Class War 101

Class War 101: Why AIG’s Outrageous Behavior is the Rule, Not the Exception

America is now in a state of bloodlust, following the shocking realization that there are bad people at the top of our economic food chain. We knew there were some bad apples out there, but AIG’s $450 million bonus swindle simply defies everything we assumed about the American character, particularly the character of our best and brightest, our All-Star Success Stories.

It was one thing to bail out their banks and insurance companies—at least our tax dollars weren’t being wired directly to specific people with names and faces, but rather to “institutions,” which makes it a little more palatable. But now, with the AIG scandal, there are real people stuffing their pockets with money looted from us. It suggests that they have no conscience. That they learned nothing. That, in fact, they didn’t give a fuck about our bailout on any emotional grounds, except as it presented a new feeding opportunity. Despite how it works in the movies, we haven’t been brought closer together—we, the common folk taxpayers, and they, the super-wealthy villains we bailed out. And this is what’s so enraging and humiliating: We were denied that cinematic transformation of character that Americans have been brainwashed to expect from our billionaire CEOs with their hardened hearts-of-gold—think Oscar Schindler’s climactic anti-greed speech, or Mister Magoo throwing coins out the window in the cartoon version of A Christmas Carol.

The shock we’re feeling today is like the shock and rage a wife feels after her husband is arrested on 152 counts of child molestation spanning three decades. How could we not know, when it’s been going on every day, every year, right in front of us?

If we’d cared to look around us at any time since the Reagan Revolution, we’d realize that the CEOs, billionaires and finance stars are behaving no differently today than they have been for nearly three decades. When we look back, what will pain us most is the way we admired the billionaires even as they brought about our ruin, turning them into TV celebrities and magazine-cover heroes, worshipping them like rock stars right up to the end.

A perfect example of the kind of person who benefited from the Reagan Revolution is Al “Chainsaw” Dunlap, a corporate superstar during the peak Clinton years, when Reaganomics accelerated under the guiding hands of Alan Greenspan, Larry Summers, and Robert Rubin. It was during Clinton’s centrist pro-business presidency that innovations like the like mass-layoff (rebranded as “downsizing”) became a regular feature of economic booms, rather than of economic busts, as they had been in the past. Layoffs expanded right with the economy for the simple reason that each mass firing freed up millions or billions of dollars that had gone to workers, but now could be divided up between executives and major shareholders. The problem was finding people cold-blooded enough to do the job—which is to say, there was no problem whatsoever. As Dunlap himself boasted in a 1998 interview with Fortune magazine, “Mickey Mouse could do the cost cutting.”

By that time, he was already a celebrity with a nine-figure net worth. It all started back in 1994, when Al Dunlap was named CEO of Scott Paper. His first move was to fire nearly one-third of the workforce, or 11,200 workers. This cheered investors, who piled in, driving Scott Paper’s stock up by 225 percent. By reclaiming the sum total of whatever 11,200 workers earned and redistributing it to the shareholders and executives, Dunlap earned himself a $100 million payout for 19 months of “Mickey Mouse” chainsaw duty.

Mutual fund billionaire Michael Price was so impressed that in 1996 he brought Dunlap in to “restructure” one of his portfolio investments, the ailing Sunbeam Enterprises. The mere announcement that Dunlap would take his chainsaw onto Sunbeam’s factory floor and massacre all those payroll-sucking employees caused Sunbeam’s stock to rise 60 percent as portfolio investors rushed to get a chunk of the promised loot. And Chainsaw Al didn’t disappoint: as soon as he had an office, he fired 6,000 Sunbeam employees, or half the work force. Investors roared in approval, driving the stock straight up for four months.

But in a now-familiar plot-twist that has repeated itself over the past 30 years, it turned out that Dunlap wasn’t the great Rand-inspired corporate innovator that he and the media made him out to be. Instead, his “success” looks to have from the oldest trick in town: cooking the books. When the shit hit the fan, he was fired, and sued. According to an SEC lawsuit filed against Dunlap, he led a team that:

"employed a laundry list of fraudulent techniques to falsely give the picture of a successful turnaround, falsely raising results, in an attempt to sell the company at an inflated price."

Sunbeam filed for bankruptcy and shareholders lost $4.4 billion in value. Even though Dunlap was fired from the company he destroyed, he still walked away with at least $16 million. The SEC looked at all this destruction, and decided to punish him with a $500,000 fine. When you consider that he’d already netted at least $116 million in the span of a few years, a half-million dollar “punishment” for all that destruction wasn’t even so much as a slap on the wrist. Moreover, the settlement allowed Dunlap to avoid having to admit wrongdoing.