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Rep. Peter DeFazio Introduces Legislation to Curb Speculative Wall Street Trading and Bolster Main Street

Rep. Peter DeFazio

WASHINGTON, D.C.—Rep. Peter DeFazio (D-OR) today introduced legislation that would levy a 0.03 percent tax on transactions of stocks, bonds and derivatives to discourage the same speculative financial trading that led to the 2008 Wall Street collapse and 2010 ‘Flash Crash’.  Revenue could be directed to programs that strengthen Main Street American families. 

The Putting Main Street FIRST Act: Finishing Irresponsible Reckless Speculative Trading would provide billions of dollars in revenue each year by taxing three basis points, or three pennies for every hundred dollars, on most financial trading including stocks, bonds, and other transactions.  According to the Joint Committee for Taxation, the tax would raise $417 billion over ten years, which could be used to fund national priorities such as free higher education or job-creating infrastructure repair.

The legislation is supported by the AFL-CIO, Americans for Financial Reform, the Center for Economic and Policy Research, the Communications Workers of America, and Public Citizen. 

“Thanks to the reckless greed of Wall Street over the past few decades, the American economy is a grossly unbalanced playing field,” said Rep. Peter DeFazio. “The only way we can level it is if we rein in reckless speculative financial trading and curb near-instantaneous high-volume trades that create instability in the stock market and our national economy. These financial practices have no intrinsic value, and exist to make a quick buck for already-wealthy speculators. If we want to give middle-class families a fair shot at a strong economy that works for all Americans, we need to put Main Street FIRST.”

“The ‘Putting Main Street First Act’ will help encourage long-term investing, fund badly needed public investment and make our tax code fairer for working people,” said AFL-CIO Director of Policy Damon Silvers.

“Given the massive costs of the financial crisis and its devastating impact on families across the country — and on the wealth of minority communities in particular — it is long past time for Wall Street to pay its fair share in taxes, said Lisa Donner, Executive Director of Americans for Financial Reform. “We applaud Representative DeFazio’s financial transaction tax proposal; a Wall Street speculation tax would not only help move our financial markets away from dangerous high-frequency trading, but also raise significant revenue to address unmet needs.”

“This tax is a great way to raise money for the federal government by making the financial sector more efficient,” said Dean Baker, Co-Director of the Center for Economic and Policy Research. “The cost of the tax will be fully covered by the savings from reduced trading. This means that the ordinary investor will be left unharmed by this tax. The only people who feel the impact will be the short-term traders and the financial intermediaries.”

“Our Take on Wall Street coalition is determined to end to the finance industry’s practice not paying its fair share of taxes and sticking working families with the bill. We’re proud to join with Congressman DeFazio in putting working families and Main Street first, by setting a small fee on the billions of dollars of Wall Street trade that happen every day. Not only would this raise more than $400 billion to help families and communities, it would put the brakes on risky Wall Street behavior that threatens our economy,” said CWA President Chris Shelton.

“This bill is good policy and good precedent,” said Lisa Gilbert, Director of Public Citizen’s Congress Watch Division. “Not only would taxing Wall Street trades grow revenue, it would stop the sorts of high-speed trading that adds volatility to our markets and increases costs for everyday investors and the public. Reining in Wall Street by stopping dangerous speculation is the right thing to do, and Public Citizen applauds Representative DeFazio and other champions for their support of this critical reform.”

Fat Profits, But Lean Wages: Workers To Protest At McDonalds Shareholder Meeting

  • Fight for $15 Vows Biggest-Ever Protest at McDonald’s Shareholder Meeting
Mcdonalds fight for 15 strike

Fight for 15 strike in 2015

As Fast-Food Giant’s Profits Grow, 10,000 Workers to Flood Company HQ, Demand Higher Pay So They Don’t Have to Rely on Food Stamps

Strike for $15, Union Rights by Chicago-Area Fast-Food Workers to Kick Off Two Days of Protest

Oak Brook, Ill. – McDonald’s cooks and cashiers announced Thursday that thousands of underpaid workers fighting for $15/hour and union rights nationwide will converge in the Chicago area next week to wage the largest-ever protests to hit the fast-food giant’s annual shareholder meeting.

Fast-food workers across Chicago and its suburbs will kick off two days of protests by walking off their jobs Wednesday morning, followed in the afternoon by a massive march of a record 10,000 fast-food, home care, child care, and other underpaid workers on the company’s Oak Brook, Ill. headquarters. The protesters will argue it is wrong for a company whose stock just hit an all-time high to pay wages so low that its workers are compelled to rely on public assistance to scrape by.

McDonald’s profits in the first quarter rose 35%, propelled largely by the company’s move to serve breakfast all day, prompting the New York Times to argue in an editorial, “Fat Profits, but Lean Wages,” that it’s time for the company to share its good fortune with its workers.

