Goldman Sachs To Pay 1% Tax Rate
By: Ian Welsh @ firedoglake.com - Tuesday December 16, 2008 6:40 pm
two bits four bits
And no, it's not primarily because of low profits, it's partly because of a big tax credit, and partly because of shifting revenue to offshore domiciles. So on the one hand, they're taking 10 billion from the taxpayer, on the other hand they're stiffing the government. Last year they paid 6 billion in taxes worldwide, this year they'll pay 14 million. You, the taxpayer, will make up the shortfall, one way or the other.
This sort of tax shifting has to end. The simplest way to do it is to say that no matter where you pay taxes, you make up the difference in the States. So if the rate is 10% somewhere else, and 30% in the US, you pay the 20% difference to the States. Make it so that folks can't set up separate companies to avoid taxes, and make some treaties with other countries. Race to the bottom economic competition needs to end—it isn't healthy when southern states give huge tax breaks to lure companies and it isn't healthy when it's countries competing with each other to see how low they can go, and to heck with providing services for their citizens.
Another possibility is to tax all transfers of money into the US. You may be able to pay lower taxes overseas, but if you try and bring the money into the country, you get charged the tax you should have paid in the first place.
Either way, it needs to be dealt with. As for Goldman Sachs, this sort of tax dodging looks about as good as everything else they've done since their ex-CEO, Hank Paulson, took over at Treasury.
SOURCE - http://firedoglake.com/2008/12/16/goldman-sachs-to-pay-1-tax-rate/
Not a business was stirring, not large corporationsTheir requests had been sent to Congress with care
In hopes that Pelosi, or Reid, would give them a share The CEO’s had their hopes set on the Fed
And visions of bonuses danced in their headsI was at home, full of hope and wonder
At the thought of big companies not going under.
Then out on the street there arose such a clatter,I looked out the window to see what was the matter.On the street was a hay wagon, making its way
Not the usual wagon, filled with bales of hay.
No, this one, (and I know this sounds funny),
Was filled instead with bales full of money.
With a very old driver, so morose and deadpan,
That I knew in a flash it was Alan Greenspan
There was a small note, stuck to each cash bale
With the name of a company too big to fail.
His wagon was drawn by eight sleek mega-bucksAnd he shouted their names as he whipped their buttocks “Now Paulson, Bernanke, Now Rubin and Volcker
On Krugman, On Samuelson, Kudlow and Cramer,To the next company’s holiday retreat! So I can deposit a bale at the revelers’ feet"And so the wagon continued on,Until the last bail-out bales were gone.Greenspan then to his team gave a whistle,And away they all flew like the down of a thistle.And as they flew way up into the sky,
Alan cried, “I must see Ayn Rand once more ‘fore I die.”And I heard him exclaim as they flew into the night"Happy bail-outs to all, and to none, oversight!"
Naomi Klein: Bailout is 'multi-trillion-dollar crime scene'
by David Edwards and Muriel Kane @ "Raw Story"Print This Email This
The Bush administration has already handed out almost half of the $700 billion in bank bailout money authorized by Congress but has not even filled the mandated oversight positions to review how it is being used.Naomi Klein, author of The Shock Doctrine: The Rise of Disaster Capitalism, has described the handling of the bailout as "borderline criminal" because of this and other problems. Klein spoke to Amy Goodman of Democracy Now! on Monday to explain her accusations.
ARTICLE-http://rawstory.com/news/2008/Naomi_Klein_Bailout_multitrilliondollar_crime_scene_1118.html
Obama to tap Eric Holder for AG? http://www.blog.newsweek.com/blogs/poweringup/archive/2008/11/18/obama-s-attorney-general.aspx
Fed Bernanke & Sec.T. Paulson still support that bailout: http://www.msnbc.msn.com/id/27784105. Frankly, they should be removed from their posts.
Lieberman sticking around: http://www.msnbc.msn.com/id/27782936. Shouldn't he have been removed?
Original Article: The Real Reason for the Global Financial Crisis…the Story No One’s Talking About
Comment: PDSimic
The fundamental point seems that the CDS, being an unregulated OTC instrument, could have been entered as a way to bet on a default of some reference debt obligation to which the “protection” buyer had no economic exposure. While this is outrageous, there is a good news too. The good news is that speculators, not having a real exposure to the reference debt obligation can not possibly claim any real loss in the case of default of either insurance company or the reference debt obligation. All they could claim is a loss of opportunity to profit enormously from a successful bet that should never been allowed in the first place.
If I understand the news correctly this would be the second scandal John McCain is involved in. The first, the savings and loans, he was involved in deregulation and now this one and again he was involved in deregulation.
