Corruption is Legal in America
Also, Elizabeth Warren: They Don’t Represent You
Corruption is Legal in America
Also, Elizabeth Warren: They Don’t Represent You
One part of the 2010 Dodd-Frank Wall Street Reform law requires the Securities and Exchange Commission (SEC) to set up rules requiring companies to disclose the median annual total compensation of all employees, the total annual compensation of the chief executive officer, and the ratio of the median employee pay to the CEO’s pay. It’s 2015 and the agency still has not done so.
In December, 16 Senators sent a letter to SEC Chair Mary Jo White asking for the SEC to vote on the final pay-ratio rule before the end of the first quarter of 2015.
From the letter:
I’ve said that the next phase for airlines is to put a big spike in the center of each seat. Then they can make passengers pay them $10 for each inch they lower the spike. In Why Airlines Want to Make You Suffer Tim Wu explains at the New Yorker that this is actually the airlines’ current business model,
Here’s the thing: in order for fees to work, there needs be something worth paying to avoid. That necessitates, at some level, a strategy that can be described as “calculated misery.” Basic service, without fees, must be sufficiently degraded in order to make people want to pay to escape it. And that’s where the suffering begins.
This isn’t a joke. There are any number of ways that monopolizeed businesses can make us suffer to squeeze money out of us.
Here’s one, what about getting kids (and here) hooked on terribly addicting drugs that also happen to cause horrible lung diseases, just so they can profit from selling the drug delivery system? No, that’s just too terrible to imagine.
Right now pharmaceutical companies publicize obscure diseases, or just invent them, to get us to ask doctors for prescriptions. But what happens when one of them spreads a terrible disease for which they sell the only cure?
What about the possibility of some day giant ag companies potentially spreading crop diseases for which they are the only company with a cure or a resistant seed?
How many ways can corporations cause us to suffer, so they can profit from the fix or the cure?
Spikes in seats? Why not! Hey it just makes business sense, doesn’t it? The capitalists will be the first to tell you — capitalism cures suffering!
The budget bill called the “Cromnibus” (for Continuing Resolution and OMNIBUS budget bill) contains a provision that undoes an important part of the Dodd-Frank Wall Street regulation bill. It would allow banks to gamble on derivatives using money from taxpayer-protected accounts. Citibank literally wrote the provision and paid someone to put it in the bill.
No one in the House or Senate will say who was paid to put it in the bill. No one will admit to putting it in the bill. No one will say that support this provision. But it will not be taken out of the bill.
OK this is not a rhetorical question, it is a question to broadcast. This was written word-for-word by Citibank, to benefit Citibank, putting the taxpayers at great risk. How can something like this be in a bill if no one put it in the bill and no one indicates support for it? How can we not get it taken out if no one will say they put it in and no one will say they support it?
Someone was obviously paid to put it in the bill. People are obviously being paid to keep it in the bill.
How FAR from the principles of democracy, transparency, accountability and everything the country, the Constitution and the Congress are supposed to stand for can we go here?
“60 Minutes” ran a report Sunday, “Falling apart: America’s neglected infrastructure,” describing the seriousness and damage to the economy caused by our country’s crumbling infrastructure.
Here are a few choice quotes, but really you should click through and watch the whole thing (and then come back here):
How bad is the problem? The American Society of Civil Engineers (ASCE) issues a regular “report card” on “the condition and performance of the nation’s infrastructure.” The 2013 grade is D+ and the cost to get us back to normal is now at $3.6 trillion. (The longer we wait the more the cost increases.) Because of this, The World Economic Forum’s Global Competitiveness Report ranks the U.S. as 16th in the quality of its infrastructure.
The election is over. Congress is back in Washington. The first order of business after the election is to give big tax breaks to the corporations – $450 billion worth. Fortunately, President Obama is trying to do something about this.
Every year Congress renews a package of “temporary” corporate tax breaks. The renewal process is called “tax extenders” because they extend the term of these temporary breaks. So now the Congress is working on this year’s extenders package, except this time it wants to just make many of them (the ones that mostly give handouts to giant corporations and campaign donors) permanent. The Washington Post calls this process “a periodic bonanza for lobbyists.”
