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Ayn Rand Destroys CEO's Empire |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=19637"><span class="small">Lynn Parramore, AlterNet</span></a>
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Tuesday, 10 December 2013 14:45 |
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Parramore writes: "Lampert created a business model predicated on the notion that the invisible hand of the market would magically drive stellar results. With his belief in economic fairy tales, he managed to kill the goose that laid his own golden egg."
Ayn Rand's influence spans 60 years, with Alan Greenspan, Ronald Reagan, Sen. Ron Johnson (R-WI) and Rep. Paul Ryan (R-WI) among her notable acolytes and devotees. (photo: Barnes & Noble Review)
Ayn Rand Destroys CEO's Empire
By Lynn Parramore, Alternet
10 December 13
The invisible hand waves bye-bye to Eddie Lampert, whose business plan has run Sears into the ground
 nce upon a time, hedge fund manager Eddie Lampert was living a Wall Street fairy tale. His fairy godmother was Ayn Rand, the dashing diva of free-market ideology whose quirky economic notions would transform him into a glamorous business hero.
For a while, it seemed to work like a charm. Pundits called him the "Steve Jobs of the investment world." The new Warren Buffett. By 2006 he was flying high, the richest man in Connecticut, managing over $15 billion thorough his hedge fund, ESL Investments.
Stoked by his Wall Street success, Lampert plunged headlong into the retail world. Undaunted by his lack of industry experience and hailed a genius, Lampert boldly pushed to merge Kmart and Sears with a layoff and cost-cutting strategy that would, he promised, send profits into the stratosphere. Meanwhile the hotshot threw cash around like an oil sheikh, buying a $40 million pad in Florida's Biscayne Bay, a record even for that star-studded county.
Fast-forward to 2013: The fairy tale has become a nightmare.
Lampert is now known as one of the worst CEOs in America — the man who flushed Sears down the toilet with his demented management style and harebrained approach to retail. Sears stock is tanking. His hedge fun is down 40 percent, and the business press has turned from praising Lampert's genius to watching gleefully as his ship sinks. Investors are running from "Crazy Eddie" like the plague.
That's what happens when Ayn Rand is the basis for your business plan.
Crazy Eddie has been one of America's most vocal advocates of discredited free-market economics, so obsessed with Ayn Rand he could rattle off memorized passages of her novels. As Mina Kimes explained in a fascinating profile in Bloomberg Businessweek, Lampert took the myth that humans perform best when acting selfishly as gospel, pitting Sears company managers against each other in a kind of Lord of the Flies death match. This, he believed, would cause them to act rationally and boost performance.
If you think that sounds batshit crazy, congratulations. You understand more than most of America's business school graduates.
Instead of enhancing Sears' bottom line, the heads of various divisions began to undermine each other and fight tooth and claw for the profits of their individual fiefdoms at the expense of the overall brand. By this time Crazy Eddie was completely in thrall to his own bloated ego, and fancied he could bend underlings to his will by putting them through humiliating rituals, like annual conference calls in which unit managers were forced to bow and scrape for money and resources. But the chaos only grew.
Lampert took to hiding behind a pen name and spying on and goading employees through an internal social network. He became obsessed with technology, wasting resources on developing apps as Sears' physical stores became dilapidated and filthy. Instead of investing in workers and developing useful products, he sold off valuable real estate, shuttered stores, and engineered stock buybacks in order to manipulate stock prices and line his own pockets.
Eddie's crazy didn't stop there. As a Wall Street creature fantastically out of touch with the kind of ordinary folks who shop at Sears, he inserted his love of luxury into the mix, trying to sell Rolex watches and $4,400 designer handbags through America's iconic budget-friendly brand.
As his company was descending into Randian mayhem, Lampert continued to cheerfully inform stockholders that his revolutionary ideas would soon produce earth-shattering results. Reality: Sears has lost half its value in five years. Since 2010, Sears has closed more than half of its stores. Sears Holdings is financially distressed and Lampert's own hedge fund has reduced its stake in the company. The Sears store in Oakland, California, open for business with boarded-up windows, has even been cited for urban blight.