I’m not sure of this but is John McCain starting to “flip flop” on the current crisis and issue?
Paulson is moving to supply banks with billions of dollars but I was just wondering if any action has been taken to prevent their “bad lending” practices? With stock ownership will banks improve or have “better” lending practices?
What other actions have been taken to help the middle class pay for their mortgages and prevent mortgage foreclosures?
How do lower interest rates affect banks, affect their lending practices, and how do they affect their bad lending practices?
Is there a team of 1000 economists helping Paulson (Republican) and Bernanke (University professor appointed by G Bush) make these decisions? Where can we see their credentials?
Some Quotes
Paulson: It’s a rough patch in the road.Paulson: The banks are strong and they are going to be strong for many many years to come.
Bush: It’s a rough patch in the road.Bush: sometimes when you over correct you end up in the ditch.
It has become painfully obvious today that, despite enormous problems requiring serious solutions by our elected officials, the McCain/Palin campaign has chosen that debating the substance of any policy or proposal is simply out of the question, as they would rather follow the swift-boat tactics ofthe Bush campaign's Karl Rove and his protoge Steve Schmidt in attempting to distort the facts beyond all reasonable bounds and to attempt to change the subject of this election to their personal attacks on Senator Obama.
As a result, one of our fundamental jobs as Obama supporters will be to remain educated about many of these facts ourselves and to ensure that undecided voters and independents do not hear these lies and distortions being told in a vacuum, and so that those voters hear the actual truth of the matter, despite McCain/Palin's vicious, discredited campaign to the contrary.
In keeping with this responsibility comes some of the basic facts put forward by McCain/Palin (including at Thursday's VP debate, and in today's speech by Sen. McCain) regarding the mortgage-bailouts and credit crisis facing the economy of both our country, and the world.
Below is a letter from Senator Obama to Henry Paulson (Sec. of Treasury, as you are probably aware) and Chairman Ben Bernanke (of the Federal Reserve Bank) which was sent in March 2007, urging a response to the mortgage crisis that saw many of its roots in the predatory sub-prime lending markets. Contrary to McCain/Palin's unsupported assertions, this letter demonstrates Senator Obama's attention to this issue in its preliminary stages, a much deeper understanding of the financial markets than that of McCain/Palin, and an actual effort on Senator Obama's behalf (which is more than can be said of Senator McCain) to nip the crisis in the bud.
Please feel free to email this or simply read it over and discuss it with your friends and family, so that they are fully informed on this most crucial issue facing our country today.
http://obama.senate.gov/press/070322-obama_urges_ber/
Dear Chairman Bernanke and Secretary Paulson,There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes.
Dear Chairman Bernanke and Secretary Paulson,
There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.
We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes.
And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody's interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators' Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:* What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates.* How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty.* How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical.* How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage.* How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.* How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short- term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation. Nevertheless, a consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don't let this opportunity pass us by. Sincerely,U.S. Senator Barack Obama
And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.
Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody's interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.
The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators' Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:
* What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates.
* How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty.
* How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical.
* How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage.
* How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.
* How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.
Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short- term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation.
Sincerely,
U.S. Senator Barack Obama
The Federal Reserve operates a Ponzi scheme. Congress can pay for federal expenses with funds collected from taxes, imposts, and duties, but congress is never satisfied with this amount. The desire to buy votes from special interest groups, and financially assist politically connected friends (or is this redundant?), compels congress-critters to spend more, and this is identified as deficit spending. To finance this deficit, the Federal Reserve will create on their accounting books a line of credit equal in the amount of the bills, bonds, or notes the congress will authorize; i.e., the Fed receives the interest-bearing obligation on the full faith and credit of the United States and in return checks written by government agencies will be honored by the banking system. The accumulated deficits are identified as the national debt... It must be observed
To make the scheme appear legitimate, the Fed sells a large percentage of the bills, bonds, and notes, with the help of the U.S. Treasury, to remove much of the currency generated by the scheme (multiplied by fractional reserves) from circulation. Japan and China hold debentures for approximately 25% of the total U.S. debt. How much of this debt holding has been required by financial and government policies to gain approval of trade status for the past 40 years is unknown. It should be apparent that if Japan and China attempt to sell the obligations to support their economy, it would precipitate a world wide tsunami. How much purchase of the US debt is required of various other nations to gain favorable trade status is unknown, but it ties all nations into a global economy. The recent invasion of Iraq is theorized by some sources as retaliation for an economic policy designed to remove the dollar as the international reserve currency.As many have written, the new creation of money by deficit spending is
Some sources suggest the Fed has never been audited. That is not totally accurate. My 360 page copy of the 1996 Annual Report to Congress by the Board of Governors obtained after several calls to D.C., contains considerable information on the financial status and revenue transfers of the banks, branches, and the system, including interest earned from holdings of national debt. It is audited and signed by Price Waterhouse, LLP, page 275. All federal government entities are audited by the GAO, are they not? It is also known that
No information is found that suggests an audit of any specie holdings, nor is there any information as to who owns controlling stock (Class A). Congressman McFadden went to his grave unsuccessful in his attempts to determine who owns the fed.When faced with litigation, the
How long will the Fed be able to continue the Ponzi scheme? A common measure of the solvency of a corporation is the ratio of profit to the cost of debt service. A company that makes 30 times what they must pay for interest on long term debt is much more stable than one with a ratio of 3. Every year the US debt service cost increases, and the increase is exponential. Interest on the national debt now consumes 20 to 25% of the taxes collected by the federal government. It is only a matter of time before taxes will not be able to service the national debt.
