What might Dr. Martin Luther King Jr. be saying, right about now, if he had somehow survived the ’60s? How would he have reacted last week after Wall Street's JPMorgan Chase announced a $1 million donation to Haitian relief, then one day later unveiled a bonus pool that equals twice the entire Haitian GDP?

Dr. King might have repeated what he told his future life partner, Coretta Scott, back in 1951. A small elite, the young Martin Luther King noted, should not "control all the wealth.”

“A society based on making all the money you can and ignoring people's needs,” he would add, “is wrong.”

Still is. How do we go about overcoming that wrong? This week, in Too Much, we have some suggestions.

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Realtors in Manhattan ought to be salivating. A Fifth Avenue condo that sold a decade ago for $11.5 million resold last month for an astounding $33 million. And the record new round of Wall Street bonuses surely means a huge new demand for luxury digs, right? Not so fast, says Jonathan Miller, the top gun at New York’s Miller Samuel Real Estate Appraisers. What’s the problem? The new bonuses, explains Miller, “will be more concentrated than ever toward the top.” The total bonus pool may be larger, but relatively little of that will be going to middle managers. Laments Miller: “That softens the impact of bonuses on real estate.”

A strike by hotel workers in San Francisco may soon turn into a national walkout, hotel worker union president John Wilhelm told the Press Associates news service last week. The big hotel chains, says Wilhelm, have “figured out how to lay off enough staff to remain profitable even in this economic crisis.” How profitable? This past November, on the same day workers at the San Francisco Grand Hyatt struck, the Pritzker family that owns Hyatt scored a $900 million payday on an initial public offering of the chain’s stock. Three months earlier, notes labor journalist David Bacon, Hyatt fired all the housekeepers in the chain’s three Boston hotels and replaced them “with workers earning half their wages.” Hyatt CEO Mark Hoplamazian took home $6.7 million in 2008 . . .

Banking colossus Citigroup, thanks to bailout tax dollars, is doing quite a bit better these days, and no one may be happier about that than Saudi Prince Alwaleed bin Talal, the nephew of Saudi King Abdullah. The tycoon prince has just shifted 180 million of his personal Citi shares — now worth just under $600 million — into Kingdom Holdings, a global investment group he controls. The newly appreciated Citi stock will help Kingdom bankroll the prince’s biggest project ever: a $26.6 billion complex in the Saudi capital that revolves around what will become, once complete, the world’s tallest skyscraper. At over one kilometer tall, Prince Alwaleed’s spire will stretch 172 meters higher than the just-opened Burj Khalifa in Dubai, the world’s current tallest edifice. The prince’s total personal fortune now stands at $18 billion . . .

Back in the mid 20th century, in one U.S. city after another, the grand private estates of America’s original Gilded Age regularly evolved into public museums and college campuses. The United States, at mid century, simply didn’t have enough super rich to maintain a Gilded Age lifestyle. That has, of course, all changed. Over recent years, the mansions-turned-museums have been turning back into private manses. Earlier this month, one of the most fabled of those mansions — the Newport, Rhode Island summer home of the uber rich Astors — made the switcheroo. The Astor “Beechwood” estate had been a museum where actors, in 1891 garb, “interviewed” tourists for jobs as butlers, footmen, and housemaids. The new owner of the 39-room mansion: a private equity company run by Larry Ellison, the California software billionaire. He paid $10.5 million . . .

America’s newest network TV “reality show” revolves around a most unreal premise: that CEOs really care about improving the on-the-job drudgery that faces their workers. Debuting February 7 on CBS, Undercover Boss will follow CEOs, identities concealed, working at “the grungiest of the low-level jobs” their companies have to offer. The prime-time goal of each boss: “to see how things can be done better and find workers who deserve recognition.” The ten-episode series has so far lined up CEOs from Waste Management Inc., 7-Eleven, White Castle, and Hooters. The new Undercover Boss, veteran media man Stuart McLean gushed recently to the Los Angeles Times, proves that “CEOs aren't afraid to get their hands dirty.” Make that “some” CEOs, says Stephen Lambert, the show’s exec producer. Lambert says he has “lost count” at how many corporations “turned him down for a warts-and-all look at their inner workings.”

Quote of the Week

“I don't know where people would go for comparable salaries. I guess perhaps they could star in major motion pictures.”
Rep. Barney Frank (D-Mass.), chair, House Financial Services Committee, commenting on Wall Street claims that any tax on bonuses would have banking talent fleeing the financial industry, Washington Post, January 14, 2009

Stat of the Week

The OECD, the Paris-based economic research arm of the world’s industrial nations, has just released figures on the size of the global bailout of the financial sector. The international total — counting direct infusions of capital, debt guarantees, and asset purchases — has so far run $11.4 trillion. The U.S. share of that bailout: $6.4 trillion.