“McDonald’s sales are going through the roof, but my children have to live with their grandparents because I can’t afford to keep a roof over our heads as long as my paycheck is stuck at minimum wage,” said George McCray, a McDonald’s worker from Chicago, Ill., who is paid $8.25/hour. “We’ve been working hard to make new changes like the All-Day Breakfast a success and have helped make the company billions, but our wages haven’t budged. How much longer will McDonald’s workers have to wait before the company’s success benefits us too?”

On Thursday morning, thousands of workers will take their demand for $15/hour and union rights directly to the company’s shareholder meeting. Underpaid workers from across the service sector – joined by McDonald’s workers from five countries spanning three continents – will demand that McDonald’s use its global economic footprint to lift up working families across the economy rather than hold them down. They’ll argue that McDonald’s is driving a race to the bottom that is hurting workers across the service economy.

Rob Mercier, a low wage worker from New Hampshire, will be one of those speaking out at the McDonalds shareholder meeting next week.

“I worked for McDonald’s for more than two years, struggling to pay bills and unable to afford to buy basic items like diapers and bottles for my newborn son at the time, said Rob Mercier, a member of the Fight for $15 in New Hampshire and a line cook at 5 Guys earning $9.00 an hour. “I worked long hours, picked up shifts, and worked overnight because my pay was too low, and when raises came around I was rewarded with a measly ten cents. That was a slap in the face. McDonald’s is the largest fast-food restaurant in the world and it’s time they do more than lead the fast-food industry by profits and start to lead by lifting up struggling families like mine.”

McDonalds low wages are not only hurting fast food workers they are driving down wages for workers all across the country in their race to the bottom.

“This isn’t just about fast-food workers or McDonald’s workers – McWages are holding us all back,” said Vicki Treadwell, a Milwaukee home care worker who is paid just $10.75/hour after 25 years on the job. “As long as McDonald’s fails to pay fair wages and rips off taxpayers, moms like me will have to turn to food pantries to feed our families. With its record profits, McDonald’s can choose to lift up all workers and the economy.”

While McDonald’s sales have soared in recent months, exceeding analysts’ expectations, and the fast-food giant’s stock hit a record high in May, the company’s low wages cost taxpayers an average of $1.2 billion every year in public assistance. This low-wage model drains revenue that could be used to support the country’s home care, child care and public education systems.

“Even though I educate and care for a classroom of three- and four-year-old children, I am paid just $8.40/hour, which means I have to choose which bills to put off so that I have enough cash for food,” said Shannon Mettie, a child care worker in Detroit, MI. “McDonald’s sets pay and standards at employers large and small. But as long as the fast-food giant keeps skimping on pay and dodging taxes, communities like mine won’t have the money we need for quality child care and strong schools.”

As McDonald’s faces louder calls from workers across the U.S. demanding higher pay and the right to a union, the company is also coming under fire from regulators and elected officials worldwide over a range of harmful business practices, including tax avoidance, labor violations, and anti-competitive practices.

In April, the French government sent a letter to McDonald’s demanding the company pay back €300 million ($340 million) in unpaid taxes and fines as a result of a scheme that funneled royalties through Luxembourg. Late last year the European Commission opened an investigation into McDonald’s over allegations the company avoided more than €1 billion in taxes via the same Luxembourg machinations.

Earlier this year, Spanish tax authorities opened a criminal investigation into McDonald’s tax avoidance, and leading consumer rights advocates and NGOs petitioned Italy’s top tax authorities late last year to investigate McDonald’s over allegations that the fast-food giant has dodged at least €74 million ($84 million) in taxes owed to Italy since 2009.

In January, Italian consumer groups filed an antitrust complaint with the European Commission, alleging exorbitant rents and onerous contracts thrust upon franchisees give the company an unfair advantage. Meanwhile, in the United Kingdom – the home of turf of CEO Steve Easterbrook – McDonald’s is facing more scrutiny than ever before. In April, Labour Party Leader Jeremy Corbyn announced his party’s support for a global campaign to hold McDonald’s accountable, saying, “We will extend that campaign all across this continent.” Also last month, Labour Party leaders barred McDonald’s from sponsoring its party’s convention because of the company’s unfair treatment of workers. Worker protests in the UK forced McDonald’s to abandon its controversial zero-hours scheduling policy in which workers are required to be available to work all the time, but receive no set hours.

In March, Brazilian prosecutors launched an investigation of alleged “fiscal and economic crimes” committed by McDonald’s, including suspected tax avoidance and violations of Brazil’s franchise and competition laws. As McDonald’s looks to sell or refranchise thousands of company-owned stores worldwide, the Change to Win Investment group sent a letter to McDonald’s Board of Directors earlier this month expressing concern over flagging sales and poor corporate governance by the company’s master franchisor in Latin America, Arcos Dorados.

“In France, like elsewhere, McJobs leave us without enough to feed our families or live with dignity,” said Lynda Zarif, a McDonald’s worker from Paris, France, who will join the protest in Oak Brook next week. “At the same time, McDonald’s and its shareholders are enriching themselves and benefiting from billions in profits. McDonald’s workers are the ones in the kitchen making the Big Macs that the company sells every day, and we deserve to benefit from the company’s success.”