The Fed was pulling currency out of circulation in the late 1920’s and the stock market was the first to feel the impact with margin calls. Local banks were compelled to call notes that were normally rolled over from year to year to meet increased reserve requirements and the stock market was the most liquid. When the economy appeared to be stabilizing, the Fed repeatedly tightened the money supply to deepen the depression.
Today, the Fed is selling government debt at one to two percent. Is the government getting a bargain? Currency is available but demand is low. Major capital investments by businesses are being deferred as production facilities are being located overseasto escape oppressive taxation levied upon employees and operations, in addition to avoiding government regulations, restrictions and fines for variances. The price of a low interest rate for government debt is the destruction of the tax base. (In reality, congress does not care what interest rate is paid. Congress does not have to make a profit to stay in business---let the people pay whatever. However, interest earned by the Fed and financial institutes holding government debt is reduced.)
The economic rape of the public will be perpetuated as long as possible. Ever increasing deficits are necessary to pay the interest and make the economy look good. The increasing deficits will escalate the cost of debt service exponentially. Congress-critters will not complain of the system or threaten not to pay the interest---the Fed might not honor their pay checks. The Fed controls the testicles of congress.
MORE: http://tinyurl.com/4zygyh
The $700 billion bailout package proposed by the President and not passed by the Congress highlights the economic dilemma being currently faced by the US. It is somewhat similar to that faced by Japan in the 1990s.
The US government wants the house prices to stabilize and the financial system to keep working. Houses are still over priced by almost any standard and it is unlikely that we will have much interest in buying houses unless house prices take another significant dip. But allowing house prices to fall further may accelerate the rate of delinquencies and foreclosures and as a result may cause many of our financial institutions to fail and the financial system to slow down to a dangerous level or grind to a halt.
The economic dilemma is that if we allow house prices to fall to its natural levels a major part of our financial system will fail but if we prop up house prices, higher house prices will stand in the way of economic recovery.
Faced with this dilemma the administration sided with Financial Institutions and Wall Street players. Wall Street is so well entrenched in Washington that it managed to get the administration come to its rescue. Wall Street’s money and power reach every center of power in Washington. By the way I would like to mention that both Treasury Secretaries Robert Rubin and Henry Paulson came from Goldman Sachs.
They sent a bill to the Congress when the Congress was about to go on a recess to campaign for the November elections, they probably thought the trick that worked so well on “Yes Minister” TV series should work in real life as well. No wonder the bill lacked details, it was barely three pages. I have heard part of the testimony the Treasury Secretary and the Federal reserve Chairman gave to the Congress: All they said was that the alternative was far worse. Does anybody remember anything more?
The swift and aggressive manner used by Bush and Paulson announcing the bailout plan reminded me of the con games used by salesman. It smelled of this tactic so blatantly that the loud "hell no" echoed by John Q. Public arose from a pit of despair and long seething anger way beyond the previous "bitter" benchmark of this past spring. We are surrounded by cons in every nook and cranny of sensory invasion pummeled through the capitalistic maelstrom of daily living.
It's all geared toward reaching for our pocketbooks (or if that's empty) adding to an overwhelming debt burden. Nothing is sacred in the con's attempt to drain away on frivolous or necessary spending the hard earned pay from the sinking middle class. I am deeply distraught by the eroding ability of “the people” to take back our country from the corporate self interests whose right to make a profit without regard to anyone or anything beyond that singular purpose outweighs our own right to pursue happiness and live in peace in this beautiful country - on this magnificent planet.
