The CEO of America’s third-largest bank thanked the American people last week. Citigroup CEO Vikram Pandit, testifying before the bank bailout oversight panel, could hardly have been more effusive in his thankfulness.

“Citi,” said Pandit, “owes a debt of gratitude to American taxpayers.”

Citi and Pandit — and the rest of Wall Street’s finest — surely do owe the rest of us. Thanks to us, their fortunes remain secure. Thanks to them, as MIT economist Simon Johnson reminded us last week, our futures remain at risk.

The billions in banker bonuses that “generate the conditions that make major international financial crises possible,” Johnson notes, are still flowing. Congress has done nothing yet to curb these hazardous incentives —  or the mammoth concentration of financial power that fuels them.

But Americans, at the grassroots level, are starting to fight back. They’re yanking their dollars, in protest, out of Citi and other banking giants. The Move Your Money campaign, one pollster estimates, has so far inspired about 9 percent of all U.S. adults to take at least “some of their business away from big banks.”

What could lawmakers be doing, at the state and federal level, to build upon this grassroots effort and help “downsize” the concentration of wealth at America’s economic summit? This week in Too Much, we explore one enticing possibility.

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Some people think Corporate America doesn’t care about the jobless. Not true. Corporate boards care deeply about the jobless — if those without work happen to be their former CEOs. Late last year, for instance, General Motors gave the heave-ho to CEO Fritz Henderson. But GM will be tiding poor Fritz over. He now has a consulting gig with the automaker. Henderson’s consulting rate: $3,000 per hour. Plus he gets an expense account. At Alabama's Regions Financial, C. Dowd Ritter will this month be exiting the bank's CEO suite, after leading Regions to $6.7 billion in losses the last two years. Ritter is leaving with a five-year consulting pact that will hand him $475,000 for 75 days of work the first year. At Domino’s Pizza, CEO David Brandon steps down this week. He's becoming a consultant, too. His rate: only $25,000 per month. But Brandon gets to fly free on Domino’s jet . . .

Hedge funds — those unregulated pools of capital that egg on global speculation — have totally recovered from the economic unpleasantness of 2008, say researchers from the Hennessee Group, a New York investment advising firm. Assets in hedge funds rose by $751 billion in 2009, enough to return the hedge fund industry back to 2007’s “pre-crisis levels.” That’s great news for hedge fund managers. In 2007, the top 25 hedge fund managers each pocketed at least $360 million. The even better news for hedge fund honchos: Efforts to plug the “carried interest” tax loophole that lets hedge fund managers treat the bulk of their income as capital gains, the Washington Post reports, have “lost momentum in the Senate.” The House voted in December to end the loophole, a move that, if the Senate ever followed suit, would hike the tax rate on most hedge fund manager income from 15 to 35 percent . . .

America’s “deficit hawks” have their claws out — and a new target: public employees. Forbes magazine last week called cutting pay for government workers “the only way to get serious about the deficit.” The “only” way? A 10 percent salary cut for all federal, state, and local government non-teaching employees, says Forbes, “could generate almost $40 billion per year.” Here’s an alternative that Forbes hasn't yet apparently contemplated: taxing the rich. If America’s 400 highest income-earners in 2007, the most recent year with stats available, had paid the same share of their incomes in federal tax as the top 400 did in 1955, the federal deficit would have shrunk by $47.7 billion . . .

The Welch want to be happier — and they’ve taken a first concrete step toward tracking their happiness progress. The government of Wales is planning to start collecting the statistics necessary to compute an index of “Gross National Happiness.” Gross Domestic Product stats and other traditional economic indicators, many researchers believe, don’t get at the factors that truly enhance “subjective well-being.” Global studies, notes Helen Mary Jones of the Welsh National Assembly, have shown that ”the best societies to live in aren’t always the wealthiest.” The best societies, she adds, appear to be nations “where wealth is shared more equally.” Agrees Cardiff University psychologist Adam Corner: “If the Assembly wants to create a happier Wales, it should pursue policies that promote a more equal society — and not just focus on generating a higher GDP.”

Russian billionaire Mikhail Prokhorov doesn’t like taking “no” for an answer. Back in 2005 the 66-year-old widow of banker billionaire Edmond Safra gave Prokhorov that “no” when he tried to buy Safra’s cliff-top mansion on the French Riviera. No big deal. Prokhorov just kept upping his offer price — until he hit $534 million, the highest price ever offered for a private residence. Widow Lily Safra, in 2008, finally relented and agreed to sell. Prokhorov promptly put down a $55 million deposit — and then wished he hadn’t after the global recession later that year hit his business operations hard. Prokhorov reneged on the sale and demanded his deposit back. Lily Safra refused. Last week a French court backed her refusal — and ordered Prokhorov to pay an additional $2 million in damages.