Hillary Clinton’s Connections To Wall Street Show Her True Agenda On Free Trade

hillary clinton (WisPolitics.com FLIKR)Hillary Clinton is acting in a desperate and short sighted manner by constantly attacking Bernie Sanders.  She seems completely unaware of the current political atmosphere. She clings to endorsements by the elite while turning a deaf ear to ordinary Americans. The times for endorsements by the political establishment having any meaning are long gone.

The NH political elite lined up en masse behind Hillary and she lost NH by 22.4%.  I think that tells the story. The Clinton’s Wall Street connections and being proponents of disastrous trade deals are issues they don’t want to expound on. Instead they try to change the subject and criticize Bernie.

A vibrant Democratic Party must include the younger voters currently joining the party because of Senator Sanders. By her relentless attacks on Sanders she risks having these voters sitting out or opposing her if she wins the Democratic nomination.

The leader of the corporate democrats is President Bill Clinton and he also has no problem attacking Bernie Sanders.  “When you’re making a revolution you can’t be too careful with the facts,” Bill  Clinton said, deriding Bernie Sanders’s oft-mentioned call for a political revolution. Well the fact is Mr. Clinton’s most lasting legacy is pushing through NAFTA with Hillary’s support.

“I think NAFTA itself will be remembered for as long as this generation draws a warm breath,” Richard Trumka said in an interview. “When I talk to people about it, they don’t remember that it was a Republican majority that passed NAFTA. They remember that it was President Clinton.”

Lopsided trade deals that both entrenched the political elite and screwed over working people is the pivotal political issue that has defined these times. The Clinton’s have firmly lined up with the corporate America. While Bernie has steadfastly been opposed these disastrous deals.

In 2003 Hillary Clinton wrote in her memoir “Creating a free trade zone in North America — the largest free trade zone in the world — would expand U.S. exports, create jobs and ensure that our economy was reaping the benefits, not the burdens, of globalization. Although unpopular with labor unions, expanding trade opportunities was an important administration goal.”

So why would NAFTA be an administration goal?  Then in 2004 she added “I think on balance NAFTA has been good for New York and America” Do we need any more proof that the Clinton’s are completely out of touch with ordinary Americans?

Fast forward 10 years and now Hillary is selling us all the virtues of the TPP (before she recently changed her position) a trade deal that will most certainly continue the race to the bottom for American workers.

This quote is from a November 15, 2012 speech promoting and selling the TPP. “So it’s fair to say that our economies are entwined, and we need to keep upping our game both bilaterally and with partners across the region through agreements like the Trans-Pacific Partnership or TPP.  Australia is a critical partner. This TPP sets the gold standard in trade agreements to open free, transparent, fair trade, the kind of environment that has the rule of law and a level playing field. When negotiated, this agreement will cover 40 percent of the world’s total trade and build in strong protections for workers and the environment”…..

A few weeks ago Chamber of Commerce President Tom Donahue noted that if elected Hillary Clinton will again support the TPP. Reporting on that interview Inside US Trade concluded: “The Chamber president said he expected Hillary Clinton would ultimately support the TPP if she becomes the Democratic nominee for president and is elected.” He argued that she has publicly opposed the deal chiefly because her main challenger, Sen. Bernie Sanders, has also done so. “If she were to get nominated, if she were to be elected, I have a hunch that what runs in the family is you get a little practical if you ever get the job,” he said.

We all know who benefits from these trade deals and Hillary will not release the transcripts of her highly paid Wall Street speeches. This is more money than almost all of us will make in a lifetime but she has no problem dismissing these talks as not an important issue.

“It was pretty glowing about us,” one attendee told Politico. “It’s so far from what she sounds like as a candidate now. It was like a rah-rah speech. She sounded more like a Goldman Sachs managing director.”

Nobody will dispute that Bernie Sanders was an outspoken opponent of NAFTA and has been quite vocal in speaking out against the TPP. Basically the fact is Bernie represents the interests of ordinary Americans while Hillary constantly reminds us she is a proud member of the Democratic Party elite.

Hillary has not yet realized the walls are starting to crumble and she will surely need an energized Democratic party if she is to defeat any Republican opponent in November. That is IF she can withstand the rebellion in her own party. The authentic energy that is thriving in the Democratic Party belongs to Bernie Sanders and she would be wise not to alienate them.

Bernie Sanders Takes On Wall Street In New Campaign Ad

Screen Shot 2016-01-28 at 6.46.55 PM

DES MOINES, Iowa – A new ad released by U.S Sen. Bernie Sanders’ campaign on Thursday, details how too-big-to-fail Wall Street banks have rigged the nation’s economic and political systems in their favor at the expense of working families.

