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They say IBM is deliberately finding ways to not pay them. This salesperson left IBM in February after a 10-year career:
"I was with IBM for 10 years and was the #1, #2, #1 rep in my software brand in the NATION for years 2009, 2010, 2011 respectively. In 2009 and 2010, I was paid accordingly. At least by IBM standards. In 2011, they screwed us all. 2012 was shaping up to be the same. In 2011, I was paid $40,000 commissions on $12,000,000 in revenue. Why? I was given a $12,000,000 quota. I left in February...and my former region’s best and brightest are peeling off." ...
The company is slowly reducing its workforce with layoffs that target older, higher-paid employees, too, some laid off employees told us. This includes an early retirement scheme in which older employees are asked to cut their hours and their pay, but are promised they won't be laid off before their declared retirement date.
Wharton management professor Adam Cobb sees another reason for what is clearly an evolving relationship. "When you are talking about loyalty in the workplace, you have to think about it as a reciprocal exchange," says Cobb. "My loyalty to the firm is contingent on my firm's loyalty to me. But there is one party in that exchange which has tremendously more power, and that is the firm." ...
Employee behavior, Cobb says, has been influenced by the dramatic organizational restructuring that began 30 years ago. "Firms have always laid off workers, but in the 1980s, you started to see healthy firms laying off workers, mainly for shareholder value." In their announcements of pending staff cutbacks, "firms would say, 'We are doing this in the long-term interest of our shareholders,'" Cobb notes. "You would also see cuts in employee benefits — 401(k)s instead of defined benefit pensions, and health care costs being pushed on to employees. The trend was toward having the risks be borne by workers instead of firms. If I'm an employee, that's a signal to me that I'm not going to let firms control my career." ...
Bidwell suggests another dynamic behind the changing employer-employee relationship. Many of the things employers did to increase employee loyalty — at least up until the 1980s — were done not to encourage higher productivity and job satisfaction, but to keep the unions out, he says. "Companies were very worried about unions and the possibility of strikes. They treated their employees well so they wouldn't join a union. But that is no longer the case. Unions are on the decline. It's easy to quash them if they try to organize. So some managers might not care as much about employee loyalty as they used to."
The new facility, located in the Zona Franca Americas in Heredia, support clients in the areas of IT security, data storage, business analytics, cloud computing, and other services in demand by IBM clients. The new centre will provide cloud infrastructure support and management, to help clients simplify and enhance operational efficiency. Cloud computing provides clients with the ability to reduce their IT infrastructure costs, have a standardized, virtualized platform, and enhance their process automation. Additionally, the center will provide technology capabilities that can anticipate and help prevent fraud and IT hacker attempts. ...
IBM also announced that it is pursuing efforts to build skills in Costa Rica. IBM is working jointly with the public and private universities, Costa Rica Investment Promotion Agency (CINDE) and the government. The aim is to provide academia with technology, knowledge and access to specialized software to improve training and education, and to strengthen the curricula of IT programs around four main themes: cyber security, cloud computing, data storage and business analytics. The purpose of the IBM University Program is to provide students with new information technology skills that are in high demand in Costa Rica.
IBM appears to be trying to reduce its U.S. headcount as part of a campaign to globalize its operations. It laid off more than 1,800 U.S. workers earlier this year. In fact, one estimate says IBM has cut U.S. headcount by 29 percent, to about 95,000 workers, since 2005. The company employs 433,000 people worldwide.
Selected reader comments follow:
Older workers are costly and the fact that they continue to work creates some financial uncertainty around future pension obligations. The bean-counters hate uncertainty as they march toward the $20 / share price.
Whatever anyone may say, IBM cannot and will not ever RA people based on age. Trust me, I've heard these discussions. Now, older folks may be disproportionately suffer from an RA for a variety of reasons, but they will never be targeted as such.
The Transition program gets these people out the door without any risk of age discrimination suits. The "no layoff" protection is a subtle reminder that the axe can fall at any point. And the silence on continuation of severance is designed to create additional incentive to leave with "something" -- although in this case the something is nothing more than not working two days per week. (I personally think severance will continue in some form since it serves to have the retiree sign away away all legal rights).
Interestingly, in the old days, workers were incented to leave by being promised something extra (health insurance, a bonus payment, etc). IBM has turned the model on its head by saying if you retire in 1.5 years you won't be fired in the interim. Your "bonus" is being allowed to work a bit longer without fear of layoff (yes, layoff -- not workforce rebalancing). It's really a very odd proposition but -- with the correct spin -- can be made to work.
