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December 31st, 2014

12/31/2014

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Maryland just declared a Republican Larry Hogan winner of race for governor and he ran on a platform of reducing taxes.  Larry is a neo-con who will continue to grow global corporations and markets as a replacement of domestic small and regional businesses and the tax cuts he will bring will be just the same as a neo-liberal Anthony Brown would have brought----corporate tax breaks, subsidy, and continuation of widespread corporate fraud and corruption.  He will reduce further the taxes on the rich and believe me----after all of those tax breaks, the working and middle-class will have to keep paying high taxes.  Hogan will probably get rid of the symbolic 'rain tax'.Let's look at what a 'business-friendly' neo-con and neo-liberal thinks needs to be done besides all of the above.

This is exactly what happens when politicians claim business-friendly tax policies that end with citizen taxes climbing ever higher.  Remember, if corporations' tax rate falls to plus or minus 20%----even if they paid taxes----that lost revenue would come in higher taxes and fees for people at state and local level.  We need Republican voters to stop being sold on the idea that tax cuts are somehow going to come to the people.  Small businesses need protection from high taxes, but corporations do not.  We have Clinton neo-liberals as in Maryland and Bush neo-cons who are going to make these two years about gutting the New Deal policy of corporate taxation just as the economic crash of 2015 hits. 

THIS IS NOT BUSINESS-FRIENDLY AS IT WILL PUT SMALL BUSINESSES OUT OF BUSINESS.


Below is an article that shows the reasoning for these policies don't add up----what he doesn't say, and which does make them add up----is the coming economic crash is meant to privatize all of government through the starving of coffers.  Union pensions will be a goner as this crash will come from a collapsing bond market where pension fund management corporations have loaded pension plans.  Remember where pensions plans ended last crash?  Buoying collapsing Wall Street banks.  This time they will buoy collapsing state and local governments and will be taken out again!


No, tax cuts will not improve the Maryland business climate.

Entrepreneurs leave the state for many reasons. For one, once you get to be a certain size, the talent pool of experienced managers and mentors in the software development industry is just not here. As Matt Yglesias notes, dreams of Maryland and Washington D.C. being high-tech start-hubs just never work out. They are not leaving for low tax states. They leave for NY and CA  – because the venture capital is there, the mentors are there, and the talent is there. Business who stay have ties to the government.

Plus, who is going to believe in tax cuts when the budget is being supported by shams and gimmickry like lowering pension contributions?
Again. Still. Unfunded pension benefits dwarf what the state collects in sales and income taxes – long term, either taxes need to go up 15-20% to fund pensions within the next 10 years, or pension benefits need to be cut. Do you really think that the unions will just sit back and allow tax cuts and reduced pension contributions, knowing that it likely leads to cuts in pension benefits? At best, they will sit back and allow it this year with a wink and a nod so that their friends get elected, so that benefits do not get cut next year. But, if they are not getting cut, taxes are going up. The legislature of Maryland has a lot of power, but repealing the laws of math is not one of them.

Tax cuts will lead to lower revenues, unless the Democrats have suddenly bought into supply-side economics. Lower revenues mean that the budget needs to be balanced with spending reductions or taxes elsewhere.

Plus, if the Democrats have suddenly bought into supply-side economics, why are they still supporting a minimum wage hike? Firms – you know, the supply-side – will react to higher labor costs by cutting hours, jobs, or both.

Sure, I am in favor of tax cuts. Who isn’t? But, until the legislature has a credible plan for dealing with the fiscal mess, tax cuts are not credible and will not fix what ails Maryland.


_____________________________________
Republicans call the estate tax a death tax-----the founding fathers called it the anti-aristocracy tax.  This tax is critical in keeping the US from reverting back to the extreme wealth and captured politics we are seeing take hold right now.  That is why it was written by these founding fathers.  Obama allowed the Federal estate tax fall ever further.  Do we need a state estate tax?  Maybe not, but it appears that when the Maryland Assembly knows there is a huge structural deficit in our budget from all of the corporate tax breaks, subsidies, and corporate tax evasion and fraud-----you do not cut taxes on the rich right now. 

You do of course if you are working for the rich which Clinton neo-liberals and Bush neo-cons.


Maryland was hit in this regard a few years ago when the tax designation for working farms lowered property tax for these land holders all under the guise of smart development.  What happened is more of Maryland's small farms are being gobbled up into large estates that pretend they are active farms and are not-----losing local farming and tax revenue for nothing.

Taxes 3/20/2014 @ 6:26PM

Maryland To Cut Estate Tax As Blue States Fall In Line

  Maryland is the latest state to make its estate tax less onerous, and it’s significant because it’s a staunchly Democratic state indicating that easing the pain of the death tax isn’t just a Republican issue.
Today the Maryland Senate passed the measure, already passed by the House, gradually raising the amount exempt from the state’s estate tax to match the generous federal estate tax exemption. Gov. Martin O’Malley’s signature is expected shortly.


Maryland is one of 19 states plus the District of Columbia that impose state death taxes. In the last four years, Indiana, Kansas, North Carolina, Ohio and Oklahoma have all repealed their state death taxes, and Tennessee’s is on its way out by Jan. 1, 2016.

Other changes are afoot in the District of Columbia, Minnesota, Maine, New York and Georgia, and a vote on the fate of the federal estate tax might come as early as this summer.

“It’s encouraging that a blue state is taking action, and we’re working hard to make sure that more follow suit,” says Palmer Schoening, executive director of the Family Business Coalition,
adding that the group’s ultimate goal is for every state death tax—and the federal estate tax—to be repealed.  Sometimes that starts with weakening the tax.

