Willravel

Certainly no one in their right mind could say that the middle class has been attacked, the wealth is continuing to shift to the hands of the super wealthy few, and that the average man or woman are working in someone else's market. As of 2004, 62.3% of business assets were owned by the wealthiest 1% of the wealth distribution. The next wealthiest 4%? They owned an additional 22.4% of the total. And here's something ever scarier: 93.7% of all bonds are held by these people.
(citation link, in pdf format: http://www.federalreserve.gov/pubs/f.../200613pap.pdf)

We've all been talking about the recent bailout as a part of a failure in oversight. I myself thought that too, at first. Still, the ultimate effect of this bailout will mean more tax dollars ending up in the hands of the super wealthy. The financial institutions that have collapsed and that are collapsing overstretched their capital. They ignored the amount of shareholder equity when they take on assets, which is insane.

So what should the government be doing? Sell the bank's assets and liabilities as a package, and get rid of the debt to bondholders. The current bailout will ultimately prove to be another failure in government decision making, and it will line the pockets of the unscrupulous and incompetent leaders of these industries.

Could this misstep by the government be intentional? Could they be bailing out the super wealthy intentionally, ignoring an obvious, more economically reasonable solution? I honestly can't say.

I'm left in the frustrated position I've found myself in ever since I became interested in politics: are they incompetent or corrupt?

So what do you think?

Cynthetiq

If the question is incompetent or corrupt, I'm going with incompetent.

People are just that for the most part. Incompetent. Yes, there is the cream of the crop, but they aren't really what we are talking about, and the corrupt, they are generally eventually caught if they are corrupt enough. Towing the line and such, well fine, that's not really corrupt, maybe more nepotism or "friends" than anything.

I will say that there are many good people out there, and there are many more good people out there who aren't willing to give more than they are already in sense of time and resources. As a member of a BoD, we can't get good people who are interested in running to govern the business. People rather complain that we are a corrupt board and kvetch than actually roll up their sleeves and dig in. I'm taking the same extrapolation to politics and other forms of businesses.

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aceventura3

I think we have to be careful of "class warfare". The statistics you cite are a bit misleading. For example, General Motors has a market capitalization (shares outstanding X share price) of about $7.4 billion. The report would show the "rich" owning that. However, the pension liability of GM is $11.4 billion. Most of that is payable to blue collar workers in the form of pension payments, your report excludes that wealth.

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ratbastid

The beast is well and truly starved now.

Willravel

I realize that it makes sense that they're just incompetent. My first thought was "Reaganomics strikes again". But the truth is that there was something nefarious about the inevitable outcome of freeing up the market and drastically reducing regulation. Considering how rich some people can get off the lack of regulation via less than ethical business practices, is it really so unbelievable that this kind of thing could be intentional?
Yes, but GM is just one massive failure among many. Asset ownership is bunched at the very top of income distribution, certainly you can't argue that's not the case.

I know you're a free market capitalist, but surly you can see where there could be a problem with having a small group of individuals owning most of the wealth to an overall society.

Cynthetiq

Looking at other countries as a lead in business and wealth distribution, I don't see anything wrong. People can invest in their wealth, or they can buy adidas, escalades, and HDTVs. No, most people aren't interested in building wealth. Consumerism shows that. Savings accounts show that.

It's not the case, many pension funds are the largest owners of assets, that's why they have huge worries when shareholders decide to change where and how they invest. These funds are held by teachers, factory workers, building supervisors, doormen, actors, and other union members.

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Willravel

The most economically stable and successful markets are clearly in Northern Europe, and they're much more "socialist" (slightly more regulated markets and more social programs) than we are. If we're going to try and imitate those that are the most successful, shouldn't we be adopting a more European way of government and economics? Shouldn't we be investing in single-payer health care instead of buying out market failures? Shouldn't we steal Luxembourg's incredible education system model instead of insane programs like NCLB?

Statistically speaking, pensions aren't as big a chunk of investments as one might think. At that absolute most, they're maybe 10-15% of all assets. Considering how many pensions are out there, that's pretty tiny.

Cynthetiq

I'm not interested in rehashing out the particulars of healthcare or education in this thread. There are plenty we've debated them and this seems to be one I'm not going to dilute your OP with.

re: the pensions, can you verfiy that claim please. As far as I can tell it's large, here's an example of two of the largest:

Bear market bites CalPERS and CalSTRS pension funds | Money & Company | Los Angeles Times

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Willravel

From the OP:
62.3 + 22.4 = 84.7%, 100%-84.7% = 15.3% remaining.

Cynthetiq

Pension plans suffer huge losses - Jul. 7, 2008

Not quite sure what the total is, because if what your math reads, then we're close to quadrillion in the assets? (sorry very very bad at math)

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Willravel

I'm using the most recent data, available for 2004. As of 2004, there was a total of about $1.002T. I can't imagine it going up nearly 1000x in 4 years, so some of the data must be off.

CalPERS can't be 1/4 of the market.

Cynthetiq

calpers can't but there are many pension funds, and 401k, 503, all those should be lumped into there as well.

