Tag: Business/Finance

1% in bed with Washington win again!

Yes, that title is me making fun of the stupid leftists that think these collectivist scumbags and crooks running our government that bought their support and votes with false promises of free shit they would pay for by slamming the evil rich & productive with higher taxes, and these politicians portend to do so to help the little guy, because they where had again. News is that those big corporations team blue paraded to tell us how higher taxes would actually be good for everyone are leaving a huge chunk of their money where the tax man can not get it. From the article:

U.S.-based nonfinancial companies are parking record amounts of cash abroad, thanks largely to a tax code that encourages them to indefinitely keep profits from their foreign subsidiaries outside of the country.

For example, the Jedi master of avoiding U.S. taxation, General Electric Company (NYSE:GE), increased its tax-free cash accumulation to $108 billion, up from an estimated $94 billion in 2010. Microsoft Corporation (Nasdaq:MSFT) increased its stockpile to $61 billion, up 36 percent from 2011 and up from $30 billion in 2010. Apple Inc. (Nasdaq:AAPL) raised its ante to $40 billion, up 73 percent from 2011.

Sixty of the country’s largest nonfinancial corporations kept $166 billion in cash outside of the U.S. last year, shielding more than 40 percent of their profits from taxes, according to a report in Monday’s Wall Street Journal. And that’s from total overseas earnings of $1.3 trillion, up 15 percent from 2011.

Get the fook out of here! Team Blue’s biggest supporters and the very companies that told us higher taxes where good are parking their money elsewhere to avoid paying said taxes? Who would ever have thunk that?

See these bastards knew that kissing donkey ass would give them the cover, even legally, to do this shit, while their competitors and the other people trying to make it rich without paying the bribes the donkeys demand, would end up getting hammered.

A separate analysis of 83 of the largest nonfinancial corporations found that companies increased by $183 billion their foreign-based cash accumulations, representing a 14.4 percent rise from 2011, according to Bloomberg. Microsoft, Apple and Google Inc. (Nasdaq:GOOG) together hold $134.5 billion in cash abroad.

Heh, yet again. I wonder how many of these 83 corporations are huge team blue players and donors? That is not mentioned tells me most of them, if not all, are. And how could they do this? I mean don’t they believe its patriotic to pay taxes like we keep getting told by team blue?

Unintended consequences my ass. This was from the start another team blue effort to hamstring & kneecap their corporate friend’s competition and rivals. And we the people are going to get had because of it. But you collectivists can keep believing the nanny staters are doing this all to help the little guy. Jeff Immelt, and many other such big wigs in team blue’s pockets, are all running to the bank with their nice bonuses, and all they had to do was kiss Obama’s ass and help the donkeys funnel a huge chunk of tax payer funed change to their pockets. The left are the new robber barons of yore they so love to tell us about.

The Bailouts and the Risk

It’s Bank Bash time again here at RTFLC. Presented for your consideration: the Atlantic’s expose on how tenuous the banks hold on sanity really is:

The financial crisis had many causes—too much borrowing, foolish investments, misguided regulation—but at its core, the panic resulted from a lack of transparency. The reason no one wanted to lend to or trade with the banks during the fall of 2008, when Lehman Brothers collapsed, was that no one could understand the banks’ risks. It was impossible to tell, from looking at a particular bank’s disclosures, whether it might suddenly implode.

Note that they are talking specifically about the banking crisis, not the mortgage crisis that precipitated it. That’s another issue entirely.

For the past four years, the nation’s political leaders and bankers have made enormous—in some cases unprecedented—efforts to save the financial industry, clean up the banks, and reform regulation in order to restore trust and confidence in the American financial system. This hasn’t worked. Banks today are bigger and more opaque than ever, and they continue to behave in many of the same ways they did before the crash.

It’s a very long read, but worth it. The go through the recent LIBOR and JP Morgan scandals and points out just how deceitful and opaque the banks have been on these subjects. The note how hesistant investors and the public are of investing in banks or entrusting their money to banks. They go through the books at Wells Fargo and discover just how opaque their investments are. In most cases, the value of trillions of dollars in assets is a guess. At best.

