On September 24th, the New York Times reported Treasury Secretary Henry Paulson as saying "The American people are angry about executive compensation, and rightfully so. Many of you cite this as a serious problem, and I agree. We must find a way to address this in legislation without undermining the effectiveness of the program.” Paulson was ostensibly arguing that banks would rather go bankrupt than face these limits on the compensation paid to their top executives.
Soon thereafter, he capitulated and agreed to the limits, one of the few sticking points in Congress for a massively unpopular bailout bill. It seemed to me at the time that he agreed fairly quickly to this condition, but I chalked it up to his stated desire to get the bailout done with unprecedented speed. Turns out, he agreed to it because they had already figured out a way around the limits.
Today's Washington Post reports that during the tense bailout negotiations, a seemingly minor change took place:
But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.
Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.
Is anyone even surprised with these revelations anymore? So now we know why Paulson decided not to use the auction mechanism after all, in favor of just giving the money directly to the banks. If there were auctions, then the big guys wouldn't get paid as much. Paulson couldn't do that to his old pals (who made $39 BILLION in bonuses alone last year), so he had to change the entire way the program worked. Luckily Congress gave him a bill that let him do whatever he wanted! As Barry Grey remarked during the original debate over executive compensation:
The universal mantra is the need for all Americans to “come together,” put aside their partisan differences and personal interests and accept the need for “sacrifice” in support of the common good—which just happens to coincide with the interests of Wall Street and the multi-millionaires and billionaires who control it.
But Paulson, in his weekend television appearances, was obliged to implicitly acknowledge that there is one segment of society that is not prepared to sacrifice a dime and will not hesitate to throw the country into a depression, if the alternative is the slightest diminution in its seven- and eight-figure compensation packages.
In spite of his intentions, Paulson’s comments demonstrate the utter fraud of the claims that the plan to place the national wealth at the disposal of Wall Street is driven by concerns for the well-being of the American people. His remarks reveal the most basic truth about American society: The interests of the overwhelming majority of the people are entirely subordinated to the money-mad strivings of a financial aristocracy.
The plutocrats call the shots. They determine public policy. They exercise an absolute veto on all decisions taken by the government, which is, in the final analysis, an instrument for the defense and advancement of their narrow and socially destructive interests.
The constant invocations of patriotism are purely for public consumption—a means of blinding the people to the class relations that dominate America.