Great Recession

The new "Let them eat cake!"

10 shocking, illuminating moments that prove just how out of touch the powerful really are

  • title=''
    AP/Chris Pizello/Wikipedia

    Number 10: Multimillion-Dollar Parties While the Globe Burns

    As the economy for most regular people continued to sputter toward the end of the Bush years, and as Wall Street was gearing up to administer its mortgage-meltdown pile driver on unsuspecting Americans, multimillion-dollar parties became all the rage.

    The most famous of these was the $5 million birthday bash for the Darth Vader of private equity, Stephen Schwarzman. (This orgy of ostentation was made even more disgusting by New York Times’ Andrew Ross Sorkin and his “In Defense of Schwarzman” apologia that is, in retrospect, a perfect example of how an entire Let Them Eat Cake propaganda system replaced serious financial journalism.)

    But before Schwarzman could be held up as an anomaly, he was soon topped by a $20 million celebrity-studded hotel party right in the heart of the desperately poor Middle East. Held just weeks after the global economic meltdown commenced, the bash included “a fireworks show that organizers said was visible from outer space,” according to the New York Daily News.

    Today, revelry in the shadow of destitution is ubiquitous to the point of mundanity. In New York, for example, it’s million-dollar bar mitzvahs just a short subway ride away from the pulverizing poverty in the Big Apple’s outer boroughs.

  • title=''
    Wikipedia

    Number 9: Receipt Dropping as a New Status Symbol

    A few weeks ago, the absurdly wealthy started an obnoxious new fad: leaving eye-popping receipts around, just for all of us poor saps to behold.

    As Mediaite reported, first a bunch of Boston Bruins players racked up a $156,000 booze bill in four hours — and then had the receipt photographed and published at Boston.com. Then a Philadelphia Eagles wide receiver tweeted news that he and friends had spent more than $10,000 in 17 minutes — and again, out came a photograph of the receipt. Then, hedge fund manager David Tepper left a receipt lying around the Hamptons showing a $99 million balance in his petty-cash ATM savings account.

    Inadvertent? In some cases, perhaps — but only in the sense that some of the top-hat-and-monocle crowd weren’t necessarily trying to brag. Nonchalance, though, is a statement unto itself, because here’s the thing: Many of us who are not masters of the universe have a deathly fear of losing those little scraps of paper that include snippets of our financial information. We fear that because we don’t want anyone to steal our multihundred-dollar fortunes. For many zillionaires that concern is trumped by the desire to flaunt their riches.

  • title=''

    Number 8: King Mike’s Spending Spree

    Though you wouldn’t know it from looking only at Manhattan, New York City is the most economically unequal city in America and the ninth-most-unequal city on the planet. Indeed, things for regular New Yorkers have gotten so awful during the recession that Crain’s New York recently sounded the alarm on what it calls a “middle-class exodus.” And not surprisingly, these trends have accelerated during the time the city has been ruled by that quintessential Marie Antoinette, billionaire media mogul Michael Bloomberg.

    There are many “Let them eat cake” moments to ogle at during the reign of the aristocrat many now call King Mike. There are his regular jaunts to Bermuda, where, like jet-setting royalty, he rules the Big Apple in exile. There are his efforts to defund social services and public schools while tenaciously fighting any attempts to tax billionaire Wall Streeters. And most recently, there was his declaration that low-income parents opposing his radical and unproven corporate-reform agenda for schools were doing so only because they “never had a formal education, and they don’t understand the value of education.”

    But no display of Bloomberg elitism tops his decision to drop $102 million on a reelection campaign that brought him just 50.7 percent of the vote. As the New York Times reports, Bloomberg shattered all previous campaign spending records, outspending his low-profile Democratic opponent by 14 to 1. That translates into King Mike paying a stunning $174 per vote — or $20 million for each point in his meager margin of victory. Or, in business terms, the amount Bloomberg spent in a few months on a municipal election is almost twice what many major corporate brands spend on their worldwide advertising campaigns over an entire year.