IBM HR clearly knew that simply offering a "no layoff" bonus if you retire would smack of blackmail. So, the "transition" element was introduced to make it seem like IBMers could ease themselves into a new profession (with healthcare benefits) two days a week. The idea of starting a new profession two days a week in today's economy is preposterous, but it's really the optics and spin that matter. And, as we've seen, the media is fairly easy to manipulate if you hand them an easily digested angle.
Lastly, getting rid of the retirement eligible individuals is another step towards moving the workforce overseas. I believe it's safe to safe that ONLY customer-facing positions will exist in IBM US within five years. The transition program is a cheap way to get another 10,000 (?) employees off the books before the real blood-bath starts in the next year. OYB
If IBM REALLY wanted to get the pre-retiree crowd out, they would offer something positive like a bump to the FHA or a cash bonus. But I really don't think IBM thinks in those terms anymore. It's all a short-term mentality based on "affordability" -- which is code for reduce expenses to goose the stock price.
It is disconcerting to see how easily the press is manipulated. In all fairness to them, I suppose they're just looking for a way to fill space with the least effort possible and don't have the time or interest to understand the complexities (and ruthlessness) inherent in an IBM job career. Clearly, we need someone like Ellen Schultz to explain how IBM is pioneering the new approach to incenting people to retire -- "retire now with a decreased schedule for the next year or you'll be fired without severance." Nice.
I believe the intended target of this are people who just needed a nudge to go out the door. It'll get some takers. Some of the politics and unsaid things, I'm sure you are correct on. Fear alone will make some take it, and some of the fear being spouted on this forum ad nauseam may get others to take it. One begins to wonder who the management paid shills are, if such exist. The ones who are fear mongering under the guise of "I told you so" or the ones currently being accused.
In talking with my manager, he would prefer that I not take it but said he would not stand in my way if I really wanted it. Neither he nor I can figure a way my job could be done in 3 sequential days leaving a group of 4 for my own personal use.
Cheers. Peter E. Greulich.
“I think we got a little bit of flavor at the meeting with the trustees with questions about traffic,” he said, noting the site is across the street from the Albert D. Lawton Middle School. “A footnote is that IBM was once 8,500 employees, and now is more like 5,000. Traffic has been there before. They’ll be able to address that.”
The Essex Junction plant went through a series of layoffs from 2001 to 2003 that reduced the workforce from 8,500 to about 6,500, and experienced further layoffs later in the years since to bring the workforce to an estimated 5,000. IBM does not release employment figures.
The 60-acre site includes the IBM north parking lot, which once had space for about 1,100 cars, but is now overgrown with weeds. There also are recreational facilities for IBM employees on the property, including tennis and basketball courts and soccer fields — but Thomas Jagielski, manager of construction, planning, systems and technology, said “interest has waned” among IBM employees to use those facilities. ...
In 1990, Crawford said, IBM contributed 62 percent of Essex Junction’s tax revenue. Today it contributes 10 percent, because of the phasing out of machinery and equipment and inventory taxes in the interest of economic development, and because an appraisal that went into effect in 2007 dropped the value of IBM’s facility from $147.5 million to $104 million.
The plan administrator retains exclusive authority and discretion to interpret the terms of the benefit plans and programs described herein. The company reserves the right, in its sole discretion, to amend, change, suspend, or terminate any benefit or other plan, program, practice or policy of the company, at any time. The company does not have any obligation to — and nothing contained in these materials shall be construed as creating an express or implied obligation or promise on the part of the company to — maintain, continue to offer, or make available such plans, programs, practices or policies.
No promise. No obligation. Can shut it down on a whim. The risk is in your pocket.
IBM can pull a bait & switch at any time. Kathi.
More young professionals wanted to work for Google last year than any other company, a survey conducted by Universum -- an consulting firm specializing in employer branding -- found last year, according to the Wall Street Journal.
As one of the most profitable companies on the Fortune 500, Google might have an incentive beyond making employees happy. A recent draft paper published by the National Bureau of Economic Research found that perks are utilized as a means to enhance productivity.
"When I budgeted for life as a single woman, I didn't budget for 3% inflation, the loss of half of my retirement savings in the market crash, my hearing loss or early retirement," she said.