I understand why the bailout of Wall Street is so vehemently opposed by John Q. Public. Its opposition, even if we are hurt or wounded by the consequential aftermath, provides some semblance of power over that which rules us and with its relentless greed and condoned usury, is bringing America to its economic knees.
~40% of Americans own homes worth less than their mortgage, and that number will rise to about 55% through 2010 according several economic forecasts. $700Bn is a lot of money, but not quite enough, and could be used more effectively if it funded the source of the problem--house prices, and provided funding and liquidity to things that matter, like consumers and families that are Fk@d by the current crisis. Assuming the average American home is currently worth $250K (down 25% from purchase), and the original loan-to-value was 90% (or $281,250), then the average American homeowner has $31,250 of negative equity. Thus, if our government bought out the negative equity of every US homeowner (assume 30 million), it would cost $937.5Bn. Imagine if every American homeowner received $31,250 to pay down their negative equity and reduce the value of their mortgage payments?
Here is what it looks like:
--Assume everyone reduces the principal value of their loans by $31,250 with a nice check from the government solely to be used to pay down negative equity as determined by mortgage value (including second mortgages if relevant), less newly-appraised value of home.
--Assume everyone with negative equity re-finances into new, 30 Yr. fixed loans at 6.3%.
--New payments would be $1,547/month
--Assume average current payments of 1,834/Mo @8% rate for sub-prime
--Assume the government takes a pro-rata equity stake in the house in exchange for bailout funding, which amounts to 12.5% in this example.
This plan would save average American homeowners $287/month, or $103Bn a year for the 30M families, allow banks to write-off and fund the negative equity of their debt, set a clear price for the bailout, set a clear price for distressed homes, and IMMEDIATELY add liquidity back to the system and help consumers start consuming again--thus stimulating the economy. Thus, the true net cost to the government, and taxpayers would be:
$937.5Bn initial up-front funding of negative equity
Less: $103.3Bn of net annual homeowners savings thanks to reduced mortgage payments
Less: Government equity value of homes. Assuming homes increase in value just 5% over the next five years, and people pay the government back after they sell, the government could earn back about $381Bn.
Total Net Cost to government:: $453Bn.
Basic Mechanics:
--Approve true cost of total consumer bailout: About $937.5Bn
--Work with banks to contact every homeowner that is underwater on their home or currently/imminently in default.
--Apprraise new values of homes and document current value of mortgages
--Send out checks to fund negative equity in the homes with equity stake agreements, as well as re-finance agreements.
--Execute and enjoy ;)
Sounds a lot simplier, more effective and faster than starting with the top down approach of valuing the toxic securitized mortgages, sending money to banks that are not likely to lend it out anytime soon, and hoping for an economic recovery, all the while the consumers are still strapped with their underwater homes and payments they can barely afford.
It is disappointing that while House Republicans were able to listen to the people in their constituencies, listen to ex Federal Reserve Board members how the bailout plan of giving money to banks who have paid out more than 3 B to just their CEOs in the last 3 years while losign billions for shareholders and making billions off the people who have taken loans from them, while House Republicans refused to bullied by their leaders by the traders on the stock market, Sen. Obama did nto show ANY of the leadership and change he has so promised. We urge you Sen./ Obama to take some tiem and talk to people who have supporeted you whether they feel money should be GIVEN ( in whatever form ) to the institutions and the traders who have made hundreds of billions while creating the problem. People like Bill GRoss had pointed out significant possibility of this happening while the need to make mroe profits and leverage the money more drove companies to ignore all this and forge ahead.
Thankfully to House Republicans Sen. Obama you still have time, pleasetry to work out a much better solution o this than what understandably biased Treasury Secretary has proposed so far. Please look at Warren Buffett's way of capital injectio. If Goldman Sachs ( Paulson's old company ) had to borrow from Buffett with such an enticign deal the U.S. taxpayer should not be forced to give money getting back this almost worthless bad debt! Please at least get us a deal like Buffett.
Who is to blame? This bill is just wrong, but then we don't have a choice, do we? The House leadership needs stop worrying about assigning blame - we will win this election by creating unity in a time of crisis, not division.
The Bill:
Emergency Economic Stabilization Act Of 2008
http://financialservices.house.gov/
The Vote:
House Votes: yes no
Democrats 140 95
Republicans 65 133
Totals 205 228
My local democratic congressman, a staunch Obama supporter from the beginning, and as did Mo Udall, has always represented my particualr main street, voted against this bill.