Quote of the Week

“Government provides the stability, under a rule of law, that businesses need in order to flourish, and the safety and security from predators that distinguishes our society from one of anarchy and chaos. So shouldn't the rich, as well as the poor, pay at least an equal percentage share of their income in taxes?”
William Cibes, chancellor emeritus of Connecticut's university system, on reports that taxpayers in the state's richest 1 percent pay a smaller share of their income in state and local taxes than the state's poor, Hartford Courant, March 7, 2010

Stat of the Week

Corporations are now busily reporting CEO pay totals for 2009, but take those totals with a grain of salt, cautions the Wall Street Journal. The figures now getting released value stock awards at the time of their grant. Actual rewards can run far higher. One example: Occidental Petroleum CEO Ray Irani took “expected pay” for 2008 originally valued at $58.3 million. His actual “realized” pay for the year: $222.6 million.

For a 'Living Wage' America, Cap the Top

The White House wants to require firms that do business with the government to pay decent wages. That could work — if we go after all pay that's indecent.

Labels can often cloud reality. Take the labels of “private” and “public” sector. We employ these labels all the time, to divide our economy into totally separate compartments, as if the “private” and “public” sectors represented two entirely different economic universes.

In reality, private and public sectors overlap and interlace, profoundly and incessantly. How connected have the two sectors become? A quarter of Americans work for firms that have contracts with the federal government.

Huge numbers of other Americans work for companies with contracts from state and local governments. Still more private enterprises regularly pocket public tax dollars, by the billions, for economic development grants and subsidies.

Without all these tax dollars, the U.S. economy would grind to a halt. And that reality, savvy policy makers have always understood, creates some interesting opportunities. By leveraging the power of the public purse — by denying, for instance, tax dollars to companies that behave poorly — governments can encourage business behavior that helps us build a better society.

Back in the 1960s, during the civil rights movement, activists acted on that reality. They pressed President John Kennedy to require federal contractors to put in place nondiscriminatory employment practices, and he did.

In the mid 1990s, in Baltimore, economic justice activists set off on a similar course. Tax dollars, they argued, should not go to companies that pay poverty wages. The city eventually agreed. In quick order, activists in localities across the United States had won what became known as “living wage” ordinances.

To win a local government contract, these living wage ordinances stipulated, businesses had to pay wages high enough to keep their workers out of poverty.

With Barack Obama's election, a “living wage” approach to procurement at the federal level has suddenly became politically possible. The Obama White House, news reports are now noting, is actively crafting plans that would “give an edge” in the federal contract bidding process “to companies that offer better levels of pay, health coverage, pensions, and other benefits.”

National corporate lobbies and their lawmaker allies are, predictably enough, already denouncing these emerging plans. They have what they consider a politically potent argument. Requiring contractors to meet higher wage standards, as Senator Susan Collins from Maine contended recently, “could have serious, negative consequences, especially for our nation’s small businesses.”

Small businesses, lobbyists for big business are so selflessly arguing, wouldn't be able to compete for contracts if they had to pay workers more.

That argument mangles the facts. Many small businesses do pay decent wages, and the nation's largest low-wage employer happens to be a corporate colossus, Wal-Mart. Still, by playing the “small business card,” corporate interests do have an argument that can resonate powerfully in the media echo chamber.

What can economic justice activists do to blunt this cynical corporate ploy? They can begin insisting on a government procurement bidding process that addresses the top of the corporate pay ladder, not just the bottom.

Such a process could set out a maximum gap between corporate top and bottom and deny government contracts to companies that pay their top executives over that maximum. A reasonable maximum for executive pay could, for instance, be set at 25 times what a firm's lowest-paid workers are receiving.

A generation ago, in the United States, few firms paid their top executives over 25 times their worker pay. Big-time firms today, at last tally, pay their top execs 319 times more than what average American workers receive.

By insisting that companies going after government contracts keep pay at the top within hailing distance of pay at the bottom, the federal government would be unleashing several different marketplace dynamics — all of them positive.

A pay ratio limit, for starters, would give small businesses a better shot at gaining contracts, since pay gaps within small enterprises seldom ever come close to the gaps at America's corporate giants. A pay ratio cap would also give large enterprises an incentive to raise the wages that go to their lowest-paid workers. The higher these wages at the bottom, the higher the allowable pay at the top.

Even more importantly, governmental procurement policies that privileged companies with narrow pay gaps between top and bottom would encourage enterprise-wide innovation and efficiency throughout the American economy.

“Effective enterprises,” researchers have shown, share rewards. “Defective” enterprises ladle rewards at the top. Peter Drucker, the father of modern management science, believed that corporations should compensate their top executives at no more than 20 or 25 times what their workers receive.

