The demise of Mervyn's department store gives Ahwatukee Foothills a concrete reminder of the parasitic plutocracy promoted by the Bush administration. Through predatory, unregulated financial speculation, three private equity firms destroyed Mervyn's, closing 150 stores and firing 18,000 workers without severance pay.

It's a classic case of redistributed wealth, upward from the fired employees to the exploiting robber barons.

In 2004, after purchasing Mervyn's for $1.2 billion, the new owners promised to revive the ailing retailer. Instead, they loaded it with $800 million in debt, sold its real estate, renegotiated store leases at nearly doubled rates and sliced $400 million from Mervyn's carcass for themselves.

Private equity firms account for an outlandish proportion of business bankruptcies like Mervyn's. Investors today discount buyout loans by up to 65 percent, says Business Week.

Mervyn's liquidation is a mere speck in the gigantic dust storm represented by the cascading economic collapse. But its demise exemplifies the stupidity of Bush's anti-regulatory policy.

Burgeoning hedge funds have made a huge contribution to the financial meltdown. According to Republican ideology, hedge funds are miracle-working promoters of economic efficiency, redirecting financial resources into more productive enterprises.

This is a fantasy. In 2007, the top hedge-fund manager, John Paulson, made $3.7 billion selling subprime mortgages short. He, thus, exploited the financial meltdown sinking the economy. Carlyle Corporation (which made the Bush family fabulously rich) does its part. Several years ago, Carlyle took Hertz private, siphoned off $1 billion in fees, and then took Hertz public again. Hertz is $1 billion poorer, with no discernible benefits.

Hedge-fund managers exploit a mind-boggling tax favor. Their fees are taxed at the 15 percent capital gains rate vs. 35 percent paid by doctors, accountants, engineers and architects. Paulson was paid $1.85 million per hour in 2007, roughly 40,000 times his secretary's pay. If her salary was $80,000, she paid tax at nearly twice her boss's rate.

CEOs have their special racket. Backdated stock options allow CEOs to steal hundreds of millions from shareholders. Here's how this racket works: CEO Jones gets stock options on 100,000 shares at a $40 "strike" price. Backdating the options to a date when the stock price was $30 enables Jones to buy the optioned shares for $1 million less. That $1 million is stolen from shareholders.

These crooked practices, augmenting the countless instances of banking and mortgage fraud, are a product of anti-regulatory, see-no-evil economic policy. The credit crunch springs from ubiquitous fear, inspired by lack of trust in the hopelessly complex, unregulated derivatives - notably, credit default swaps made in a corrupt evasion of insurance laws - that have frozen credit markets.

This corrupt economic ideology is not, as claimed, grounded in Adam Smith's free-market philosophy. Banking, warned Smith, should be conducted according to "strict rules" - i.e., regulations. He warned against the reckless speculation that has demolished a huge segment of our banking industry.

Smith also favored redistribution of wealth through tax policy. He favored the remedying of "inequality of riches" by "relieving the poor and burdening the rich."

If they had read his book, Republican conservatives would denounce Smith as a raving socialist.


C.W. Griffin has lived in Ahwatukee Foothills since 1988. He is a retired consulting engineer.





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