Read his explanation:
Grijalva Votes to Defeat Bailout"I am not in disagreement that there is a financial crisis in our country. Daily the headlines deliver news of another bank in crisis.I am in disagreement of a proposal that is rushed and more importantly does not advocate equally for main street and strong protections for working families.The proposal before us today is a strong improvement to what was originally proposed by President Bush and Treasury Secretary Paulson. However, provisions have been left out that would assure us that the taxpayer comes first. The lack of inclusion and advocacy for families directly is why I cannot support today’s bill.This $700 billion price tag does not have an offset or enforcement of Pay-As-You-Go. During my tenure in Congress, infrastructure, healthcare, education, and investment in domestic projects have been sacrificed because of Pay-Go. This bill had an opportunity to require a security transfer tax so that Wall Street would payback the American taxpayer. Unfortunately, this guarantee was taken off the table.
Furthermore, throwing money at a problem will not solve this crisis; we need to undo bad policies, such as the 2005 Bankruptcy Reform, that passed under the Bush Administration and the then Republican Congress. This proposal had an opportunity to reduce foreclosures by changing Chapter 13 in Bankruptcy law. This minimal language would have meant much for the community, as it would have provided relief to homeowners at no cost to taxpayers. This would have helped homeowners and those in foreclosure, alike, stay in their homes and house values would have maintained.
In the basic tenet of Congress, we are to do checks and balances. Pursuing this historic deal without strong oversight and ensuring strict regulations occurred for passage is a bad deal. The language allows for an oversight Committee to only critique the proposal, not halt actions. In addition, although the proposal makes allowances to limit the “golden parachute”; it is not strong enough in assuring that the CEOs, who are at fault of these risky deals, are not rewarded.This crisis felt by Wall Street is the bubble hitting the top. The crisis of losing finances, homes, and having to brunt poor investment decisions by the Bush Administration has been felt in our neighborhoods, jobs, and homes for the last 8 years. I look forward to working on a different piece of legislation that confronts the crisis on Wall Street and provides real protections for taxpayers and homeowners. Congress should be prepared to work during the recess to do this right."
"You can't negotiate with reality." - James Kunstler
Please be sure to check my website at http://thesaucywench.com for a complete VOTE TALLY of the U.S. House of Representatives WALL STREET BAILOUT BILL. I have color coded and enhanced those congresspeople who disgraced their office by voting for this Middle-Class subsidy of Wall Street Investment Banks. IF YOUR REPRESENTATIVE VOTED "YES" FOR THIS SPECIOUS EXERCISE IN WEALTH REDISTRIBUTION, WRITE THEM AND TELL THEM THAT YOU'LL BE VOTING THEM OUT OF OFFICE ON NOVEMBER 4. REPUBLICANS. DEMOCRATS. INDEPENDENTS. It makes NO DIFFERENCE to me: ANYONE who allowed themselves to be baited by Paulson Bernanke et al. IS NOT FIT TO SERVE THEIR OFFICE. PERIOD. Show me a bread line . . . and we can talk; UNTIL THEN, LET CITIBANK AND JP MORGAN et al. GO SHOPPING. Never Never NEVER must the market be socialized in this fashion until disaster has IN FACT hit. IT HASN'T. And it won't because the banks WILL go shopping and absorb the losers (WAMU, Wachovia, Lehman et al.) VISIT MY WEBSITE NOW, AND PRINT OUT THIS LIST. This -- THIS, my friends -- is the ONLY VOTING GUIDE YOU NEED THIS NOVEMBER. Anyone who would shift what little money the Middle Class has yet remaining after 8 years of Bush spending NEEDS TO GO. THAT __INCLUDES__ DEMOCRATS. God Bless and hop on over to http://thesaucywench.com to see just who feels it is acceptable to PLAY WITH YOUR MONEY. Isadore Olivia Pine http://thesaucywench.com
The most recent suggested bill for the Rescue Plan has posted the (printable) bill at: http://www.cspan.org/pdf/marketsbill_draft.pdf
CSPAN.ORG/pdf/marketsbill_draft.pdf Earlier in the day, Representative Gregg (R) briefly outlined the main points of the bill, and it sounded like the Treasury Secretary is still getting way too much unregulated and unsupervised power. PLUS, the "oversight panel" they are constructing, he said, includes SEC Chairman Cox, FED Chairman Bernanke, CEOs from Freddie Mac and Fannie Mae, and Treasury Secretary Paulson. The congressional oversight is only done by monthly reports from the above mentioned people, who are directly involved in receiving funds, profits, and other money from the deals they do to "save" the economy.
Initial reviews of the "new" bill say that it's basically the same thing Treasury Secretary Paulson proposed the first time! (See CSPAN Washington Journal for September 28, 2008: guest speaker from Freedom Works, Matt Kibbe.)