Congress now actually has legislation pending that leans in this direction. Rep. Janet Schakowsky's Patriot Corporations Act would give a federal contract bidding preference to firms that pay their executives less than 100 times their workers.

An earlier bill along that line, in the last Congress, had the support of a young senator from Illinois. That senator: Barack Obama.

New Wisdom
on Wealth

Mary Bottari, How Goldman Sachs Wins No Matter What, Capital Times (Wisc.), March 2, 2010. How Wall Street's power suits enabled the Greek slide into fiscal crisis — and now are turning that slide into bonus bucks.

Nick Gier, The Huge Costs of Economic Inequality, New West, March 2, 2010. A long-time University of Idaho philosopher explains why equality's the key to getting liberty and community right.

Stephen Armstrong,  The billionaire refugees, Guardian, March 6, 2010. A look at the “super-rich nomads” globetrotting the world to find tax havens.

Citizens for Tax Justice, President's Medicare Tax Reform Would Affect about 2% of Taxpayers and End the Exemption for Wealthy Investors, March 5, 2009. A new analysis.

An Antidote to Big Banker Arrogance?

Taxing Banks: A report submitted to the International Monetary Fund. Task Force on Financial Integrity and Economic Development, Christian Aid UK, Tax Justice Network International, Trades Union Congress. February 2010.

Never Again: no turning back to boom and bust banking, Compass,
February 2010.

In today's post-meltdown economy, the UK Compass think tank observed last month, taxpayers have become “an invisible investor in every banking business.” We invisible investors aren't seeing much of a return on our investment.

We are, to be blunt, getting hosed. In the UK and the United States, in Europe and Asia, tax dollars saved the world's banking giants from total collapse. To the big banks, that's now ancient history. They've returned to business as usual.

The big banks are, once again, chasing after speculative windfalls and stiffing Main Street businesses that need loans to create jobs. To speed this return to business as usual, the big banks have also declared total war on legislative proposals for consumer protection and common-sense banking regulation.

Most arrogantly of all, these same banking giants are dumping billions into bonuses, at a time when the banks have still only paid back but a pittance of the subsidies they've received — and continue to receive — from taxpayers.

Some nations, most notably the United States, have done next to nothing to slow the banker charge back to the pre-meltdown status quo. Others, most notably the UK and France, have taken some substantive action.

The UK has put in place a one-time 50 percent tax on all individual bank bonuses over £25,000 a year, about $40,000. France is instituting a similar levy. These taxes apply to banks themselves. The more they shell out in bonuses, the higher the bonus tax they pay.

UK officials figured that banks that do business in Britain would cut back on their bonus outlays to avoid paying the tax. They haven't. The UK now stands to collect £2 billion from the tax on bonuses for 2009, not the £550 million British officials originally expected to collect.

This continuing bonus cascade is sending a simple message, suggest two new reports from the UK, one from a London progressive think tank, the other from a coalition of tax reform and labor groups. For our contemporary global banking elites, these reports intimate, stuffing pockets has become all that matters. The near-calamity of the meltdown hasn't chastened bankers in the least.

The rest of us, meanwhile, can't afford another meltdown, and that means, these two new reports note, that we have to act now — both globally and nation by nation — to end the excessive financial sector rewards that breed excessive financial sector recklessness and risk.

The one-time UK bonus tax now in place, argues the think tank Compass, represents only a minimal first step. That tax needs to be made permanent and applied to hedge funds and the full-range of risk-taking financial institutions. Also needed: an additional tax on currency trades and other speculative financial transactions. 

The final needed piece: a cap on bank pay. Over recent years, banks have been routinely allocating 50 percent of their revenues to compensation, with most of that settling in the pockets of a relative handful of bank executives and traders.

The new Compass report urges a “a short-term ceiling on total remuneration given as both cash and share options,” set at 15 percent of total bank revenues.

The second new UK report, a white paper on taxing banks that Britain's top tax reform groups and labor movement have jointly delivered to the International Monetary Fund, treats this remuneration cap notion as even more central to real reform.

The more banks currently pay their top execs and traders, Taxing Banks points out, the less they report in profits — and the less they pay in corporate income taxes. Taxing Banks proposes capping the remuneration banks can claim as a legitimate business expense at ten times the median income in whatever country the banks are doing business.

If a nation's median income ran $30,000, under this ten-times rule, banks would have to pay corporate income tax on any individual compensation over $300,000.

In the end, both these reports sound the same call. Independent analysts, as the Compass paper notes, widely acknowledge “the link between excessive pay and the economic crisis.” Fine populist-sounding rhetoric about overpaid executives won't break that link. We need real limits.

Inequality Links

Working Group
on Extreme Inequality

Common
Security Clubs

United for a
Fair Economy

The Equality Trust

Wealth for the
Common Good

New Economy
Working Group

Class Action

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