The solution they point to is not more Dodd-Frank or Sarbanes-Oxley complexity. No, it’s straight-forward disclosure to investors and to the general public who have, through TARP and the Federal Reserve, become the ultimate fiscal backstop:

The starting point for any solution to the recurring problems with banks is to rebuild the twin pillars of regulation that Congress built in 1933 and 1934, in the aftermath of the 1929 crash. First, there must be a straightforward standard of disclosure for Wells Fargo and its banking brethren to follow: describe risks in commonsense terms that an investor can understand. Second, there must be a real risk of punishment for bank executives who mislead investors, or otherwise perpetrate fraud and abuse.

These two pillars don’t require heavy-handed regulation. The straightforward disclosure regime that prevailed for decades starting in the 1930s didn’t require extensive legal rules. Nor did vigorous prosecution of financial crime.

Since [the 1980’s], however, the rules have proliferated, the arguments about compliance have become ever more technical, and the punishments have been minor and rare. Not a single senior banker from a major firm has gone to prison for conduct related to the 2008 financial crisis; few even paid fines. The penalties paid by banks are paltry compared with their profits and bonus pools. The cost-benefit analysis of such a system tilts in favor of recklessness, in large part because of the complex web of regulation: bankers can argue that they comply with the letter of the law, even when they violate its spirit.

The Basel I agreement was 18 pages long. Basel III is 616 pages long. And the current financial disclosure agreements can mean thousands of columns of numbers. Dodd-Frank may be end up being 30,000 pages long. Does that sounds like a transparent banking system to you?

Our government, of course, loves this situation because it means they can employ lots of regulators and gets lots of lobbyists genuflecting to them. But the result is that banks that don’t even know how much money they have.

This isn’t a fix. This is a system that employees zillions of regulators and lobbyists while our banking system becomes more complex, more opaque and more vulnerable. It makes bankers rich and unaccountable while leaving the taxpayers holding a bag that might be trillions of dollars deep.

And we really shouldn’t be surprised that this situation has only gotten worse under supposed communist Barack Obama. Matt Taibbi also has an article out detailing some of the chicanery behind TARP, particularly the way the Obama administration retasked it, lied about the use of TARP, lied about the health of the banks and allowed them to find ways to pay out gigantic bonuses despite the provisions that supposedly prevented it. He eventually reaches an identical conclusion: TARP has created a banking system that is more centralized, more complex and more at risk than ever before.

It’s not just the politicians, of course. What jumps out at you from the Taibbi article is the overweening sense of entitlement that emanates from the big banks: a sense of entitlement so profound, AIG (not a bank but it pretends to be one) is considering suing the government that loaned it $180 billion because its stock crashed.

(The Rolling Stone Article is a tough read because of Matt Taibbi’s famous bullshitedness. According to him, the only people who opposed TARP and stood in the way of this crony capitalist juggernaut were progressives. The battle over the bailouts is seen entirely in those terms. He completely ignores the deep conservative opposition to it. He says that TARP initially died because “95 democrats lined up against it” ignoring that 133 Republicans lined up against it too and that a majority of Republicans opposed in the eventual passage of the bill. Here’s the fucking roll call.)

We are not safer than we were five years ago. Our banking system is not more secure or more regulated. And, at some point, this is going to blow up on us.

John Huntsman was one of few in Election 2012 who tried to alert us to the danger we face. Ron Paul and Gary Johnson have also warned us about the danger of handing out large sacks of Federal Reserve funny money. But no one in power has picked it up. They’re too busy fighting each other over self-created crises like the fiscal cliff. And while they’re fighting over that cliff, we’re in danger of the whole fucking mountain falling out from under us.

This is being spun as an issue for “progressives” but it’s just as critical to conservatives and libertarians who value a sound banking system and straight-forward laws (also, you know, a functioning economy). We have to realize that this mess is bipartisan. Republicans may have opposed Dodd-Frank, but they haven’t exactly been proposing a new regime of better law. And Democrats may bash the big banks, but they take their campaign contributions and make sure no one knows what’s going on behind the doors.