Almost daily, we hear stories of the crisis stemming from the breakdown of the three-legged stool of retirement: traditional pensions, Social Security and individual savings. For the majority of Americans, one of the legs of the stool is already gone -- traditional pensions. With its replacement, the 401(k), the stool is in danger of tipping retirees into poverty.
Recent research finds 401(k)-style defined contribution plans have lost their shine. IRAs and 401(k) plans lost a combined $2.8 trillion, or 47% of their value, between September 2007 and December 2008, the height of the economic recession.
Retirement experts find that these plans have numerous shortcomings, including high operation costs and low investment returns. The biggest problem with defined contribution plans is that alone they do not provide retirees with guaranteed retirement income.
Retiree health costs add up in part due to what’s not covered by Medicare, of course. But Medicare premiums and copays also contribute—a couple can spend about $2,400 a year on Medicare Part B (the part that covers doctors and other services not covered by Part A, for hospital service, or Part D, for prescription drugs) alone. The chart to the left shows a breakdown of projected costs, with 23 percent going to out-of-pocket prescription drug expenses, 45 percent going toward other out-of-pocket expenses and 32 percent going toward Medicare Part B and Part D premiums.
That's forcing many Americans to plan to work beyond age 65. "A number of clients have had to postpone retirement simply because of their health care cost," says Sheryl Garrett, a financial planner at Garrett Planning Network. "Continuing employment is probably their best choice, as well as staying as healthy as possible." A quarter of middle-class Americans even say they need to work until 80 in order to live comfortably in retirement, a November 2011 survey by Wells Fargo found.
The L-1B visa gives employers access to a large labor force that has very few rights in the workplace. First, employers are not required to pay L-1B visa beneficiaries a minimum or prevailing wage. Workers are not in a position to negotiate better wages, because they can be easily fired, which renders them out of status and requires that they leave the country immediately. Second, the L-1B visa is not a long-term investment in the U.S. economy since only a small fraction of L-1B visa beneficiaries will be sponsored by their employers to stay in the U.S. permanently. The L-1B visa is really about businesses having ready access to a powerless, low-wage workforce.
The L-1B visa also has a significant impact on U.S. workers. U.S. workers can be fired and replaced with L-1B visa beneficiaries. A report by the Department of Homeland Security, Office of Inspector General in January 2006 found “[t]hat so many foreign workers seem to qualify as possessing specialized knowledge [that it] appears to have led to the displacement of American workers.” Labor unions support the use of nonimmigrant visas for high-skilled workers, but also strongly support assessing the impact of work visas on the U.S. workforce.
The L-1B visa is largely a black box. We do not know how many beneficiaries are currently working in the U.S., where they are working, what their qualifications are, and how much they are earning. We should have answers to these very basic questions and a thoughtful debate before the standard for “specialized knowledge” is weakened. ...
Editor's note: I can attest that IBM abuses the L-1B visa program extensively. Before leaving IBM recently, most of my IGS projects were staffed with over 50% (and sometimes nearly 100%) employees from IBM India here on L-1B visas. The IBM India employees included program managers, developers, database administrators, business analysts, and others...hardly employees with "specialized knowledge." In fact, many of the IBM employees were newly hired into IBM India and their first IBM job was in the United States on an L-1B vista.
Unlike the H1-B visa, which is more closely monitored, the L-1B visa program has provided IBM with a means to bring unlimited numbers of offshore employees to the U.S. to staff projects, instead of employing North American employees. It is a travesty.
In today's IBM there's no money for business essentials like new computer equipment, software licenses, or travel, let alone education. Ginni and Sam talk about all the money available for education, but have you tried asking your immediate manager whether any of it is available to you? From personal experience, you will get a resounding "no", perhaps accompanied by a strange look, or even raucous laughter. Yet, here's UTC spending $1B (yes that's a "B", Ginni and Randy, not an "M") because they realize the value of an educated workforce. Take heed IBM; this one-sided labor market isn't going to last forever, and you are going to very much regret how you have treated your most valuable asset ... your employees. -IBM Mentat-
Look for another e-mail from Randy around the end of 2013 with some bizarre, twisted explanation about how HR is responding to the requests of IBM employees and retirees by eliminating this benefit (not to mention probably ALL retiree health insurance). Because, IBM Management, out of the goodness of their hearts and in support of Health Care Reform, wants to provide everyone with the opportunity to purchase insurance through the Exchanges (using their own money, of course).