While studying the available “Rescue Plans” that have graciously been allowed to circulate on the web, members of Congress are debating and in the process of drafting a modification of the Paulson Plan, TARP (Troubled Assets Relief Program), This plan is the worst plan presented, with the exception of the Republican’s insurance plan. The Bush Administration and Treasury Department presented the TARP plan in the worst possible way with the help of Fed Chairman Ben Bernanke. The modified TARP plan is now suggested to have incorporated parts of the Republican insurance plan, the other of the two worst plans in circulation. The current Republican administration and the Republican minority in Congress are shamefully responsible for presenting both of these plans to our Democratic Congress. In order for any bill to be passed, the Democrats and Republicans must be united. Due to the lack of any sound bill being presented for consideration to Congress by this current Republican administration considerable delay in its passage has ensued. For this, the Bush administration has failed miserably both the American people and the world.
According to top world economist Nouriel Roubini, “The Treasury plan (even in its current version agreed with Congress) is a very poorly conceived and does not contain many of the key elements of a sound and efficient and fair rescue plan” additionally he writes, ”It is a disgrace the no professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan. “(1)
Meanwhile the entire world is waiting and watching to see if our Government is capable of acting responsibly in it’s handling of a world crisis that originated in the United States. Ultimately it is the responsibility of the United States to both respond quickly and effectively since this problem began with us. And in reality, we may be the only nation that can adequately address this problem to the fullest extent possible. Much is at stake and our nation’s ability to remain a super power and global leader rests in our ability to correctly respond to this crisis in a responsible way.
In researching several plans, TARP in its current drafting is least favorable to Main Street and does not address the core issue, the need for debt relief for distressed households. The Charles Calomiris Preferred Stock Plan is better than TARP in that it gives the taxpayer preferred stock status, which is superior to equity status. In addition it does not involve a reverse auction. The following two plans, The HOME (Homeowners Mortgage Enterprise): A 10 Step Plan to Resolve the Financial Crisis as proposed by Nouriel Roubini (2) and Hussman’s plan, as submitted by John P. Hussman, Phd to Congress, September 22, as An Open letter to Congress Regarding the Current Financial Crisis. (3) are the most viable and best for the nation as a whole.
Roubini’s plan would include the creation of an umbrella agency called HOME (Home Owner’s Mortgage Enterprise). Under this agency there would be new 3 government institutions, all very similar to those having been used in the past. These include an HOLC (Home Owners Loan Corporation) type institution, the most important of the three. In addition there would be an RFC (Reconstruction Finance Corporation) to help with the recapitalization of undercapitalized financial institutions and finally an RTC (Resolution Trust Corporation) type institution for the rescue/bailout of financial institutes. (2)
Why the HOLC part of the plan is so important is that it helps the folks on Main Street in the same way it did during the Great Depression. “The government purchased distressed mortgages from banks at discount price, reduced further the face value of such mortgages refinancing distressed homeowners into new mortgages with lower face value and lower fixed rate mortgages. This massive program allowed millions of households to avoid losing their homes and ending up in foreclosure.” (2)
And since according to Roubini:
This lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession – with a sharp fall now in real consumption spending – now worsening. The fiscal actions taken so far (income relief to households via tax rebates) and bailouts of distressed financial institutions (Bear Stearns creditors’ bailout, Fannie and Freddie and AIG) do not resolve the fundamental debt problems for two reasons:First, You cannot grow yourself out of a debt problem: When debt to disposable income is too high increasing the denominator with tax rebates is ineffective and only temporary; i.e. you need to reduce the nominator (the debt).Secondly, rescuing distressed institutions without reducing the debt problem of borrowers does not resolve the fundamental insolvency of the debtor that limits its inability to consume and spend and thus drags the economy into a more severe contraction. (2)
1) Public funds must function to increase the capital of distressed financial companies not simply to take bad assets off the balance sheet at market value (which may improve the “quality” of the balance sheet, but does nothing to improve the capital cushion and therefore little to avoid future runs on the institution).2) In return for these funds, the government should NOT take equity (which is a subordinate claim and also creates potential conflicts of interest), but instead should take a SENIOR claim that precedes not only the stockholders but also the senior bondholders in the event the company defaults anyway…The Governments claim…should also be countable as capital for the purposes of satisfying bank capital requirements. (3)Hussman also suggests that Congress consider modifying bankruptcy law to provide expedited bondholder approval for this. He writes, “the governments claim should be subordinate only to customers in the event of default and senior to both stockholders and bondholders. (3)3). Ideally the rate of interest on such funds should be relatively high (which will encourage these firms to substitute private financing as soon as possible) but actual payment should be made once the firms are again profitable so that the payment burden does not weaken them during the present recession. 4). The bill should allow for expedited bankruptcy resolution…For nearly all of these institutions, the debt to bondholders is far more than sufficient to absorb any losses even in the event of bankruptcy. 5) To assist homeowners, the bill should allow for a reduction of mortgage principal during foreclosure but the mortgage lender should also receive Property Appreciation Right (PAR) that gives the original lender a claim on future property appreciation up to that original amount. (3)