No, it’s going to have to come from outside Washington, from the hundreds of millions of Americans who loaned the banks trillions and are still holding the bag four years later. I just fear that we won’t do anything about it until the next financial collapse plunges us into a dark age.

Waters on Fi Services

OK, then:

Democrats just elected Maxine Waters to the top Democratic spot on the House Financial Services committee.

This is really an extraordinary development. “Flabbergasting” might be a more apt word. Leave aside the recent ethics investigation over whether she used her position on the committee to help a bank her husband was involved with (which ended with her chief of staff getting reprimanded). Maxine Waters reliably delivers the craziest questions and the most bizarre speeches on that committee, and tends to demonstrate a stunning lack of grasp of the committee’s core subject matter.

McArdle has some stuff. Maxine has also been a favorite target here at RTFLC. Check out our previous coverage here, here, here and here. My all-time favorite was when she threatened to nationalize the oil companies over high oil prices, displaying a stunning ignorance of markets, the oil industry, history, economics, American law, the Constitution, business and the laws of physics, which are defied by the failure of her skull to implode. Water isn’t just an ignorant liberal. She’s specifically and spectacularly ignorant about the matters her committee deals with. This would be like appointing a creationist to head a … oh.

In case you were wondering how serious the Democrats are about governing, this is a good look at how things would work if they had the majority.

What the class warriors are really aiming for: tax everyone more

Thrill had a post up discussing the upcoming tax battle as the Bush tax cuts are scheduled to expire at the end of this year. The donkeys are clamoring for that to happen, because they want stupid people to believe that tax hikes on the rich will somehow cover the $1.3 trillion – estimated since we conveniently have had no budget in the last 3 years to verify it is only this much that they are over spending by – of annual deficit spending we have had since the democrats took over (BLAME BOOSH! – trademark). But the fact is that this tax hike is not going to change anything in any meaningful way.

Let us start with the real numbers, and we can take a look at the Tax Foundation’s site where they have this special report breaking down the numbers. First up, the table showing the Bush tax cut provisions and what is going to happen on January 1st (table 2 in the report):

Major Bush Tax Cut Income Tax Provisions

Let’s break down the tax changes, focusing on income tax brackets. The first thing to notice is that the lowest bracket, 10% goes away. All those that were in that bracket now are moved into the 15% bracket. Note that this apparently still leaves a sizable chunk of people that are not paying income taxes because of some earnings threshold, still not paying any income taxes. All other brackets jump some 3 ½ percent. According to this Tax Foundation’s special report’s table 1, line one, this change across the board will result in a measly $156 billion dollars of extra annual revenue.

Tax Changes Effective 1-1-2013

So an across the board hike of 3 ½ percent for ALL BRACKETS that are currently paying income tax will yield us just $156 billion more. Focusing only on the hike the left wants, the top earner’s bracket, the question begs to be asked: what’s the revenue then? If we want to be generous, apply historical precedent where these rich people already pay 50%+ of the taxes, we can guestimate their share amounts to some $80 billion. Yeah, I am fudging it upwards, but in the grand scheme of things – they are spending over $1.3 trillion more than they are collecting each year – that $2 billion is a rounding error, and then one in the left’s favor. Shit, let’s just say it is an even cool $100 billion they are going to rake in, because these stupid rich people are not going to react at all to the government wanting to fleece them even more. So where are the other $1.2 trillion they need to just break even going to come from? There is no way this gap gets covered by just the rich. Even if they jack their bracket up to over 50%. And that’s the point.

This Obamanomics strategy here is just that: a fake. The intent is to allow the left to pretend they created new revenue by socking it to the group people envy the most. We have had more than a decade of this conditioning. The Boosh tax cuts caused a deficit! (Not the fact government spent more than it took in). Those evil Boosh wars caused the deficit (again: not the fact government spent more than it took in). The rich are not paying their fair share! Boosh’s tax cuts and wars, not the stupid and doomed attempt to social engineer through mortgage lending, caused that horrible economic down turn that still plagues poor genius Obama. Even after 4 years of Obamanomics, and that’s because these evil republicans are protecting their rich fat cat buddies! The fact that 4 out of every 5 of these rich people voted for Obama be damned.