    The timing was particularly grotesque because it came just as he was saying his city’s fellow elites couldn’t afford to pay more taxes, at exactly the moment that the recession was pulverizing the Big Apple’s dwindling middle class.

  • title=''
    Reuters/Steve Marcus

    Number 7: The Lament of the Persecuted Wall Streeter

    The $700 billion TARP bailout and the ongoing multitrillion-dollar Federal Reserve bailouts of Wall Street were, in themselves, epic acts of Let Them Eat Cake-ism, especially since they’ve come at the very moment politicians are citing budget deficits as reason to cut people off food stamps and unemployment benefits. But in the spirit of Marie Antoinette’s aphorism, it’s important to find the one moment that sums up that unprecedented pillaging of the federal treasury.

    There have been many individual instances of shocking elitism that somehow portray the rich as oppressed. Until last year, my personal favorite was the one where a top Wall Street fundraiser for President Obama complained that “the investment community feels very put-upon” and that bankers “feel there is no reason why they shouldn’t earn $1 million to $200 million a year, and they don’t want to be held responsible for the global financial meltdown” that they created.

    However, we got a new winner when September 2010 rolled around. That fateful month, the nation was formally introduced to hedge fund manager Anthony Scaramucci, who used a nationally televised presidential town hall meeting to declare himself the man that “represent[s] the Wall Street community.”

    Lecturing President Obama — a president who had helped pass the multitrillion-dollar Wall Street bailouts, refused to prosecute Wall Street wrongdoers, and almost singlehandedly halted U.S. House-passed legislation cracking down on excessive bonuses at bailed-out banks — Scaramucci declared that though Wall Street pay was at that very moment continuing to break records, Wall Streeters nonetheless feel “like a pi

  • title=''
    iStockphoto/Marina_PH/Salon

    Number 6: Pleading Poverty at $500,000 a Year

    As Mother Jones has reported, the average American family in the bottom 90 percent of income earners makes just $31,244 a year — and, to reiterate, that’s the average, meaning many make far less. Similarly, the median net worth of American families is a mere $120,000 — and remember, “net worth” means the sum value of all of a family’s assets liquid or otherwise, from income to home to car to furniture to the kids’ dirty undies.

    So when you see a newspaper article during the recession about how difficult it is to live on far more than the average American’s income, you can be forgiven for thinking you are reading either (a) the Onion, (b) the in-house newsletter of 18th-century Versailles or (c) an old clip of NBA guard Latrell Sprewell infamously saying a $7-million-a-year contract was an insult because “I have a family to feed.” But in 2009 two such articles appeared in a pair of our nation’s supposed journalistic beacons.

    The Washington Post’s article headlined “Squeaking By on $300,000″ was absurd enough, but a Sunday Styles piece in the New York Times took that cheeky, gee-whiz journalism a step further. Daring readers to attempt the supposed hardships of affluence, the piece was titled “You Try to Live on 500K in This Town.” (The story naturally fails to mention that the city’s median household income is about $38,000 a year, meaning that most New Yorkers take the headline’s challenge on a yearly basis.) Instead, it reported on a proposal to limit bailed-out bank salaries to a half million dollars a year, and then proceeded to try to cheekily illustrate how impossible that would be in the Big Apple.

    According to the Times’ “cold hard math,” this is virtually untenable given expenses that include $32,000-a-kid private school bills, $96,000-a-year mortgages, $96,000-a-year co-op maintenance fees, $45,000-a-year nanny tabs and, of course, the undebatable requirement that very rich people take “at least two vacations a year, a winter trip to the sun and a spring trip to the ski slopes.” And mind you, the Times was quick to inform us, this doesn’t even include other “prerequisites” to living in New York City like “restaurants, dry cleaning… kennels for the dog when the family is away, summer camp, spas and other grooming” and $1,000 suits from Brooks Brothers.