Goldman Sachs “just settled with authorities for their part in the crisis that put seven million out of work and millions out of their homes,” the narrator explains.

“Our economy works for Wall Street because it’s rigged by Wall Street and that’s the problem,” the ad says. “As long as Washington is bought and paid for we can’t build an economy that works for people.”

Sanders has proposed a plan, backed by 170 economists and financial experts, to remake the financial system to serve America’s working families.

To watch the ad, click here.

 

Bernie Sanders: Stop the Wall Street to Washington Revolving Door

"Wall Street - New York Stock Exchange" by Carlos Delgado

“Wall Street – New York Stock Exchange” by Carlos Delgado

“Under my administration, top executives of Goldman Sachs and other Wall Street CEOs will no longer go through the revolving door from Wall Street to government”

BURLINGTON, Vt. – U.S. Sen. Bernie Sanders on Friday said he would stop the revolving door between Wall Street and the federal government.

He cited Goldman Sachs’ deal this week to pay a $5 billion fine for bogus marketing schemes on home mortgages during the financial crisis seven years ago as the latest example of the need for independent regulators and prosecutors.

“The $5 billion settlement with Goldman Sachs should make it clear to everyone that the business model on Wall Street is fraud. In my view, the time has come to shut the revolving door between Wall Street and the federal government. Goldman Sachs and other Wall Street banks will not be represented in my administration,” Sanders said.

“Instead, we need federal prosecutors and regulators with a clear track record of standing up to the greed, recklessness and illegal behavior on Wall Street,” added Sanders, who is seeking the Democratic Party nomination for president.

Wall Street’s undue influence in both Republican and Democratic administrations is exemplified by two recent Treasury secretaries who have held posts in and out of Washington and Wall Street. In 1995, Robert Rubin, the former co-chairman of Goldman Sachs, became the Treasury secretary. In 1999, Rubin left to become a director and senior counsel of Citigroup. In 2006, Henry Paulson left his job as chairman of Goldman Sachs to become Treasury secretary. In 2008, Paulson asked Congress to pass legislation giving him a blank check of $700 billion to bailout Wall Street.

“Under my administration, top executives of Goldman Sachs and other Wall Street CEOs will no longer go through the revolving door from Wall Street to government,” Sanders said.

Sanders pledge to fill financial posts with regulators who are not beholden to Wall Street came as he made the case for his sweeping plan to rein in the greed of the nation’s biggest financial institutions. In laying out the proposal during a major speech last week in New York, Sanders pledged to break up the biggest banks. He also advocated restoring the post-Depression Glass-Steagall Act to prevent Wall Street speculators from crashing the economy. He also said his administration will cap credit card interest rates and ATM fees, allow post offices to offer basic banking services and reform the Federal Reserve to focus on its mandate to promote full employment.

Sanders plan is backed by some 170 economists and other experts, including former Labor Secretary Robert Reich, University of Texas Professor James K. Galbraith and Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC.

Sanders: Wall Street Will Play By The Rules If I’m President

"Wall Street - New York Stock Exchange" by Carlos Delgado

“Wall Street – New York Stock Exchange” by Carlos Delgado

NEW YORK – Speaking a few subway stops away from the epicenter of the global financial crisis, U.S. Sen. Bernie Sanders promised to remake the financial system to serve America’s working families.

“We can no longer tolerate an economy and a political system that has been rigged by Wall Street to benefit the wealthiest Americans in this country at the expense of everyone else,” Sanders said. “I’ll rein in Wall Street behavior, so they can’t crash our economy again. Will they like me? No. Will they begin to play by the rules if I’m president? You better believe it.”

Sanders presented a sweeping plan to rein in the greed of the nation’s biggest financial institutions, drawing sharp contrasts with Sec. Clinton’s approach. “My opponent says that as a senator she told bankers to ‘cut it out’ and end their destructive behavior,” Sanders said. “But, in my view, establishment politicians are the ones who need to ‘cut it out.’ The reality is that Congress doesn’t regulate Wall Street. Wall Street and their lobbyists regulate Congress. We must change that reality and as president I will.”

Sanders’ administration will create a list of “too big to fail” institutions by the end of his first 100 days in the White House. ”Within one-year, my administration will break these institutions up so that they no longer pose a grave threat to the economy,” he said. Sanders will accomplish this goal by appointing strong regulators who will utilize Section 121 of Dodd-Frank to ensure the safety and soundness of the financial system by breaking up large banks and shadow banks that pose a grave threat to the economy.

Sanders promised to fight to establish a 21st Century Glass-Steagall Act, a Depression-era law signed by President Franklin D. Roosevelt designed to prevent Wall Street speculators from crashing the economy. He also said his administration will cap ATM fees, allow post offices to offer banking services and reform the Federal Reserve to focus on its full employment mandate.