A few of the special tax breaks in the extenders package are really good and serve an important purpose. For example, part of the package is tax credits that provide incentives to invest in renewable energy. But most others are just giveaways and handouts to the already-wealthy, like depreciation tax breaks for people who own racehorses. (Yes, really.) Even worse, some of these are loopholes that actually encourage corporations to shift U.S. profits offshore into tax havens. (Yes, really.)
The good breaks are used to grease the wheels to slip these special favors through – as in “if you want to get those wind tax credits you’re going to have to pass a tax break for Mitt Romney’s racehorses.”
The media is reporting that Congress is near a deal on these extenders. The deal kills several “good” tax breaks that help working people and the middle class, like an expanded child tax credit for the working poor and expanded earned-income credit. The deal phases out the wind power tax credit after 2017.
Rep. Chris Van Hollen (D-Md.) pointed out that companies that renounce their U.S. citizenship would even get special breaks from this deal:
“The package would provide a permanent boon to large corporations, even those that renounce their U.S. citizenship and invert,” he said. “And adding insult to injury, the proposed deal chooses to leave behind working families and would make things harder for millions of Americans. …The overall package is simply unacceptable and adds more than $400 billion to the debt. We need to grow the middle class, not punish those working hard to get by while always giving preferences and priority treatment to big corporations who can hire high-priced, well-funded lobbyists.”
Not Paid For
These tax breaks are not “paid for” – they just add to the deficit. Remember how Congress rejected providing benefits for the long-term unemployed because they were not “paid for?” Congress won’t fix the country’s infrastructure because doing so is not “paid for.” Even disaster relief had to be “paid for!”
But none of these corporate tax breaks and loopholes being considered are “paid for” – but for some reason this isn’t a problem – this time. Because racehorses. Anyway, we’re only talking about $450 billion.
President Says He Will Veto
The President says he will veto this deal if it reaches his desk. Roll Call has the story, in, “Obama Would Veto Corporate Tax Cut Bill“:
President Barack Obama would veto an emerging $450 billion tax cut deal coming together in the Senate because it doesn’t do enough for the middle class, according to the White House.
“The President would veto the proposed deal because it would provide permanent tax breaks to help well-connected corporations while neglecting working families,” said Jen Friedman, deputy White House press secretary.
Corporate secrecy, anonymous corporations, lack of transparency… but we can do something about it.
Are We the People the boss of the corporations, or are the corporations the boss of We the People? The Securities and Exchange Commission (SEC) needs to be reminded which way that question is supposed to be answered.
The SEC is the agency set up by We the People to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The SEC states that “all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. … Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions.”
One would think those basic corporate facts and timely, comprehensive, and accurate information needed by investors would include access to a company’s tax returns. One would think they would include information about where the executives of the company are spending millions and millions of the company’s dollars. And one would think they would include disclosure of the ratio of CEO “pay ratio” of compensation to worker compensation, as required by the 2010 Dodd-Frank law.
But so far the SEC is not asking corporations to provide investors and the public with this information. Don’t shareholders — and We the People — deserve to know what these companies are really doing and how much they are really making?
What Are These Companies Really Earning?
Companies tell their investors that they are making tons of money. But to get out of paying taxes the same companies tell the IRS something entirely different. Don’t investors have a right to know what the companies they invest in are telling the tax office?
Last month Catherine Rampell wrote in the Washington Post, in “Shareholders, public deserve tax transparency,” that:
“[There is an] array of eye-glazingly complicated tax avoidance strategies adopted by America’s biggest companies … The basic rationale behind tax transparency is that shareholders (and creditors and the general public) deserve to know what publicly traded companies are doing, particularly if complicated tax acrobatics are distorting their operational and investment decisions.”
She points out that we started out requiring this.