Bottom line, it might be worth sticking around to get the enhanced pension annuity, depending on your circumstances, but I wouldn't stick around just for the FHA, because it probably won't be there after next year. I know I'm certainly not counting on it. -Hope this Helps-
Your comment was pretty darn rude and unreasonable. There are plenty of people who never applied for jobs with major travel requirements because they could NOT work that kind of job. If you have some image of IBM workers all being men with stay-at-home wives, or young single people, you may think this is just dandy, but what about single mothers? What about parents who both work for IBM and now must both travel? What about any employee with family commitments with no second person around to handle the job?
Many people purposely never applied for these kinds of jobs because they are totally unworkable for them. Also, that "Just be glad you have a job" line has no place here, where people are struggling to keep their employer from beating them into the ground. People deserve jobs with decent wages and benefits, with stability and fair treatment. That's the purpose of the Alliance and this website. I suggest you re-THINK calling people who are looking for a fair deal whiners. -Anon-
As current employees do not even seem willing or able to organize to save their own jobs I think the odds of this happening are slim to none. Its amazing that IBMers know the code names and goals of all the management programs designed to screw them over and they discuss them here like they are talking about baseball games. I wonder why they pinch hit lefty. I wonder when Ginny will close down the pension plan. Yet they do nothing to stop the oncoming personal crisis an RA will have on them and their families. Its like they are watching someone else's life unfold without caring that a disaster is coming and they see it and do nothing even though its their own life! Have all of you really become the disposable, interchangeable work widgets IBM management has always dreamed of?
I am amazed by comments not just here but on TV and in daily conversations about corporations can't do this or that. People are confused by the difference between a union shop and an at will shop. Someone recently said their employer is getting rid of older workers. Someone else asked how many years the person had. She said 30 years. The other person said oh you should be safe. My wife said Why should she be safe? Its non union. Seniority does not help in layoffs. In fact its opposite in non union. The older more senior people are let go first because they cost more. Both the other ladies went from looking shocked to appalled when they realized she was right. Just because a Teacher gets tenure does not mean a salesman does. Just because an autoworker faces layoffs by seniority does not mean a bank teller does.
Understand that by law you are entitled to very little from your at will employer. Severance is not guaranteed by law. Just because your neighbor has an employment contract does not mean you do. Learn what you are entitled to by law. Count on nothing that is not in writing. Wake up and get a contract before it is too late. -Exodus2007-
So if you don't take this option and get fired some time afterwards and are an older worker you typically get 26 weeks pay: aka: 6.5 month pay plus unemployment for however many months your state provides, perhaps another 6-9months which might be another 2-3 months of former pay.
So the choice comes down to 12.6 months with this new snake oil option and not a penny more, or 8-9 months pay (package + unemployment) and potentially years more. So not taking this snake-oil offer is risking the next 4 months income at most and potentially not getting years more of pay if you want to keep working. Of yes and as for working 60% of the time, that might be 3 days a week or more likely 4 hours a day and hr knows that if you get a beamer in his chair for 4 hours it won't take much pressure to have him working full 8 hour days for his new 70% pay scale. This is just another sleazy offer by hr scum. -ibm-snake-oil-salesman-report-
Alliance reply: From what we have heard your 60% work time is based on what you have already been working. If you have been working 60 hrs a week your new work hours would be 40 hrs a week at 70% pay. Remember when a 40 hour work week was the norm in America for full pay?
Not to mention, there is a lot more competition in the emerging countries, employees jump from company to company frequently. Personally, I've been buying IBM stock for many years, but come 2015, I'm selling all of it. This bubble can't last forever, I just need to time it right.
The old saying that you get what you pay for applies here. While there are a few gems in the emerging countries, the bulk simply aim to please. IBM is deviating from the "Think" mentality that Watson pushed. Eventually, it will come back and bite the company. I'm saddened by this as there are some very talented engineers and scientists that gave a lot of their life to IBM. It would be very difficult for me to recommend a college grad to come to IBM at this time. Oh well, the new Republican American is upon us... Either Americans rise up and change it, or we can expect all companies to evolve into IBM... -Sad-
Alliance Reply: You make several good points; except that IBM has been "deviating from the THINK mentality" while a Democrat is in the White House, too. It isn't just the Republicans. The president has listened to IBM as if they are doing right by America, when the opposite is true. The president, Democrats and Republicans et al; need to listen to IBM US employees, instead of the IBM Executive liars that are running the company into the ground. Visit our Twitter page to view the tweets we've been making on this topic.
IBM can end the FHA at any time.