Truth be told, hedge fund honchos have had little to fear from royally screwing companies. Bank accounts fattened at the expense of workers and other stakeholders, they go on their merry way to mess up something else. But the epic incompetence of guys like Lampert may be dispelling the myth that financiers are the smartest guys in the room. Research suggests that not only do hedge fund managers typically understand squat about running a company, they're often not much good at beating the stock market, either. A recent Bloomberg article points out that in 2013, hedge funds returned 7.1 percent. That doesn't sound so bad, until you consider that if you had just stuck your money in the Standard & Poor's 500 Index you would have seen returns of 29.1 percent. Big difference!
While Lampert was caught up in Randian delusions of crass materialism and cut-throat capitalism, he failed to realize that a business is an experience as much communal as it is individual. Employees are not just competitive beings — they benefit from cooperating with each other and perform better when they are respected, rather than beaten down and driven by fear.
Slowly but surely, Ayn Rand's economic theories are being discarded because they simply don't add up in the real world. Even Rand acolyte Paul Ryan (R-Wis) is now distancing himself, calling his well-documented enthusiasm an "urban legend."
Lampert created a business model predicated on the notion that the invisible hand of the market would magically drive stellar results. With his belief in economic fairy tales, he managed to kill the goose that laid his own golden egg.
Looks like the invisible hand just waved goodbye to Eddie Lampert.
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JP Morgan Chase and the Corruption of America |
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Tuesday, 10 December 2013 09:10 |
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Reich writes: "The Justice Department has just obtained documents showing that JPMorgan Chase, Wall Street's biggest bank, has been hiring the children of China's ruling elite in order to secure 'existing and potential business opportunities' from Chinese government-run companies."
Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)
JP Morgan Chase and the Corruption of America
By Robert Reich, Robert Reich's Blog
10 December 13
 he Justice Department has just obtained documents showing that JPMorgan Chase, Wall Street's biggest bank, has been hiring the children of China's ruling elite in order to secure "existing and potential business opportunities" from Chinese government-run companies. "You all know I have always been a big believer of the Sons and Daughters program," says one JP Morgan executive in an email, because "it almost has a linear relationship" to winning assignments to advise Chinese companies. The documents even include spreadsheets that list the bank's "track record" for converting hires into business deals.
It's a serious offense. But let's get real. How different is bribing China's "princelings," as they're called there, from Wall Street's ongoing program of hiring departing U.S. Treasury officials, presumably in order to grease the wheels of official Washington? Timothy Geithner, Obama's first Treasury Secretary, is now president of the private-equity firm Warburg Pincus; Obama's budget director Peter Orszag is now a top executive at Citigroup.
Or, for that matter, how different is what JP Morgan did in China from Wall Street's habit of hiring the children of powerful American politicians? (I don't mean to suggest Chelsea Clinton got her hedge-fund job at Avenue Capital LLC, where she worked from 2006 to 2009, on the basis of anything other than her financial talents.)
And how much worse is JP Morgan's putative offense in China than the torrent of money JP Morgan and every other major Wall Street bank is pouring into the campaign coffers of American politicians - making the Street one of the major backers of Democrats as well as Republicans?
The Foreign Corrupt Practices Act, under which JP Morgan could be indicted for the favors it has bestowed in China, is quite strict. It prohibits American companies from paying money or offering anything of value to foreign officials for the purpose of "securing any improper advantage." Hiring one of their children can certainly qualify as a gift, even without any direct benefit to the official.
JP Morgan couldn't even defend itself by arguing it didn't make any particular deal or get any specific advantage as a result of the hires. Under the Act, the gift doesn't have to be linked to any particular benefit to the American firm as long as it's intended to generate an advantage its competitors don't enjoy.
Compared to this, corruption of American officials is a breeze. Consider, for example, Countrywide Financial's generous "Friends of Angelo" lending program, named after its chief executive, Angelo R. Mozilo, that gave discounted mortgages to influential members of Congress and their staffs before the housing bubble burst. No criminal or civil charges have ever been filed related to these loans.
Even before the Supreme Court's shameful 2010 "Citizens United" decision - equating corporations with human beings under the First Amendment, and thereby shielding much corporate political spending – Republican appointees to the Court had done everything they could to blunt anti-bribery laws in the United States. In 1999, in "United States v. Sun-Diamond Growers," Justice Scalia, writing for the Court, interpreted an anti-bribery law so loosely as to allow corporations to give gifts to public officials unless the gifts are linked to specific policies.
