Corporations Gone Wild

It’s a magnificent time to be alive – if you’re a giant corporation, that is.

Spring is here, and after a deep chill, the mighty mega-businesses are not merely reborn, but blossoming. “Big U.S. companies have emerged from the recession more productive, more profitable, flush with cash and less burdened by debt,” swoons the Wall Street Journal.  The seductively sweet smell of speculation – in mortgages, derivatives, oil, wheat – once again fills the air. Amidst the giddy exuberance of the stock market, why dwell on the dreary conditions among the human population, where one out of every six Americans lives below the poverty line, one of every ten is out of work, and one of every five homes are worth less than the loans that secure them?

Oh to be young, free and incorporated – preferably in an island like Bermuda.

Being a Big Business wasn’t always so much fun. For a long time, corporations had to obey the same rules as the rest of us. And after Wall Street drove America into a ditch four years ago, Corporate America was hurting, too. True, many of us never really thought of inanimate objects as capable of suffering. And come to think of it, I never did meet a homeless corporation (though I’ve encountered many a crooked one). But with bailouts, special tax breaks, and the ability to borrow taxpayer money from the Fed at .05% interest, that painful period didn't last very long.

And then, in 2010, the U.S. Supreme Court decreed in the infamous Citizens United case that under the U.S. Constitution, corporations are the same as people and spending money is a form of free speech. So when corporations write checks, it’s the same as you and me speaking. And corporations have the right, under the First Amendment, to use money to buy public officials and purchase elections.

Corporate America’s been partying like its in Ft. Lauderdale on Spring Break ever since.

As you might expect from a climate of unrestrained corporate debauchery, there’ve been some ill-fated hook-ups, like AT&T and T-Mobile (the annulment cost $4 billion). But don’t worry about a newly rejuvenated Ma Bell not having any BFFs. Its 100 million customers literally cannot dump the company, at least not without paying a massive “early termination fee.” AT&T’s allies on the Supreme Court ruled last year that the company can strip you of your right to take it to court, leaving you no way to sever the relationship if your service fails, your “unlimited” data plan gets throttled, or you get overcharged.

Big businesses were screwing people way before Citizens United and Concepcion v. AT&T, of course. But those decisions fundamentally altered the balance of power between citizens and corporations in the courts, Congress and the executive branch.

Philosophers, scientists and science fiction writers have long predicted that the moment would come when artificial creatures, created by humans, would become more intelligent than humans – a technological "singularity" projected to arrive later this century. But no one would have guessed that 2010 would become the date of the political singularity – the year in which a legal construct – a corporation – would become more politically powerful than humans.

That corporations don’t yet have all the benefits of personhood misses the point. Justice Stevens’ dissent in Citizens United  warned: “Under the majority's view, I suppose it may be a First Amendment problem that corporations are not permitted to vote, given that voting is, among other things, a form of speech.” But corporations don’t need to vote. Corporations decide who gets elected simply by dumping vast quantities of cash into elections on behalf of candidates who will do their bidding.

As a student of American civic life named Tony Montana once explained, “In this country, you gotta make the money first. Then when you get the money, you get the power.”

In this “Bust Bowl,” It’s Every Person for Themselves

During the 1930s, drought and dust storms combined to devastate farms in the heartland of the United States, already decimated by the Great Depression. One quarter of the population of the “Dust Bowl” lost their farms and ranches when the banks foreclosed on them. Millions left the Great Plains for California or elsewhere.

Today, the entire nation is trapped in a “Bust Bowl,” laid low from coast to coast by the collapse of an economy based largely on finance and speculation. The “official” unemployment rate, which has been above 9.5% for the last fourteen months, understates the true devastation wrought by the Wall Street debacle. Vast numbers of our citizens have descended into poverty: 42 million Americans – one in seven – are considered poor.  Just an hour or two outside LA, 15 to 20% of residents in towns like Bakersfield and Riverside are below the poverty line.

Back in the Thirties, farmers joined together to protect each other against foreclosures: trying to block authorities from seizing the farms, moving furniture back into the homes of the evicted, and refusing to bid on properties that were foreclosed. But there’s little sympathy for our neighbors evident these days.

To the contrary, speculation has ingrained itself so deeply in the American psyche that people view foreclosures as an opportunity to snatch up a home at distressed prices. And now that some banks are pulling homes off the market because they can’t prove they hold the mortgages, as my colleague Martin Berg has described, would-be purchasers are unhappy. The New York Times quoted a Florida mother who was supposed to move into a foreclosed “three bedroom steal” when Fannie Mae took the house off the market. “Now I’m sharing a room with my son,” she complained. “What the hell is up with that?”

It’s hard to feel sorry for someone who is trying to reap some kind of a windfall from someone else’s tragedy.

I know, everyone’s just trying to get by. The Times noted that one man who had lost his own home to foreclosure after falling behind on his payments had made a successful bid on another foreclosed home – his “dream house” – only to have the deal frozen by the bank.

But is the solution to beggar thy neighbor?

Consider the debt collector profiled in the New Yorker this week. A former drug dealer who did some time, “Jimmy” now runs a small operation in Buffalo, New York. He buys bad debts from businesses like banks and credit card companies for a few cents on the dollar, and then does what he can to collect from the people who owe the money. Anything he can get, he keeps. With so many Americans out of work and deeply in debt, the collection business is booming these days. Buffalo’s home to quite a few such firms these days, because, as Jimmy explains, “Buffalo is broke!” Jimmy’s got five kids and he’s trying to make a living and meet the payroll for his staff, whose job is to nag and cajole people into paying something on what they owe. Plus he’s up against some bigger firms that are willing to break the law in order to collect. But it’s not a pretty picture, especially because it soon becomes clear that Jimmy’s company is in trouble, and he may soon find himself among the debtors of Buffalo.

The average American is not going to be able to leverage himself out of this economic nightmare.

In the Thirties, the federal government ultimately came to the rescue: prodded by Roosevelt, Congress authorized the courts to reduce a farm mortgage to its diminished market value, and to suspend a farm foreclosure for three years. (A conservative US Supreme Court initially struck the law down as an improper intrusion of the government in the banking business, but it was later upheld.) Farmers were also allowed to borrow money through the federal government to pay off their old mortgages. This was the New Deal.

This time around, Wall Street firms have been given access to trillions of dollars of federal money at rates approaching zero interest, but with no requirement that they lend this taxpayer money back to taxpayers at all, much less at fair interest rates. Thus the banks, credit card companies and investment firms are back in business and in fact, most are rolling in dough. The rest of us have to pay exorbitant interest to borrow our money, if it is offered at all. And at the behest of Wall Street, the US Senate rejected a proposal to allow federal bankruptcy courts to modify mortgages so people could stay in their homes. A few days ago, the Obama administration rejected a nationwide moratorium on foreclosures. "While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse," according to the Federal Housing Administration.

I'd call this a "Raw Deal."