Three of the world's richest and most powerful people (and Timothy Geithner) had a good laugh over income inequality earlier this year. Former Treasury Secretaries Robert Rubin, Henry Paulson and Geithner were asked about the issue by Facebook executive Sheryl Sandberg during a conference in Beverly Hills. When Paulson responded that he'd been working on income inequality since his days at Goldman Sachs, Geithner quipped, "In which direction?" "You were increasing it!" cracked Rubin, as everyone on stage roared with laughter. Watch the exchange: http://www.huffingtonpost.com/entry...bde4b093be51bb73c3?ncid=fcbklnkushpmg00000063 The April conference was hosted by former junk-bond kingpin Michael Milken, who served prison time in the 1990s for securities and tax scams. Milken has since attempted to rehabilitate his image through philanthropy. After serving as Treasury secretary under President Bill Clinton, Rubin made over $120 millionworking at Citigroup, which he left shortly before the faltering megabank was bailed out by taxpayers. Rubin spent 26 years at Goldman Sachs, and ran the firm for his final two before joining the Treasury. Paulson made about $500 million working at Goldman before serving as Treasury secretary under President George W. Bush. Geithner, sadly, had to settle for making $411,200 a year when he served as president of the Federal Reserve Bank of New York. Geithner and Paulson coordinated the bailouts that saved Citi and other banks in 2008. Geithner succeeded Paulson as Treasury secretary under President Barack Obama and took a high-paying job at the private equity firm Warburg Pincus in 2013. Sandberg, whose question prompted the moment of levity, is worth almost $1.2 billion. She worked for Treasury Secretary Larry Summers during the Clinton years and has been a staunch advocate for women's equality in the workplace. While in office, all three men advocated Wall Street-friendly policies that helped bolster pay for top bankers. Overall worker wages have been stagnant for decades and falling for most workers since 2007. Hilarious!
As much as I think Hank Paulson is an enemy of the state I do think the laughing was in jest and being taken out of context here. That being said, if there were a BBQ Paulson party tomorrow I'd show up with a case.
Like so many other hot button issues in the US right now - where the politically correct thing to say has no basis in reality whatsoever.
I wish Sheryl Sandberg had followed up Paulson's explanation for income inequality with this question. "So considering that today's wealth and income distribution is the typical, or normal one, observed over many centuries, with the exception of that brief period, in the U.S., from roughly 1950 through the mid 1980s or so, how is it that technology is now the root of wealth and income inequality? Why are the reasons now so different than they were in the past? Perhaps we're asking the wrong question, and instead we should ask why was that period from 1950 through the Mid 1980s so atypical? Surely if we are going to blame income inequality now on technology, we can't blame income inequality, during all those prior centuries, also on technology. Nor would it make any sense to blame the relative equality of the 1950s through 1980s on the absence of technology. Where is the consistency in your argument?"
By the way, I have not seen Greenspan's thesis exposure being talked about that much since it happened. But a brief recap is that Greenspan had his NYU PhD thesis sealed back in the late 1980s. He went on to hold the Fed Chair until 2006. As HW Bush ran for a second term he refused to ease (planning to hike in the near future). Once Clinton won, he indeed started to hike. But HW still blamed his re-election loss on Greenspan's refusal to ease. Forward many years and low and behold, HW's son won the white house in early 2001. At that time NASDAQ had peeked and was dropping hard so Greenspan eased. But HW's son was in the white house now so he eased and eased and left it way too easy for too long (always be careful what you wish for). The result was the housing bubble and crash which became HW's son's legacy. Greenspan left the fed in 2006 just as the housing bubble began to peke. Come to find out (sometime in 2008 or 2010) that Greenspan's PhD thesis was an in-depth study of how a housing bubble is formed and what damage it could/would do to the US economy (payback is a bitch). While this was all going on, HW's son was spending much of his white house time and much of the US taxpayers money getting payback regarding his father's Iraq war and the resulting hard feelings left behind (also one of his great legacies).
I like Pricechange's analysis. I'll add that there are additional factors that fed the housing fiasco. One such factor was mortgage bond securitization invented in the 1980s. Sliced and diced mortgages created by Wall Street investment banks were much easier to peddle than the original mortgages; consequently the amount of investor money available for mortgages mushroomed. To feed Wall Street's insatiable demand for mortgages it was necessary to find new borrowers, and that eventually led to a collapse in underwriting standards. Anyone who's breath could fog a mirror could qualify. This increased demand for housing and put upward pressure on prices. The government cooperated by giving a capital gains, tax break to house flippers. With rapidly rising real estate prices, flipping became the new get rich quick scheme. Another factor, and this too was at the root of the housing bubble, was that Greenspan, the chief regulator, did not believe in regulation. He was notified time and time again of the deterioration in lending standards. He did nothing. He believed that lending excesses, like the "irrational exuberance" of the dot com era, would self-correct. And of course he was right. The excesses did eventually began to self-correct, and when they finally did, the "correction" threatened to bring down the Western World's entire financial system!