10 Top Robber Barons

The financial crisis has unveiled a new set of public villains—corrupt corporate capitalists who leveraged their connections in government for their own personal profit. During the Clinton and Bush administrations, many of these schemers were worshiped as geniuses, heroes or icons of American progress. But today we know these opportunists for what they are: Deregulatory hacks hellbent on making a profit at any cost. Without further ado, here are the 10 most corrupt capitalists in the US economy.

1. Robert Rubin

Where to start with a man like Robert Rubin? A Goldman Sachs chairman who wormed his way into the Treasury Secretary post under President Bill Clinton, Rubin presided over one of the most radical deregulatory eras in the history of finance. Rubin's influence within the Democratic Party marked the final stage in the Democrats' transformation from the concerned citizens who fought Wall Street and won during the 1930s to a coalition of Republican-lite financial elites.

Rubin's most stunning deregulatory accomplishment in office was also his greatest act of corruption. Rubin helped repeal Glass-Steagall, the Depression-era law that banned economically essential banks from gambling with taxpayer money in the securities markets. In 1998, Citibank inked a merger with the Travelers Insurance group. The deal was illegal under Glass-Steagall, but with Rubin's help, the law was repealed in 1999, and the Citi-Travelers merger approved, creating too-big-to-fail behemoth Citigroup.

That same year, Rubin left the government to work for Citi, where he made $120 million as the company piled up risk after crazy risk. In 2008, the company collapsed spectacularly, necessitating a $45 billion direct government bailout, and hundreds of billions more in other government guarantees. Rubin is now attempting to rebuild his disgraced public image by warning about the dangers of government spending and Social Security. Bob, if you're worried about the deficit, the problem isn't old people trying to get by, it's corrupt bankers running amok.

2. Alan Greenspan

The officially apolitical, independent Federal Reserve chairman backed all of Rubin's favorite deregulatory plans, and helped crush an effort by Brooksley Born to regulate derivatives in 1998, after the hedge fund Long-Term Capital Management went bust. By the time Greenspan left office in 2006, the derivatives market had ballooned into a multi-trillion dollar casino, and Greenspan wanted his cut. He took a job with bond kings PIMCO and then with the hedge fund Paulson & Co.—yeah, that Paulson and Co., the one that colluded with Goldman Sachs to sabotage the company's own clients with unregulated derivatives.

Incidentally, this isn't the first time Greenspan has been a close associate of alleged fraudsters. Back in the 1980s, Greenspan went to bat for politically connected Savings & Loan titan Charles Keating, urging regulators to exempt his bank from a key rule. Keating later went to jail for fraud, after, among other things, putting out a hit on regulator William Black. ("Get Black – kill him dead.") Nice friends you've got, Alan.

3. Larry Summers

During the 1990s, Larry Summers was a top Treasury official tasked with overseeing the economic rehabilitation of Russia after the fall of the Soviet Union. This project, was, of course, a complete disaster that resulted in decades of horrific poverty. But that didn't stop top advisers to the program, notably Harvard economist Andrei Shleifer, from getting massively rich by investing his own money in Russian projects while advising both the Treasury and the Russian government. This is called "fraud," and a federal judge slapped both Shleifer and Harvard itself with hefty fines for their looting of the Russian economy. But somehow, after defrauding two governments while working for Summers, Shleifer managed to keep his job at Harvard, even after courts ruled against him.

That's because after the Clinton administration, Summers became president of Harvard, where he protected Shleifer. This wasn't the only crazy thing Summers did at Harvard—he also ran the school like a giant hedge fund, which went very well until markets crashed in 2008. By then, of course, Summers had left Harvard for a real hedge fund, D.E. Shaw, where he raked in $5.2 million working part-time. The next year, he joined the the Obama administration as the president's top economic adviser. Interestingly, the Wall Street reform bill currently circulating through Congress essentially leaves hedge funds untouched.

