Book by Huffington Arianna
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Preface to the 2009 edition
When I was asked to reissue Pigs at the Trough in the midst of our current economic crisis, I sat down to reread it and was stunned by how much of what the book speaks to has brought us to our knees in 2009.
Sure, the characters are different, the accounting gimmicks have different names, the sophistication that allows the gimmicks to take place within the law is greatly enhanced, and the numbers have gone from mere billions to hundreds of billions and trillions. So, different pigs, deeper trough, worse result–but, other than that, the narrative is unchanged: CEOs and others at the top of the corporate ladder engaging in rampant–though often legal–corruption to improve the bottom line and line their own pockets until finally they fall prey to their greed and self-indulgence . . . only to find themselves routinely protected from the retribution of their beloved “free market” by their companies, their peers–and, ultimately, by the government.
“So the stomach-turning revelations of corruption that have come to light,” I wrote in the book in 2003, “are surely only the appetizer for a far larger banquet of sleazy scandals.” Little did I know at the time just how much larger the banquet of scandals would end up being. It turned into an all-they-could-eat buffet.
The corporate crooks of WorldCom, Tyco, Global Crossing, Adelphia, Enron, and others profiled in this book were largely playing with shareholders’ money (small comfort to the thousands who saw their nest eggs scrambled by the likes of Ken Lay, Jeff Skilling, and Bernie Ebbers). The new villains are playing with taxpayer money, trillions of it. During the French revolution, Marie Antoinette and her “let them eat cake” attitude became the symbol of not getting it. And just like Marie Antoinette, John Thain, the former Merrill Lynch CEO, didn’t get it even while being led to the corporate guillotine. Though Merrill Lynch was hemorrhaging money and preparing to lay off thousands of workers, Thain, reaching new heights of tone deafness, spent $1.2 million redecorating his office. Lowlights included $80,000 for an area rug and $1,400 for a trash can. And even after Merrill Lynch, in a deal brokered by the government and partially financed by taxpayers, was acquired by Bank of America in October 2008, Thain, sleeping through this wake-up call, asked for a $30—$40 million bonus. He was awarded a much more appropriate bonus of $0. But he was not stopped from ramming through $4 billion in bonuses for Merrill Lynch executives just days before the Bank of America merger became official.
Which brings us to the miserable job Thain did at Merrill, for which he wanted to so lavishly reward himself. As one insider told the Wall Street Journal, Thain “didn’t really have a good grasp of what was going on.” But apparently having a grasp of what’s going on isn’t one of the requirements for becoming America’s highest paid CEO, as Thain was in 2007, taking in a package worth around $83 million. This disconnect between performance and reward is at the heart of what has plagued our economy and has contributed to the crisis we are living through today. In no other industry is this gulf as wide as it is in the industry that most publicly celebrates its belief in the market system. Pigs at the Trough deals with the failures both of poorly regulated markets, which were magnified in the recent years, and of our market system to appropriately reward and penalize executives. As Treasury Secretary Tim Geithner put it, “Excessive executive compensation that provides inappropriate incentives has played a role in exacerbating the financial crisis.” The list of clueless Marie Antoinettes of the meltdown is very long.
Gateway Financial Holdings executives Ben Berry and David Twiddy, who received nearly $1 million in bonuses on the same day their bank received $80 million in bailout money.Wells Fargo and State Street. Both financial institutions received bailout money ($25 billion for Wells Fargo, $2 billion for State Street), then turned around and increased the amount of money they spent lobbying the government in the last quarter of 2008. Not a bad deal: we give them our money, which they use to pay lobbyists to buy off lawmakers to give them more of our money–a perfect (if very costly) Washington perpetual motion machine.
Citigroup, which received $45 billion in government bailout funds–but was still about to take delivery on a new $50 million corporate jet that featured a “plush interior with leather seats, sofas and a customizable entertainment center,” until public outrage forced Citigroup to cancel the order. Let them eat cake . . . while sitting on plush leather sofas!
Corporate jets, redecorated offices, lavish retreats, and CEO bonuses may be small potatoes compared to the bailout billions poured into the black hole of basically insolvent financial institutions. But they are emblematic of the tone deafness of those at the top of our crumbling economic pyramid. It’s as if nothing has been learned since the Enron days. It’s just that the numbers got larger. Two days prior to Enron going belly-up, the company gave $55 million in bonuses to senior employees while simultaneously coming out against additional help for the 4,500 unceremoniously fired workers. There was outrage and recrimination. But little did we know it was just a prelude.
Similarly, in 2002, on the same day WorldCom stunned the world with the magnitude of its accounting fraud, the company’s inner circle began an extravagant, all-expenses-paid vacation at the Grand Wailea Resort Hotel and Spa in Maui–a foreshadowing of the $443,000 luxury spa retreat executives of AIG took in October 2008, just days after the government unveiled an $85 billion bailout package for the insurance giant.
