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Krugman: Plutocrats feeling prosecuted

  • (MIKE LUCKOVICH / Atlanta Journal-Constitution)

Robert Benmosche, the chief executive of American International Group, said something stupid the other day. And we should be glad, because his comments help highlight an important but rarely discussed cost of extreme income inequality — namely, the rise of a small but powerful group of what can only be called sociopaths.

For those who don't recall, AIG is a giant insurance company that played a crucial role in creating the global economic crisis, exploiting loopholes in financial regulation to sell vast numbers of debt guarantees that it had no way to honor.

Five years ago, U.S. authorities, fearing that AIG's collapse might destabilize the whole financial system, stepped in with a huge bailout. But even the policymakers felt ill-used — for example, Ben Bernanke, the chairman of the Federal Reserve, later testified that no other episode in the crisis made him so angry.

And it got worse. For a time, AIG was essentially a ward of the federal government, which owned the bulk of its stock, yet it continued paying large executive bonuses. There was, understandably, much public furor.

So here's what Benmosche did in an interview with the Wall Street Journal: He compared the uproar over bonuses to lynchings in the Deep South — the real kind, involving murder — and declared that the bonus backlash was “just as bad and just as wrong.”

You may find it incredible that anyone would, even for an instant, consider this comparison appropriate. But there actually have been a series of stories like this. In 2010, for example, there was a comparable outburst from Stephen Schwarzman, the chairman of the Blackstone Group, one of the world's largest private-equity firms. Speaking about proposals to close the carried-interest loophole — which allows executives at firms like Blackstone to pay only 15 percent taxes on much of their income — Schwarzman declared, “It's a war; it's like when Hitler invaded Poland in 1939.”

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