“Secretary Clinton says that Glass-Steagall would not have prevented the financial crisis because shadow banks like AIG and Lehman Brothers, not big commercial banks, were the real culprits. On this issue, Secretary Clinton is wrong. Shadow banks did gamble recklessly, but where did that money come from? It came from the federally insured bank deposits of big commercial banks – something that would have been banned under the Glass-Steagall Act,” Sanders said.

Sanders also said he will fight to cap ATM fees at $2, cap interest rates on credit cards and loans at 15 percent, establish modest banking services at post offices, and turn credit rating agencies into non-profits that are committed to accurately rating financial products, and are not beholden to Wall Street.

“Not one major Wall Street executive has been prosecuted for causing the near collapse of our entire economy,” Sanders said before describing some of the biggest crimes committed by financial institutions in recent years. “That will change under my administration. ‘Equal justice under law’ will not just be words engraved on the entrance of the Supreme Court. It will be the standard that applies to Wall Street and all Americans.”

Click here to read Sanders’ prepared remarks.

Big Banks: Paying Billions (of Borrowed Money) to Stockholders

NASDAQ Watch Photo by Kowloonese used under CreativeCommons license via Wikimedia Commons

Photo by Kowloonese; used by CreativeCommons license via Wikimedia Commons


The “new economy” in a nutshell:
full-time employees need government assistance because their wages are so low. Businesses are shrinking, not growing. And corporations are borrowing money to pay it out to stockholders… because, well, that’s what the system is designed to reward.

The more I look, the more I see it. The same pattern, almost everywhere. It’s not limited to just a few rogue companies. It’s not limited to just a few industries.

And it’s not getting any better.

Here’s the view, from the financial sector.

Remember that study showing that almost one-third of bank tellers receive food stamps, Medicaid or other public assistance? The authors calculated that taxpayers pick up the tab for almost $900 million in government aid – just to bank tellers – each year. That study didn’t break those costs out by particular employer, but…

— — — —

Bank Teller Counting Money for Customer --- Image by © Duncan Smith/Corbis via Flickr

© Duncan Smith/Corbis via Flickr. Used under CreativeCommons license.

According to Glassdoor, Bank of America tellers receive an average wage of $12 per hour – or, just about poverty-line wages for a hypothetical full-time employee supporting a family of four.

And the corporation just announced another set of layoffs, bringing the total to

  • about 14,300 jobs eliminated in the past year
  • about 69,000 jobs eliminated in the past five years.

But owners of the bank’s common stock are doing OK. So far this year, the corporation has distributed $3.1 billion to shareholders, through dividends and stock buybacks. And there will be even more money going to stockholders in December.

Can’t help noticing, though… Bank of America has issued a lot of bonds this year – more than $25 billion. Which means the corporation now has more than $270 billion in long-term debt that it has to pay off between now and 2047.

Yes, Bank of America is borrowing money at the same time it’s paying money out to stockholders.

(Which, yes, is sort of like running up your credit card to buy Christmas presents for people who already have everything.)

Wondering how stock prices are affected by the amount of money paid to shareholders?  Last year, Bank of America announced it would increase dividends and start buybacks – but then discovered an accounting mistake and had to withdraw those plans. And stock prices fell by 6.3%.

Want to know why corporate executives care so very much about short-term stock prices?  Look at the way Bank of America compensates its CEO. On the 13th of every month, Brian Moynihan receives the cash equivalent of 17,747 shares of common stock. In August, the per-share price was $17.62; for 17,747 shares, that works out to a payment of $312,702. In September, the per-share price was $16.04; that works out to $284,662. In October, the per-share price was only $15.52; that works out to $275,433. Don’t you think CEO Moynihan notices, when his monthly payment drops by ten or twenty thousand dollars?

But there’s good news for him: this month – after that latest set of layoffs was announced – the per-share price is back up above $17.  (Even though the Bank is $270 billion in debt and its credit ratings are, ahem, less-than-stellar… and it borrowed almost another $3 billion since CEO Moynihan’s October payment.)

— — — —

bankerAccording to Glassdoor, J.P. Morgan bank tellers also receive an average wage of $12 per hour… which is still, yes, about the poverty line for a hypothetical full-time employee trying to support a family of four.

And the corporation is, ahem, “cutting costs” by eliminating another 5,000 jobs. (Last year, they cut 7,900 jobs.)

But… stockholders are doing OK. The corporation just raised its dividend and is buying back $6.4 billion worth of its own stock. (That’s in addition to almost $18 billion in buybacks between 2010 and 2013.)

And CEO Jamie Dimon just got tagged as “the Best Big Bank CEO, Measured by Shareholder Returns.” Between buybacks and stock dividends, Dimon has “generated a total shareholder return of 119.5%” in the last decade.

Even though… can’t help noticing… J.P. Morgan had, at last report, $434.4 billion in long-term debt (which was an increase of $8.3 billion from the previous quarter). And it will be paying off debt through 2049.

I’m sure somebody at JP Morgan can explain why it makes sense to pay billions out to stockholders at the same time the corporation is borrowing billions. (And I’m sure somebody at the Federal Reserve Bank can explain why regulators approved this plan.)