We don't even require that American corporations disclose to their own shareholders the largesse they bestow on our politicians. Last year around this time, when the Securities and Exchange Commission released its 2013 to-do list, it signaled it might formally propose a rule to require corporations to disclose their political spending. The idea had attracted more than 600,000 mostly favorable comments from the public, a record response for the agency.
But the idea mysteriously slipped off the 2014 agenda released last week, without explanation. Could it have anything to do with the fact that, soon after becoming SEC chair last April, Mary Jo White was pressed by Republican lawmakers to abandon the idea, which was fiercely opposed by business groups.
The Foreign Corrupt Practices Act is important, and JP Morgan should be nailed for bribing Chinese officials. But, if you'll pardon me for asking, why isn't there a Domestic Corrupt Practices Act?
Never before has so much U.S. corporate and Wall-Street money poured into our nation's capital, as well as into our state capitals. Never before have so many Washington officials taken jobs in corporations, lobbying firms, trade associations, and on the Street immediately after leaving office. Our democracy is drowning in big money.
Corruption is corruption, and bribery is bribery, in whatever country or language it's transacted in.
Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
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Illinois Democrats Wage Class War |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=7118"><span class="small">Carl Gibson, Reader Supported News</span></a>
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Monday, 09 December 2013 15:27 |
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Gibson writes: "The only noteworthy difference between these two Midwestern political giants [Scott Walker and Rahm Emanuel] is the letter after each of their names."
Rahm Emanuel. (photo: AP)
Illinois Democrats Wage Class War
By Carl Gibson, Reader Supported News
09 December 13
ry to name one difference between the policies of Wisconsin governor Scott Walker and Chicago mayor Rahm Emanuel that isn't of importance to evangelicals - I'll wait. Both are unnecessarily slashing budgets and laying off workers, to the detriment of public services like schools and health care while clamoring to throw more tax dollars at corporations. Both have made disparaging remarks about public workers and the unions that help them organize for a better work environment. Both have a long track record of cronyism and corruption. But one is a Republican being groomed for the GOP presidential nomination in 2016, and the latter a former chief of staff for President Obama.
The only noteworthy difference between these two Midwestern political giants is the letter after each of their names. Just like the Republicans who control the Wisconsin legislature through unfair gerrymandering and go out of their way to redistribute financial and environmental wealth from the people to the elite, the Democrats who control the Illinois statehouse do the same, and have also solidified their grip on the state through highly questionable political boundaries that they themselves have drawn. And regardless of the party name, both sides of the corporate party's one coin are exacting a near-identical agenda of enriching their campaign benefactors at the expense of taxpayers and public workers.
Democrats' Double-Cross
Not paying your workers what they're owed is against the law. But Illinois governor Pat Quinn, a Democrat, just signed into law Senate Bill 1, which will slash the pensions of state workers by over $160 billion over 30 years. Senate Bill 1 was a double-cross by the Democrats in charge of both legislative houses, a giant middle finger to hundreds of thousands of firefighters, teachers, garbage collectors, and other public employees who worked decades with the understanding that they would have a secure retirement at the end.
The kicker - these public workers don't receive Social Security income during their retirement, because Article 13, Section 5 of the Illinois constitution guarantees workers that their pensions are immune from conniving politicians.
Senate Bill 1 was a double-cross precisely because SB 2404, a bipartisan deal brokered between both parties, was a compromise that Senate president John Cullerton made with the GOP that still unfortunately cuts pensions those workers earned, but to a lesser degree of $46 billion over that same time period. SB 1 was chosen instead since it "saved more money," while legislators offered the false excuse that the state of Illinois did not have enough money. Such a falsehood is insulting, given that Illinois ranks 5th out of all states in Gross Domestic Product this year, and Illinois's legislators have had no problem forking over millions of tax dollars to corporations at the same time they have their hands in teachers' pockets.
It's already a scandal that pensions in Illinois have gone unfunded for so long - this systemic theft of workers' earned income is partly the fault of the same ratings agencies that rated bogus subprime mortgages as AAA in the years leading up to the crisis, saying that the growing bubble meant the state didn't have to contribute to pensions; partly because Chicago mayor Richard M. Daley refused to fund city workers' pensions during his tenure; and partly because the state legislature continued to neglect the pension fund after the mortgage bubble burst in 2010. Some states would never dream of defaulting on debts incurred through bond issues brokered by big Wall Street banks, but don't seem to give a second's thought to breaking their promise to pay the state's public workforce money they've earned and been promised in the state's own constitution.