4. Phil and Wendy Gramm

Summers, Rubin and Greenspan weren't the only people who thought it was a good idea to let banks gamble in the derivatives casinos. In 2000, Republican Senator from Texas Phil Gramm pushed through the Commodity Futures Modernization Act, which not only banned federal regulation of these toxic poker chips, it also banned states from enforcing anti-gambling laws against derivatives trading. The bill was lobbied for heavily by energy/finance hybrid Enron, which would later implode under fraudulent derivatives trades. In 2000, when Phil Gramm pushed the bill through, his wife Wendy Gramm was serving on Enron's board of directors, where she made millions before the company went belly-up.

When Phil Gramm left the Senate, he took a job peddling political influence at Swiss banking giant UBS as vice chairman. Since Gramm's arrival, UBS has been embroiled in just about every scandal you can think of, from securities fraud to tax fraud to diamond smuggling. Interestingly, both UBS shareholders and their executives have gotten off rather lightly for these acts. The only person jailed thus far has been the tax fraud whistleblower. Looks like Phil's earning his keep.

5. Jamie Dimon

J.P. Morgan Chase CEO Jamie Dimon has done a lot of scummy things as head of one of the world's most powerful banks, but his most grotesque act of corruption actually took place at the Federal Reserve. At each of the Fed's 12 regional offices, the board of directors is staffed by officials from the region's top banks. So while it's certainly galling that the CEO of J.P. Morgan would be on the board of the New York Fed, one of J.P. Morgan's regulators, it's not all that uncommon.

But it is quite uncommon for a banker to be negotiating a bailout package for his bank with the New York Fed, while simultaneously serving on the New York Fed board. That's what happened in March 2008, when J.P. Morgan agreed to buy up Bear Stearns, on the condition that the Fed kick in $29 billion to cushion the company from any losses. Dimon-- CEO of J.P. Morgan and board member of the New York Fed-- was negotiating with Timothy Geithner, who was president of the New York Fed-- about how much money the New York Fed was going to give J.P. Morgan. On Wall Street, that's called being a savvy businessman. Everywhere else, it's called a conflict of interest.

6. Stephen Friedman

The New York Fed is just full of corruption. Consider the case of Stephen Friedman (expertly presented by Greg Kaufmann for the Nation). As the financial crisis exploded in the fall of 2008, Friedman was serving both as chairman of the New York Fed and on the board of directors at Goldman Sachs. The Fed stepped in to prevent AIG from collapsing in September 2008, and by November, the New York Fed had decided to pay all of AIG's counterparties 100 cents on the dollar for AIG's bets—even though these companies would have taken dramatic losses in bankruptcy. The public wouldn't learn which banks received this money until March 2009, but Friedman bought 52,600 shares of Goldman stock in December 2008 and January 2009, more than doubling his holdings.

As it turns out, Goldman was the top beneficiary of the AIG bailout, to the tune of $12.9 billion. Friedman made millions on the Goldman stock purchase, and is yet to disclose what he knew about where the AIG money was going, or when he knew it. Either way, it's pretty bad—if he knew Goldman benefited from the bailout, then he belongs in jail. If he didn't know, then what exactly was he doing as chairman of the New York Fed, or on Goldman's board?

7. Robert Steel

Like better-known corruptocrats Robert Rubin and Henry Paulson, Steel joined the Treasury after spending several years as a top executive with Goldman Sachs. Steel joined the Treasury in 2006 as Under Secretary for Domestic Finance, and proceeded to do, well, nothing much until financial markets went into free-fall in 2008. When Wachovia ousted CEO Ken Thompson, the company named Steel as its new CEO. Steel promptly bought one million Wachovia shares to demonstrate his commitment to the firm, but by September, Wachovia was in dire straits. The FDIC wanted to put the company through receivership—shutting it down and wiping out its shareholders.

But Steel's buddies at Treasury and the Fed intervened, and instead of closing Wachovia, they arranged a merger with Wells Fargo at $7 a share—saving Steel himself $7 million. He now serves on Wells Fargo's board of directors.