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Willravel

Host knows this stuff a lot better than I do.

roachboy

this kind of problem explains why i keep going to the level of ideology to make sense of what's been happening.
what was the framework that enabled the conservative wing of the american political monoculture to advocate dismantling regulations, that made the opposition between "government" and "markets" seem sane, that enabled people to seriously believe that "growth" is a constant and on that basis to systematically underestimate/undervalue/undersell to themselves and others risk?
what on earth, in the face of the entire history of actually existing capitalism, enabled the conservative wing of the american political monoculture to make the claim "markets are rational" with a straight face, and even more bewildering, how was that taken seriously?

because outside this general ideological framework, none of this makes any sense.
and if you say "there are nice people out there" then you have even more reason to look for an explanation--what enabled these "nice people" to buy into the conditions of possibility for a fiasco of this magnitude?

i don't think it's a matter of "insufficient oversight"--i think this is an expression of the lunacy of the whole of neoliberalism, the whole of the worldview that's dominated the american political climate since the reagan period concerning the nature of capitalism.

the current outlines of the bailout plan are obviously flawed, and they won't be passed in the form they've been discussed since thursday night. i don't expect anything before congressional hearings scheduled for wednesday.

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Willravel

I've been asking this same question since freshman economics. If anyone ever gives you a straight answer, please share it with the rest of us.

guyy

Historical distance from the Great Depression perhaps. Even folks in their eighties would have only experienced it as children. I think too that 1970s libertarians & neoliberals profited from new left critiques of the postwar state.

Neoliberal dogmatists are now saying that the bailout will be like Nixon's price controls will prolong the slump, that democratic intervention (through, say, Congress imposing conditions on the bailout or regulating financial markets) will be a Bad Thing. It's something like market royalism or market transcendentalism, where other structures of power have to be parallel to the market's. If we have a transcendental market we need a transcendental Treasury, transcendental executive. It seems to imply similar attitudes toward authority.
-----Added 22/9/2008 at 05 : 43 : 47-----
If people didn't buy shit, the whole fucking thing would collapse. Morally upright capitalists with savings accounts would suffer.

Among other things, savings accounts show that real wages are low.

Cynthetiq

I'm not advocating stopping spending all together. I'm talking about spending in moderation, and buying with CASH instead of credit.

One doesn't need to buy a new car every 3 years. Many people are caught in the leasing trap. How many new TVs does one need? Consumer electronics are notorious for making one feel the need to buy and buy and buy to have the latest and greatest items.

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roachboy

this link take you to 2007 census information on income, poverty & health insurance--the data's linked at the top, followed by a series of interpretations.

Economist's View: New Census Data on Poverty, Income, and Health Insurance

there is a difference between structural features and statements about subjective dispositions or attitudes--the latter can operate in any number of structural configurations. this one, which has taken shape since the beginning of the bush period, show working people's incomes stagnating, poverty rates higher, the number of uninsured people up---this beneath the massaged data you get from the administration's permanent campaign machine, which a cynical fellow would call propaganda--but i am not a cynical fellow.

there is no morally upright capitalism at the structural level, but there's a potentially infinite series of bromides that function to blame the poor for being poor, as if structural conditions didn't exist. i don't think there's a moral capitalism at all, except in some candyland version.

put this in the context of the bailout, and it spells class warfare.
nothing moral about that shit.

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

Willravel

I think I was going in circles there for a moment.

FYI, the CalPERS info:
Asset Allocation

The wealthiest 5% (w5) own 65.9% of that particular class of assets (common stocks) but a much higher percentage of non-publicly traded business assets. That explains the higher number in the business asset category.

The w5 may own a smaller part of common stocks because they're less secure. During a crash like we're seeing, the common stocks go first. After that come preferred stock holders, and then bond holders are fine because the lesser holders cushion the effect. And as you go from common stocks to bonds, the percentage of ownership in the w5 increases from about 65% up to about 93%.

guyy

Fine, i don't have any problem with that, but realise that the system as it is -- and that includes our own livliehoods -- depends on unsustainable levels of consumption. It is unsustainable environmentally, but also on its own terms. The economy has depended on consumption, and that in turn depends on consumer credit. It's insane, but that's the way it is -- or was.

If you want to move your argument beyond moralising -- bad, stupid people doing bad, stupid things -- you need to talk about how they can live differently.

Cynthetiq

The system as it became. People were not the conspicuous consumers that I've seen when I was growing up in the 70's. There aren't 10 different versions of The Usual Suspects that people seem to have to need to own each and every variation.

It is insane. So while people are worrying about how are they now going to pay for things, since their mortgage ATM ran dry, it's on them to figure out how to stop living paycheck to paycheck.

I can't do much about it. I make some popcorn and watch Suze Orman's Can I Afford this segment and laugh my ass off... stupid people.

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guyy

No, they were buying pet rocks or troll dolls or AMC Pacers or lining up to see Star Wars for the 37th time. Consumerism is not a recent invention.

TV is the consumerist media par excellence. It presumes overconsumption, which means that if you really want to feel superior, you're going to have to ditch the TV.