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Posts Tagged ‘economy’

CEOs From Hell!

Posted by terres on July 2, 2008

Overpaying CEOs
by Ralph Nader
July 1, 2008

The worst top management of giant corporations in American history is also by far the most hugely paid. That contradiction applies as well to the Boards of Directors of these global companies.

Consider these illustrations:

The bosses of General Motors (GM) have presided over the worst decline of GM shares in the last fifty years, the lowering of GM bonds to junk status, the largest money losses and layoffs of tens of thousands of workers. Yet these top executives are still in place and still receiving much more pay than their successful counterparts at Toyota.

GM’s stock valuation is under $7 billion dollars, while Toyota is valued at over $160 billion. Toyota, having passed GM in worldwide sales, is about to catch up with and pass GM in sales inside the United States itself!

GM’s executives stayed with their gas guzzling SUVs way beyond the warning signs. Their vehicles were uninspiring and technologically stagnant in various ways. They were completely unprepared for Toyota’s hybrid cars and for the upward spiral in gasoline prices. They’re cashing their lucrative monthly checks with the regular votes of confidence by their hand-picked Board of Directors.


Chevrolet pickup trucks and SUVs are seen at a dealership in Silver Spring, Maryland, July 1, 2008. REUTERS/Yuri Gripas. Image may be subject to copyright. See RTSF Fair Use Notice!

About the same appraisal can be made of Ford Motor Co., which at least brought in new management to try to do something about that once famous company’s sinking status.

Then there are the financial companies. Top management on Wall Street has been beyond incompetent. Wild risk taking camouflaged for years by multi-tiered, complex, abstract financial instruments (generally called collateralized debt obligations) kept the joy ride going and going until the massive financial hot air balloon started plummeting. Finally told to leave their high posts, the CEOs of Merrill-Lynch and Citigroup took away tens of millions of severance pay while Wall Street turned into Layoff Street.

The banks, investment banks and brokerage firms have tanked to levels not seen since the 1929-30 collapse of the stock market. Citigroup, once valued at over $50 per share is now under $17 a share.

Washington Mutual – the nation’s largest savings bank chain was over $40 a share in 2007. Its reckless speculative binge has driven it down under $5 a share. Yet its CEO Kerry Killinger remains in charge, with the continuing support of his rubberstamp Board of Directors. A recent $8 billion infusion of private capital gave a sweetheart deal to these new investors at the excessive expense of the shareholders.

Countrywide, the infamous giant mortgage lender (subprime mortgages) is about to be taken over by Bank of America. Its CEO is taking away a reduced but still very generous compensation deal.

Meanwhile, all these banks and brokerage houses’ investment analysts are busy downgrading each others’ stock prospects.

Over at the multi-trillion dollar companies Fannie Mae and Freddie Mac, the shareholders have lost about 75 percent of their stock value in one year. Farcically regulated by the Department of Housing and Urban Affairs, Fannie and Freddie were run into the ground by taking on very shaky mortgages under the command of CEOs and their top executives who paid themselves enormous sums.

These two institutions were set up many years ago to provide liquidity in the housing and loan markets and thereby expand home ownership especially among lower income families. Instead, they turned themselves into casinos, taking advantage of an implied U.S. government guarantee.

The Fannie and Freddie bosses created another guarantee. They hired top appointees from both Republican and Democratic Administrations (such as Deputy Attorney General Jamie Gorelick) and lathered them with tens of millions of dollars in executive compensation. In this way, they kept federal supervision at a minimum and held off efforts in Congress to toughen regulation. These executives are all gone now, enjoying their maharajan riches with impunity while pensions and mutual funds lose and lose and lose with no end in sight, short of a government-taxpayer bailout.

Over a year ago, leading financial analyst Henry Kaufman and very few others warned about “undisciplined” (read unregulated) and “mis-pricing” of lower quality assets. Mr. Kaufman wrote in the Wall Street Journal of August 15, 2007 that “If some institutions are really ‘too big to fail,’ then other means of discipline will have to be found.”

There are ways to prevent such crashes. In the nineteen thirties, President Franklin Delano Roosevelt chose stronger regulation, creating the Securities and Exchange Commission (SEC) and several bank regulatory agencies. He saved the badly listing capitalist ship.

Today, there is no real momentum in a frozen Washington, D.C. to bring regulation up to date. To the contrary, in 1999, Congress led by Senator McCain’s Advisor, former Senator Phil Gramm and the Clinton Administration led by Robert Rubin, Secretary of the Treasury, and soon to join Citibank, de-regulated and ended the wall between investment banks and commercial banking known as the Glass-Steagall Act.

Clinton and Congress opened the floodgates to rampant speculation without even requiring necessary and timely disclosures for the benefit of institutional and individual investors.

Now the entire U.S. economy is at risk. The domino theory is getting less theoretical daily. Without investors obtaining more legal authority as owners over their out of control company officers and Boards of Directors, and without strong regulation, corporate capitalism cannot be saved from its toxic combination of endless greed and maximum power—without responsibility.