Charles Calomiris agrees that a broad based approach is needed. In his article, A Matched Preferred Stock Plan for Government Assistance (4) he writes:
Government injection of preferred stock into banks as advocated by Senator Charles Schumer, inspired by the Reconstruction Finance Corporation’s policies in the 1930’s would be a better choice.”Preferred stock assistance would work best if it were required to be matched by common stock issues underwritten by the private sector, which would ensure the proper targeting of assistance, and force private parties rather than taxpayers to bear first tier losses. Banks in need of capital would apply for Matched Preferred Stock (MPS) assistance. Initially, say for three years there would be no dividend paid to the government on MPS. That subsidy would increase the net worth of the recipient and facilitate raising additional capital via common stock.Any US based financial institution could apply for US government-held MPS (foreign-based banks could also apply if foreign governments were willing to provide MPS financing). To ensure that MPS is only supplied as needed from a systemic standpoint, and to limit any abuse of the taxpayer-provided subsidy, the private sector would also be required to act collectively to help recapitalize undercapitalized banks, and share the risks associated with recapitalizing banks. (4)
Reverse auctions may not obtain a fair price for the government for many other types of assets the Treasury may seek to purchase. In particular, determining fair market prices using an auction is difficult for assets that are not clearly the same or very similar in quality – that is, when the seller has more information about the quality of asset than the buyer does. In such cases each auction participant will offer up assets with unique attributes known only by the seller, thus increasing the likelihood that the government will pay too much. That type or problem is likely to be particularly severe for assets like individual home mortgages or esoteric derivative products entirely owned by specific financial institutions (a) Substantial purchases of such assets would make it unlikely that the Treasury could operate the proposed new program at little or no cost.In other words, the more the Treasury program concentrates on assets that are difficult for a buyer to value, the more likely that the government will overpay. The more that occurs, the more the program moves beyond simply reestablishing trading in illiquid financial markets and instead subsidizes the particular financial institutions selling assets to the government, at a cost to taxpayers.(a) Such problems could be attenuated by requiring that private capital pools run by the asset managers hired by the government under the program participate in some share of each purchase made by the government. (5)
Unlike the TARP plan, both The HOME (Homeowners Mortgage Enterprise) as proposed by Nouriel Roubini and Hussman’s plan address the core problem that needs to be fixed in order to pull our nation and the globe out of recession and keep us from going into a depression. These plans supply real relief to the homeowners on Main Street.
If these plans are superior to the one currently being worked on by Congress, why are they not being considered? Luigi Zingales writes for VOX:
It is much more appealing for the financial industry to be bailed out at taxpayers’ expense than to bear their share of pain. Forcing a debt for equity swap or a debt-forgiveness would be no greater a violation of private property rights than a massive bailout, but if faces much stronger political opposition. The appeal of the Paulson solution is that it taxes the many and benefits the few. Since the many (we the taxpayers) are dispersed, we cannot put up a good fight on Capital Hill. The financial industry is well represented at all levels. It is enough to say that for 6 of the last 13 years, the Secretary of Treasury was a Goldman Sachs Alumnus.The decisions that will be made this weekend matter not just to the prospects of the US economy in the year to come, they will shape the type of capitalism we will live in for the next fifty years. Do we want to live in a system where profits are private, but losses are socialized? Where taxpayer money is used to prop up failed firms? Or do we want to live in a system where people are held responsible for their decisions, where imprudent behavior is penalized and prudent behavior rewarded?The time has come to save capitalism from the capitalists. (6)
The lack action on behalf of the American people and the world as shown by this current administration is totally irresponsible. And by not acting swiftly and decisively months ago when this crisis was unraveling, this administration has shown just exactly what compassionate conservative values mean to them. They have a considerable amount of compassion for the large banks and corporations, and also for the rich. All the while the poor are left with an ever-increasing debt and tax load, few prospects to find meaningful work, and a government whose presidential executive power continues to expand at an alarming rate. So hurray for the Republican concept of compassionate conservative values now on display in the White House and in Congress. You will know them by their fruit.
