March 20, 2009 05:13 AM EST
The "Masters of the Universe"- on Wall Street--through their greed, recklessness and illegal behavior--have plunged this country and much of the world into a deep recession, causing millions of Americans to lose their jobs, their homes, their savings and their hope for the future.
One of the institutions that is most responsible for the financial crisis we are in today is American International Group. Over the past several years, AIG moved away from being the largest insurance company in the world to becoming the world's largest unregulated casino. In essence, AIG placed hundreds of billions of dollars in risky bets on behalf of wealthy investors, banks and hedge funds. Once the bets turned sour, AIG could not cover the losses and turned to the government for help.
As a result of AIG's risky gambles in what the financial world calls credit default swaps or financial derivatives, the American taxpayers have bailed out the company to the tune of $170 billion--about $600 for every man, woman and child in this country--and now own 80 percent of the company.
Incredibly, outrageously, reprehensibly, AIG executives, including those who ran the division that led to today's financial catastrophe, have just been awarded $165 million in bonuses. The mess they created is so complicated, their defenders argue, that only the brain trust that created the puzzle can solve it. The bonuses supposedly are the price AIG must pay to retain executive talent and lead us out of this financial crisis. What nonsense.
We must demand that they give back the bonus money--all of it--to the American people.
If the bonus recipients want to argue that they had some contractual right to the money, I say let them go to court. Let them explain to a judge and jury why they deserve these bonuses after they helped create the largest financial crisis in our nation's history and after they turned to taxpayers to keep the company from collapsing.
If the bonuses are not returned, Congress should impose a steep surtax--not just on AIG executives but on the extravagant bonus payments made to every single person who works at a company bailed out by taxpayers. All together, employees at bailed-out banks last year received more than $18 billion in bonuses they did not deserve. Unashamed, the financiers' and bankers' bonus machines are still churning out payments this year. Fannie Mae, for example, reportedly plans to shower bonuses on executives despite enormous losses at the government-backed mortgage company.
Enough is enough. We should cap the pay of executives of bailed-out banks and financial institutions at no more than the $400,000 salary of the president of the United States.
We must do more. Among other initiatives:
We need a serious investigation into what went wrong on Wall Street. My idea is to give subpoena power to the panel Congress already established to bird-dog the bailout program. The panel is headed by Elizabeth Warren, the whip-smart and tough-as-nails Harvard economist.
We must reform and re-regulate the financial services industry. It is too late to help in the current crisis, but we cannot let blind greed continue to be the only law of the land on Wall Street.
We must break up behemoth businesses so no one company's failure would bring the rest of the economy down with it. If a company is too big to fail, it is too big to exist.
We cannot allow banks that take taxpayer bailouts to turn around and charge credit card customers interest rates of 30 percent or more. It is time for a national usury rate. A statutory cap of 15 percent already is in place for loans by credit unions.
We also need to rethink the function of Wall Street. It is time for business schools to turn out a new generation of financiers and businesspeople who will see that their role in society is to help this country, help create decent-paying jobs, help people get the homes they need. That is a radical idea, I know, but I hope the main lesson learned from the current crisis is that the culture of greed, fraud and excessive speculation must come to an end.
Sen. Bernie Sanders, a Vermont independent, is a member of the Senate Health, Education, Labor and Pensions Committee.
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