The Maryland measure gradually increases the amount exempt from the state estate tax from $1 million this year, to $1.5 million in 2015, $2 million in 2016, $3 million in 2017, and $4 million in 2018. Finally, in 2019 it will match the federal exemption which is projected to be $5.9 million, up from $5.34 million today (it’s indexed for inflation).

The Maryland estate tax change provides serious relief, but there’s a big catch for some: even if no estate tax is due, depending whom you leave your assets to at death, a separate inheritance tax may be assessed. Spouses, children (and their spouses and children), parents, and siblings are all exempt from the state inheritance tax, but a niece or aunt or friend, for example, would owe the inheritance tax at a rate of 10%. Maryland and New Jersey are the only two states that have an inheritance tax in addition to an estate tax.

_________________________________________

O'Malley set the citizens of Maryland on a tee ready to allow global corporations to take over after the coming economic crash.  He tied the state to high levels of credit bond leverage----high levels of corporate tax breaks, subsidy, and systemic corporate fraud and tied Maryland's economy to global corporations and markets giving global corporations the foot in the door to take over completely after this coming crash.  Now, the Maryland Assembly is ready to further starve state coffers in favor of corporations with more revenue cuts for the rich and corporations.  This is what Clinton Wall Street neo-liberals and Bush neo-cons do and ALL OF MARYLAND POLS ARE GLOBAL CORPORATE POLS!  GET RID OF THEM.

Remember, Mike Miller made the comment last year that he intends on ending state funding of public schools and universities.


Maryland politicians plan wave of business tax cuts


By Trent Novak
11 March 2014

The Maryland state legislature is deliberating over various proposals aimed at cutting taxes for corporations and the state’s wealthiest residents.
Plans are underway to implement sweeping reductions in income tax rates for both individuals and businesses, and to massively inflate tax exemptions for millionaires and their estates.


Republicans in the Maryland House of Representatives have authored and supported the Income Tax Relief Act of 2014, which would reduce personal income taxes by 10 percent over the next 10 years.

Another bill, with bipartisan sponsorship, would establish a flat 3.5 percent income tax on every resident making more than $30,000 a year, scrapping an established eight-tier rating system. In the present system, the lowest rate stands at 2 percent, while the highest stands just under 6 percent, with rates between 5 and 6 percent reserved for those making $100,000 or more.

Since January, as many as six bipartisan bills have been put forward to lower the corporate tax rate, which is currently 8.25 percent, to rates between 4 and 7 percent over varying periods of time.

Republican state delegate Andrew Sarafini, one of the main figures involved in these legislative efforts, favors the 4 percent corporate rate. Douglas Gansler, the state’s current attorney general, has announced his support for the 6 percent rate in his bid to win the Democratic candidacy for governor.

Legislative committees have also been hearing various bills aimed at raising the estate tax threshold. The two bills with the greatest amount of support in this area are predominately backed by Democrats, and would raise the threshold from $1 million to just over $5 million.
This means that each millionaire residing in the state of Maryland would effectively receive an extra $4 million “window” before taxes are levied against their holdings.

Local news agencies have mentioned that several less “popular” proposals being considered would have dispensed with the estate tax, inheritance taxes, or both.

The arguments being used to advance and justify these measures revolve around the notion that Maryland needs to persuade its more prosperous residents to continue living in the state, to encourage consumption to boost its stagnating economy, and to make the state a serious regional competitor for corporate investment. In official quarters, there is a general sense that Maryland either has to equal or undercut Virginia’s corporate tax rate of 6 percent if it hopes to rescue its chances for meaningful “job creation.”

Attempts to paper over this transparent agenda have consisted of false cries of concern for average workers and residents in the state.

Ben Wilterdink, a research analyst who spoke after Sarafini in testimony at the General Assembly in Annapolis last month, exemplified this approach: “The corporate income tax burden is passed on to the consumer, to the shareholder, and even to employees who have to work for lower wages than they otherwise would be.” Wilterdink cited a recent Treasury Department study, which purports that laborers bear at least 40 percent of the cost of higher corporate taxes.

In reality, American corporations are gorged with record levels of money, having amassed record financial reserves estimated to be about $1.5 trillion. Rather than use these resources to hire workers or invest in the productive levers of society, there has been a concerted effort to drive wages and benefits to record lows, while artificially stimulating share values through stock buybacks and various other schemes.

Corporations have also received billions of dollars in tax abatements and other payments handed over to them from virtually every level of government. A report in The New York Times earlier this year estimated that state and local governments spend roughly $80 billion annually in such corporate welfare measures. (See “States, cities, hand out billions in tax abatements”)

President Obama’s latest attempt to feign concern over social inequality involves the creation of five urban “promise zones,” which are essentially areas where taxes and regulations on businesses will be stripped down to minimal levels. These initiatives have been coupled with drastic attacks on the living conditions of workers and the absence of any public works programs or serious reforms to alleviate poverty and social misery.

On Thursday, Peter Franchot, the comptroller of Maryland, abruptly announced that there had been a $238 million decline in state revenues for the last quarter of 2013, which must be made up for through $127 million in cuts this fiscal year and $111 million in the next. The drop in revenue was mostly attributed to a drop in retail sales during the winter months, but commentators could not avoid mentioning declining wages and salaries, persistently high unemployment, and rising expenditures on food, energy and other basic commodities.

In remarks that can only be read as a sign of things to come, Franchot stressed the need to act “with the utmost caution” and urged the state “to invest in the things we truly need” and “forego many of the things we simply want.”