To qualify for the FHA, IBM employees need to have at least 15 years of service AND are at least 55 years old that are not under the old retiree health plan.
If you do not meet both years of IBM employee service and age you don't qualify for the FHA: you essentially lose it and don't get it upon an RA or retirement.
Even for those that get the FHA it is only going to get you a little retiree health insurance that will not last too long.
Let's put an end to the FHA discussion. The FHA is just a small carrot that IBM is dangling in front of employees that are hoping to hang on during the RA roadkills to 2015.
We need to be concerned with joining the Alliance and stopping RAs now. -da_facts-
“Americans – even those who have diligently saved for their golden years – are not prepared for the reality of health care costs in retirement and don’t really understand how Medicare works,” said John Carter, president of Nationwide Financial Distributors, Inc. “Too many assume their employers will continue to pay their premiums during retirement or Medicare will cover all health care expenses.” ...
Medicare provides health coverage to 46 million older or disabled Americans, but according to the Employee Benefit Research Institute, Medicare currently covers only about 51 percent of the expenses associated with health care services.
“Retirees’ access to employer-sponsored health insurance continues to decline, and there are potential changes in Medicare benefits due to the program’s projected funding shortfall,” Carter said. “Americans need to realistically plan to be responsible for their own health care in retirement.”
Some big employers are already taking this tack, known as value-based insurance design, by lowering copayments for medicines to manage chronic conditions like diabetes, high cholesterol and high blood pressure. It helps that many of the most prescribed pills are now generic and pretty cheap. ...
Now some employers are thinking about adapting the approach for pricier specialty drugs, such as those used to treat rheumatoid arthritis, multiple sclerosis and cancer, according to a recent report by the Center for Studying Health System Change.
These medicines are often very expensive and have no generic competition. So instead of charging a simple copay for these drugs, some health plans charge a percentage of the total cost, which can run to thousands of dollars a month.
Such care can be crushingly expensive: Just one hour of home-health-aide care costs roughly $20, while the average private nursing home room costs $87,000 a year. Neither routine employer-based medical insurance nor Medicare will pay for extended periods of custodial care. ...
For the nation's roughly 78 million baby boomers, the time for humor about who will prepare their meals is quickly running out. Many boomers, people born between 1946 and 1964, are expected to fall so far into poverty trying to provide themselves with paid care that they will qualify for Medicaid — the medical care program for the deeply impoverished.
A fortunate few will have long-term-care insurance, but even that option is looking sketchy as more companies exit the business. Insurance giants such as Prudential and MetLife have recently pulled back from offering long-term-care policies. Others, such as John Hancock and Genworth Financial, have turned to state regulators, seeking permission to dramatically hike premiums. Depending upon the location, the insurers' requests for higher rates have been for amounts such as 18 percent or 40 percent or, in a few cases, 90 percent.
The insurance system was what Relman pointed his finger directly at as the sole reason for why the country’s healthcare system has become a “fragmented” “shambles.” “We run our healthcare system as if it’s a business in the free market…and not like the social service it ought to be,” he said. “In no other country do they make that terrible mistake.” He also said that “we believe in the myth that the private market—private capitalism—can work as well in healthcare as it is reputed to work in other areas [of the economy].”
These misaligned incentives, most experts believe, are largely responsible for the notorious inefficiency of American health care -- costing more than $8,000 per person, or twice what most other countries spend. The total tab -- $2.6 trillion in 2010, or 18 percent of GDP -- is substantially responsible for America's trillion-dollar deficits. The federal government pays roughly a third of the total national health care bill, mostly through Medicare (health care for the elderly) and Medicaid (health care for the poor). It also spends hundreds of billions -- $177 billion in 2011 -- in tax expenditures for employer-provided health insurance.
Instead of aligning human incentives, the structure tries to contain costs through bureaucratic restrictions. Reimbursement schedules are managed through complex computer programs. In 2014, if not sooner, the federal government will add over 120,000 separate health care reimbursement categories, including 21 separate classifications for "spacecraft accidents" and 12 for bee stings. This bureaucracy is expensive, and skews incentives even more. For example, Medicare will cover the cost of a registered dietician if patients already have diabetes or kidney disease, but it won't pay for referrals to a dietician for obesity alone -- this despite the fact that obesity is a leading contributor to diabetes, kidney disease and scores of other costly ailments. Almost every aspect of health care bureaucracy is hateful. Doctors say they spend a third of their time on paperwork. Patients are driven to tears by the cold calculations of incomprehensible reimbursement guidelines.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
When the ruling was issued, Brian T. Fitzpatrick, a law professor at Vanderbilt University, described it to The New York Times as “one of the most important and favorable cases for businesses in a very long time.” He called it “a game changer.”