Uncle Sam, the deeply deficit ridden bailout man, may have another taxpayers-to-the-rescue operation for Wall Street. But don’t count on stretching the American dollar much more without devastating consequences to and from global financial markets in full panic.

Consider the U.S. dollar like an elastic band. You can keep stretching this rubber band but suddenly it BREAKS. Our country needs action NOW from Washington, D.C.

END

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Stop the Oil Speculators

Posted by terres on May 28, 2008

by Ralph Nader
5/27/08

What factors are causing the zooming price of crude oil, gasoline and heating products? What is going to be done about it?

Don’t rely on the White House—with Bush and Cheney marinated in oil—or the Congress—which has hearings that grill oil executives who know that nothing is going to happen on Capitol Hill either.

Last week the price of crude oil reached about $130 a barrel after spiking to $140 briefly. The immediate cause? Guesses by oil man T. Boone Pickens and Goldman Sachs that the price could go to $150 and $200 a barrel respectivly in the near future. They were referring to what can be called the hoopla pricing party on the New York Mercantile Exchange. (NYMEX)

Meanwhile, consumers, workers and small businesses are suffering with the price of gasoline at $4 a gallon and diesel at $4.50 a gallon. Suffering but not protesting, except for a few demonstrations by independent truckers.

A consumer and small business revolt could be politically powerful. But what would they revolt to achieve? Their government is paralyzed and is unable to indicate any action if oil goes up to $200 or $400 a barrel. Washington, D.C. is leaving people defenseless and drawing no marker for when it will take action.

Oil was at $50 a barrel in January 2007, then $75 a barrel in August 2007. Now at $130 or so a barrel, it is clear that oil pricing is speculative activity, having very little to do with physical supply and demand. An essential product—petroleum—is set by speculators operating on rumor, greed, and fear of wild predictions.

Over the time since early 2007, U.S. demand for petroleum has fallen by 1 percent and world demand has risen by 1.3 percent. Supplies of crude are so plentiful, according to the Wall Street Journal, “traders of physical crude oil say their market is suffering from too much supply, not too little.”

Iran, for instance, is storing 25 million barrels of heavy, sour crude oil because, in the words of Hossein Kazempour Ardebili, Iran’s oil governor, “there are simply no buyers because the market has more than enough oil.”

Mike Wittner, head of oil research at Societe Generale in London agrees. “There’s various signals out there saying for right now, the markets are well supplied with crude.”

Historically, oil has been afflicted with the control of monopolists. From the late nineteenth century days of John D. Rockefeller, and his Standard Oil monopoly, to the emergence of the “Seven Sisters” oligopoly, made up of Standard Oil, Shell, BP, Texaco, Mobil, Gulf and Socal, to the rise of OPEC representing the major producing countries, the “free market” price of oil has been a mirage. Despite the breakup of the Standard Oil company by the government’s trustbusters about 100 years ago, selling cartels and buying oligopolies kept reasserting themselves.

In an ironic twist, the major price determinant has moved from OPEC (having only 40% of the world production) and the oil companies to the speculators in the commodities markets. What goes on in the essentially unregulated New York Mercantile Exchange (NYMEX)—without Commodity Futures Trading Commission (CFTC) enforced margin requirements, and, unlike your personal purchases, untaxed—is now the place that leads to your skyrocketing gasoline bills. OPEC and the Big Oil companies reap the benefits and say that it’s not their doing, but that of the speculators. Gives new meaning to “passing the buck.”

Deborah Fineman, president of Mitchell Supreme Fuel Co. in Orange, New Jersey, summed up the scene: “Energy markets have been dictated for too long by hedge funds and speculators, who artificially manipulate the numbers for their own benefit. The current market isn’t based on the sound principles of supply and demand but it is being rigged by companies and speculators who are jacking up prices for their own greed.”

Harry C. Johnson, former banker who worked for many years inside Big Oil and ran his own small oil company in Oklahoma, blames the CFTC, the Department of Energy, the Administration, and Congress, as “asleep at the switch on an issue that is probably costing U.S. consumers $1 billion per day.”

He cites “some industry experts, who profit greatly from the high price of crude, and have stated openly that the worldwide economic price of crude, absent speculators, would be around $50 to $60 per barrel.

Imagine, our government is letting your price for gasoline and home heating oil be determined by a gambling casino on Wall Street called NYMEX. The people need regulatory protection from speculators and an excess profits tax on Big Oil.

In addition, a sane government would see the present price crises as an opportunity to expand our passenger and freight railroad capacity and technology.

A sane government would drop all subsidies and tax loopholes for Big Oil’s huge profits and other fossil fuels and promote a national mission to solarize our economy to achieve major savings from energy conservation technology, retrofitting buildings, and upgrading efficiency standards for motor vehicles, home appliances, industrial engines and electric generating plants.

Those are the permanent ways to achieve energy independence, reduce our trade deficit, create good jobs that can’t be exported and protect the environmental health of people and nature.

Those are the reforms and advances that a muscular consumer, worker and small business revolt can focus on in the coming weeks.

What say you, America?
[EoF]

Related links: Pinheads in the House: Fanning Oil Chaos

mnc

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