As if on cue, Maryland’s Department of Legislative Services immediately stepped in to suggest cuts to state workers’ salaries, education funding, and the Chesapeake Bay Trust Fund, as well as canceling proposals for expanded prekindergarten services.



___________________
The Federal government has super-sized corporate profits through public private partnerships, corporate subsidy, and allowing massive corporate fraud and now they are moving to state and local government to protect wealth and corporate profit.  None of this has to do with job creation or helping small business.  It further consolidates wealth at the top and will create the condition for every higher taxation on the people.


The Revolutionary War was fought for just this reason and the US Constitution was written to keep this from happening.  Clinton neo-liberals and Bush neo-cons are re-writing the Constitution they say to hand our rights to global corporations and taxing them is not a policy they support.  You can see why the election rigging that happened in the Democratic primary was so important---they would not want a progressive labor and justice candidate like me in office with this coming economic crash---

Michigan taxes: Businesses pay less, you pay more


Stephen Henderson and Kristi Tanner, Detroit Free Press Staff Writers 11:59 p.m. EDT October 4, 2014

People pay more.

Businesses pay less.


And the jobs picture is still clouded by slow growth and unemployment.

Four years into Gov. Rick Snyder's first term in office, that's the net effect of the signature tax reforms he pushed through the Legislature in 2011.

Snyder's plans relied heavily on the premise that lower taxes for businesses would create a stellar turnaround, ending the depression that gripped the state when he took office. And many of his changes made good policy sense.

But a close analysis of tax incomes shows that the cost of funding state government has shifted to those who can least afford it, and the job growth that would have justified that shift hasn't materialized.

That's a hard sell for a governor seeking re-election in a competitive race with a challenger who vows to reverse some of Snyder's most significant changes.

And with just a month before the election, Snyder has neither acknowledged the deficiencies of his tax policy, nor indicated that he's open to changing course.

How you're paying more

For some Michigan families, changes to tax credits and deductions have been deeply felt.

The state is collecting nearly $900 million a year more from individuals, many of them poor people who have lost tax credits or deductions.

Meanwhile, businesses pay about $1.7 billion less in taxes, all while job growth has slowed each year since the tax cuts took effect.

Michigan's individual income tax revenue jumped 25% between 2011 and 2012, a $1.4-billion increase. About $560 million of that is because of income growth, and much of that is because of a one-time spike in national income tied to changes in the federal tax code.

The remainder of the increase can be explained by deductions and tax credits that were either eliminated or modified significantly. For millions of Michigan residents, these were experienced as tax increases.

They include:

■ $270 million from a decrease in the homestead property tax credit.

■ $240 million from cuts to the Earned Income Tax Credit (EITC).

■ $200 million from the pension tax changes.

■ $50 million from the elimination of deductions for children.

■ $50 million from the elimination of the special exemption for age and unemployment compensation.

■ $90 million from elimination of other nonrefundable credits, such as city income tax, homeless/food bank contributions and contributions to public universities and public broadcasting.

The average taxpayer received half as much in credits in 2012 as in 2011. In addition, the new tax code freezes the individual income tax rate at 4.25%; before the changes, that rate was scheduled to drop 0.1 percentage point each year until it reached 3.9% in 2015.

In fact, Michigan had the fifth largest percentage increase in tax revenue collected from individuals, according to a survey of government tax collections by the U.S. Census Bureau during fiscal year 2013.

"By taking away taxes on business, you are increasing the burden on everything on else," said Norton Francis, a senior research associate at the Urban-Brookings Tax Policy Center. "The money has to come from somewhere."

Shifting tax burden toward individuals tends to hit the low-income population the hardest, Francis said: "High-income individuals tend to save more, those receiving the Earned Income Tax Credit pour that money right back into the economy and tend to spend locally."

Michigan taxpayers claiming the EITC and seniors able to claim property tax credits experienced some of the largest tax increases. About 793,000 tax returns qualified for the Michigan EITC in 2011; the average return was $450. In 2012, the average EITC credit dropped to $140 among 772,000 returns filed by Michigan residents. Senior citizens averaged about $740 in property tax credits in 2011, down to $590 in 2012.

The revamping of Michigan's tax code — described as some of the most sweeping tax reforms the state has seen since the mid-1990s, "involved a fairly significant tax burden shift; reducing business taxes and increasing individual taxes," according to a report by the Citizens Research Council, a nonpartisan research group.

It's a different story for businesses.

Revenue from business taxes fell by about $1.7 billion after the elimination of the Michigan Business Tax (MBT), replaced in 2012 by a 6% flat corporate income tax. About 95,000 businesses no longer pay state taxes. In addition, the repeal of the business personal property tax passed this year by the Legislature is estimated to reduce state revenue from business by $350 million in fiscal year 2017.

Where are the jobs?

While businesses have paid less in taxes, job growth is slowing.
It's an astonishing outcome for a tax policy whose sole purpose was to put Michiganders back to work.

In 2009, at the end of the great recession, Michigan unemployment spiked at 14.2%, largely because of massive automotive and manufacturing job losses. Nationally, unemployment stood at 9.6%. Yet despite the overall decline, jobs began returning to Michigan in 2010, the last year of then-Gov. Jennifer Granholm's administration, as the auto industry improved. While the unemployment rate was 11%, Michigan added about 76,000 payroll jobs -- more jobs than in any year since Snyder's tax cuts took effect, but still a fraction compared to the nearly 800,000 jobs lost over that decade.

At the end of Snyder's first year in office, Michigan added 97,000 jobs. The unemployment rate was 9%, a percentage point above the national rate of 8%. But in 2012, the first year of Snyder's business tax cuts, hiring grew by only 75,000 jobs. Between 2013 and 2014, just 32,000 jobs were added.

