Former New York Mayor Rudy Giuliani has an interesting trickle down theory. According to Giuliani, the outrageous bonuses for Wall Street figures (many paid for by public funds) are a vital part of economic recovery for average New Yorker. According to Giuliani, the relatively few super rich recipients are a major source of money for the thousands of people who serve their whims and fulfill their wishes for exotic foods, fast cars, and impeccable service. It is basically the same economic theory advanced by that pre-Friedman scholar Marie Antoinette in the eighteenth century but under Giulianiomics, we don’t let the peasants actually eat the cake . . . just serve it.
Giuliani insists: “If you somehow take that bonus out of the economy, it really will create unemployment, It means less spending in restaurants, less spending in department stores, so everything has an impact.” Indeed, these people support many New Yorkers, including some former mayors unable to find regular work.
In the meantime, even Republicans in Congress are outraged by Wall Street bankers receiving $18.4 billion in bonuses in 2008.
Giulianiomics goes something like this:
“Wall Street has $1 billion, $2 billion in bonuses, the city had a deficit. Wall Street has $15 billion to $20 billion, New York City had a $2 billion, $3 billion surplus, and it’s because that money gets spent. That money goes directly into the economy. First of all, it gets taxed as income. Secondly, it gets taxes again when somebody buys something with it.” In other words, all those Botox doctors, skin pealers, and food tasters who rely on Mr. Guiliani’s friends for employment need us to continue to fund these windfall checks. Then there is Guiliani himself, who appears equally dependent on the super rich of Wall Street.
In the meantime, New York city is facing cut to meet a $4 billion budget gap in fiscal year 2010 and the city will lose 300,000 jobs, including 46,000 from Wall Street.
For the full story, click here.
They may not have invested in their products but they did a pretty good job investing in their politicians. Surprising that there were no limitations on the payment of such bonuses in the first round of bailouts, isn’t it?
Jill, good point on the credit rating agencies. The fact is the agencies were constantly pressured to rate securities consisting of nothing more than bits and pieces of risky mortgages, stuff that is not even capable of being fairly rated. I have consistently maintained that the only people who didn’t lose money eventually were the brokers. They were receiving commissions on both ends of the deals. I’m sure the smart ones didn’t invest a dime in any of the packages they were putting together.
Mike and CEJ,
I’m squarely in the “The Big Score” camp. I have been since the first AIG “retreat”.
Hi Jill, thanks for the link. I remember Frank Raiter (funny how some people’s names fit their occupation) he is a very honorable man who resigned from S&P’s rather than participate in what he felt was ongoing fraud. In October 2008 he did testify before Congress in the investigation of the credit collapse. It was clearly more than incompetence, people willingly chose to look the other way.
Hi Mike, thanks for your post. I share you disdain for Rudy and am also surprised that anyone holds him in high regard. It was with a little bit (okay a lot) of schadenfreude watching both his Senate and Presidential campaigns implode. Remember his ridiculous battle over the painting of the Virgin Mary adorned in elephant dung; or his $15 million for the Emergency Command Center located on the 23rd floor of 7 WTC which he then typically lied about having selected when it prove to be the worst possible site (guess he forgot about the previous terrorist truck bombing attack in which 6 died).
That this bailout is just one more of the Republican’s attempts to stop Obama’s progressive agenda is possible I suppose, especially when you place it in the context of “We have been sold a phony mythology.” I hoped and continued to hope that more people are seeing through this now bankrupt mythology!
You and many of the other regulars have frequently and excellently addressed this topic before; and I can only say I agree whole heartily!
I, like many others, am most upset about the Iraq War: the selling of the War, exploiting 9/11, lying about WMD, sanctioning torture,
not providing our soldiers with proper equipment,delaying and misdiagnosing Vets so they don’t get the care they need etc. etc..
Now the hypocrisy, when these so called fiscal conservatives who failed to raise taxes to fund/budget for this War of Choice, are so worried about deficits!
P.S. Thanks for letting me vent.
This is practically identical to what went on with AIG
but on a much larger scale, of course until then Andrew Cuomo,
NY’s AG, stepped in.