And yes, folks high up the corporate ladder are doing OK, too. Their compensation includes mechanisms like restricted stock units and stock appreciation rights, which ensure they’re paying attention to share prices.  For instance, Managing Director Mary Erdoes just received stock appreciation rights equal to 200,000 shares of JP Morgan stock… on a day when the stock closed at $67.39 a share.   (Yep, some people get paid according to how high the stock price goes.)

Meanwhile… 5,000 JP Morgan employees will be looking for new jobs… and employees who still have their jobs get poverty wages and need government benefits to make ends meet.

— — — —

US states by poverty rate

States by 2013 poverty rate

And I’m betting that if I looked, most of the other Big Banks would show this same paying-low-wages-to-employees while cutting-rather-than-expanding-the-business while borrowing-against-future-revenues so they can pay-more-money-to-stockholders pattern.

It’s not just a few employers.

It’s not just a few industries.

Borrowing money in order to pay it to shareholders is the same basic thing Bain Capital was doing, back before journalists started writing about it, when Mitt Romney ran for President.

Only, this is on a bigger scale.

These are corporations that employ hundreds of thousands of people. And they’re borrowing against future revenue, in order to pay stockholders today.

While their executives rake in millions in compensation.

And their employees need government assistance just to get by.

— — — —

Read my last post, “McDonalds: Paying Billions (of Borrowed Money) to Stockholders” here.

Read my series about Verizon as a case study of what’s wrong with the economy, starting here.

 

McDonald’s: Paying Billions (of Borrowed Money) to Stockholders

Photo by Annette Bernhardt via Flickr

Photo by Annette Bernhardt via Flickr

Right there, in the USNWR story “Why McDonald’s stock is blowing the competition away,” was the clearest example yet of how our economy doesn’t work for anybody but the folks at the very, very top.

The company will cut $500 million [in costs] by 2018… it has a goal of having 4,000 stores refranchised in three years… it’s returning $30 billion to shareholders, an increase from $20 billion, through dividends and share buybacks and funded by taking on more debt.

And because of this strategy…

The famed restaurant chain has seen its stock jump by 17 percent since September.

Yes, McDonald’s. The corporation that costs taxpayers an estimated $1.2 billion a year in public assistance, because so many of its workers need government help to make ends meet. One of the employers who provoked the Fight for 15.

Yes, McDonald’s. The corporation whose per-share book value has dropped by 20% over the past decade … while its financial leverage (debt level) has more than doubled. The corporation that just saw its credit rating downgraded again, because Moody’s is concerned about “the company’s recent announcement that it intends to increase its returns to shareholders, the vast majority of which will be funded with additional debt.”

The corporation that has only $5.7 billion in net tangible assets (roughly $6.24 per share).

Yet the stock price hit $114 per share this week.

Because McDonald’s will be distributing an additional $10 billion to shareholders, “the vast majority of which will be funded with additional debt.”

(Even while its employees need $1.2 billion a year in food stamps and other assistance.)

— — — —

Image by Rose Lincoln, 1199SEIU

Image by Rose Lincoln, 1199SEIU

McDonald’s long-term debt will, as Moody’s noted, “limit its financial flexibility” for decades to come. Remember, the corporation eventually has to pay all that debt back, plus interest.  So basically, the corporation is using future revenues to pay stockholders now.

Moody’s expects the corporation to borrow even more as it increases its payments to stockholders.  At the same time, McDonald’s is selling off its assets, by “refranchising” 4,000 stores.

And Wall Street rewarded this strategy.  The stock price hit a record high this week… because McDonald’s will be distributing $30 billion, rather than only $20 billion, to shareholders.

And some McDonald’s executives took advantage of that record highChief Administrative Officer Peter Bensen reportedly exercised stock options to buy 15,870 shares – and then sold them the same day – making what I calculate to be a $1.2 million personal profit. Executive Vice President Richard Floersch exercised stock options to buy 23,910 shares, and then sold them – making a profit that I calculate at more than $1.3 million.  Executive Vice President Kevin Ozan also exercised stock options, buying 3,463 shares and then selling them at what I calculate to be almost $268,000 in profit.

And Executive Vice President David Fairhurst sold every share of McDonald’s stock he owned, that day of the record high.

Meanwhile… McDonald’s employees are receiving $1.2 billion in annual government assistance, because their wages are so low they can’t make ends meet.

And the financial press is trumpeting the fact that McDonald’s will be “cutting costs” – usually a euphemism for employee layoffs or wage reductions – by half a billion dollars.

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And no, I’m not the only one who thinks that our economy is being ruined by this fixation on short-term payouts to stockholders.

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Read “What Mitt Romney taught us about America’s Economy” here.

Read my series about Verizon as a case study of what’s wrong with the economy, starting here.

What You Should Know About That Completed TPP “Trade” Deal

global deal free tradeSpecial Guest Post from Dave Johnson of Campaign For America’s Future.  