"It's fair to say that job growth has been slower in Michigan after the tax shift went into effect than the first year of Gov. Snyder's administration," said Charles Ballard, an economics professor at Michigan State University. "It doesn't mean that his policy wasn't successful, so much is determined by forces beyond control of the governor."

Ways to help the people

Taken individually, many of the changes that Snyder pushed made sense, say policy watchers and economists who saw the old tax code as antiquated and complicated.

The Michigan Business Tax, for instance, was almost universally loathed, and considered a disincentive for companies to locate or operate in the state.

"MBT was a labyrinthine business tax," said Ballard, "such a godawful mess — it was a mighty bad tax."

The hope, falsely placed or not, was that a simpler business tax that produced a reduction for thousands of businesses would jump-start hiring.

Snyder's pension tax was even described by the Free Press editorial page as a move toward fairness: Retirees with 401(k) accounts paid income taxes, so it didn't make sense to treat pensioners differently.

Other changes were simply part of the governor's fiscal philosophy, such as his overall dislike of tax credits, which he has described as built-in budget liabilities. His effort to balance a state budget that was routinely at least a billion dollars out of whack relied heavily on removing those kinds of liabilities up front.

But viewed in totality, Snyder's tax code revisions have placed a much heavier burden on individuals, and haven't resulted in sufficient job growth to bring Michigan in line with national unemployment numbers. In Michigan, the August unemployment rate was 7.4%, compared to the national rate of 6.1% in the same month.

In addition, the governor has balked at enacting other sensible tax changes that could help turn the jobs tide.

There has been no talk, for instance, of tying the new tax breaks for businesses to job creation, or of tax penalties for companies that eliminate jobs in Michigan or move them elsewhere.

Nor has Snyder discussed ideas such as a progressive individual income tax, which would require a constitutional change. Under many models, that would lower rates for the vast majority of low- and middle-income taxpayers, while raising rates for top earners to those similar in other states.

And Michigan is an outlier there: In 2012, only six other states had flat income taxes, while 34 had graduated tax rates.

Policy wonks can argue about business versus individual taxes, how to grow jobs, and how to keep more money in families' pockets. But analysis of results — and data — matter.

Credit where it's due

Most people, Ballard says, think of a business tax as "a tax on fat cats." But that's not entirely true, the Tax Policy Center's research shows: On average, taxes levied on business income are funded roughly 80% by shareholders, but about 20% by workers, in the form of lower wages.

But economists like Ballard and Francis say cuts to business taxes are unlikely to produce real employment changes.

For most businesses, the economy, not tax policy, guides investment, Francis said: "The literature suggests tax policy may make a marginal difference, but companies tend to make location decisions based on labor force, market and infrastructure."

Snyder is an accountant, a data guy whose entire leadership pitch hinges on Michigan's financial recovery. Four years into his term, there's no question that Michigan's economy has improved — along with the nation's.

Can Snyder take credit? That's the question voters should be asking.

Michigan's changing business tax structure (numbers for fiscal year 2013, in millions)

Below are revenue estimates for the impact of changes to Michigan business taxes for fiscal year 2013.


____________________________________________
Obama and Congressional neo-liberals have spent several years cutting Federal funding and have allowed corporate tax evasion in the hundreds of billions.  This has lowered the amounts of revenue coming to states and localities even after the massive corporate frauds that brought the 2008 crash starved government coffers.  Now these same neo-liberals along with Republicans are cutting more tax base from corporate taxes at the state and local level under the guise of job creation.  As this article states----none of this has anything to do with job creation or small business-friendly----it will do the opposite.  IT IS CRITICAL THAT LABOR AND JUSTICE STOP SUPPORTING THESE FRAUDULENT SCHEMES THAT HAVE NOTHING TO DO WITH JOBS OR HELPING SMALL BUSINESS.  THESE POLICIES SIMPLY MOVE MORE OF THE TAX BURDEN TO THE PEOPLE WHO THEN CANNOT CONSUME TO KEEP SMALL BUSINESSES ALIVE.

Remember, global corporations do not want any competition so killing small and regional business is a goal of global corporate pols!


Cutting State Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies
PDF of this report (18pp.)

By Michael Mazerov

February 19, 2013



Cutting state personal income taxes not only won’t promote small business growth and job creation, but it is also likely over time to threaten the success of entrepreneurs by taking resources away from critical services like education.

Until recently, most proposals to cut state taxes in the name of boosting economic growth and job creation focused on cutting business taxes like the state corporate tax.  But in the past several years a growing number of elected officials and business organizations have called for cuts in state personal income taxes.  They contend that because owners of most small businesses take advantage of provisions that allow them to pay personal income taxes on their profits — rather than corporate taxes — a personal income tax cut is required for small business to get the economic benefits of tax reduction.  Supporters of such tax cuts argue that the level of state personal income taxes is a significant factor in small businesses’ ability, and incentive, to create jobs despite the fact that there is virtually no evidence to support this claim.

Proposals include cutting state income tax rates across the board, reducing tax rates for the highest income brackets, cutting or eliminating state taxation of “small business” income, or entirely repealing the state income tax.


Regardless of the specific form they take, state personal income tax cuts will almost inevitably provide disproportionate tax savings to the most affluent households in a state. 
At the same time, cutting income taxes is a poor strategy for stoking small business growth and job creation.

