note, to the cheap energy and unlimited fossil fuels that used to “grow” our economy — and we don’t want to return to the “bubble” economics that grew our vast inequalities of income and wealth and triggered last fall's crash.

“We need to prepare ourselves and our communities,” sums up organizer Chuck Collins, “for more fundamental changes and a new economic model.”

Why Banks So Want to Keep Us 'Protected'

Leslie Parrish, Overdraft Explosion. Center for Responsible Lending, Washington, D.C., October 6, 2009.

Back in late August, a new executive pay report revealed that CEOs at America’s 20 biggest bailed-out banks pocketed 37 percent more compensation in 2008 than CEOs overall. Tax dollars from average American taxpayers, in effect, are subsidizing excessive banker pay.

But bankers, the Center for Responsible Lending makes plain in this study released last week, aren’t just grabbing tax dollars from average Americans. In huge quantities, they’re snatching consumer dollars — through schemes that amount to outright bank robbery.

The banks, of course, don’t call their scheming “robbery.” They call it “overdraft protection.” In 2008, banks managed to charge their customers nearly $24 billion in overdraft fees for “protection” that hardly any of those customers ever asked for. In 2004, banks collected only $10.3 billion in overdraft fees.

Back then, five years ago, if you went to a checkout counter with a debit card and didn’t have enough money in your account to cover your purchase, the vast majority of financial institutions — 80 percent — wouldn’t let the transaction go through.

Now almost all banks automatically enroll their customers in an “overdraft loan program.” They no longer deny debit card transactions when accounts don’t have sufficient funds. Instead, they let the transactions go through — and then charge the customer a penalty fee that averages about $34.

The average debit card transaction that triggers these overdraft fees: $20.

Consumer surveys, notes the Center for Responsible Lending, “show that consumers would rather have their transaction denied than be approved in exchange for a $34 fee.” No matter. The banks aren’t trying to serve customers here. They’re trying to squeeze them — and succeeding admirably.

But this squeezing, we need to remember, actually predates the economic troubles of the last few years. Fee gouging has been a big part of the banking playbook for nearly two decades, ever since the deregulation of consumer banking — as completed in 1994 — let banks cross state lines and merge together into huge national “financial services” empires.

Banking executives had a powerful incentive to engage in all this empire building: their personal net worth. The bigger their bank, the bigger their paycheck. By the end of 1996, bankers had cut 70 different merger deals valued at over $1 billion. By the end of 1998, they had cut 300 such deals.

Bankers raised the money for all this wheeling and dealing by promising Wall Street that their ever bigger banks would deliver spectacular earnings to investors. The bankers then had to make good on those promises — and they did, by fleecing customers.

One example: Surcharges on using another bank’s ATM nearly tripled, from an average $1.01 in 1996 to $2.86 in 2001. Over that same five-year period, bank credit card late fee income leaped five-fold, to $7.3 billion.

This fee explosion continues. Newsweek financial writer Daniel Gross recently found himself charged $32 when he stopped payment on a check, about the cost, he points out, “to sponsor a child for a month through Save the Children.”

Gross marveled last week at the enormity of the scam our banking giants have been running.  The bankers first blow “the economy up while paying themselves grotesquely large salaries.” Then they “figure out multiple ways to get taxpayers and customers” to bankroll their comeback.

“You've got to hand it to the bankers,” sighs Gross. “Actually, we pretty much already have.”

Stat of the Week

Senator Carl Levin of Michigan will shortly be introducing a proposal to help finance health care reform inside the United States by cracking down on wealthy tax evaders who park their fortunes overseas. Offshore tax tricks, notes Citizens for Tax Justice, cost the U.S. Treasury an estimated $100 billion per year.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.