And also, if you recall, the bank stimulus package WAS presented more as a threat ie ‘Take it, even if you don’t need it, or else
– meaning we’re not going to help you later on if you get into trouble’.
http://jonathanturley.org/2008/10/08/shvitz-spa-and-a-bailout-aig-officials-treat-themselves-to-a-resort-celebration-after-bailout/
Patty C 1, October 9, 2008 at 6:05 pm
This is a start. They are officially on notice. Getting the execs to
give up the contract bonuses without a scuffle might be a little trickier, unless, as it has been suggested, the argument is made they legally are not entitled to them in the first place, when you look at shareholder interests versus withheld information – not to mention colossal mismanagement and resulting losses.
CEJ,
I ‘m coming to think it worse than that, though your point plays a good role in the affair. I think this was a big con job foisted on us by Bush’s Base, the haves and have-mores, after realizing Obama was going to win the election. They had themselves one last payday and tried to ensure the government would be too strapped for funds to enact Obama’s proposed programs. Think about it, it fits the facts very well.
“Could they be seen as inducements, bribes, payoffs etc. to those who received them to participate in a cover up?”
If it is a scam, as we both suspect, of course they need to keep it quiet. Some people may say that it’s paranoid to think this way, but if they do, have they looked at the panoply of human history. Stuff like this has happened over and over again. The refusal of people in the US to believe it can happen dovetails with a point MikeA made in one of his comments. We have been sold a phony mythology, like The Protestant Work Ethic, that serves to control our thought processes and the way we view the world. Think of the view after the curtain’s opened in The Wizard of Oz.
Hello CEJ,
This link somewhat address your question: (from PBS, NOW)
“What role did the credit rating agencies play in the current economic crisis? This week, a former managing director at Standard & Poor’s speaks out on U.S. television for the first time about how he was pressured to compromise standards in a push for profits. Frank Raiter reveals what was really going on behind closed doors at the credit rating agencies the public relies on to evaluate the safety of their investments.”
http://www.pbs.org/now/shows/446/index.html
This may be a very cynical point of view; but is it possible that these year end bonuses were much more than “theft of federal bailout money” as Mike A. pointed out. More than just greed?
Could they be seen as inducements, bribes, payoffs etc. to those who received them to participate in a cover up?
Rudy is a loathsome slug of a man who was an incompetent, headline grabbing prosecutor and then ran his mayoralty as a servant of wealth. He was arguably among the most corrupt of NYC mayors (google HANAC for instance and know that’s the tip of the iceberg)but the local newspapers and TV had his back so he was deemed to be incorruptible, primarily because papers like the Times serve NYC’s wealthy and the rest are tabloids run by members of the same club.
David Dinkins, his predecessor was an honest man but made to seem ineffective because of his skin color. The truth was Dinkins inherited a budget deficit from Ed Koch(not a great mayor but primarily honorable), but was blamed for the needed tax increases because he didn’t want to accuse Koch, a fellow Democrat directly for what Koch caused. Dinkins’ administration began the idea of community policing which caused crime to drop in the last 6 months of his administration.
The local media credited Rudy with the dropping crime rate and in truth he had appointed an excellent police commissioner Bill Bratton. Bratton was receiving too much media attention so Rudy got rid of him and replaced him with his former driver, the corrupt Bernard Kerik.
Rudy’s popularity fell when he began a public affair whose blatancy embarrassed his wife and alienated his children. He was on the road to political oblivion when 9/11 happened and he benefited from the usual Bush crisis inactivity and the hero worship of a media inept in the art of journalism and reportage.
All the rest is history except for the fact that his was one of the mayoral administrations I worked under and while I never met the man, that was way beyond my title, I met enough of his appointees to understand how low the City had sunk. It infuriates me, I guess you can tell, that he still holds any place of honor in this country and that he has made millions from others’ misfortunes.
To follow his advice, taxpayers would do better to randomly stop a few thousand people on the street and give them several millions each.
May Guiliani’s coach turn back into a pumpkin.
so now we are talking about a French Revolution. If I remember my history that was a very bad revolution, more like mob rule.
Mr. Turley you are Robespierre? remember what happened to him
Mike, Mike, Mike . . . you are forgetting all those Botox doctors, skin pealers, and food tasters who rely on Mr. Guiliani’s friends for employment. Heck, think of Guiliani himself. He appears equally dependent on the employment of the super rich.
