Category Archives: Finance

Middle-class Massacre

As US debt negotiations propel this country toward the cliff, one thing is becoming increasingly apparent: Republicans are not interested in a deal, not even on their own terms. Obama has put forward a $4T plan that…well…gave the Republicans more than they asked for on deficit reduction. Boner and the House Thug’s rejected it because it included new revenues. Harry Reid, quite literally, gave Boner everything he’d outlined the previous week. Eric C*nter called the plan a “gimmick”.

Pundits claim that this high-stakes brinksmanship is about destroying the Obama administration, about defunding Medicare so that it can be used in the next election to get a ‘Thuglican back in the White House, but this is incorrect.

Republicans want a default, and here’s why: They’re not out to destroy Obama but the middle-class. They want, with one stroke, to wipe out that class of people that provide stability in this country but that also make elections volatile and unpredictable. They feel, that if they can destroy the middle-class, they can somehow consolidate Republican power for a generation.

Personally, I can’t really grok this twisted logic, but the result—what will happen to markets on Thursday and Friday—is the end that justifies, or at least exposes, the means. When 8 trillion more in wealth is wiped out between Thursday and Monday of next week, the loss will fall squarely on the middle-class. Most of us will be wiped out in one giant financial massacre, and every time I see the Republicans walk away from the negotiating table with some pathetic, lame, entirely new, excuse I become more convinced that the real goal of the Republican party is to finish us off for good.

Railroad barons got nothin’ on us

The heartland’s favorite gajillionaire, Warren Buffet, this week convinced 40 of the wealthiest Americans to donate half of their money to charity.  This hasn’t happened in a long time.  Well since the good old days when Carnegie bought his way into heaven by creating a University, Getty provided the world with a parting gift of not one, but two beautiful museums, and countless other robber barons left their houses and extensive art collections to posterity.  It warms the cockles of my little heart to hear that Bill & Melinda Gates (Buffet’s partners in the effort), won’t be only the billionaires waiting for me at the Pearly gates.  They’ll be joined by Larry Ellison, Jimmy Buffet and George Lucas.  Sure their kids are probably freaking out, but it’s not like they’re going to have to get jobs or anything.  Half a gajillion dollars is still a lot of money.

Full disclosure:  I’m actually pretty impressed by this.  I don’t know I’d be selfless enough to give up half the lily pad if asked.  You go rich guys!

Palin advocates for Greek tax avoidance system

Saying the birthplace of western civilization still has much to teach us, Sarah Palin today called on America to adopt Greece’s popular tax avoidance system.

“Everyone likes lower taxes, and it doesn’t get much lower than zero,” said the former Alaska governor.

Palin’s remarks came in the wake of a May 1 International Herald Tribune report that as many as 95% of Greeks underreport their income, or evade taxes entirely.

“Ancient Greece invented many things that are American as apple pie today, such as the Olympics, Grecian Formula and sodomy. We can still learn from them too, because the average U.S. taxpayer is lagging way behind in tax avoiding also,” she said.

Palin described how the Greek system can help achieve an important Republican goal: “As well, the Greece system creates a nation-wide tax protest. People not paying their taxes is a threat to big government. Big government has to cut programs, the people are in the streets risin’ up, and I applaud them.”

“Anyone who wants to be inspired by patriotic Americans need look no further than courageous Greece peoples,” she added.

Most of all, Palin stressed that wider tax avoidance would bring much-needed fairness to the U.S. tax system. “Tax avoidance shouldn’t just be for corporations and the richest one percent,” she declared.

To This We Have Been Reduced – Your Own Personal Bailout

…and no I don’t mean the kind where the government decides to throw a little of that fat bailout cash at you.  No… I mean the kind that you really should be considering for yourself if you’re seriously underwater on your mortgage.

This report from the University of Arizona College of Law does a good job of summarizing how American’s who owe more on their homes than their homes are worth should really consider just walking away—that the financial well-being of one’s family may depend on it.  Consider this example (emphasis added):

Unfortunately for Sam and Chris, the housing market began to collapse in 2007. Though they still owe about $560,000 on their home, it is now only worth $187,000.  A similar house around  the corner from Sam and Chris recently listed for $179,000, which, with a modest 5% down, would translate to a total monthly  payment of less than $1200 per month – as compared to the $4300 that they currently pay.  They could rent a similar house in the neighborhood for about $1000.

Assuming they intend to stay in their home ten years, Sam and Chris would save approximately $340,000 by walking away, including a monthly savings of at least $1700 on rent verses mortgage payments, even after factoring in the mortgage interest tax reduction.  The financial gain for Sam and Chris from walking away would be even more substantial if they took their monthly savings and put it into an investment account.  If they stay in their home on the other hand, it will take Sam and Chris over 60 years just to recover their equity – assuming, of course, that they live that long, the market in Salinas has indeed hit bottom, and their home appreciates at the historical appreciation rate of 3.5%.

Underwater and Not Walking Away, Page 10

The report goes on to discuss the many factors that cause individual homeowners to decide not to take a step that so many companies seem willing to take, even willing to build their business models around—In other words, government indemnification against losses.

It’s a sad fact that so many Americans are in this state, even more sad that they seem to be unable to do the one thing that makes imminent financial sense.

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To This We Have Been Reduced – Too Poor To Bank

What does it mean not to have, for lack of opportunity, access to something as simple as a bank? For one, it means you are probably stuck with predatory check-cashing and pay-day loan companies for getting access to ready cash—and sure this is no secret, but consider in addition: You have no access to something as simple as a humble savings account, and this means that you can’t even keep what little savings you do have safe from theft, fire, or other disasters. You have no way of keeping your savings from being eaten away by inflation. You’re money is not insured by the FDIC, indemnifying you against fraud and malfeasance. Many online services are unavailable to you because they require a legit checking or savings account as proof of identity and as a guarantee of income. You can’t take out a loan or pay your bills without wasting time and effort. In short, life is a grinding, money sapping, poverty enforcing bitch!