This is not a new idea. In fact, when the modern federal corporate income tax was introduced in 1909, it came with a requirement to disclose the returns. Such transparency mandates were fought over bitterly for the next couple of decades, and U.S. returns have been confidential since 1935.
What About Company “Donations”?
If a company’s executives are literally giving the company’s money away to politicians, “charities” (maybe run by a relative), “think tanks” (that employ relatives, etc.) or other worthy recipients, shouldn’t investors be provided with information about who is getting the company’s money, and how much they are getting? (Milton Friedman notably claimed that such donations are “theft” from the company.)
(Note: If a company gives money to a politician, and is not simply “giving the money away” for nothing — with absolutely no expectation of getting anything in return — that would be bribery, under the law.)
Last week in The Nation Zoë Carpenter wrote about this in, “SEC Faces Renewed Pressure to Consider a Corporate Disclosure Rule”:
The campaign to lift the veil on secret corporate campaign donations hit a milestone on Thursday. More than 1 million comments have been submitted to the US Securities and Exchange Commission calling for a requirement that corporations disclose political spending to their shareholders—ten times more than for any other rule-making petition to the SEC, according to the Corporate Reform Coalition.
“Investors want to know how their money is being spent,” Tim Smith, director of shareholder engagement at the firm Walden Asset Management, said at a press conference outside the SEC in Washington. A sign over his right shoulder read, “Your money is being invested in secret. Why is the SEC doing nothing?”
Why Is SEC Sitting On These Rules?
So why is the SEC just sitting on these proposals to disclose basic information to shareholders? In the case of the CEO pay ratio, this is even required by a law passed almost 5 years ago.
Could it be that the people working at the SEC really do know who is the boss now? (“Boss” as in the writer of the big paycheck and future employer.) Maybe, and maybe not. Who’s to say?
In early 2013 the Project On Government Oversight (POGO) released it report, “Dangerous Liaisons: Revolving Door at SEC Creates Risk of Regulatory Capture”:
A revolving door blurs the lines between one of the nation’s most important regulatory agencies and the interests it regulates. Former employees of the Securities and Exchange Commission (SEC) routinely help corporations try to influence SEC rulemaking, counter the agency’s investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and win exemptions from federal law. POGO’s report examines many manifestations of the revolving door, analyzes how the revolving door can influence the SEC, and explores how to mitigate the most harmful effects.
At the time of the report’s release Bloomberg reported,
From 2001 to 2010, POGO says, more than 400 SEC alumni filed about 2,000 disclosure forms (which POGO obtained using the Freedom of Information Act) saying they planned to represent an employer before the SEC. That may vastly understate the problem because, as POGO points out, former SEC employees must file such statements for only two years after departing.
The SEC has exempted some senior employees (even sometimes blacking out their names on SEC documents) from a one-year cooling-off period during which they are barred from representing clients before the agency, POGO found.
Soon after the report was released: April, 2013, Ex-SEC chief Schapiro takes revolving door back to private sector,
With her seat barely cold at the chairmanship of the Securities and Exchange Commission, Schapiro will become a managing director at a financial consulting and lobbying firm that has hired a slew of former financial regulators over the last several years and that represents for many a nexus of the cozy relations between banks and their regulators.
Are We the People the boss of the corporations, or are the corporations the boss of We the People? Who’s to say? Not the SEC, apparently.
Eric Cantor was a congressman from Virginia and was House majority leader. He was known for being particularly friendly to Wall Street and the giant, multinational corporations.
In the June Republican primary, his Virginia constituents got fed up with this and booted him, choosing to nominate Cantor’s challenger, David Brat, instead. Conservative Erik Erikson explained at FOX, that Cantor’s Virginia constituents did this because, “K Street, the den of Washington lobbyists, became his chief constituency.”
Cantor didn’t bother to finish his current term supposedly representing his Virginia constituents. He resigned from office effective August 18.