  • The vast majority of those who would get a personal income tax cut are in no position to create small-business jobs.  Only 2.7 percent of all personal income taxpayers are owners of bona fide small businesses that have any employees other than the owner or owners.  Most high-income households — the group that likely would get the most money back from a personal income tax cut — are not small business owners.  And many who do have ownership interests receive only a small portion of their income from their business investments.  Profits from the ownership of small businesses that have paid employees account for less than 4 percent of the income of households with incomes over $100,000. 

  • If Tax Cuts Won’t Create Small Business Jobs, Tax Increases Won’t Eliminate Them This paper argues that state personal income tax cuts won’t help small businesses create jobs, and in fact could harm the ability of the small-business sector to contribute to economic growth.  For all the reasons stated in this paper, the converse is also true:  personal income tax increases, including those on the highest earners, won’t harm small-business job creation.  They could even contribute to a stronger business climate for entrepreneurs if the proceeds are invested wisely in better state schools and universities, roads and bridges, police and fire protection, and other critical services.

  • Most small businesses make too little money for tax cuts to produce enough income to pay new employees.  Only 13 percent of small businesses have $50,000 or more in taxable income in a given year.  The rest make less than that or lose money.  State income tax rates on income at this level already are so low, typically no more than 6 percent, or just a few thousand dollars for most of them, that even eliminating the personal income tax would generate negligible additional cash flow for the average small business — not nearly enough to pay one full-time worker’s salary.  For innovative start-up businesses that create a disproportionate share of jobs, tax breaks are even less important.  These operations account for 3 percent of all businesses and 20 percent of gross job creation.  But they generally plow all their cash flow into new facilities, marketing, and R&D and have little taxable income.
  • Most small business owners are not significant “job creators” and have no plans to be.  Only 11 percent of taxpayers reporting business income own a bona fide small business with employees other than the owner(s).  Even among recipients of business income who are true small business owners, most will not create jobs in response to a small increase in their after-tax incomes resulting from a state income tax cut.  Most small business owners do not have the goal of expanding their business, according to a recent survey.  This group includes self-employed skilled tradesmen, lawyers, accountants, real estate agents, consultants, and others with no need or desire to employ anyone else other than perhaps an office administrator.  Many others are passive investors who do not have the authority to hire additional workers.  Still others (like owners of restaurants, bars, and beauty shops) might have some employees, but the business serves a highly local market for an existing good or service; any job growth these firms experience is likely to come at the expense of jobs at competitor firms. 
  • Small businesses hire employees based on product demand, not tax levels.  Big or small, businesses typically hire when demand for what they make or sell exceeds what the existing workforce can produce.  Savings from a state income tax cut matters very little to hiring decisions — businesses are likely to hire when demand increases, and not hire when demand is flat or declining, regardless of tax rates.  Employee wages are fully deductible in calculating state income tax liability, so the presence of taxes is not likely to discourage hiring.
  • Careful economic studies issued by organizations across the political spectrum show that there is just no relationship between state personal income tax levels and the decisions of people in a state to start a business and of would-be entrepreneurs to move to the state.  A rigorous 2012 study commissioned by the U.S. Small Business Administration found “no evidence of an economically significant effect of state tax portfolios on entrepreneurial activity.[1]  In fact, considerable research shows that many entrepreneurial firms spin off from or otherwise “cluster” in geographic areas where other firms in the industry have concentrated.  It is highly unlikely that the meager tax savings arising from state personal income tax cuts would overcome the benefits of locating near other firms in the same industry.
There are better alternatives than tax cuts to help small businesses succeed, such as specially-tailored worker training, making it easier for entrepreneurs to turn the findings of state university research into commercially-viable goods and services, and providing strategic advice.  These more direct approaches offer a much bigger “bang for the buck” than personal income tax cuts.  States also can broadly promote long-term economic growth by investing in strong schools, cutting-edge research universities, modern transportation and broadband networks, efficient court systems, and other fundamental public services that reduce business expenses and improve the local quality of life.  By reducing revenue, personal income tax cuts make it harder for states to invest in these and other public services that form the foundation of future economic growth.  So personal income tax cuts not only don’t help small businesses to grow but they can end up being counterproductive.

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By now most Americans know an economic crash is coming next year as the bond market collapses.  Know who feels the pain of a bond market crash the most?  Government coffers.  Job loses as public sector jobs are slashed and employment in general falls as with the 2008 crash.  So, when a Clinton neo-liberal like Cuomo does a great big tax slash----with big savings for the rich and corporations----he is moving to starve government coffers of revenue just as they will need it the most.  When the crash comes and revenue is needed these corporate pols will be back with more taxes and fees on the people.  Maryland is so leveraged on credit bond debt that when the Maryland Assembly works with our Republican governor for these same business-friendly tax cuts----our government coffers will be empty.  Baltimore has super-sized this scenario and will see bankruptcy from these policies.

YOU WILL SEE BOTH CLINTON NEO-LIBERALS AND BUSH NEO-CONS MOVING THESE TAX POLICIES KNOWING THEY WILL RAISE TAXES ON THE PEOPLE AND KILL SMALL BUSINESS.


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Below is an example of where all of this state and local business-friendly tax cutting will go.  State and local government coffers are already starved so bringing less to government from the people most able to do so starves government investment and consumption both of which kills small business.

Republicans and Clinton neo-liberals do this to end War on Poverty and New Deal programs and pesky public services like public schools, public water and waste, and public transportation.  If you think these are good things and allowing global corporations to control every aspect of your life while soaking you  for more and more taxes and fees YOU DO NOT UNDERSTAND WHERE THESE POLICIES LEAD! 

STOP ALLOWING THESE GLOBAL CORPORATE POLS TO LIE TO YOU!