8. Henry Paulson

His time at Goldman Sachs made Henry Paulson one of the richest men in the world. Under Paulson's leadership, Goldman transformed from a private company ruled by client relationships into a public company operating as a giant global casino. As Treasury Secretary during the height of the financial crisis, Paulson personally approved a direct $10 billion capital injection into his former firm.

But even before that bailout, Paulson had been playing fast and loose with ethics rules. In June 2008, Paulson held a secret meeting in Moscow with Goldman's board of directors, where they discussed economic prognostications, market conditions and Treasury rescue plans. Not okay, Hank.

9. Warren Buffett

Warren Buffett used to be a reasonable guy, blasting the rich for waging "class warfare" against the rest of us and deriding derivatives as "financial weapons of mass destruction." These days, he's just another financier crony, lobbying Congress against Wall Street reform, and demanding a light touch on—get this—derivatives! Buffet even went so far as to buy the support of Sen. Ben Nelson, D-Nebraska, for a filibuster on reform. Buffett has also been an outspoken defender of Goldman Sachs against the recent SEC fraud allegations, allegations that stem from fancy products called "synthetic collateralized debt obligations"—the financial weapons of mass destruction Buffett once criticized.

See, it just so happens that both Buffet's reputation and his bottom line are tied to an investment he made in Goldman Sachs in 2008, when he put $10 billion of his money into the bank. Buffett has acknowledged that he only made the deal because he believed Goldman would be bailed out by the U.S. government. Which, in fact, turned out to be the case, multiple times. When the government rescued AIG, the $12.9 billion it funneled to Goldman was to cover derivatives bets Goldman had placed with the mega-insurer. Buffett was right about derivatives—they are WMD so far as the real economy is concerned. But they've enabled Warren Buffett to get even richer with taxpayer help, and now he's fighting to make sure we don't shut down his own casino.

10.  Goldman Sachs
No company exemplifies the revolving door between Wall Street and Washington more than Goldman Sachs. The four people on this list are some of the worst offenders, but Goldman's D.C. army has includes many other top officials in this administration and the last.

White House: 
 Joshua Bolton, chief of staff for George W. Bush, was a Goldman man

Regulators:
Current New York Fed President William Dudley is a Goldman man

Current Commodity Futures Trading Commission Chairman Gary Gensler has been a responsible regulator under Obama, but he was a deregulatory hawk during the Clinton years, and worked at Goldman for nearly two decades before that.

A top aide to Timothy Geithner, Gene Sperling, is a Goldman man

Current Treasury Undersecretary Robert Hormats is a Goldman man

Current Treasury Chief of Staff Mark Patterson is a former Goldman lobbyist

Former SEC Chairman Arthur Levitt is now a Goldman adviser

Neel Kashkari, Henry Paulson's deputy on TARP, was a Goldman man

COO of the SEC Enforcement Division Adam Storch is a Goldman man

Congress:
Former Sen. John Corzine, D-N.J., was Goldman's CEO before Henry Paulson

Rep. Jim Himes, D-Conn., was a Goldman Vice President before he ran for Congress

Former House Minority Leader Dick Gephardt, D-Mo., now lobbies for Goldman

And the list goes on.

Zach Carter/AlterNet

The 'New' GM: Private Investors Set To Make A Killing As More Workers Are Laid Off

The “new” General Motors exited bankruptcy court on Friday. With the help of the courts, and under the direction of the Obama administration, the company has shed nearly $130 billion in liabilities and created the framework for a vast increase in the exploitation of its workers.

The speed of the bankruptcy proceedings is remarkable. GM passed through the entire process is less than six weeks. One analyst called it “unprecedented, unbelievable, breathtaking.”

Bankruptcy court Judge Robert Gerber brushed aside a series of objections from retirees who will see their health care eliminated, along with asbestos and accident victims and other unsecured creditors. With the potentially profitable assets sold to the new GM, these obligations, along with a number of unwanted brands, will languish in bankruptcy court as part of the “old” GM.

