Hostess Brands is classic case of private equity engineers and executives looting a viable company, loading it up with debt, and then asking the employees to make up the difference.
In the 1960s and 1970s, the pre-existing company went on a buying spree, picking up some of America’ s most famous brands. It paid $330 million for Hostess. The company, then known as Interstate Bakery Holdings, was taken private in 1987, then went public again in 1991. At each step of the way, middlemen and insiders captured windfalls.
In 1995, Interstate bought Continental from Ralston Purina, giving it ownership of the precious Twinkie, as well as Ding Dong, Ho Hos, and Wonder Bread. Yet another acquisition brought Drakes Cakes into the family.
Having taken on massive debt, the company, now called Hostess Brands, declared bankruptcy in 2004. When it emerged from bankruptcy, having laid off some 17,000 workers, its private equity owners loaded it up with debt again. By early 2012, Hostess was in debt to the tune of $860 million. Despite its distress, its last chief executive was paid over $2.5 million a year.
So when further worker pay cuts of 27 to 32 percent were demanded to make up for all these corporate misdeeds, the union said, No way. The company then asked permission of the bankruptcy judge to liquidate—sell off its assets.
So the real story is not one of recalcitrant unions, but of private equity abuses…
There is still a possibility that the judge in the case will not allow Hostess to be broken up. However, if the liquidation does go forward, fear not for the Twinkie. The gooey food has value as a brand and some company or other will surely buy it.
But fear for America’s workers. The way the private equity game is played, the financial engineers who keep creating these serial crises for their own enrichment will not be satisfied until the employees agree to work for nothing at all.
If you’re a Wall Street behemoth, there are endless opportunities to privatize profits and socialize losses beyond collecting trillions of dollars in bailouts from taxpayers. One of the ingenious methods that has remained below the public’s radar was started by the Rudy Giuliani administration in New York City in 1998. It’s called the Paid Detail Unit and it allows the New York Stock Exchange and Wall Street corporations, including those repeatedly charged with crimes, to order up a flank of New York’s finest with the ease of dialing the deli for a pastrami on rye.
The corporations pay an average of $37 an hour (no medical, no pension benefit, no overtime pay) for a member of the NYPD, with gun, handcuffs and the ability to arrest. The officer is indemnified by the taxpayer, not the corporation.
New York City gets a 10 percent administrative fee on top of the $37 per hour paid to the police. The City’s 2011 budget called for $1,184,000 in Paid Detail fees, meaning private corporations were paying wages of $11.8 million to police participating in the Paid Detail Unit. The program has more than doubled in revenue to the city since 2002.
The taxpayer has paid for the training of the rent-a-cop, his uniform and gun, and will pick up the legal tab for lawsuits stemming from the police personnel following illegal instructions from its corporate master.
Astroturf is a wonderful thing…
Suzy Khimm points us to redstate.org leader and right-wing establishment figure @ewerickson declares he is “one of the 53%”: part of this generation’s “silent majority” who are upset at #occupywallstreet and its attacks on the top 1%:
What Erick says:
I work three jobs.
I have a house I can’t sell.
My family insurance costs are outrageous.
But I don’t blame Wall Street.
Suck it up you whiners.
I am the 53% subsidizing you so you can hang out on Wall Street and complain.
Erick should blame not Wall Street but the health-insurance industry for the fact that his family insurance costs are outrageous—but at least come 2014 the Obama-Romney Affordable Care Act will give him the bargaining power that those of us who work for large organizations have in the health insurance marketplace and lower his insurance costs to more reasonable levels.
Erick should blame Wall Street for the fact that he can’t sell his house: had Wall Street not broken mortgage finance, and had the breaking of mortgage finance not led to the general credit crunch that launched our Lesser Depression, then Erick would be able to sell his house.
And it is not clear to me what Erick’s three jobs are: his internet biographies mention (i) right-wing internet community organizer, (ii) CNN commentator, and (iii) radio host. Are these his “three jobs”? Most of us would say that those are three aspects of one occupation—not three jobs.
1. Bank of America Just Unveiled A Shocking New Debit Card Fee: Late last month, BOA announced that it would start charging a $5-a-month fee simply for consumers to use their debit cards for purchases. Although a few of its competitors have started using similar fees in recent times, BOA’s presence as America’s largest banking chain means that if it successfully enacts such a fee, it may be able to set a trend in the industry to make such charges the norm. More than 137,000 Americans have signed an online change.org petition protesting the fee. Most credit unions do not charge for using one’s debit card, and one credit unions, Delta Credit Union based in Atlanta, is even holding a “Switch Day” to encourage BOA’s customers to switch over to its services instead.
2. Bank of America Has Spent Millions Lobbying To Gut Reforms With Your Tax Dollars: Despite being bailed out to the tune of billions of dollars by the federal government, Bank of America has still had the gumption to spend millions of dollars in Washington battling new reforms meant re-regulate the financial sector. It spent nearly $4 million hiring a double-digit number of lobbyists in 2010, mostly aimed at gutting legislation related to banking regulations. Meanwhile, it spent a million dollars on campaign contributions in the 2010 electoral cycle.