Remember, if you think you are getting a tax break at the level of main Street with these tax policies only meant to boost the rich and corporate wealth.....think what happens to replace that missing revenue -----fees, tolls, fines, and more taxes on the working and middle-class.


Busting the Budget Yes, if You Cut Taxes, You Get Less Tax Revenue Kansas Tax Cut Leaves Brownback With Less Money

JUNE 27, 2014

 Kansas has a problem. In April and May, the state planned to collect $651 million from personal income tax. But instead, it received only $369 million.

In 2012, Kansas lawmakers passed a large and rather unusual income tax cut. It was expected to reduce state tax revenue by more than 10 percent, and Gov. Sam Brownback said it would create “tens of thousands of jobs.”

In part, the tax cut worked in the typical way, by cutting tax rates and increasing the standard deduction. But Kansas also eliminated tax on various kinds of income, including income described commonly — and sometimes misleadingly — as “small-business income.” Basically, if your income results in the generation of a Form 1099-MISC instead of a W-2, it’s probably not taxable anymore in Kansas.

Consider me. I draw a salary from The New York Times; if I lived in Kansas, I’d pay state income tax on it. I also earn income from other news outlets, including MSNBC, where I am not a payroll employee. That makes me a “small-business owner” in the eyes of the government, and if I lived in Kansas, my income from MSNBC would be tax-free.

While no state has gone as far as Kansas, four others — Missouri, Ohio, Oregon and South Carolina — have passed laws in the last decade that give some small-business owners lower tax rates than wage earners.

By creating this preference for some types of income over others, Kansas has run into at least five problems:



It’s sometimes possible to turn taxable salary income into untaxed “business” income.


The Times has me on its staff, but it could commission freelance work from me instead. Income from the same work would then become tax-free under the Kansas rules.

Jim Dunning Jr., managing partner of Dunning & Associates C.P.A.s in Wichita, says he has seen a few clients change the way their businesses are incorporated to take advantage of the tax law. Many small firms are structured as S-corporations, and federal law requires an S-corporation’s owner-managers to pay themselves at least a “reasonable” salary. But by converting to a limited liability company, or L.L.C., owners can set their salaries to zero and take all of their income from the company as profits, thus avoiding any Kansas tax.



A lot of the beneficiaries of the tax break won’t be small businesses.

Many are sole proprietors like me, who are fundamentally engaged in labor, not entrepreneurship, and aren’t likely to hire anybody just because they receive a tax break.

At the other end of the spectrum, there’s no size limit on “small businesses” as defined by Kansas and the Internal Revenue Service. The Kansas tax break does not extend to C-corporations, the typical corporate form used by large publicly traded companies. But large companies can be structured in forms typically used by small businesses. For example, as of 2005, only 0.2 percent of business partnerships — which Kansas counts as small businesses — had earnings of more than $50 million, but they accounted for 57 percent of all partnership earnings.

The investment giant Fidelity Investments converted from a C-corporation to an L.L.C. in 2007, and thus stopped paying corporate-level income tax. Fidelity’s owners pay federal tax on the share of Fidelity’s income attributable to them, but in Kansas the income would not face state income tax at either the corporate or the individual level.



It’s not clear that there’s anything special about small businesses for the purpose of job creation.

A 2013 study by economists from the Census Bureau and the University of Maryland found that while young firms add jobs more quickly than older ones, the size of a firm does not appear to drive job growth.

And indeed, while Governor Brownback wrote last month that the tax cuts were allowing businesses to “hire more people and invest in needed equipment,” job growth in Kansas has been modest since he signed the bill, trailing the national average and the rate in three of its four neighboring states.


Some of the revenue loss doesn’t even benefit taxpayers.

Let’s say you own an L.L.C. in Kansas but live in Oklahoma. Mr. Dunning, the accountant in Wichita, described clients in this situation who have oil and gas interests along the state border. The tax change in Kansas relieves those business owners of their obligation to pay income tax to Kansas — but they also lose a credit on their Oklahoma tax returns for taxes paid to Kansas, so they just end up paying more to Oklahoma. This provides no particular incentive to do business in Kansas.

Small-business owners who switch from an S-corporation to a limited liability company also face a federal tax hit that partly offsets their Kansas tax savings, again enriching another government at Kansas’ expense, and blunting the tax changes’ benefit to businesses. All of which brings us to the last issue.



The state budget is suffering.

Of course, lawmakers in Kansas knew when they passed the tax cuts that this would happen;
the question is whether they will lose even more revenue than they expected over the long run.

The Kansas Legislative Research Department — the state-level equivalent of the Congressional Budget Office — issued a memo this month saying that “it appears that some of the fiscal notes associated with various income tax law changes enacted in 2012 and 2013 were understated.” Translation: It looks as if we gave out a bigger tax cut than we thought.

Steve Stotts, the director of taxation at the Kansas Department of Revenue, disagrees. He says the April and May shortfall is driven by a one-time federal tax event unrelated to Kansas state policy that isn’t indicative of future revenue shortfalls.

The “fiscal cliff” at the end of 2012 induced people to shift whatever income they could into 2012 to take advantage of low capital-gains tax rates before they went up. That lifted income tax collections, but only for one year (2013, when final payments for tax year 2012 were made). As a result, income tax receipts in 2014 are lower than they were in 2013, and many states underestimated just how much they would drop.

But Kansas missed by more than most. According to data collected by the Rockefeller Institute, of 17 states that produce public monthly income tax revenue projections, Kansas’ April error — off by 28 percent — was by far the largest. No other state missed by more than 16 percent, suggesting that a failure to anticipate falling capital gains tax revenue was not the only problem in Kansas.