Anyway, back to the plan. So the left socks it to the group everyone loves to hate, and then what? Well, then jack up spending, yet again. After all, they have provided new revenue, and in the mind of the math challenged tools that love this nonsense, they think things are all fine and more spending is no big deal. After all, their buddies in government can just confiscate more from those rich people to cover any new spending, right? Heh, sure. Eventually taxes will have to go up on everybody to cover the gap, or that gap is only going to grow, sine the end goal is to provide an excuse to spend more. And that’s the big goal: an excuse to spend more.

Now, if all that we ere facing was an economic growth crushing tax hike and increased government spending, things would only look ugly. But there is another monster on the horizon that promises to make this bleak scenario downright frightening on account that it is going to not just siphon even more money out of the economy and allow government to mismanage it, but drastically affect employers, and thus employment. And that is on top of the fact that while they told us this thing would end up collecting more than it would cost to sell it, we now know that is not even remotely close to the truth. Yeah, we are talking about Obamacare and the pain that will cause us.

The table below breaks down Obamacare taxes, and man are there a lot of them.

Obamacare Taxes

This monster is just going to have staggering implications. But that’s a post for another day. Right now, let’s focus on why the class warriors really want that tax hike, and that it will not be just on the rich, by necessity.

The Ryan Factor

(I’m on vacation. I spent today in a pool throwing Sal 11000 Beta up in the air. So, this week, I will just have an occasional post when the family’s asleep and I haven’t had too much to drink yet.)

I’ll give Team Romney credit for this: his VP pick sure has the Left shitting their pants. Today, some protesters tried to rush the stage. And the Democratic leadership, with Ms. Verbal Diarrhea in the lead, has been … to put it mildly … lying their asses off about him:

It had the makings of a scandal: Paul Ryan traded banking stocks during the financial crisis the same day as a meeting with top Treasury Department officials, a Virginia blog wrote Monday. But the rumor, which spread rapidly across the Internet, doesn’t hold up to scrutiny.

The meeting in question took place on Sept. 18, 2008, between Federal Reserve Chairman Ben Bernanke, then-Treasury Secretary Hank Paulson and congressional leaders including Nancy Pelosi, John Boehner and Harry Reid. The Richmonder, a progressive Virginia blog, noted on Monday that Ryan’s financial disclosure form from 2008 showed that he sold stock in Citigroup and JP Morgan, who were in crisis, the same day and bought stock in Goldman Sachs, which proved to be stronger. The blog claimed that Ryan also attended the meeting. The implication, they stated, was that he was using information gleaned from the briefing for personal profit.

It was wrong. In fact, the meeting with Bernanke took place in the evening after trading hours, meaning Ryan wouldn’t have had time to execute the move if he wanted to.

The Romney campaign said Ryan had nothing to do with the trades in the first place. They were part of a Russell 1000 index fund that automatically traded stocks as part of a pre-set formula. Ryan’s disclosure forms include several similar trade patterns at various points throughout the year.

There have been other lies too. There has been what Politifact labelled as their Lie of 20011: that the Ryan Plan ends Medicare as we know it. The Democrats are leaving out the part where people over 55 will not be moved to vouchers and other can opt out. They also incorrectly claimed that the Federal Personhood bill he supported (which was bad enough) tried to outlaw abortion, which it did not. It simply called on the states to recognize that life begins at conception. And so on.

Look, Ryan has a lot of controversial views. We can discuss them. But we don’t need to resort to making shit up, do we? No? No? OK. I don’t like his views on a number of issues, including abortion. But, as I said on Twitter, it’s unlikely abortion is going to be outlawed in the near future. It is likely — very likely — that we will go bankrupt or have a major fiscal crisis. And Ryan is one of the few people who has proposed doing something about it.

I expect, that as time goes on, most attention will focus on Ryan’s budget plan. This is a good thing; we need to be discussing the budget. Ryan will take a lot of heat for his plan but … well, this is what he gets for actually having a plan (unlike Obama) and not trying to have every plan simultaneously (like Romney).