A FDIC survey, reported in the Washington Post, estimates that almost 1/4 of American households, almost 60 million families have limited or no access to banks or other traditional financial services.

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Banks Say “Please, No More Regulation”…

… the only way they know how, by throwing a tiny bone to consumers in the form of slightly (very slightly) less abusive practices.  But don’t be fooled. With Barney Frank (D-MA) breathing down their necks, Bank of America and Chase are going to do anything they can to keep additional restrictions of the CARD Act from being implemented early. In this case, they’ll remove some inconsequential automated overdraft fees in a bid to show what good corporate citizens they are:

New York-based JPMorgan said it made the changes, which include removing overdraft fees if a customer’s account is $5 or less overdrawn, in a bid to help its 25 million debit card customers amid the recession and rising U.S. unemployment levels.

— Reuters

Gee… $5!  Really? I suppose if I overdraw buying a Snicker’s bar I might benefit from this sop, but on anything else? Not bloody likely! And check this out:

…it [J.P. Morgan/Chase] will start recognizing debit-card transactions and cash withdrawals as they occur, according to the statement.

Oh…fabulous! My bank is going to stop deliberately lying about my account balance.

As excited as I am about my bank’s new found concern for my financial well-being, I can’t help but wonder how fast these silly changes will be withdrawn once consumers start using their credit again, once Barney Frank and his ilk find something else to focus on?

Madoff escape plan foiled – Oversold tunnel shares

An escape plot by Bernard Madoff was foiled recently when the disgraced financier was turned in by a disgruntled accomplice, federal corrections officials report.

Madoff, serving 150 years for a Ponzi scheme that defrauded his investment clients of an estimated $65 billion, has been placed in solitary confinement and deprived of access to his Ameritrade account.

In a statement released by Butner Federal Prison Director Ward N. Frandle, Madoff had circulated an ‘escape prospectus’ among the prison population, proposing a 1,500 foot escape tunnel under the prison’s walls. The work would be done by 1,500 ‘shareholders’ — fellow prisoners digging one foot each, reports Frandle.

Each ‘tunnel investor’ was told by Madoff to come to his cell at a scheduled time, according to the report. “Prisoner Madoff told each investor he was the first to dig. After a investor finished with his 12 inch segment, Madoff would fill it back in and await the next victim.”

“Madoff essentially oversold the escape tunnel 1,500 times,” Frandle said.

The plan came to light just after midnight Monday morning, when all 1,500 investors rendezvoused at Madoff’s cell with their luggage.

GSSE – Goldman Sachs Stock Exchange

Goldman Sachs exerts a huge amount of influence over what and how much gets traded on the New York Stock Exchange. Some days their share of the trading reaches 50%—though until recently automated program trading that broke a $1M barrier was disclosed in a pubic report issued by the NYSE on Thursday afternoons.

Well no more. Now it seems that the NYSE is going to become even more a Goldman Sachs’ puppet after new rules were issued that do away with the transparency requirement. Now the large investment banks, especially Goldman, will have the unfettered ability to manipulate the market with no public accountability.

I suppose we could expect Obama’s Treasury Department, with all of its yammering about new, more restrictive rules on investment banking, to step in and restore those rules. But with a never ending succession of ex-Goldman bankers occupying key positions in both the current and former administrations—bankers whose sole purpose seems to be to keep the money flowing into their former employer—I wouldn’t count on it.

Scandal American-style

Bernie Madoff was sentenced to 15o years in prison yesterday
for financial malfeasance.  Yes, in the good old U.S. of A. you get a life sentence for taking people’s money, but only 10 years for taking their lives.  Seem a bit messed up?  I think so. Here’s my take on scandal American-style.

The government who, in their oversight capacity has been asleep at the wheel for years, suddenly wakes up in the midst of a media storm, they charge in like Rambo without a jockstrap and pick one person (a scapegoat), to take the fall.  There is a trial, a lot of pontificating, then that one guy goes down and voila!  Scandal is over.

I’ve seen it happen time and again.  All I can say is Hollywood we need a new screenplay for this.  Wouldn’t it be nice if just once we actually stood up and did something about the graft?  It’s time America, who’s with me?!

So Long And Thanks For All The TARP

So now we’ve got a total of 10 banks that have been given the go-ahead to pay back money borrowed from the government under the Treasury’s TARP program. But—setting aside the fact that most of these well-heeled f*ckers just want to get out from under government restrictions on pay, perks, and practices—there are still a number of questions that Treasury Secretary Geithner needs to answer:

1) Those loans gave the government the opportunity to obtain warrants for common stock in the affected banks. If those banks are now allowed to buy back the warrants, then WTF did the public get in return for 8 months of essentially interest free loans to these corporate parasites?

2) JP Morgan/Chase, one of the approved banks, used their TARP funds to acquire Washington Mutual at a bargain basement price. Shouldn’t…maybe…there be a punishment for misusing funds that should have been allocated for lending to the public sector?

3) Bank of America and Wells Fargo, the two biggest leeches in the pond, have not been approved to pay back their TARP funds, but also haven’t demonstrated that they intend to do anything with the money other than acquiring former competitors (e.g., Wells’ purchase of Wachovia). When is the public going to see some punishment of these assholes?

All in all, Geithner is proving that he’s just as much of a tool as his predecessor Henry Paulson, and maybe it’s time that the administration replace him with someone who actually has the public’s best interest on his mind.