The whole process was a travesty of legality and due process, demonstrating that when Wall Street wants something done, every institution of the American state snaps into line. The bankruptcy courts are supposedly a mechanism for mediating the different claims of various “stakeholders.” In the event, the court served as a rubber stamp for decisions that had already been made. The wealthy investors and banks will recover 100 per cent of their investments in GM debt, while workers and other claimants will end up with nothing.

The new GM is born out of a process of social devastation. The company will shed 27,000 more jobs in the US, bringing its total US workforce to 64,000. Thirty years ago the company employed over 618,000 in the US. At the beginning of last year, it employed 110,000.

An additional 14 plants will be closed, along with some 2,000 dealerships. GM is also shutting plants in Canada, bringing the total workforce there to 7,000, down from 20,000 in 2005.

The “new” company emerges from the rubble of closed factories and dealerships and the impoverishment of working class communities that depended on auto employment to fund schools, hospitals and other basic services, as well as the blighted lives of hundreds of thousands of workers and retirees.

As part of a deal negotiated with the United Auto Workers, workers who retain their jobs will have their wages frozen. A no-strike pledge through 2015 agreed by the UAW will facilitate further job, wage and benefit cuts, without the inconvenience of a contract vote. The company aims to replace all older workers with new-hires making $14 an hour.

In an indication of things to come, CEO Fritz Henderson declared Friday that he would employ the “intensity, decisiveness and speed” of the bankruptcy process and transfer it “to the day-to-day operations of the new company.”

UAW retirees, who have already seen their dental and optical benefits eliminated, will face sharp cuts in health care, enforced by the UAW. The UAW-run health care trust—the Voluntary Employee Beneficiary Association (VEBA)—will own 17.5 per cent of the new GM. Its assets will be insufficient to cover benefits owed to UAW retirees, but the UAW executives hope to grow rich from the 17.5 per cent of stock in the new company they will control.

More than 50,000 retirees who are members of the International Union of Electrical Workers and other non-UAW organizations face the immediate elimination of their health care, as they are not covered by the VEBA.

The downsizing of GM—along with Chrysler, which exited bankruptcy last month—will ripple throughout the auto parts industry and other industries, producing a wave of bankruptcies, plant closures, layoffs and wage cuts.

The restructuring of General Motors and Chrysler is the direct outcome of the policy of the Obama administration, the tool of the most powerful sections of the financial elite. The government conditioned loans to the automaker on securing this result, making explicit its demands for massive concessions from auto workers. Everything has been tailored to the interests of Wall Street, which was determined to transform the former auto giants into much smaller, but highly profitable, enterprises.

The US government will now own 60 per cent of GM, but the administration has repeatedly made clear that it has no intention of playing any role in the day-to-day management of the company.

This will be left to Henderson and the new chairman, Edward Whitacre, former CEO of AT&T, who was handpicked by the Obama administration’s auto task force. The Wall Street Journal quoted Karl Rove, former advisor to George W. Bush, calling Whitacre “very tough”—i.e., very dedicated to the interests of Wall Street.

The administration has said it hopes to quickly sell off its shares to private investors, who are set to make a killing.

The bankruptcy of General Motors, once the pinnacle of American manufacturing, is a stunning expression of the protracted and precipitous decline of American capitalism. The economic crisis that has overcome world capitalism is rooted in the decay of American capitalism. But the crisis precipitated by the money-mad speculation and fraud of the US financial elite has only increased its domination over the political system and every other official institution in the country.

The banks, utilizing the services of the Obama administration, are exploiting the crisis of their own making to plunder the national treasury and carry through a further dismantling of unprofitable industries, in order to divert even greater resources to the enrichment of the American financial aristocracy.

At the heart of this process is an assault on the living standards of the working class without historical precedent.

Joe Kishore

The GM Bankruptcy

The bankruptcy of General Motors is an historic event. The collapse of the 101-year-old Detroit automaker is the largest industrial failure and third largest bankruptcy in US history.