3. Bank of America’s Practices Are At The Nexus Of The Foreclosure Crisis: Bank of America CEO Brian Moynihan raised eyebrows recently when he excitedly cheered for faster foreclosures of Americans’ homes. Despite being found to be a major user of error-ridden “robo-signing” foreclosure practices last year, the mega-bank only briefly halted its foreclosure proceedings nationwide. It is also facing lawsuits by multiple states over its mortgage practices.
4. Bank of America Just Announced That It Was Laying Off 30,000 People: The “firm’s 30,000 job cuts are more than double what any other U.S.-based employer has announced so far this year, according to a employment tracking group.” The layoffs come after a decision by Bank of America, JP Morgan, and Citigroup earlier this year to “outsource IT and back office projects worth nearly $5 billion this year to India, as they seek to lower costs.”
5. Despite The Poor Economy, Bank Of America Continues To Reward Its Executives With Multi-Million Dollar Salaries: Despite blaming economic woes for layoffs of employees and its new debit card fee, the mega-bank continues to deliver huge paydays to its executives. The bank just announced that two of its former executives, Sallie Krawcheck and Joe Price, will receive a salary of $850,000 and a payment of $5.15 million and a salary of $850,000 and a payment of $4.15 million respectively. Meanwhile, BOA maintained its CEO’s salary of $950,000 plus $9.05 million in performance-based stock awards this year.
Angus Johnson […] wrote recently that if you think that the protesters have “no message, you’re not paying attention.” They clearly believe that there is “something seriously broken” in America’s economy and politics and that “an accelerating concentration of wealth and power in the hands of a small minority” is to blame.
If this sounds radical, the hyperbolic blathering of dreadlocked twentysomethings, consider that a slew of top political scientists have been saying the same thing for nearly a decade. For example, one of the most authoritative recent studies of democracy and inequality, by the Princeton political scientist Larry Bartels, found that “the preferences of people at the bottom third of the income distribution appear to have no apparent impact on the behavior of their elected officials.”
JON STEWART, on epic fails by Congress and regulators in keeping banks under control, leading to the financial collapse which was the impetus for OWS — as well as laying the smackdown on Fox idiot Steve Doocy — on The Daily Show (via inothernews)
Repeating for emphasis:
“If the people who were supposed to fix our financial system had actually done it, the people who have no idea how to solve these problems wouldn’t be getting shit for not offering solutions!”
Mayor Michael Bloomberg, a billionaire who made his fortune as a corporate executive, has said the demonstrators are making a mistake by targeting Wall Street.
"The protesters are protesting against people who make $40- or $50,000 a year and are struggling to make ends meet. That’s the bottom line. Those are the people who work on Wall Street or in the finance sector," Bloomberg said in a radio interview Friday.
“We always tend to blame the wrong people,” added Bloomberg. “We blame the banks–they were part of this, but so was Freddie Mac and Fannie Mae and Congress and you and me. Everybody wanted the boom times.”
In other words, Bloomberg and his ilk continue trying to convince us that we were all EQUALLY at fault for the financial meltdown and that it’s unfair to single out Wall Street in particular.
Nice try, but that is patently false:
Actually, the median salary for stockbrokers is approximately $88,000 a year. But that is besides the point. The demonstrators are not targeting the individuals who work on Wall Street, they are targeting the financial institutions and practices they represent.
Recall, the banks were the primary actors who set off the global recession, and that recession plunged 60 million people into extreme poverty worldwide. By protesting in favor [of] things like a financial transactions tax, Americans can hope to get some of that wealth back from financial institutions that are anything but “struggling to make ends meet.”
I don’t know why people seem to be confused on this point.
The main impetus behind the Occupy Wall Street protest seems to be that more and more middle classed folks are struggling to keep one step ahead of financial disaster. They’re doing all the ‘right’ things to have a good (not fabulous, just good) lifestyle, but the system that used to reward you for following the ‘rules’ (e.g. getting an education) is now screwing you over for doing the same things (e.g. massive student loan debt).
Meanwhile, the wealthiest 1% in this country keep doing better and better. And their cronies in the government keep doing all they can to ensure that the wealth gap keeps widening.
Yes, the college students at the protests and bloggers covering it may be privileged with regard to most of the world, but the context of the protest is not global (at least, not at the moment); it’s domestic. It’s about how incredibly unequal things are in this country. It’s pointing out that we are rapidly shifting from a multi-class society (poor, middle class, rich) to a two-class society (poor, rich). It’s pointing out the exponentially increased difficulty for have-nots to become haves these days.
The fact that more middle classed folks are feeling the pinch of unjust economic and corporate policies is important here. The very poor don’t have the numbers, resources, or political clout to mount an effective campaign against the powers-that-be—they need the working and middle classes to be involved too.
That’s why the Wall Street protestors are calling themselves “the 99%”, not “the bottom 10%” or “the middle 70%”.