A year later, we’re starting to see how much the game has changed. On April 25, the consumer advocacy group Public Citizen released a report titled “Justice Denied” that said that since Concepcion, judges had cited the decision at least 76 times as a reason to prevent potential class-action lawsuits from moving ahead. In some of those cases, the judges made clear that they were ruling against the plaintiffs through gritted teeth, explaining that Concepcion basically made it impossible to come to any other decision. ...
For other arguments against class actions, the Haggler spoke to a representative at the United States Chamber of Commerce’s Institute for Legal Reform, which is a big fan of the Concepcion decision. Matt Webb, a senior vice president of the organization, says the class-action system is flawed because it is designed by and for lawyers. Arbitration, he added, can work. “If you have a $30 dispute and a good arbitration system in place, one that is administered fairly,” he said, “you have the ability to get a claim resolved without giving money to a lawyer.”
A co-author of the Public Citizen study, Taylor Lincoln, disputed that. Many well-known arbitration companies have a pro-business bias, he said, because corporations pay the arbiters. But the real agenda of Concepcion’s champions, he added, is to block collective legal action — the kind that gets a company’s attention by affecting the bottom line. Justice Stephen Breyer echoed that notion in his dissent in the Concepcion case — it split the Supreme Court 5 to 4 — when he quoted from a 2004 decision written by Judge Richard Posner of the United States Court of Appeals for the Seventh Circuit: “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”
Most important, the cache dispels the myth that Dick Fuld, chief executive officer of Lehman Brothers Holdings Inc., and his close associates were unaware of the risks their business faced in 2007 and 2008. That would be bad enough, but the more devastating reality is that Fuld and his sycophants were warned repeatedly but were blinded by their hubris.
The records confirm, yet again, that the “forces-out-of- our-control” argument we hear from Wall Street leaders is bunk. It is the ill-advised behavior of one banker after another, day in and day out, that leads to the sort of devastating financial crisis we are only now emerging from.
For instance, at a Lehman board meeting in September 2007, according to a copy of the presentation in the data cache, Lehman executives presented a clear summary of the brewing crisis. “The initial tremors were felt at the end of 2006,” the board was told, “when the poor loan performance of sub- prime borrowers began to be a cause for concern in the marketplace. This was evidenced by a gradual spread widening in the asset backed index.” The presentation continued: “The market continued to widen as it became apparent that the performance problems in mortgage loans was not going to abate and was no longer limited to the sub-prime market but also affecting the Alt-A product.”
The problem comes in the distribution of the benefits of the productivity revolution. A large portion of the population no longer earns the money it needs to live nearly as well as the productivity revolution would otherwise allow. It can't afford the "leisure" its now experiencing involuntarily. Not only is this a problem for them; it's also a problem for the overall economy. It means that a growing portion of the population lacks the purchasing power to keep the economy going. In the United States, consumers account for 70 percent of economic activity. If they as a whole cannot afford to buy all the goods and services the productivity revolution is generating, the economy becomes stymied. Growth is anemic; unemployment remains high.
That's why "supply-side" tax cuts for corporations and the wealthy are perverse. Corporations and the rich don't need more tax cuts; they're swimming in money as it is. The reason they don't invest in additional productive capacity and hire more people is they don't see a sufficient market for the added goods and services, which means an inadequate return on such investment. ...
During the Depression decade of the 1930s, the nation reorganized itself so that the gains from growth were far more broadly distributed. The National Labor Relations Act of 1935 recognized unions' rights to collectively bargain, and imposed a duty on employers to bargain in good faith. By the 1950s, a third of all workers in the United States were unionized, giving them the power to demand some of the gains from growth. Meanwhile, Social Security, unemployment insurance, and worker's compensation spread a broad safety net. The forty-hour workweek with time-and-a-half for overtime also helped share the work and spread the gains, as did a minimum wage. In 1965, Medicare and Medicaid broadened access to health care. And a progressive income tax, reaching well over 70 percent on the highest incomes, also helped ensure that the gains were spread fairly.