As revenue comes in over the next few months, Kansas will learn just how big of a tax cut it’s given out in the name of small business, and what it will have to do to the rest of the state budget to make the tax cut affordable.

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December 30th, 2014

12/30/2014

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I had to laugh out loud when, after Democrats lost control of the Senate and Barbara Milkulski lost her chair of appropriations committee said with such remorse------

NOW THOSE REPUBLICANS ARE GOING TO END ALL NEW DEAL PROGRAMS. 

Mikulski's district is Baltimore Maryland and Baltimore ended New Deal programs decades ago!  Corporations suck Baltimore's revenue like a vampire squid and pay no taxes.

As I stated yesterday the coming economic crash will pull the same trillions of dollars in taxpayer bailouts to Wall Street and the rich investment firms.  Bill Gross and PIMCO will be the next AIG and its CEO and no doubt PIMCO is in the process of spinning off all of its assets into investment firms like HighStar as AIG did just before the last crash.  You can bet the US Ivy League universities that were the major shareholders in the AIG asset spinoff are in line to capture all of the wealth PIMCO generated selling pension investments knowing he was imploding the bond market.  Don't worry about Gross losing his wealth by Rule of Law bringing back fraudulent gains---as with the AIG CEO----not a single indictment.

So, both shareholders and taxpayers will be bailing out this global  MUNI-FUND corporation
. 

THAT'S THE WAY YOUR CLINTON NEO-LIBERAL AND BUSH NEO-CON POLITICIANS WANT IT!  ALL MARYLAND POLS ARE WALL STREET GLOBAL CORPORATE POLS!  GET RID OF THEM.


Bill Gross' Parting Gift to Fund Shareholders: Higher Taxes?

 By Dan Caplinger
November 3, 2014


Bill Gross. Source: PIMCO


Today I want to look at the R & D  credit and the expensing tax credit for corporations given as a gift by Obama and Congressional neo-liberals.

As you see below, Obama super-sized the wealth of the rich in 2010 using a manufactured Congressional fight as a ploy for compromise.  Remember, by 2010 Obama and his US Justice Department had already told us THEY SEE NO CORPORATE FRAUD as the entire world was victim of tens of trillions of dollars in corporate fraud.  That was Obama's gift to Wall Street as well.  Make no mistake---had we elected Hillary she would have done the same as they are both Clinton Wall Street global corporate neo-liberals.  As this article shows---it not only gave breaks in income and capital gains----it eliminated what is a huge corporate tax revenue -----R & D and property taxation for corporations.  How did this pass with a Democratic President and Senate?  It wouldn't have had they been progressive labor and justice!

'But Obama wants to create billions in new tax breaks for businesses that make no sense at all--such as making the R&D credit permanent (just a tax break for R&D that businesses have to do to stay viable) or providing 100% expensing (just a tax break, and likely to result in purchases of equipment from overseas, thus shipping jobs out of the country rather than helping jobs domestically)'.


We already knew that extending the Bush tax cuts would send a trillion dollars to the rich----but what most people don't know is how is ended yet another corporate tax revenue stream at a time of huge national debt and the move toward austerity against the American people.
  Imagine how many of the rich sent their estates into trusts for absolutely nothing during this two year window----the loses of estate tax revenue was huge.  The Founding Fathers included the Estate Tax as the great equalizer----keeping America from becoming what it is today----an oligarchy of wealth disparity.  Lucky for the American people much of this wealth disparity was created by corporate fraud so recovering the fraud redistributes the wealth back to the people.


ataxingmatter
September 13, 2010

Estate tax and extension of Bush cuts generally

According to an interview with Treasury's Michael Mundaca reported in the Wall St. J. today (Sept. 13, 2010), Congress and the Obama administration are discussing a possible bill to allow estates that pass in 2010 to have the 2009 or the 2010 law apply.  See Martin Vaughn, Estate Tax Choice May Be In Works For 2010 -- Treasury Official, Wall St. J..

Does that make sense?  Probably not.  The problem exists because the gimmick was adopted by the GOP to pretend that the cost of all their tax changes wasn't as big as it actually would be if the changes were permanent reforms rather than temporary.  Allowing an election doesn't make sense, but neither did the original Bush tax cuts, that provided a gradual phasing out of the estate tax over the years of the Bush regime with a complete repeal for one year in 2010 and then a resurrection of the 2001 laws in 2011.  But how Congress deals with that sunsetting gimmick now will determine a great deal about the economy in the future.

Regretably, politicians hear the loud ranting from the tea partiers and others, and so, as the New York Times reported on Saturday, in an article by David Kocieniewski, Tax Cuts May Prove Better for Politicians Than for Economy, NYTimes, Sept. 11, 2010.

Obama at least knows that passing a new tax cut for the wealthiest 2% makes very little sense--they will save it or invest it overseas; they are unlikely to spend it on consumer goods that create new production demand in the economy or use it to create new, entrepreneurial businesses that hire people.
  But Obama wants to create billions in new tax breaks for businesses that make no sense at all--such as making the R&D credit permanent (just a tax break for R&D that businesses have to do to stay viable) or providing 100% expensing (just a tax break, and likely to result in purchases of equipment from overseas, thus shipping jobs out of the country rather than helping jobs domestically).

Meanwhile, the Republicans generally haven't ever seen a tax cut they didn't like (unless it is one targeted at the lowest-income Americans).  They make ridiculous claims such as the one that not providing an extension of the Bush tax cuts for the wealthiest Americans will stifle small businesses and hurt job creation.  Ridiculous, because very very few Americans who receive income from small businesses will be much impacted by letting the tax cuts for the wealthiest Americans lapse as currently set by law (only 2% of small business owners receive more than $250,000 of income from their business) and those with small business income aren't really encouraged to plow it back into the business by cutting their income taxes.  See, e.g., William Gale, Five Myths About the Bush Tax Cuts, Washington Post, July 30, 2010 (hat tip Linda Galler for reminding me about this article).