Pay for Play Politics
Much of the blame for this pension theft can be shifted to Chicago mayor Rahm Emanuel, recently outed as a lackey of the innocuously-named State Policy Network (SPN) used to chip away at public worker pensions. Documents recently leaked to The Guardian show that the SPN and the more notorious American Legislative Exchange Council (ALEC), both of which are corporate-funded institutions that exist to buy influence in state legislatures nationwide, aim to gradually change state pension plans into 401(k) plans that siphon workers' earned income into large revenue streams for Wall Street. The New York Times explained how 401(k) plans make retirees pay tens of thousands of dollars in superfluous fees over a long period of time, which go directly into the banks' balance sheets rather than the retirees' future.
The Guardian reported on leaked documents showing Mayor Emanuel being positioned to lobby for the conversion of pensions into 401(k) plans at the Illinois statehouse in a scaremongering campaign to give justification for pension "reform," sung to the tune of "out of control" deficits. This is particularly ironic and insulting, considering Rahm Emanuel's history of looting public assets to reward his rich friends as mayor of Chicago. Emanuel used the deficit as an excuse to close 50 public schools in Chicago, while making taxpayers fork over $55 million in tax-incremented financing (TIF) to DePaul University for a new sports stadium and $50 million in tax breaks to the Chicago Mercantile Exchange, which was also his top campaign contributor in the last election with a hefty $200,000 donation.
The Illinois legislature's hypocrisy is also astounding. They cite their fear over ballooning deficits as justification for taking away public employees' sole retirement income, yet they're simultaneously contemplating an $88 million tax break package for Archer Daniels Midland, Office Depot, and Univar. Coincidentally, Archer Daniels Midland just gave House Speaker Madigan, who forced Senate Bill 1 through the House, $10,000 in campaign contributions in the 2012 election cycle. Calls to Speaker Madigan's office for this story were not returned.
Time for a New Party
All of us who have been continuously coerced into voting for one party that continuously lets us down so the other party that continuously lets us down won't win have had enough. The dichotomy of Wisconsin Republicans and Illinois Democrats is just one example of how two supposedly opposing parties can do almost the exact same thing just one state line apart from the other.
It's time for the creation of a new political force that organizes from a purely populist standpoint. We need a new party, with fresh faces that run on a desire to make change, rather than a career from within the system. This party needs a new brand not associated with existing third parties that expend millions of dollars on losing presidential campaigns, but one that organizes for ballot access and wins at the local level.
This party needs to separate itself from the Republican and Democratic parties by refusing to accept any donations from corporations, banks and developers, and has an unapologetically populist platform. We need a party that doesn't rely on flooding TV markets with advertising to get its message out, but one that relies on bettering the lives of ordinary people in their own communities to recruit a mass base of supporters. And only through the support of this mass base of volunteers can this new party win elections and give regular people real decision-making power.
It's time to take this populist movement we've built in the streets over the past few years from not only protesting those in power, but also directly taking power away from the corrupt officials who have had it for too long.
Carl Gibson, 26, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary "We're Not Broke," which premiered at the 2012 Sundance Film Festival. He currently lives in Madison, Wisconsin. You can contact him at
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
, and follow him on twitter at @uncutCG.
Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.
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How to Stick it to the Poor: A Congressional Strategy |
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Monday, 09 December 2013 15:15 |
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Rosen writes: "In just a few short decades, we've gone from LBJ's Great Society, where many of these ideas originated, to this Congress' attacks on the poor."
House Speaker John Boehner. (photo: file)
How to Stick it to the Poor: A Congressional Strategy
By Samantha Paige Rosen, The Week
09 December 13
he 113th Congress has stuck it to the poor at pretty much every opportunity. In fact, if you take all their past and future plans into account, it looks like they have accomplished that rare feat: To close in on enacting an overarching, radical agenda without control of the Senate or the presidency. How did they do it? Probably by escaping scrutiny through a piecemeal approach to legislation, a president who is willing to meet them halfway, and one diabolic word: Sequester.