This time, though, the nation has taken no similar steps. Quite the contrary: A resurgent right insists on even more tax breaks for corporations and the rich, massive cuts in public spending that will destroy what's left of our safety nets, including Social Security and Medicare and Medicaid, fewer rights for organized labor, more deregulation of labor markets, and a lower (or no) minimum wage.
This is, quite simply, nuts.
With $100m in the bank already for the 2012 cycle, Crossroads is the largest and most feared of the new kind of campaign group unleashed by a series of court decisions removing all limits on cash donations for spending on elections. In this year’s presidential, Senate and House elections, the super-political action committees, or super-Pacs, such as Crossroads have the firepower to swing a crucial state or seat.
“They can get 20 guys around a table and say, ‘we can win this seat if we spend $20m, and I’d like you all to put in one million dollars each’. It changes the whole dynamic,” says a prominent Republican fundraiser. ...
Mr Law says Crossroads is on track to meet its fundraising target of between $240m and $300m for the 2012 elections. By contrast, Priorities USA Action, the prime pro-Obama super-Pac, has raised a paltry $9m.
When the Supreme Court handed down its 2010 decision in the Citizens United case allowing corporations to donate unlimited funds to campaign organisations, a legion of critics envisaged Fortune 500 companies taking over politics.
But as with other pro-Republican super-Pacs, the Crossroads donors writing million-dollar cheques have been entrepreneurs, not large companies, many from Mr Rove’s longstanding Texas network.
Of the top 10 donors to all super-Pacs so far for the 2012 elections, seven are individual businessmen, according to the Center for Public Integrity, including four billionaires.
Today was a very good day for Brian Moynihan, the Bank of America CEO whose 2011 compensation package was just approved. As they were preparing to formally approve his lavish remuneration, I stood outside in a line of shareholders with a letter naming me the official representative for an investor who owns 82,000 BofA shares. Around me were about forty investors, each of whom was about to contribute in some small way to Mr. Moynihan's payday. But our little band of investors were haughtily dismissed by bank executives after waiting, some for hours, in the wilting Carolina heat. ...
Sounds bad, you say. But how's the share price? Asked like a true investor. In this, a modern executive's most crucial performance measurement, our friend also fails badly. The corporation's stock - which had been trading at $52 per share when our protagonist joined the senior management team - has fallen from $15 to somewhere between $7 and $8 today.
Can you imagine any corporation but a big bank that would reward this individual with continued employment as CEO, much less with a seven million dollar compensation package?
But then, Brian Moynihan doesn't run any corporation. He runs a too-big-to-fail bank. And running a too-big-to-fail bank means never having to say you're sorry. One of the acquisitions described above is Merrill Lynch. The other's Countrywide. And Federal investigators said that Moynihan's Bank of America is outdoing Angelo Mozilo's Countrywide in malfeasance and rascality. ...
No wonder things went so well for Mr. Moynihan today. Activists told their stories inside the shareholders' meeting, and Moynihan and his team pretended to listen. But despite the stories they heard, despite the grumbling from their investors and the chanting in the streets, there was an eerie hush over Charlotte today. They're Bank of America. They don't have to hear anything they don't want to hear. Their friends in Washington have built an impermeable bubble around their executive suite, and that of every big bank in the country.
In the light of JP Morgan's stunning losses on derivatives, announced yesterday but with the full scope of total potential losses still not yet clear (and not yet determined), Jamie Dimon and his company do not look like any kind of appealing role model. But the real losers in this turn of events are the Board of Governors of the Federal Reserve System and the New York Fed, whose approach to bank capital is now demonstrated to be deeply flawed.
JP Morgan claimed to have great risk management systems -- and these are widely regarded as the best on Wall Street. But what does the "best on Wall Street" mean when bank executives and key employees have an incentive to make and misrepresent big bets -- they are compensated based on return on equity, unadjusted for risk? Bank executives get the upside and the downside falls on everyone else -- this is what it means to be "too big to fail" in modern America. ...
The lessons from JP Morgan's losses are simple. Such banks have become too large and complex for management to control what is going on. The breakdown in internal governance is profound. The breakdown in external corporate governance is also complete -- in any other industry, when faced with large losses incurred in such a haphazard way and under his direct personal supervision, the CEO would resign. No doubt Jamie Dimon will remain in place.
And the regulators also have no idea about what is going on. Attempts to oversee these banks in a sophisticated and nuanced way are not working.
If only there was a way to let a giant bank crash on its own without bothering anybody! Actually, it would be better to not have big banks at all. But it's anti-American to think that way. So the crafters of the Dodd-Frank financial reform act have tried to make it so that a failing big bank can be gently put to sleep while the rest of us get on with our lives, rather than panicking and shelling for a costly bailout.