The action will have a devastating effect on GM’s 230,000 global employees and the millions more who will be hit by plant shut-downs, the closing of more than 1,000 dealerships and the wave of failures of auto suppliers that is expected to follow.

GM, which has already announced plans to cut 47,000 jobs worldwide, including 23,000 of its remaining 62,000 hourly employees in the US, is expected to announce plans to close between 12 and 20 more plants.

The rise of the automaker in the first half of the 20th century paralleled the ascent of American capitalism and the global predominance of US industry. And the bankruptcy of what was long the iconic symbol of the power of American industry signifies the failure of not only one company, but of American capitalism as a whole.

It is a milestone in the decline in the global position of US capitalism and the crisis of world capitalism. It poses in the starkest form the need for the working class to advance a socialist alternative to the profit system.

With its massive size, innovative management methods and global reach, GM defined the modern American corporation. With 850,000 hourly and salaried employees, including half a million in the US, GM was the largest private employer in the world, second only to the state-owned industries of the former Soviet Union.

In the decade following World War II, Detroit’s Big Three automakers—GM, Ford and Chrysler—were making four out of five of the world’s cars, with GM producing half of them. In 1955, the largest foreign competitor, Volkswagen, was only slightly bigger than GM's own German subsidiary, Opel, and Toyota was producing only 23,000 cars in Japan, compared to 4 million manufactured by GM in the US.

Over the last three decades, a sea change has taken place. In the late 1970s, faced with growing competition from abroad, a falling rate of profit in basic industry and the militant resistance of workers determined to defend the gains won in past struggles, the American ruling elite embarked on a deliberate policy of deindustrialisation.

Sections of industry deemed insufficiently profitable were starved of investment and then shut down in order to free up capital for increasingly parasitical forms of financial speculation.

This coincided with a corporate-government offensive against the working class, involving union-busting, strikebreaking, labour frame-ups and the use of plant closures and lay-offs to undermine the militancy of the working class and impose cuts in wages and benefits. This offensive was carried out under Democratic as well as Republican administrations.

The government-dictated bankruptcy of GM marks a new stage in the ruling class offensive against the working class. After this next round of restructuring, GM expects to have only 38,000 hourly workers and a maximum of 34 factories left in the United States, compared with 395,000 hourly workers in more than 150 plants at its peak employment in 1979.

The billions in wage and benefit concessions extorted from workers since the early 1980s were used, not to invest in the company’s long-term viability, but to finance stock buybacks and other measures to boost “shareholder value,” i.e., to enrich Wall Street investors and GM executives.

After decades of declining market share and some $90 billion in losses since 2005, the final nail in the coffin was the financial crash of 2008 and drying up of credit, which have led to a collapse of car sales in the US and internationally and what many analysts expect will be a wave of bankruptcies and mergers that will leave no more than five or six global auto companies left standing.

A “New GM”—largely owned by the government—will be shrunk to a fraction of its current size and freed from any obligation to pay decent wages, pensions or retiree health benefits. Once ample profits can be guaranteed, the government will sell the company back to private investors at a bargain price.

The New York Times website reported Sunday night that administration officials briefed reporters and stressed that the government, which will own 60 per cent of GM stock, intends to leave management of the company in private hands.

While handing out trillions in public assets to Wall Street, the Democratic administration has demanded that auto workers accept the destruction of all of the gains won in the course of decades of bitter struggle.

The wage and benefit concessions imposed on auto workers—with the direct complicity of the United Auto Workers—will freeze wages, eliminate cost-of-living increases, substantially reduce break time and holidays and strip retirees of medical benefits, including dental and optical care.

The companies will expand the use of low-paid entry level and temporary workers and workers will be stripped of the right to strike or even to vote on the terms of the next labour agreement until 2015.

The UAW, which will be handed 17.5 per cent share of the “New GM,” will be retained as a labour police force to suppress any resistance to poverty wages and brutal exploitation. With billions in shares and a seat on the corporate board of directors, the UAW apparatus will have a direct financial stake in collaborating with the Obama administration in the further slashing of labour costs.
Jerry White/WSWS