The big problem is Ryan’s plan hits Medicare. You want to criticize him for it? Fine. But first you have to put out a plan that balances the budget without cutting Medicare (no, raising taxes on the rich won’t get us there).

You can’t. It’s impossible. Because, without changes, Medicare is going to swell to gobble up an unrealistic section of our economy. No budget plan — no plan — works without reining in MedicareMedicare. As Ryan said in testimony to the House, Medicare as we know it is ending. That’s not up for debate. What we’re discussing is how it’s going to change. Both Simpson-Bowles and the President’s semi-plan incorporate cost controls to Medicare. Medicare changes are going to happen; the debate is over how we are going to fix the program.

So all the people screaming about the Ryan plan need to shut up. Because what they are advocating is no plan. What they are advocating is bankruptcy.

A Talking Point Bites the Dust

Big corporations are hoarding cash. Corporate cash on hand is higher than ever! This just proves that we need to tax … oh.

in its quarterly “flow of funds” report on Thursday, the Federal Reserve sharply revised its estimates of how much cash companies are holding on their balance sheets. The bottom line: Corporations have nearly $500 billion less cash on hand than previously believed.

Perhaps more significant than the number itself, however, is how the revision affects the trend. Before the revision, the Fed showed corporations continuing to accumulate cash, with liquid assets rising nearly every quarter since the recession ended and reaching a record $2.2 trillion at the end of last year. Now, however, it appears corporate cash piles grew rapidly through 2009, then leveled off. Companies aren’t spending their cash, but they aren’t holding more of it, either.

Moreover, companies are holding a smaller share of their total assets in cash. At the end of 2009, liquid assets made up 6.3% of their corporate assets, the most since the 1960s. Under the unrevised data, that share continued to grow, topping 7% last year. But the revised data show cash has actually fallen as a share of assets, to 5.7% at the end of March, its lowest level in the recovery.

Basically, the Fed revised their methods, got better data from the IRS and wound up with figure much closer to what private firms were asserting. This resolves away one of the puzzles of our economy: the supposed unwillingness of business to invest their vast piles of cash into the economy. Now we know that those vast piles of cash are much less vast than thought.

There is still a basic unwillingness to invest. If we really were in a recovery, we would expect corporate cash to fall as companies expanded, then rise as they reaped the profits. That hasn’t happened yet.

The Month of Ouch

Looks like we’re in for another Recovery Summer:

The latest jobs report is a total disaster. We got 69,000 new jobs in May which is well below already tepid expectations and is below the labor force trend growth rate. Terrible.

But it gets worse!

“The change in total nonfarm payroll employment for March was revised from +154,000 to +143,000, and the change for April was revised from +115,000 to +77,000.” In other words, we gained 69,000 new jobs in May (estimated) but lost 49,000 in revisions. That leaves us with a net increase in employment of just 20,000. Disaster disaster disaster.

Yglesias is overstating the case, I think. What we were going through three years ago, when we hemorrhaging jobs by the millions, was a disaster. This is just bad.

To be honest, I’m kind of surprised it isn’t worse, given what the economy is enduring right now:

  • Europe.
  • Slowdowns in the boom economics of South America, India and China.
  • Europe.
  • The debt standoff and subsequent downgrade of US debt.
  • Europe.
  • I’m sure the Left will start jumping up and down that we need more stimulus (since this has worked so well so far) and the Right will start jumping up and down that we need more tax cuts (ditto). Rumor has it that Paul Krugman had to be hauled away in a strait jacket this morning. But even if these were wise policies — and I don’t think they are — we simply can’t afford them right now. The only possible thing we could afford is more quantitative easement (i.e, inflation) from the Fed. But they’re already taking fire for following the economic ideas of Milton Friedman. Streamlining regulation, overhauling the tax system and suspending the more onerous bits of Dodd-Franks/SOX would also help, but I don’t see the will in Washington.

    Five years ago, I said this was going to be a long haul. We were in debt up to our eyeballs, leveraged in the wrong way and turned around. Five years later, I still think the same thing. We’re slightly better off — consumer and personal debt is way down; unemployment is at 8.2% and the economy isn’t falling like a brick. But real recovery is still some distance in the future, closer but not here yet.