Countries negotiating the Trans-Pacific Partnership (TPP) say they have reached a deal. So here it comes.

Monday morning it was announced that a “Trans-Pacific Partnership Trade Deal Is Reached,” presented as much as a foreign policy success as a “trade” deal.

“The United States, Japan and 10 other Pacific basin nations on Monday agreed after years of negotiations to the largest regional trade accord in history, an economic pact envisioned as a bulwark against China’s power and a standard-setter for global commerce, worker rights and environmental protection.

… The trade initiative, dating to the start of his administration, is a centerpiece of Mr. Obama’s economic program to expand exports. It also stands as a capstone for his foreign policy “pivot” toward closer relations with fast-growing eastern Asia, after years of American preoccupation with the Middle East and North Africa.

The effect the deal will have on actual “trade” is unclear, since the U.S. already has trade agreements with many of the participating countries. Also much of the deal appears to be about things people would not usually consider “trade”, like investor rights and limits on the ability of countries to regulate.

Though the deal remains secret, here is some of what is known about the agreement deal.

● Currency manipulation is not addressed in TPP, even though Congress’ “fast track” legislation said it must be. To get around this, a “side agreement” supposedly sets up a “forum” on currency. Past side agreements have proven unenforceable. For this reason Ford Motor Company has already publicly announced opposition to TPP.

● A “tobacco carve-out” is in the deal, in some form. This was added because the agreement contains investor-state dispute settlement (ISDS) provisions that will allow corporations to sue governments that use laws or regulations to try to restrict what the companies do. These provisions restrict the ability of governments to protect their citizens so thoroughly that tobacco companies have used ISDS provisions in similar agreements to sue governments that try to help smokers quit or prevent children from starting smoking. TPP proponents felt that this carve-out will help TPP to pass, while the ability to limit other laws and regulations remains.

● President Obama has said TPP includes the “strongest labor provisions of any free trade agreement in history.” Previous “trade” agreements do not even stop labor organizers from being murdered, so even if TPP has “stronger” labor provisions, that is an extremely low bar.

● TPP reduces or eliminates many tariffs, further encouraging companies to move factories out of the U.S. to low-wage countries like Vietnam. An example of the effect TPP will have on U.S. manufacturing is Nike vs. New Balance. Nike already outsources its manufacturing to take advantage of low wages, while New Balance is trying to continue to manufacture in the U.S. When tariffs on imported shoes are eliminated Nike will gain an even greater advantage over New Balance. New Balance has said that the tariff reductions in TPP will force it to stop manufacturing inside the US.

● The reduction and elimination of tariffs reduces revenues for the governments involved.

What Next?

Here is a brief rundown on what to expect as TPP begins to make its way toward a Congressional vote:

● The TPP is still secret and according to the terms in this year’s fast-track legislation it will remain secret for 30 days after the president formally notifies Congress that he will sign it. That could be a while still, as the agreement’s details need to be “ironed out.” After that 30-day wait the full text has to be public for 60 days before Congress can vote. The full timeline is yet to unfold and will be reported here as it does.

● Expect a massive and massively funded corporate PR push. The biggest corporations very much want TPP. It massively benefits the interests of giant corporations and the “investor” class, even as it incentivizes moving jobs and production out of the U.S.

● While only a small portion of TPP is about what people would normally consider to be “trade,” TPP will be heavily pushed as a “trade” deal. Many people believe that “expanding trade” increases jobs. Note that closing a U.S. factory and importing the same goods “expands trade” because those goods cross a border.

Also see the American Prospect, “What’s Next for the TPP: Clyde Prestowitz in Conversation with David Dayen.”

Questions To Ask About TPP

When the still-secret TPP becomes public, these are some of the questions the public will want answered:

● What do regular, non-wealthy people in the U.S. get from TPP? Will it increase American wages? Will it have provisions that force wage increases in countries that currently pay very little, thereby helping those workers (and helping them buy American-made products, too) and reducing downward pressure on American wages? Or will there be NAFTA-style provisions encouraging outsourcing to low-wage countries like Vietnam, creating further downward pressure on wages and increasing inequality?

● What do people in the U.S. lose? For example, the Los Angeles Times explains, “U.S. industries such as auto, textiles and dairy, however, could experience some losses as they are likely to face greater competitive pressures from Vietnam, Japan and New Zealand.”

● Does the TPP contain badly needed provisions to require member countries to jointly fight global climate change?

● Will provisions on state-owned enterprises force further privatization of publicly owned and publicly operated infrastructure like the U.S. Postal Service, highways, water systems and other public utilities – even services like municipal parking operations?

● Will TPP enable the U.S. to continue using tax dollars to help American companies, like our “Buy America” procurement policies?

● Will TPP expand imports from countries where food is often found to contain banned toxic chemicals? If so, will TPP require increases in food and product safety standards and inspections?

