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Krugman: Plutocrats feeling prosecuted

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."

And you know that such publicly reported statements don't come out of nowhere. Stuff like this is surely what the Masters of the Universe say to each other all the time, to nods of agreement and approval. It's just that sometimes they forget that they're not supposed to say such things where the rabble might learn about it.

Also, notice what both men were defending: namely, their privileges. Schwarzman was outraged at the notion that he might be required to pay taxes just like the little people; Benmosche was, in effect, declaring that AIG was entitled to public bailouts and that its executives shouldn't be expected to make any sacrifice in return.

This is important. Sometimes the wealthy talk as if they were characters in "Atlas Shrugged," demanding nothing more from society than that the moochers leave them alone. But these men were speaking for, not against, redistribution — redistribution from the 99 percent to people like them. This isn't libertarianism; it's a demand for special treatment. It's not Ayn Rand; it's ancien r?ime.

Sometimes, in fact, members of the 0.01 percent are explicit about their sense of entitlement. It was kind of refreshing, in a way, when Charles Munger, the billionaire vice chairman of Berkshire Hathaway, declared that we should "thank God" for the bailout of Wall Street, but that ordinary Americans in financial distress should just "suck it in and cope." Incidentally, in another interview — conducted at his seaside villa in Dubrovnik, Croatia — Benmosche declared that the retirement age should go up to 70 or even 80.


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