And as outrageous as they were, the $165 million in bonuses paid out by AIG in early 2009 were in keeping with what has come to be expected on Wall Street–and come to be accepted in Washington. Which is why the Treasury Department pushed Senator Chris Dodd to put a loophole in the stimulus bill allowing these kinds of bonuses–and why a provision in the stimulus package that would have curtailed bonuses at bailed-out companies was killed in conference after it had passed the Senate. “It is the ultimate indictment of what Washington has become,” Senator Ron Wyden, cosponsor of the eliminated provision, said. “It’s a place where, again and again, the public interest is deep-sixed behind closed doors and withoutany fingerprints.”
In his inaugural address, Barack Obama defined what the New Era of Responsibility would entail: “A recognition, on the part of every American, that we have duties to ourselves, our nation, and the world.” But we are a long way from ushering in the New Era of Responsibility and tossing the Era of Not Getting It into the trash can, one that costs considerably less than John Thain’s $1,400 wastebasket.
Capitalism comes with great rewards–and commensurate risks. Allowing top executives to reap the rewards during the good times and having taxpayers pick up the tab when their gambles don’t pay off isn’t capitalism. It’s lunacy.
But unfortunately, while the collapse of communism as a political system sounded the death knell for Marxism as an ideology, the ideology of unregulated capitalism remains alive and kicking even though it has been proven to be a monumental failure. If a politician announced that his campaign would be guided by the principle “From each according to his ability, to each according to his needs,” he would be laughed off the stage. That is also the correct response to anyone who continues to make the case that markets do best when left alone.
William Seidman, the longtime GOP economic adviser who oversaw the S&L bailout in 1991, said that the Bush administration “made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight. To make the market work well, you have to have a lot of rules.” Even Alan Greenspan, whose owl-eyed visage would adorn a Mount Rushmore of unregulated capitalists, has begun to see the light, telling a House committee in October that he “made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.” Yet, as we are bailing out insolvent zombie banks while letting millions of average American home owners lose their homes and 401(k)s, it is clear that our leaders are still operating on the basis of an outdated cosmology that places banks and other financial institutions–rather than people–at the center of our economic universe.
Here is one example. Everybody agrees on the paramountimportance of freeing up credit for individuals and businesses.In a bank-centric universe, the solution was a bailout plan giving hundreds of billions to banks. It failed because, instead of using the money to make loans, the banks “are keeping it in the bank because their balance sheets had gotten so bad,” as President Obama acknowledged in March on The Tonight Show with Jay Leno. As a result, the administration, again according to the president, had to “set up a securitized market for student loans and auto loans outside of the banking system” in order to “get credit flowing again.”
But think of all the time we wasted while the first scheme predictably failed. And how much better off we’d now be if we had provided credit directly through credit unions or small, healthy community banks or, as happened during the Depression, through a new entity like the Reconstruction Finance Corporation.
Yet, in a bank-centric universe, funneling no-strings-attached money to too-big-to-fail banks is the logical thing to do. In a bank-centric universe, it’s also no surprise that “mark-to-market” accounting rules, in which banks have to calculate and report their assets based on what those assets are actually worth, instead of what they’d like them to be worth, are being abandoned. A good name for the reworked accounting standards would be mark-to-fantasy, because that’s basically what balance sheets will be under these new rules. Of course, to a true believer in bankcentrism, the problem with mark-to-market is that it’s not good for the banks.
In the years covered in Pigs at the Trough, which ended with the collapse of the “new economy”–for which Enron was the poster child–“restatement of earnings” became the euphemism du jour to refer to out-and-out fraud in overstating earnings in the supposedly meticulous annual reports prepared by well-established accountants and auditors.
At the G-20 meeting in 2009, Gordon Brown proclaimed that “the old Washington consensus is over.” Wishful thinking, Mr. Prime Minister, because when it comes to attacking the financial crisis, the Wall Street/Washington consensus that has everything in America orbiting around a few big zombie banks is still the order of the day.
Back in the days after the collapse of Enron, executives at Citigroup and JPMorgan Chase appeared on Capitol Hill to be lambasted for helping Enron defraud shareholders to the tune of $8 billion. But after being publicly raked over the coals–branded as bold-faced liars and criminal accessories–they were allowed to go back to Wall Street, heat up the derivatives market, and produce what turned out to be a financial Chernobyl. And once again, in 2009, the Wall Street chieftains were brought back to Capitol Hill to be theatrically attacked for their misdeeds while, at the same time, hundreds of billions of taxpayer dollars were being allocated in an attempt to save them. It’s a slap on the wrist the executives will take every time.
This toxic collusion between financial interests and policy makers is the only explanation for policies that appear more driven by the perceived need to save particular banks than by the clear necessity to serve the American people. This is hardly an ideological fight. It’s a battle between the status quo and the future, between the interests of the small but extremely powerful financial/lobbying establishment and the public interest.
