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Filthy rich and grabbing for more

May 11, 2007 | Page 16

ERIC RUDER looks at obscene wealth of the top dogs in the financial world.

YOU MIGHT think that New York Yankees infielder Alex Rodriguez--baseball's highest-paid player at $25 million a year--would be right at home among the richest people in the world. After all, he makes about $45,000 for each at bat.

But on the playing field of the superrich, he's a bush leaguer. A-Rod would have to play at $25 million a year until he's 100 to make as much as James Simons last year alone.

Who's James Simons? He's the world's top hedge fund manager. He "earned" $1.7 billion last year. The top 25 hedge fund managers made a combined $14 billion last year, according to industry magazine Alpha.

To get some idea of how much money this is, consider that these 25 individuals raked in more in one year than the national income of Jordan, with its 5.9 million people--or enough to pay the salaries of New York City's 80,000 public school teachers for nearly three years.

On average, these hedge fund honchos made $443 per second last year--every second of every day of every week of every month. If it took you 30 seconds to read this far into this article, a top hedge fund manager just made more than $13,000.

When ABC World News felt compelled to report on this story in late April, what angle did the coverage focus on? Did the report note the contrast between the enormous wealth of these 25 individuals and the 37 million Americans living below the poverty line? Or ask about the wildly diverging incomes of executives and production workers?

No. The pressing issue, in the judgment of ABC News, was how hard it would be to spend all that money in a year.

So ABC's reporter talked to a personal shopping assistant at Bloomingdale's, who suggested an $1,800 set of bed sheets. Then off to a grocery store, whose entire inventory amounted to about $2.6 million. If Simons felt that hungry, he could buy almost two whole stores--each day of the year.

The ABC reporter concluded that it would be hard to spend all that money--but never once suggested there might be something wrong when Simons takes home in an hour what 92 minimum-wage workers make in a year.

In fact, the only judgment offered during the segment defended the obscene pay day enjoyed by Simons and other hedge fund managers. "They buy when nobody's willing to buy, they sell when nobody's willing to sell," said Stephen Brown of New York University's Stern School of Business. "They take on great risk, and they deserve high returns for doing so."

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FOR WORKING Americans, work comes with real risks--and much less pay. Consider the nine workers at a microwave popcorn plant in Jasper, Mo., who came down with a rare, life-threatening disease that was destroying their lungs.

The cause was traced to a new additive being used to give the popcorn a more buttery taste. But the Occupational Safety and Health Administration (OSHA) didn't step up plant inspections or order new safety standards for other businesses using the additive, even as more workers became ill.

In late April, the director of OSHA told Congress he would prepare a "safety bulletin" and a plan to inspect a few dozen of the thousands of food plants that use the additive. If this sounds like a less-than-muscular response to a significant workplace health threat, consider that OSHA's new plan comes seven years after the nine workers first fell ill.

This is the reality for the working Americans exploited by the hedge fund managers and other corporate executives. Resisting stronger health and safety standards, cutting corners on standards that do exist, keeping wages low and pushing the cost of health care onto workers--all of it makes for fatter bottom lines and market returns.

Since 2001, "wages and salaries have captured an exceptionally small share of the total growth in national income that has occurred in the current period," according to the Center on Budget and Policy Priorities.

"Only 34 percent of the overall increase in national income since the end of 2001 has gone to increases in workers' pay, a smaller fraction than in any other expansion since World War II. For the first time on record, corporate profits have captured a larger share of the income growth in a recovery--46 percent of it--than wages and salaries have."

In the last 15 years, CEO compensation has mushroomed by 300 percent, while wages have inched up by 5 percent. If wages had kept up with CEO pay, the average production worker would be bringing home $110,136 instead of $27,460.

This has produced a situation that increasing numbers of people would like to see changed. Some 66 percent "feel that the money and wealth in this country should be more evenly distributed among a larger percentage of the people," according to an early April Gallup poll.

Thirty-seven percent said they thought that there were too many rich people--the highest percentage since Gallup began asking the question in 1990--while 49 percent said that "government should...redistribute wealth by heavy taxes on the rich," a much larger proportion than agreed with that statement in 1939 at the end of the Great Depression.

The question is not whether there are sufficient resources to lift people--not just in the U.S., but globally--out of poverty conditions. There certainly are. The question is when those who are shut out of prosperity will come together and demand their share.

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