A Banker Bonus Dilemma for Reformers

Would a stiff tax on banker bonuses blunt Wall Street profiteering — or let the vast majority of America's wealthy off the hook?

“Wall Street,” the New York Times observed earlier this month, “is confronting a dilemma of riches: How to wrap its eye-popping paychecks in a mantle of moderation.”

The wrapping isn’t working. President Obama has already called the latest round of banker bonus payouts “obscene” — and America’s biggest investment bank, Goldman Sachs, hasn’t even yet reported its 2009 bonus total.

JPMorgan Chase has. On Friday, the bank announced a $9.3 billion set-aside for the 24,654 employees in its investment banking operations. The bulk of that will go to the bank’s top execs and traders. In 2008, 1,626 JPMorgan personnel collected bonuses over $1 million. The firm’s top 200 averaged $5.6 million. They’ll do better in 2009. The bank’s earnings over doubled for the year.

By this week’s end, the nation’s biggest banks and securities firms will almost all have reported their bonus totals for the year. The overall compensation payout, estimates the Wall Street Journal, will hit $145.9 billion. That’s 18 percent over pay at America’s financial giants in 2008 and 6 percent more than pay in 2007, the previous record year.

These over-the-top totals are creating dilemmas for more than just bankers. Politicians who've been pocketing generous banker campaign contributions for years are now desperately trying to figure out how they can look “tough on Wall Street” — and not upset their personal gravy cart.

And real reformers face a dilemma, too. That dilemma: With Wall Street having gone arrogantly rogue, how best to react?

Would a bonus tax be the best riposte? In Britain, authorities have already moved in that direction. They’ve placed a one-time 50 percent tax — on banks — for any bonuses they shell out over £25,000 per individual, about $40,000.  

A growing group of lawmakers in Congress are backing similar proposals. Rep. Peter Welch from Vermont last week introduced legislation that would fix a 50 percent tax on bonuses over $50,000 at banks that accepted aid under the federal TARP bailout program.

Rep. Dennis Kucinich from Ohio, meanwhile, is pushing a bill that would put a 75 percent tax on all large banking industry bonus payouts, “whether the bank has received or repaid TARP funds or not.” 

But taxing banks on their big bonus payouts, other progressives believe, may not be a comprehensive enough answer. In the UK last week, over 100 members of Parliament “demanded curbs on the pay and perks of all top earners,” not just those in the banking sector.

The UK one-time 50 percent tax on banker bonuses, the MPs charged, “has done very little, if anything” to dampen down the corporate “culture of excessive pay.”

Taxing only banker bonuses, progressives like these are arguing, leaves untouched the enormous windfalls that have been pouring into power-suit pockets elsewhere in the economy.

Banker bonus taxes, for instance, don’t touch hedge fund managers. In the go-go subprime years, the New Yorker magazine detailed last week, these hedgies worked hand-in-glove with top investment bankers.

At one point, hedge fund kingpin John Paulson and bankers together assembled “bundles of the most absurdly toxic mortgages.” The banks then sold these bundles to “hapless investors,” collecting fat fees in the process, and Paulson promptly bet — with credit default swaps — that those toxic bundles would crash. They, of course, did.

In 2007, Paulson scored nearly a $4 billion personal profit.

To forestall the crises that chases after such grand fortune inevitably engender, the Washington, D.C.-based Institute for Policy Studies last week urged Congress and the White House to consider broader steps than taxes on just banker bonuses. The progressive think tank is calling for a 50 percent surtax on all individual income over $2 million.

“In the current economy,” the Institute explains, “all super incomes — not just banker bonuses — represent windfall profits made possible by the sacrifices working Americans have made to stabilize the nation's financial system.”

Even with a 50 percent surtax on income over $2 million, adds the Institute, America’s richest would still be paying taxes at a lower overall rate than their counterparts during the Eisenhower years.

The Institute also wants Congress to limit the tax deductions corporations can take on executive pay — to $500,000 per executive, or 25 times the pay of a company’s lowest-paid worker. To discourage speculation — and drain the pool of cash available for executive bonuses — the Institute is pressing as well for a “financial transaction tax,” a modest levy on securities and currency trading.

The financial transaction tax notion has won broad support among European governments, but U.S. Treasury secretary Timothy Geithner has repeatedly dissed the idea.

The Obama administration, instead, is now pushing a “financial crisis responsibility fee” designed to recoup from big banks, over the next 10 years, the $117 billion the bailout TARP program seems likely to end up costing.

But Wall Street doesn’t seem particularly worried about this new proposed fee. The share prices of big bank stock actually rose after the White House announced the new fee plan, perhaps because the new tax, if enacted, would only tax away about 5 percent of bank profits.