  • title=''
    Wikipedia

    Number 5: Being Worth $31 Million Is “Struggling Like Everyone Else With the Economy”

    What is “rich” and what is “middle class?” Those terms and concepts didn’t use to be up for debate — to paraphrase the Supreme Court, you knew wealth when you saw it. Yet, as the recession intensified over the last few years, the most basic economic taxonomy has been challenged by a furious propaganda campaign to convince Americans that the super-rich are experiencing the same struggles as we are.

    During a January 2008 Democratic presidential debate, ABC News’ Charlie Gibson — who made $7 million a year — used a question about taxes to insinuate that a household pulling in $200,000 a year is merely making a middle-class income, when in fact, roughly 97 percent of American households make less.

    Gibson’s message, however out of touch, subsequently oozed into cable TV — and from there, into elite culture at large. In 2010, for example, CNN’s Kiran Chetry suggested that “in some parts of the country” making $250,000 a year “is middle class” — a statement that defies Census data showing that even in the wealthiest enclaves in America, a quarter-mil a year is still three times the median income. Meanwhile, University of Chicago professor Todd Henderson garnered national headlines for an essay railing on the repeal of Bush’s tax cuts — an essay declaring that his family’s $250,000-a-year income meant he was “just getting by.”

    Over on Wall Street, the definitions became even more skewed. In a 2009 New York Times article on proposals to limit executive pay at bailed-out banks to $500,000 a year, corporate compensation consultant James F. Reda said that such a cap was “pretty draconian.” Why? Because, he said, $500,000 a year “is not a lot of money.”

    Nothing, however, compares to the series of declarations that are emanating from professional politicians in Washington this year — and specifically from Rep. Paul Gosar, R-Ariz., and Rep. Denny Rehberg, R-Mont. Their recent statements show how clueless multimillionaire politicians really are about the plight of the average American.

    The former, who represents a district with a median income of $32,900, told a recent audience that though he earns $174,000 a year as a public employee and though he’s worth more than $2 million, “I ain’t wealthy … I live just like the rest of you folks.” The latter, who represents one of the poorest states in the nation, gets paid the same annual salary and is worth $31 million. Nonetheless, he told his constituents that his family is “struggling like everyone else with the economy.”

  • title=''
    Reuters/Molly Riley

    Number 4: For Me, but Not for Thee

    One of the hallmarks of Let Them Eat Cake-ism is an absolute lack of self-awareness mixed with a complete disregard for hypocrisy or personal responsibility. The end result is an especially nauseating “for me, but not for thee” attitude.

    In this recession, that has manifested itself as bankers walking away from their obligations to cover their own losses and happily vacuuming up public bailout dollars — all while lecturing strapped homeowners about their moral responsibility to pay their bills.

    Recall that in February 2009, Jamie Dimon — the $17-million-a-year CEO of the bailed-out JP Morgan — went on CNBC to deliver a sermon about the moral obligation of covering one’s own losses and not running to someone else for help.

    “I don’t think just because someone’s underwater [in their home], they say, I don’t have to stay there,” he said. “They’re supposed to pay the mortgage, and we should teach the American people, you’re supposed to meet your obligations, not run from them.”

    Following Dimon’s lead in 2009 was the Mortgage Bankers Association, the umbrella group for the entire bailed-out industry. In a Wall Street Journal story about underwater homeowners, the group’s chief executive, John Courson, was quoted declaring that borrowers had no right to any kind of bailout themselves, and that they should pay back their loans immediately. If they don’t, he said, “What about the message they will send to their family and their kids and their friends?”

    This, of course, was not a question Courson or his fellow bankers considered when they went to taxpayers begging for a handout. And, as importantly, it was not the question Courson’s own trade group made when they short-sold their own headquarters in a complex scheme that may have had them walk away from the very obligations they said homeowners must fulfill. As the Boston Globe reported at the time:

    The trade group has sold its 10-story Washington headquarters for $41 million after shelling out $79 million for it three years ago. All but $5 million of that was financed.

    It gets better, for it’s not clear the Mortgage Bankers Association will pay off all of the roughly $30 million it still owes its lenders on the trophy office building, just a few blocks from the White House… On top of that, giant commercial landlord Tishman Speyer is battling in court with the MBA, contending the trade group still owes $1 million after breaking an earlier lease to move into its now clearly massively overpriced headquarters.