    The interesting thing is to see what will happen as unemployment benefits run out. This is going to test yet another economic theory: that unemployment benefits create more unemployment. If the job numbers start to come up, there may be something to this. But I’m not optimistic. Work just doesn’t appear because you want it to.

    Update: I want to quote Yglesias again, because this is important:

    A lot of this is already getting fed through an election-year-politics lens, but it’s important to remember that this is first and foremost a human tragedy for unemployed and underemployed people, and for employed workers who’ve been stripped of bargaining power due to persistent labor market weakness. If growth stays dismal and Barack Obama loses the election, he and Michelle and Jack Lew and Tim Geithner and all the rest will go on to have happy, healthy, prosperous lives. Other people’s careers are much more in the balance.

    I don’t care who the hell is in office if the economy improves. If we got a huge surge in jobs and that pushed Obama to re-election, I would not shed a tear. Frankly, I think we are best off with a divided Washington. For all the problems the ridiculous showdowns have produced and their inability to come to a budget agreement, we have seen a modicum of spending and regulatory restraint over the last two years — far better than we ever got when Republicans controlled both the Capitol and the White House. The GOP is half-crazy but, on the budget, they have held Obama’s feet … well, not to the fire, exactly, but at least in the general vicinity of it. At least they’ve admitted that there is a fire … somewhere.

    In the end, this is about people who have been out of work for, in some cases, Five. Fucking. Years. There are solutions both sides can agree on — see Tom Coburn’s recent interview with Ezra Klein. But they won’t do them because it a fucking election year.

    Screw that. Stick ‘em all in Washington and don’t let them out until they’ve done something that does not involve exploding the debt even more. Either that, or we can create 460 brand spanking new jobs this fall.

    Argentina and Japan

    Wasn’t it just like a week ago that Paul “Wrong Way” Krugman was praising Argentina? And wasn’t it this week that he gushed over Japan’s growth, stimulated by tsunami reconstruction?

    Oops:

    Recently, two more countries have felt the bite of Keynesianism. Today, the credit ratings agency Fitch downgraded Japan’s economy and the AP reported that the Argentinian economy is likely to decline sharply. While Japan and Argentina might be different kinds of economies performing differently in different markets, their recent bad news can be attributed in part to a fondness for government spending.

    These countries have used two different approaches to Keynesianism, but it amounts to the same thing: gushers of debt, oceans of spending and rivers of “stimulus” producing … bad economies. And that’s ignoring, for the moment, the recent downgrades of all the other economies trying to spend their way into prosperity (the US) or raising taxes and calling it “austerity” (most of Europe). They have not acted as dramatically as Japan and Argentina have, which is probably they aren’t hurting as much. Yet.

    Is Keynesianism ever wrong? Really, it’s only a matter of time until they drag out the Phillips Curve again.

    The Least Surprising Mortgage Story

    You remember the Tobacco settlement, don’t you? Based on dubious claims that smoking costs the states healthcare money, 46 states entered into an agreement that (1) froze the market for cigarettes in favor of a cartel existing companies; (2) took hundreds of billions from those companies, which they simply passed on as price hikes to the captive market; (3) paid lawyers tens of millions of dollars; (4) poured money into states ostensibly for healthcare and anti-smoking initiatives that, in the end, went into the same ratholes all other taxes went to.

    We’re seeing the same script play out with the mortgage bubble. The big banks are more powerful and have a bigger market share than before. They’ve paid lots of money to various governments, and

    Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.

    In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts.

    The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes.

    Fifteen states, so far, have admitted they will use all or most of the settlement money like general revenue. This is being justified as “economic development”.

    Is anyone surprised? Is anyone at all shocked that state governments took one look at the mortgage industry and said, to paraphrase what Dave Barry said about the Tobacco Settlement: “You’re making billions by selling mortgages to people who can’t afford them and then selling the securities to investors the Feds bail out. We want a piece of that action!”

    Really, the only thing missing is warning labels on mortgage documents. I’m sure they’re working on that.