The feds, says financial analyst James Kwak, should be moving to recover much more from banks than the $117 billion TARP tab — since TARP represents “only a small part of the government response to the financial crisis.”

JPMorgan Chase CEO Jamie Dimon, in the meantime, is loudly opposing the White House bank fee — and every other attempt to end excess on Wall Street.

“Using tax policy to punish people is a bad idea,” he pronounced last week.

But not all Wall Streeters remain unrepentant. One former financial superstar, the 71-year-old Citigroup co-founder John Reed, says Wall Street won’t regain any serious public trust until banks scale back their bonus outlays for good.

As of yet, Reed has seen no scaling back. Nothing he has seen, Reed acknowledges, “gives me the slightest feeling that these people have learned anything from the crisis.”

“They just don’t get it,” says Reed. “They are off in a different world.”

A world that pays well. More unconscionably well than ever before.

New Wisdom
on Wealth

Steve Butler, Punitive tax reform for some banks overdue, San Jose Mercury News, January 12, 2010. A financial columnist explains why a “dose of shame might do some good for Goldman Sachs.”

Kristi Heim, Should Wall Street execs be required to donate to charity? Seattle Times, January 12, 2009. A philanthropy beat reporter explains why reducing America's gap between rich and poor “could do a lot more good than contributions to charity.”

Steve Waldman, Inequality and the Macro-Economy, Seeking Alpha, January 13, 2010. An intro to recent debates on the impact of income maldistribution by “one of those people who thinks that extreme inequality is inconsistent with a healthy economy.”   

The Encroaching Deserts Among Us

Ajamu Dillahunt, Brian Miller, Mike Prokosch, Jeannette Huezo, and Dedrick Muhammad, State of the Dream 2010: Drained – Jobless and Foreclosed in Communities of Color. United for a Fair Economy, January 13, 2010.

For the past half-dozen years, the Boston-based United for a Fair Economy has been publishing a Dr. Martin Luther King Jr. holiday report that zeroes in on the glaring problem the 20th century should have solved but didn’t: the massive disparity of wealth between white communities and communities of color.

State of the Dream 2010, the just-published seventh edition in this series, offers up still another disturbing update on America’s racial and ethnic divide.

“The Great Recession,” State of the Dream 2010 details, “has pulled the plug on communities of color, draining jobs and homes at alarming rates while exacerbating persistent inequalities of wealth and income.”

You’ll find all the relevant numbers here. Unemployment? Among African Americans, that now stands at 16.2 percent, among Latinos, 12.9 percent, both figures well over the 10 percent national average.

These jobless rates are translating into higher foreclosure rates, in communities of color already devastated by predatory lending practices that routinely shoved homebuyers who qualified for regular mortgages into high-interest subprimes.

So what should we do? We need to do, State of the Dream argues, what the federal recovery plan so far hasn’t done: start targeting help to those communities suffering the most from unemployment and foreclosures.

Ten members of the Congressional Black Caucus tried to make that point last month. They urged that 10 percent of all federal job-creation monies go to regions with the highest jobless rates.

In public health crises, State of the Dream notes, we already regularly target special help to those most in need. Why not extend that approach?

“No one objects if children, pregnant mothers, or the elderly are given extraordinary access to flu vaccines before the general public gets access,” the UFE report points out. “Economic policy should emulate public health policies and heal the nation by supporting the most vulnerable first.”

If we focus on communities hit hardest by joblessness and foreclosures, the report argues, we would both “help bridge the racial wealth divide that has long torn our nation apart” and, at the same time, start “lifting white working class families who have been left behind in our increasingly stratified economy.”

The federal government, State of the Dream 2010 observes, has been “targeting” big-time — to the rich — for years now. The George W. Bush tax cuts have “overwhelmingly” benefited “America’s wealthiest individuals, at the expense of the national debt and important public programs.”

In 2010, an incredible 37.8 percent of the tax cuts enacted in the Bush years will go to the richest 1 percent of U.S. households. That targeting to the top, says State of the Dream, needs to end.

And if we reverse that targeting, suggests the new State of the Dream, all America would ultimately benefit, not just the denizens of the barren economic deserts that high-unemployment, high-foreclosure communities have become.

“Like the deserts of the natural world, the deserts of the economic world can spread and encroach on the fertile lands nearby,” sums up State of the Dream 2010. “It is in all our interests as a people to let it rain in the deserts.”

Inequality Links

Working Group
on Extreme Inequality

Common
Security Clubs

United for a
Fair Economy

The Equality Trust

Wealth for the
Common Good

Too Much is published by the Institute for Policy Studies: Ideas into action for peace, justice, and the environment. 1112 16th St. NW, Suite 600, Washington, DC 20036. (202) 234-9382. E-mail: editor@toomuchonline.org. Unsubscribe.

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