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OLEAN -- The United States is choking on greed. Don't take my word for it. Ask our high priest of the economy, Alan Greenspan.
The Federal Reserve Chairman told Congress last week -- several months after John Q. Public caught onto it -- that corporate executives in America have been stricken with "infectious greed" of such magnitude as to threaten our economic system.
Gee, what a big fat surprise. The guy on the street, the simple working stiff former President Clinton used to characterize as "playing by the rules, but ends up getting the shaft," has known for years he was being hosed by the big boys.
The chattering-class financial reporters -- mostly concerned with getting their mugs on television -- are so preoccupied with the stock market and its current woes, they rarely write about two other slick moves by corporate America in the roaring 1990s that put a tremendous burden on senior citizens and those about to retire.
One was removing medical benefits from retirement plans, with the excuse that Medicare would now take care of the elderly in much better fashion. Such medical benefits, particularly for spouses and widows, were common ingredients in the retirement plans of almost all big companies only a decade or two ago. The corporate numbers crunchers began figuring out they could save billions. Let government do it. Who cares if the old people have to rely on a screwed-up and inferior health system riddled with fraud, inefficiency, and so much paperwork doctors are quitting their practices in droves?
The second was the clever smoke-and-mirrors maneuver by many corporations after the arrival of tax-easing savings plans like the IRA and the 401(k). While no one can argue these don't have certain advantages, they rob the investor of flexibility and liquidity. They either lock workers into plans that carry big penalties if you want to bail out in a down market, or are often too heavily weighted with company stock that can't be dumped as easily as the stuff in your brokerage account. They are overrated.
They were, however, tremendously popular because they gave the illusion the savers and investors were in control of their own fate. Once corporate slicksters realized they were here to stay, they also realized they could chuck traditional and expensive retirement plans out the window. They quietly replaced them with lots of hoopla about self-managed 401(k) plans -- the worker contributions often matched with a pittance from the company -- and with deceptive "cash value" systems that replaced monthly benefit checks-for-life with a lump sum payment when you left the firm.
Well, you've always got your 401(k), was the mantra upon leaving with your severance check in hand.
To someone 35 or so, going to another job, a year's pay might seem like good severance just for leaving a firm -- but to shocked 60-year-olds staring fixed-income years in the face, a single bag of money, usually a light one at that, has none of the security of monthly paychecks. Now, goes the unfunny joke on Wall Street, those highly touted 401(k) plans have become 201(k)s -- worth about half. Why? Because of the greed of shameless corporate executives who looted their companies for millions while they were failing, painted a blue-sky picture for investors with deception and fraud, and covered up the losses by bribing auditors with mammoth consulting contracts.
Most of these new "retirement" plans forced the worker into betting on equities. The stock market is a crapshoot in the best of times, but during the hell-for-leather 1990s, it seemed no one could lose. We became a speculative culture, even though we knew little about what the hell we were doing. One broker told me, in that execrable decade, that the 4.5 percent return I was enjoying from a money market fund was "doing you no favors" and urged me to switch the money into shares of "can't lose" Lucent and WorldCom. I did. I lost a pile. Today, investors would crawl on broken glass to get a reliable 4.5 percent return.
The stock market has dropped over 2,000 points in recent weeks for a simple reason the big shots are just starting to grasp: Nobody trusts it anymore. The numbers are impossible to digest. A week ago today -- July 16 -- $152 billion of stock value evaporated. Since the recent slide started July 8, over $920 billion in stock market wealth has gone up in smoke. Since early 2000, the stock market has lost about a third of its value -- close to $6 trillion (with a T).
On one page, we read of these losses.
On the next, we read how chief financial officers and company presidents and chief operating officers and such refuse to give back scores of millions they presented themselves when they saw the stock market tumble coming -- and how many of them are still building gargantuan mansions in tax-haven states like Florida, where you don't have to give up your house when you go bankrupt, or are sued into destitution.
The whole system depended on trust and honesty, and they wrecked it. One by one, the firms tumbled -- Enron, Global Crossing, WorldCom, Tyco, ImClone, Adelphia, other former darlings of the market.
Greenspan told Congress it isn't that "humans have become any more greedy than in generations past." It is that "the avenues to express greed had grown so enormously."
He was referring to stock options -- shares of your own firm offered at bargain rates as a bonus, which could make you wealthy if you nudged the share price up high enough with phony profits. So, losses were painted as income, expenses were shifted offshore -- oh, there were a million tricks. And the auditors who were supposed to protect the shareholders were in cahoots with the crooks.
Greenspan last year said no accountant reform was necessary, because the auditors realized "the integrity of their operations" and making certain "their reputation was unimpeachable" was the linchpin of their existence.
"Regulation by government was utterly unnecessary and most inappropriate," he testified previously. Last week he told Congress, "I was wrong."
You want to restore confidence in the stock market?
You want the average American to even consider getting back into stocks?
Then slap some corporate big shot's sorry fanny in jail. And be quick about it.
As yet, nada. Top Enron officials gifted themselves with $681 million in bonuses and stock options in the waning days of their rigged enterprise, and they're still wandering around -- complaining about being down to their last two or three mansions.
Arthur Andersen accountants -- who wracked up Enron's and an impressive number of other fabricated audits that soothed investors into crippling and life-altering losses -- even shredded a mountain of possibly incriminating documents in the face of specific, written federal restraining orders not to do so. They got a wrist-slap fine.
The average citizen can only assume the federal government is not yet serious about helping end this nightmare.
Not that any of this is new. A little over a century ago, the Gilded Age was coming to an end and the main reaction of Congress to various scandals emanating from that excess was to vote itself two years back pay. It remained for Teddy Roosevelt to start enforcing a tool already on the books, the Sherman Anti-Trust Act -- a piece of legislation some think pretty much ignored of late by the Justice Department.
It goes back a lot further in time.
Who wrote this?
"The lust of avarice has so totally seized upon mankind that their wealth seems rather to possess them, than they to possess their wealth"?
Answer: Pliny the Elder, the great Roman historian, about two millennia ago.
And yes, I know, I know -- you can't legislate morality, and you can't legislate character. But, as Greenspan observed in his typically understated testimony, even a small hint of serious criminal penalties for "egregious" activities by corporate executives "can have profoundly important effects" upon their behavior.
We'll see. In the meantime, there's always humor. I'm adopting the attitude of comedian Jackie Mason, who observed last month, "I have enough money to last the rest of my life -- unless I buy something."
| Niagara Falls Reporter | www.niagarafallsreporter.com | July 23 2002 |