Let's drill down into each piece:
1. Kick 'em to the curb
Congress will basically start kicking poor people out of their homes early next year. The idea is, if you can't pay for your home without government assistance, you don't deserve to live in one. In this spirit, budget cuts due to sequestration will take rental assistance vouchers away from 140,000 low-income families by the beginning of next year, making housing more expensive as agencies raise costs to offset the budget cuts. All in all, about three million disabled seniors and families will be affected. The savings? $2 billion, which is pretty much what the government shutdown cost in back-pay to federal workers.
If you're lucky enough to keep your home, don't expect to heat it. Sequester cuts to the Low Income Home Energy Assistance Program (LIHEAP) meant that 300,000 low-income families in 2013 were denied government support for energy costs.
2. Take the food out of their mouths. Literally.
The recent reduction in Supplemental Nutrition Assistance Program (SNAP) benefits has affected more than 47 million Americans and is the largest wholesale cut in the program since Congress passed the first Food Stamps Act in 1964.
The cuts to Food Stamps were implemented on November 1. Yet, Congress won't let the program rest there - House Republicans are pushing to take $39 billion from SNAP over the next decade. If their plan succeeds, the Congressional Budget Office estimates that 3.8 million low-income individuals would lose their benefits in 2014 with 2.8 million more getting kicked off the program each year. SNAP is one of the three most effective anti-poverty programs the government has, keeping four million people out of poverty last year alone. So the initial and further cuts make a lot of sense - if you despise the poor.
And don't worry, other cuts to food programs ensure both the oldest and youngest amongst us won't be spared. Cuts to Meals on Wheels will cost poor seniors four to 18 million meals next year. Meanwhile, the Women, Infants, and Children program (WIC), which provides health care referrals and nutrition to poor pregnant and postpartum women and children up to age five, has grappled with $500 million in cuts this year and faces even deeper ones next. Fair's fair, though.
3. Dim their kids' future
There's nothing that will make our economic future brighter than under-educating our children, right? That's why, again as a result of sequestration, Head Start literally had to kick preschoolers out of their classrooms this March and removed 57,000 children from the program this September (70,000 kids total are will be affected). If this weren't enough, more than half of public schools have fired personnel due to the ominous cuts - and Representative Jim Jordan (R-Ohio) said sequestration "has been one of the good things that has happened." Given that 40 percent of children who don't receive early childhood education are more likely to become a parent as a teenager, 25 percent are more likely to drop out of school, and 70 percent are more likely to be arrested for a violent crime, this is definitely the definition of a "good thing."
4. Erase the roadmap for employment
The United States has one of the stingiest unemployment programs in the developed world and it is getting even stingier. People who have been out of work for 27 weeks or more - 40 percent of the unemployed - have already begun and will continue to lose a large portion of their benefits between January and March. Eight percent of this year's sequestration cuts are coming from unemployment insurance. The logic here is that the program discourages people from looking for work, so why fund something that just makes the unemployed lazier? The evidence, however, proves that government assistance fuels the job searches of these 4.4 million Americans. Yet by the end of December, about 1.3 million will lose their extended jobless benefits if Congress doesn't renew the program. And cuts to the Temporary Assistance for Needy Families program (TANF, or welfare) means there will be even less of safety net to fall back on.
5. Make 'em work till they drop
President Obama put Social Security cuts in his budget for fiscal year 2014, and Republicans are thrilled. Switching to a new formula called Chained CPI would lead to benefit cuts of $230 billion dollars in the next ten years. Apparently, it's Social Security that's driving up the debt, as Speaker of the House John Boehner (R-Ohio) has said. The irony here, according to The New York Times' Paul Krugman, is that while debt can indirectly make us poor if deficits drive up interest rates and discourage productive investment (they haven't), investment is low because the economy is so weak, partly from cutbacks in public spending and investment - the cuts, such as this one, that supposedly protect Americans from a future of excessive debt. Democratic Senators Elizabeth Warren (Mass.) and Tom Harkin (Iowa) have been fighting an uphill battle to boost Social Security benefits. But carry on, Congress. What you're doing really makes sense here.
In just a few short decades, we've gone from LBJ's Great Society, where many of these ideas originated, to this Congress' attacks on the poor. According to the Census Bureau, safety net programs keep tens of millions of Americans out of poverty each year. But that's just not the federal government's priority anymore. This Congress' message: It's every man for himself.
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