● Does the TPP increase oversight of financial companies like banks, insurance companies and hedge funds?

TPP Pits Obama, Republicans, Wall Street And Big Corporations Against Democrats, Labor, Progressives

While still secret, the agreement is likely to have many of the same proponents and opponents as the fast-track trade promotion authority battle had. As the Los Angeles Times words ittoday, it “pits the White House, many Republicans and supporters of free trade against organized labor, civic groups and many lawmakers from Obama’s own party, who fear the deal will hurt workers and the environment.”

In a Monday morning call Representative Rosa DeLauro (D-Conn.) said the TPP text Congress is allowed to see has not been updated for some time, so even they don’t know what is in it. Saying Congress has had to rely on leaks and hasn’t seen the supposed “side agreements” at all, DeLauro asked the administration to “have the courage” to show Congress and the public the text now.

DeLauro complained that leaked drafts show U.S. negotiators negotiating hard for pharmaceutical companies, but not for the interests of American workers. “The administration has put big corporations first, workers last.”

She said rules-of-origin requirements allow less than half to be made in U.S. and TPP countries, the rest can come from countries like China. “None of us can think of a clearer mechanism for taking American jobs”

Rep. Paul Tonko (D-N.Y.) said, “we’ve seen the nightmare NAFTA brought to our manufacturing sector and hard-working American families; this deal is NAFTA on steroids” because this is much broader. Multinational corporations will benefit from increased drug prices and access to cheaper labor.

Rep. Dan “Rock Star” Kildee (D-Mich.) said “what’s not there is there is a lack of any enforceable currency provision. This ties American manufacturer’s hands behind their back as they try to compete. Worse, new rules of origin allow the Chinese to provide more than half the content of a car and it will be treated as domestic. Combined with no currency rules, this will have a devastating effect.”

He added, “I would ask members who voted for fast track to look at the details. When they see specific details and impact on their businesses I think they will vote no.”

Rep. Debbie Dingell (D-Mich.) said, “I’m a car girl … we are only operating on early reports but already Ford and Chrysler are opposed, joining the UAW, and those companies have strongly supported previous deals.”

Rep. Brad Sherman (D-Calif.) called TPP a “huge win for China because of currency, rules of origin; we get zero access to the Chinese market.”

On the ability to ensure even these ow rules of origin, Sherman said, “What about de facto rules? How does anyone police it? Are Chinese going to report companies that are mislabeling?”

Petitions

The Teamsters are asking people to sign this petition:” Tell Congress: Show Me the Text on Reported TPP Deal.”

Democratic presidential candidate Bernie Sanders has released this petition and is asking people for signatures: “Sign my petition to join our fight against the disastrous Trans Pacific Partnership trade deal. We cannot afford to let this trade deal hurt consumers and cost America jobs.”

The U.S. Trade Representative office has released this summary

Why You Should Care about Stock Buybacks – in 3 Charts

top corporate tax rate 1945 - 2013For decades, we’ve been letting the GOP tell us that corporate tax cuts could somehow fix our economy and balance the budget.

Turns out: corporations have been using that extra money to buy back their own stock, instead of creating jobs.

Last year, corporations in the S&P 500 index spent a combined $564 billion on stock buybacks.  That’s more than 3.1% of the entire US Gross Domestic Product for 2014.  Spent NOT on job creation… not on deficit reduction… but instead, spent on consolidating corporate ownership.

For decades, the political rhetoric about “cutting taxes for job creators” has been both accepted and effective.

But back when our country had a thriving Middle Class, corporations had top tax rates in the 50% range.

share of income taxes 1945-2014But as corporate tax rates began to fall, total federal income tax revenues began to fall – and the share of taxes paid by individuals began to grow.

And we all waited for corporations to spend their extra money on job creation.

And we waited.

And we waited.

And somebody convinced the Securities and Exchange Commission to create its “Safe Harbor Rule” in 1982 – enabling corporations to buy back their own stock without fear of federal prosecution.

And under the radar, that’s exactly what corporations started doing.  And I DO mean “under the radar.”  Nobody knows exactly how much money US corporations have been spending on stock buybacks.  Buybacks are tracked for the S&P 500 – which are the numbers I’ve used here –but not for all the other corporations that do business in our country.  Even the SEC doesn’t keep statistics on overall stock buybacks.

But let’s take a minute to pretend.

Let’s pretend that our corporate tax rates weren’t so low (and there weren’t so many loopholes), and that the SEC’s “Safe Harbor Rule” had been repealed.

2014 share of federal income taxesLet’s pretend that all the money (the S&P 500) spent on stock buybacks had been paid as corporate taxes, instead.

Here’s what that would have done, to the share of federal income taxes paid by individuals in 2014.

Yep.  THAT’s why you should care about stock buybacks.

They’re coming out of your pockets, in the form of higher taxes.

—–

Read more NHLN coverage of stock buybacks here.

Read Marketwatch, “Wall Street’s new drug is the stock buyback” here.

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