(1) Nouriel Roubini, Sept 24, 2008, HOME (Homeowners’ Mortgage Enterprise): A 10 Step Plan to Resolve the Financial Crisis
www.rgemonotor.com
(2) Nouriel Roubini, Sept 19, 2008, We need a new HOLC – more than a new RTC or RFC-to provide massive debt relief to the household sector. We need to create the HOME (Home Owners’ Mortgage Enterprise)
www.rgemonitor.com
(3) John P. Hussman, PhD, September 22, 2008, An Open Letter to the U.S. Congress Regarding the Current Financial Crisis
www.hussmanfunds.com
(4) Charles Calomiris, September 25, 2008, A matched preferred stock plan for government assistance
(5) Congressional Budget Office Testimony before the Committee on the Budget, US House of Representative, September 24, 2008, statement of Peter R. Orzag, Federal Response to Market Turmoil
(6) Luigi Zingales, 21 September 2008, Why Paulson is wrong, VOX-Research-based policy analysis and commentary from leading economists
www.voxeu.org
Derivatives that were traded on Wall Street are worthless. They had value only because buyers gave them value, in the same way that buyers of Treasury notes give them value. Neither asset is backed by reserves in gold, but both assets are backed by investor confidence in continued economic growth, a real expansion of the economy that would generate wealth to support their worth.
Unfortunately, real growth did not take place; rather, artificial growth took its place. I define artificial growth to be a phantom economic expansion based on credit that had no realistic basis in repayment. That happened when consumers were over-extended, and still were buying homes, with no money down.
Well, as Shakespeare said in King Lear, "Nothing will come from nothing." So, with nothing supporting the phantom economic expansion, the market is now crashing, returning nothing to the consumer/investor. But reality is worse than simply having nothing; it is in debt, and there is not enough money in the market to service that debt.
When Paulson says he will issue bonds to give liquidity to the market, he is issuing a promise that the United States will have real economic expansion to pay for it, all $700 billion, on top of the nearly $10 trillion deficit that is already on the books. Who in the right mind will buy this promise? Not to worry, someone will, for if the United States goes down economically, so go the rest.
But, if he does not, what will become of the markets? They will suffer, and the economy will contract and economic misery that has already permeated throughout America and the world will worsen, for a contracting economy will keep on contracting, pushing the world over the precipice and into a deep and extended depression. That means no jobs, no money, no house, no health care and no meals on occasion.
What if Treasury issues $700 billion and it stops working a few months down the road? Politically speaking, Paulson does not care. It’s another administration. But everyone else on Main Street has to care. Therefore, I suggest again, as I have already, that Treasury spend a trillion, $500 billion on Wall Street for immediate liquidity, letting money flow from the top down, and $500 billion on Main Street for infrastructure and alternative energy, to create jobs and stimulate the economy from the bottom up.
Very happy to say I was apparently wrong on this one...
The RNC has been hoping for a way to tie the Democrats to Bush / Paulson and show that McCain is bucking Bush.
Yesterdays fiasco was part of that. There is no way that McCain is going to the debate tonight. At the very least they will run the clock out till Sunday that way McCain can claim that he couldn't debate for the good of the country (not city!).
Pure politics. Who are we... Warren Christopher in 2000.
The financial crisis of today is directly traceable to the Bush policy called "The Ownership Society" as outlined in a speech given in October, 2002. The OS policy granted permission to Fannie and Freddie along with cohorts in the real estate and financial markets to unleash the steamroller that's crushing our economy today by granting loans to people with unnworthy credit. About 60% of creditworthy people were also caught in the net and given the same rates as those with bad credit.
"He (Bush) called on Fannie Mae and the private sector "to unlock millions of dollars, to make it available for the purchase of a home"--an important reminder that subprime lenders were taking their cue straight from the top." Naomi Klein 2/18/2008 in an article in The Nation copy and paste www.thenation.com/doc/20080218/klein to view it entirely.
The story on MSM is one of shock and awe created using "psychological gunpoint" tactics hustling and hastening the legislative branch to agree on providing bail out welfare to Bush's "have more" base under the guise of "the sky is falling" tomorrow.
Oh no, there's no time to think, there's no time to look at any interim solution that would tide the crisis over until the new president is in office. There's no time to have consultations on alternative plans to Paulson's four page undetailed plan (ransom note) demanding $700,000,000,000 within five days. There isn't time to consider informing "we the people" why two weeks ago the economy was fundamentally sound and now it's hurry up before we sink! We can't even get the candidates together for debate on TV so Democratic processes have been canceled too in what seems like marshall law on Capital Hill!
I have written letters to my Senators, Congresspersons, Obama, McCain with my concerns as have hundreds of thousands of other citizens who're on the borderline of experiencing the depth of outrage that drives revolutions and uprisings.