None other than Anna Schwartz, the coauthor of Milton Friedman’s seminal work, A Monetary History of the United States, 1867—1960, described the battle this way: “They should not be recapitalizing firms that should be shut down. Firms that made wrong decisions should fail.” You’d think so, but not while bank-centrism is the dominant cosmology of our public policy. It’s time to put the American people at the center of this economic universe.
There is an enormous human cost to this bank-centric dogma. Unemployment, already at levels not seen since 1983, is skyrocketing. As of this writing, in many places in the country, it’s approaching 20% (and in Detroit it’s 22%). And the depressing indicators keep piling up, each statistic representing more pain and hardship.
More than thirty-two million people received food stamps in January 2009, an increase of 16% from a year earlier. In Philadelphia, demand for emergency food assistance is up 31%. In New York City, the number of homeless families entering shelters is up 40%. In Massachusetts, 20,000 new applications for food stamps are coming in each month, along with 18,000 requests for extensions.
In Arizona, there’s been a 100% increase in the number of people seeking social services from the state. In Contra Costa, California, 40,000 families applied for 350 available affordable housing vouchers. In San Francisco, food banks report a 30% rise in demand for emergency food assistance. In Lehigh Acres, Florida, demand is up 75%.
With national unemployment approaching double digits, the Center on Budget and Policy Priorities estimates that the number of Americans driven into poverty will rise by 7 to 10 million–on top of the 37.3 million currently living below the poverty line (and while that number is the latest from the Census Bureau, it’s from 2007, before the worst of the downturn).
Making matters worse–much worse–is the fact that the growing need is being met by a decrease in government programs and charitable services: Eighteen states cut their welfare rolls last year. The number of families receiving government financial assistance is at a forty-year low. In South Carolina, low-income women under forty with breast or cervical cancer have had their treatment cut. In Nevada, the state’s largest public hospital has stopped providing outpatient oncology services. In Arizona, programs to prevent child abuse and lower the number of children in foster care were slashed. In Florida, home services for poor seniors are on the budget chopping block. In Utah, 20,000 poor people face being removed from the state’s primary care health network. And more cutbacks like these seem inevitable as forty-four states are facing budget shortfalls over the next two years.
“The scale of this is unprecedented,” AARP vice president Elaine Ryan told the Los Angeles Times. Ryan says that in her nearly thirty years of working on health-policy issues, “I really have never seen anything like this.”
Meanwhile, over half of the nation’s charitable organizations saw a decrease in donations in the final quarter of 2008...
Who filled the trough? Who set the table at the banquet of greed? How has it been possible for corporate pigs to gorge themselves on grossly inflated pay packages and heaping helpings of stock options while the average American struggles to make do with their leftovers?
Provocative political commentator Arianna Huffington yanks back the curtain on the unholy alliance of CEOs, politicians, lobbyists, and Wall Street bankers who have shown a brutal disregard for those in the office cubicles and on the factory floors. As she puts it:
“The economic game is not supposed to be rigged like some shady ring toss on a carnival midway.” Yet it has been, allowing corporate crooks to bilk the public out of trillions of dollars, magically making our pensions and 401(k)s disappear and walking away with astronomical payouts and absurdly lavish perks-for-life.
The media have put their fingers on pieces of the sordid puzzle, but Pigs at the Trough presents the whole ugly picture of what’s really going on for the first time—a blistering, wickedly witty portrait of exactly how and why the worst and the greediest are running American business and government into the ground.
Tyco’s Dennis Kozlowski, Adelphia’s John Rigas, and the Three Horsemen of the Enron Apocalypse—Ken Lay, Jeff Skilling, and Andrew Fastow—are not just a few bad apples. They are manifestations of a megatrend in corporate leadership—the rise of a callous and avaricious mind-set that is wildly out of whack with the core values of the average American. WorldCom, Enron, Adelphia, Tyco, AOL, Xerox, Merrill Lynch, and the other scandals are only the tip of the tip of the corruption iceberg.
Making the case that our public watchdogs have become little more than obedient lapdogs, unwilling to bite the corporate hand that feeds them, Arianna Huffington turns the spotlight on the tough reforms we must demand from Washington. We need, she argues, to go way beyond the lame Corporate Responsibility Act if we are to stop the voracious corporate predators from eating away at the very foundations of our democracy.
Devastatingly funny and powerfully indicting, Pigs at the Trough is a rousing call to arms and a must-read for all those who are outraged by the scandalous state of corporate America.
From the Hardcover edition.
Les informations fournies dans la section « A propos du livre » peuvent faire référence à une autre édition de ce titre.
Description du livre Highbridge, 2003. 5 Audio CDs. État : VG. Audiobook. Some wear on case; CDs in overall nice shape. Audiobook on 5 CDs. Approximate running time - 6.2 hours. Read by Alison Fraser. N° de réf. du libraire 24878
Description du livre Highbridge Audio, 2003. État : very good. Gently used. Expect delivery in 2-3 weeks. N° de réf. du libraire 9781565118430-3