Just two weeks later Cantor has gone to his reward. Cantor will receive a huge, fat, lucrative, awe-inspiring, 1-percent-making, mansion-jet-and-yacht-buying, zillion-figure paycheck from his Wall Street/corporate constituents. He will become board member, vice chairman and managing director of investment bank Moelis & Co. (It typically takes longer than two weeks to negotiate a senior position like this one, if you know what I mean.)
Cantor earned this senior investment banking position with his vast experience in investment banking, if you know what I mean. (Cantor has a law degree, and a Masters in real estate, and worked in real estate development for his father before entering the clearly more lucrative field of representing certain constituencies, if you know what I mean.)
“Eric has proven himself to be a pro-business advocate and one who will enhance our boardroom discussions with CEOs and senior management as we help them navigate their most important strategic decisions,” Moelis CEO Ken Moelis said in a statement.
Wink, wink, nudge, nudge, say no more, if you know what I mean.
Take The Gold Or Take The Lead
Our system has become corrupted and everyone knows what I mean. Everyone understands that government officials who “play ball” can get a huge paycheck after leaving government if they help certain big businesses while serving in government. The Nation explains, in When a Congressman Becomes a Lobbyist, He Gets a 1,452 Percent Raise (On Average), Secret deals, bribery and “buying” members of Congress are commonplace in today’s government. (See also: Tauzin, Billy.) (And: Public Interest Groups Call For Corruption Investigation Into Prescription Drug Law.)
Neil Barofsky was Special United States Treasury Department Inspector General overseeing the Troubled Assets Relief Program (TARP). In the preface to his book Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, Barofsky explained that people in government are given two choices, “the gold or the lead.” From the NY Times review, (emphasis added, for emphasis)
Mr. Barofsky, wearing an unseasonal wool suit at odds with a “Washington-appropriate wardrobe,” is poised to let the hostess seat them at a front table of her choosing, but Mr. Allison insists on a private table in the rear. Then he gets down to business.
“Have you thought at all about what you’ll be doing next?” Mr. Allison asks Mr. Barofsky, soon adding, “Out there in the market, there are consequences for some of the things that you’re saying and the way that you’re saying them.”
“Allison was essentially threatening me with lifelong unemployment,” Mr. Barofsky concludes, and alternatively suggesting a plum government appointment some day if Mr. Barofsky would simply “change your tone.”
When Mr. Barofsky tells his deputy of the exchange, the deputy says, “It was the gold or the lead,” resorting to the lingo of their joint experience prosecuting Latin American drug kingpins in New York: Cooperate and share the riches, or don’t and get plugged.
There are “consequences” if you don’t play ball. But if you do play ball, there are rewards. And everyone knows it.
Cantor represented Wall Street instead of Virginia in the Congress. His Virginia constituents didn’t like it, and booted him. Cantor has gone to his reward: a big pot of Wall Street gold. And everyone knows it.
Solution? Make it a law: No person employed by the government in any capacity may receive compensation in any form that is significantly greater than the compensation they received for their public service, for a period of five years.
A Virginia state senator took a bribe to resign, thereby throwing control of the state Senate to the other party. In exchange for this scheme he got a nice job and his daughter received a judgeship.
This was big news last week.
So … will he be prosecuted for taking a bribe, or not? What is the public to think if he is not prosecuted?
After all, it’s not like the guy is a banker or anything.
It has become a “truth” on the right that the IRS “targets” conservative “political” groups. Here is what is going on.
Sea Of Smear Ads From Anonymous Donors
Who is providing the sea of anonymous money behind the nasty smear-campaign ads in local, state and national elections? You might (not) be surprised to find out that these ads are from “social welfare” organizations! These organizations don’t have to disclose their donors because they are tax-exempt nonprofits that, according to the Internal Revenue Service (IRS), “must be operated exclusively to promote social welfare.”
That’s right, your community, state and nation elections are being flooded with nasty, political, smear-campaign ads from organizations that claim to “further the common good and general welfare of the people of the community” and have no involvement with political campaigns.