The responsibility for keeping things running smoothly the next time a giant bank gets itself in a Lehman-like pickle rests in the hands of a government regulatory agency, the Federal Deposit Insurance Corporation, whose funding Congressional Republicans are trying to slash. ...
Meanwhile, Dodd-Frank opponents in Congress -- including Rep. Paul Ryan (R-Wis.), who has http://www.huffingtonpost.com/2012/05/09/paul-ryan-volcker-rule_n_1503209.html?ref=business that banks shouldn't be too big to fail -- are trying to strip the FDIC of its resolution power. They have already killed a provision of Dodd-Frank that would have made the biggest banks pony up $19 billion for a rainy-day fund that would provide necessary cash to keep a failed bank's subsidiaries running.
Instead, now the FDIC has to finance its Orderly Liquidation Fund with taxpayer money first, and then try to get the money back from profits of a failing bank. It also will have the right to try to pull money out of the other big banks after a failure has already happened, in what Rolling Stone's Matt Taibbi, in a new article on financial regulation Thursday, calls "an assessment process so convoluted that you could grow a four-foot beard in the time it would take to understand it."
What's more, as Taibbi points out, Republicans in Congress are also trying to kill even that assessment process, leaving taxpayers on the hook, just as they were before anybody had ever heard of Dodd-Frank.
“Ryan’s plan would insure that any profits created offshore by U.S. corporations would never be taxed by the U.S. government,” explains Johnston, who won the 2001 Pulitzer Prize for his work as The New York Times' tax reporter. “This would create a tremendous incentive to move more and more U.S. jobs overseas to escape taxes on the profits that foreign workers produce for them,” Johnston says.
“Up until now, we’ve been losing good jobs because CEOs practice a kind of labor ‘arbitrage,’ seeking the most advantageous place to locate their plants based on low wages,” Johnston says. “It doesn’t take a genius to see that if your labor costs are about $40 an hour at a major unionized —$27 an hour plus benefits—you can save money if you relocate the work to China where the cost may be $4 an hour or under.”
Right now, foreign-generated profits of U.S. firms are not taxed until they are brought back into the United States. But a huge number of multinational corporations like Apple and GE and Nike use a variety of accounting tricks to essentially launder their profits before moving money home. The key mechanism to this systematic tax avoidance is not the territory in which profits are generated, said Johnston. "Territoriality is a phony issue,” he stated “What's critical is the ability of corporations to form hundreds of corporations.”
These arrangements permit some subsidiaries to artificially charge other parts of the corporation high fees for the use of logos and brand names, and then to place the real profits in tax havens like the Cayman Islands.
Richard Fisher, president of the Dallas Federal Reserve Bank, stated in a report by Reuters that the nation's top five banks need to be split up into smaller entities due to their inadequate risk management.
The public opprobrium directed at Wall Street throughout 2008 and 2009 met with no satisfactory reformist result. The white-collar perps responsible for plunging American society into the abyss were rewarded for their malfeasance and walked away as rich and powerful as ever. Jamie Dimon personifies the hubris of these self-anointed "Masters of the Universe" and his pathetic attempts to spin his way out of the current CDS boondoggle is another glaring reminder of the wider lack of accountability.
In 2008-2009, two administrations, acting with Congress and the Federal Reserve, simply stuffed the big banks with taxpayer cash and let them go their merry way. When it comes to lobbying, Dimon's banking conglomerate has outspent all others in the industry, throwing down $7.41 million in 2010 alone, (and that doesn't include the wads of campaign cash and SuperPAC donations). It has become abundantly clear in recent years that neither the Obama Administration nor the Congress has the will to take on the financial services oligopoly. Dimon, with his political clout, became the poster boy for everything that is wrong with Wall Street, and through his high-profile lobbying efforts, Washington as well.
Dimon, who disclosed a $2 billion loss by the banking giant last week, should "send a signal to the American people that Wall Street bankers get it and to show that they understand the need for responsibility and accountability," Warren said in a statement following Dimon's Sunday appearance on "Meet the Press." ...
"We need to stop the cycle of bankers taking on risky activities, getting bailed out by the taxpayers, then using their army of lobbyists to water down regulations," Warren said. "We need a tough cop on the beat so that no one steals your purse on Main Street or your pension on Wall Street."
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