  • title=''
    Reuters

    Number 3: Let Them Eat Foreclosures

    By 2011, JP Morgan’s Jamie Dimon had finally stopped excoriating homeowners for trying to walk away from their obligations in exactly the same way Dimon’s fellow bankers had during the Wall Street meltdown. In fact, he seemed to dial back his hardline position on paying back loans. But the operative word is “seemed.”

    You see, the gentler Dimon couldn’t keep his intense elitism from coming out after his bank began facing legal questions about its moves to aggressively accelerate foreclosures on homeowners.

    As more details emerged — including revelations of scandalous treatment of active-duty soldiers — it became clear that Dimon’s new reticence about the morals of paying back mortgages wasn’t reflective of a bank that had suddenly become more humane or lenient toward underwater homeowners. On the contrary, the bank had simply stopped imploring homeowners to pay up, and instead just started throwing teetering homeowners out of their homes as soon as possible — all while lobbying against federal legislation that would have forced banks to renegotiate their loan terms so as to prevent such foreclosures.

    When all of this started coming out, Dimon couldn’t restrain his Let Them Eat Cake impulses any longer. And so he pioneered a previously unthinkable line of spin, asking people forcibly removed from their homes to see his bank’s moves as altruistic acts of benevolence. He told CNBC: “Giving debt relief to people that really need it, that’s what foreclosure is.”

  • title=''
    Wikipedia

    Number 2: The Palaces That Taxpayers Built

    In Louisville, Ky., as the city struggles with high unemployment, Goldman Sachs engineered a scheme to construct a huge new sports arena that is now siphoning millions of dollars of public money into the investment bank’s coffers. In Jefferson County, Ala., Goldman orchestrated the construction of what’s been called “the Taj Mahal of sewer-treatment plants” — a massive boondoggle that has bankrupted the county and, once again, made Goldman huge money. And in New York, where public budgets are being gutted, Goldman just opened a monstrous $2 billion headquarters, financed by what Bloomberg News calls “unprecedented” aid from taxpayers.

    Recent news out of Colorado suggests that Goldman and other companies are likely to profit even more off municipal finance. Despite Denver, Aurora and the state of Colorado facing crushing annual deficits, lawmakers at both the municipal and state level are now putting together what could become the largest package of corporate welfare in the state’s history in order to get a private hotel corporation to build a new convention center. And not just any new convention center — one that’s just a few miles from a newly renovated convention center that already exists in downtown Denver.

    Incredibly, as part of the deal, Denver policymakers who have been for years slashing municipal services are now floating the idea of asking Denver voters to approve a bond initiative that would spend $150 million on a plan to move the National Western Stock show out of Denver entirely.

    That’s right, taxpayers may be asked to pay to move a revenue-generating event out of their city for the sake of enriching a corporation, rather than, say, spending that revenue on rebuilding the tattered social safety net.

  • title=''
    Wikipedia

    Number 1: “Suck It Up and Cope”

    “Let them eat cake” is a phrase composed of four simple, easy-to-remember words, which is probably why it became so emblematic of a larger set of ideas. “Suck it up and cope” is a phrase made up of five similarly simple and memorable words, which is why it may well replace “Let them eat cake” in the annals of history.

    Yes, “Suck it up and cope” — that is what billionaire Charlie Munger said that the unemployed, the homeless and the impoverished should do as their lives are torn apart by the recession.

    Of course, had he said the same thing about bailed-out banks, his now-infamous line might have just seemed like the innocuous rant of a crotchety geezer who might be a little too zealous about old-school principles. But no, Munger made the remark during a 2010 speech to University of Michigan students in which he first lauded bankers as people who “saved your civilization” and then urged all Americans to bow down and “thank god” that the bailouts preserved the financial industry’s profits.

    And so we end this feature with a worthy successor to “Let them eat cake”: “Suck it up and cope.”