Social Welfare Organizations
Here are the technical details. A 501(c)(4) charity is a group that does not have to disclose its donors to the public. The law says these groups must operate “exclusively” as “social welfare” organizations and not political organizations. They “must operate primarily to further the common good and general welfare of the people of the community.” (Disclosure: The Campaign for America’s Future operates as a 501(c)(4) organization; its sister organization, the Institute for America’s Future, is a 501(c)(3) organization.)
But government agencies have to “interpret” laws when it comes to their own day-to-day operating rules, and there are grey areas between activities that could be seen as “social welfare” and activities that could be seen as electoral politics. Is voter-registration a general social welfare activity or a political activity? Is issuing a well-researched policy paper on the effect of a higher minimum wage on poverty a social welfare activity or a political lobbying activity?
So years ago the IRS decided that these social welfare groups could spend “up to 49%” of their efforts in politically related activity.
“Congressman Bob Bobson Eats Babies” Is Not A Political Ad?
Obviously these groups are not supposed to be running campaign ads. But a smear ad appearing a week before an election that says “your member of Congress Bob Bobson eats babies” but not “vote against Bob Bobson for eating babies” has been “interpreted” to be a social welfare activity and not a political ad.
Because of this huge, vast, gaping loophole a number of (mostly Republican) political election campaign-related organizations that wanted to hide their donors figured out they could become “social welfare” organizations to run these campaign ads. Then “the Republican majority” on the Supreme Court as E.J. Dionne calls them, allowed billionaires and corporations (even foreign-owned corporations) to put unlimited sums of money into politics. This opened the floodgates of influence-buying – the more money you put into politics, the more tax breaks, contracts, subsidies, monopoly protection, etc. you get back – and a race was on.
Keeping Campaign Donors Secret
Corporations and billionaires that wanted to keep their influence-buying secret could put money into these “social welfare” organizations (and the people running these organizations could make themselves a fortune), so there was a flood of applications to the IRS to start conservative, tax-exempt, “social welfare” nonprofit organizations.
At the same time, Senate Republicans also filibustered the DISCLOSE Act that would let the public know who was funding all of these smear ads.
The Phony IRS “Scandal”
Republicans charge that the IRS is “targeting” conservative “political” groups when they look to see if “social welfare” groups are actually illegally engaging in election-related politics. It has become a “truth” on the right that “the government” is “harassing” conservatives for their politics. They say the IRS is “intimidating” them by looking into “their political activities.”
This all feeds into the Republican/Fox News/Wall Street Journal/talk radio/blog “scandal machine.” For example, the Wall Street Journal today has this “story” today, “GOP Report on IRS: Only Tea Party Groups Received ‘Systematic Scrutiny’.” The party issues a “report” and the conservative media machine blasts the “findings” around the wingnutosphere, and the “outrage” ensues.
Republicans in the House of Representatives have been holding hearings intended to drive this idea of IRS “harassment” out to their followers. Rep. Darrell Issa (R-Calif.) has his Oversight and Government Reform Committee holding televised (FOX) “hearings” that haul people before them to be yelled at by various Republicans. One person, threatened by Republicans with prosecution and jail, was advised by her attorney to assert her Fifth Amendment rights, so Republicans made her appear for hours, repeating again and again that she was “pleading the Fifth.” Now Republicans plan to vote to hold her in “contempt” for asserting her constitutional rights, and have even created a logo advertising the contempt vote:
Here’s The Thing
The IRS is required by law to look at all applicants to see if they are engaged in impermissible political activity. If they are engaged primarily in political activity, they are neither “charities” nor “social welfare” organizations and, by law, are not supposed to receive special tax status allowing them to keep their donors secret. That alone should tell you that something is fishy with the corporate/conservative accusation that the IRS is “targeting” conservative “political” groups. The IRS is required by law to see if groups are “political.”
This is really about Republicans trying to stop the IRS from policing the big right-wing political groups that are using special tax status to mask their donors. This is an intimidation tactic; it’s an attempt to keep the IRS from seeing if these groups are engaged in political campaign activity and shut down the ones that are, all in an effort to mask their billionaire/corporate and foreign corporate donors.