Mr. Guiliani’s take on all of this is absurd. It is true that most of the income paid on Wall Street comes in the form of year-end bonuses. Those in turn are calculated based upon performance utilizing a variety of formulae. We all know how well Wall Street performed in 2008. Therefore, it requires no mathematical calculations to conclude that the bonuses discussed in this thread were nothing more than the theft of federal bailout money.
Here’s the response of my Congresswomen to people like Baron Guiliani:
“U.S. Rep. Marcy Kaptur (D., Toledo) is advocating home-owners threatened with foreclosure exercise squatter’s rights in trying to stave off the loss of their house…
She said she believes that many so-called predatory and subprime loans – those made to borrowers who did not qualify for a conventional mortgage – may have been illegal.
She urged homeowners not to panic and leave their home just because they receive a foreclosure notice from their lender, and she said they should demand that the mortgage-holder produce a mortgage audit.
Miss Kaptur was interviewed Thursday night on CNN by Lou Dobbs, and a CNN report cited a woman who lives on Cass Road in South Toledo as an example of the trend of homeowners ignoring foreclosure notices from their lender.
Allen Seelenbinder, a Toledo-based mortgage banker with Main Street Financial, said the only audit the borrower is entitled to is an audit of the borrower’s payments.
But Sandusky lawyer Dan McGookle, who is representing a homeowner trying to have a predatory loan rescinded, said mortgage firms may not be able to prove they complied with truth-in-lending laws and other state and federal procedures.
“We have strong reason to believe that a majority of the mortgage loans made in the last 10 years are defective – unenforceable for various reasons,” Mr. McGookle said.
Cathleen Tillman, director of the Lucas County Sheriff’s Department’s civil section, which carries out court-ordered foreclosures and evictions, also said people should remain in the homes until the deed has been transferred, and not to abandon a home that is still listed in their name.
“The foreclosure takes a long time,” she said. More than 4,000 foreclosure actions were filed in 2008 in Lucas County, and the sheriff’s department carried out 85 foreclosure-related evictions.
Miss Kaptur said she started advocating that homeowners fight foreclosure by staying their home after it became clear that the $700 billion bailout of the financial industry passed last year was not working as intended by Congress.”
http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20090131/NEWS16/901310383
FIGHT BACK!
CLAW IT BACK!
Jill:
It would be interesting to see Guiliani as Treasury secretary. By his logic, the recovery plan should mandate billions in bonuses for the super rich to support those who serve them. It is precisely the type of argument that put certain Frenchmen in ox carts and paraded through Paris.
I know the way to get these people to disgorge their ill-gotten gains–appoint them to a post in the Obama administration. Tim Geitner and Tom Daschle have just forked over quite a bit in back taxes. Appointments all around! I’m guessing Rudy might have a few bucks to fork over.
rc,
You’re right. They are out of touch with reality. Pay is supposed to be for performance. If that was true they’d be giving back their bonuses so fast that time my shift as the created a riff in the space/time continum.
And JT?
I don’t think that’s cake they’re serving. :-&
Good luck with that, Marie, um, er, Rudy.
I think we all know where the “let the eat cake” argument leads.
Genius.
I heard some of this interview. It was the most outrageous leap of logic I’ve heard in some time. He’s suggesting that $8.4 billion in bonuses paid to a few hundred people is THE bellweather and the economic buoy of New York City’s prosperity. By his reasoning, as long as these folks are getting large bonuses, everyone else in the city is doing just fine, thank you very much.
He said that the total of the bonuses were a little larger this year than he had expected, but that that was a good thing because, therefore, the city was doing better than he anticipated. And this guy is considered a moderate Republican. It puts into perspective just how out of touch Republicans are with average Americans and in Giuliani’s case, with reality.
Guiliani is all about the money. He was kicked off the 911 Commission for refusing to attend meetings because he was too busy giving for-pay speeches at $50K a pop just to make ends meet. He also took blood money from Motorola who supplied firemen with defective radios and jumped right into bed with kick-back king Bernard Kerik. Typical career public servant hobnobbing with those who, but for his elevated position, wouldn’t give him the time of day without a 7 figure commission. He now thinks that all IS gold that glitters and wants some. I’m glad he made his money with Guiliani Partners. Maybe he’ll do like the classy rich and just shut-up. Guess not.