The Times article reports on the CBO's analysis of short-term effects of policy decisions, which concluded that (to quote the Times' description) "extending the tax cuts would be the least effective way to spur the economy and reduce unemployment" while tax cuts for the rich "would have the smallest 'bang for the buck' because wealthy Americans were more likely to save their money than spend it."  The CBO had more support for payroll tax relief, since those cuts in taxes would got to the people who are most likely to spend it in ways that stimulate the domestic economy.  The problem I see with payroll tax cuts is not who they are targeted to benefit but the result that can be misused by the right-wingers who want to decimate Social Security and Medicare--a payroll tax cut results in less money going into those coffers, which just feeds the ridiculous notion that the payroll tax programs are nearing bankruptcy.  No sense in giving the entitlement-haters more ammunition.  Better would be a pre-bate of income tax amounts, including a negative income tax refund to those who won't pay any income tax but will pay payroll taxes.


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When you hear about the corporate R & D tax credit you may think----well, that helps the economy.  Think who gets the bulk of these credits?  The US oil industry writes off hundreds of billions in tax subsidy through this law.  Only the richest corporations conduct their own R & D and the tax deductions from this credit comes from wages, supplies, and maintenance of facilities that are the very operational costs of doing business.  So, this tax credit never brought value to the American people----all of the money saved was spent overseas and it will be for the near future.  When we see memes that show the hundreds of billions cut from Food Stamps versus the hundreds of billions in tax subsidy to US oil corporations----THIS IS THE CREDIT THAT BRINGS THIS SUBSIDY.


Obama and Congressional neo-liberals are a tag -team for corporate tax cuts and subsidies at a time when we have a $17 trillion national debt and an equal amount of corporate fraud needing to come back----FDR used a 70% corporate tax rate to do that------Clinton neo-liberals are cutting corporate taxes to zero.

REMEMBER, OBAMA IS NOT FORCED TO DO THIS----REDUCING CORPORATE TAX REVENUE AT A TIME OF SUCH NATIONAL DEBT AND A COMING ECONOMIC CRASH----A RECIPE FOR FISCAL DISASTER---FOR THE AMERICAN PEOPLE.


R&D credits: Tax savings value for 2014 and beyond


June 6, 2014


Robert W. Henry, CPA
Weaver


Recent news further illustrates the value oil and gas companies may realize from claiming research and development (R&D) tax credits at the federal and state levels.

Extension of the federal R&D tax credit for the 2014 and 2015 tax years was approved by the Democrat-led U.S. Senate Finance Committee in April 2014. Additionally, the Republican-led House of Representatives approved a bill in May 2014 that would make the R&D credit permanent.  The House measure passed with a vote of 274 – 131. The House bill still requires full Senate approval and President Obama’s signature, but it remains clear that the R&D tax credit enjoys widespread political support
.  This bipartisan support for the R&D credit in general makes it more likely than ever (since the credit’s most recent expiration at 12/31/13) that its proposed extension will become law in either temporary or permanent form at some point in the foreseeable future. The R&D tax credit was originally enacted as part of the Economic Recovery Tax Act of 1981, and has been extended for virtually every year since.

Effective January 1, 2014, oil and gas companies may also claim an R&D tax credit in Texas. With that move, Texas joins other significant energy-producing states in offering an R&D tax credit.

Oil and gas companies operating in the industry’s upstream sector may undertake activities that qualify for the R&D tax credit when experimentation is used to overcome the uncertainty regarding recoverability of resource reserves. Activities to identify a petroleum or gas reservoir’s existence typically do not qualify for the credit. Many costs incurred in maximizing return on capital for recovery of known reserves, though, may qualify for the credit.

Various midstream and downstream activities, such as determining methods of more efficiently transporting or refining oil and gas, may likewise qualify for the credit.


U.S. Internal Revenue Code (IRC) sections 174 and 41 provide primary guidance for defining qualifying R&D activities.


Federal direction for defining R&D activity
US Treasury regulations section 1.174.2 (Regs. §1.174.2) defines qualifying research and experimental expenditures. A qualifying activity must:

  • Relate to the development or improvement of a “product,” inclusive of a technique, invention, formula or process; and;
  • Address uncertainty regarding the appropriate method or design for the product.
  • An eligible §174 activity may also qualify for the R&D credit under Internal Revenue Code section 41 (§41), if the activity:
  • Is technological in nature (i.e. based in engineering, geology or other hard science).
  • Contains a sufficient degree of development uncertainty.
  • Consists primarily of a process of experimentation.
  • Has a permitted purpose that improves a business component, which may be a product, process, software, technique, formula or invention.
Internal Use Software (IUS) may also meet the §41(d) qualified research definition if:

  • The software is innovative.
  • The software development involves significant economic risk (i.e. possible changes to anticipated return on investment is at risk due to developmental uncertainty), and;
  • The software is not available for commercial use.
Individual companies and industry vendors rely upon analytics and other software tools. An oil and gas company may develop its own software, which may qualify for the R&D credit. A vendor may likewise develop software that is not marketed as a separate product. Once a company has determined an activity meets R&D qualifications, it needs to determine that credit’s worth.

Calculation methods for the R&D tax credit
The Traditional Credit Method or the Alternative Simplified Credit (ASC) Method may be used to calculate the R&D tax credit’s value.

The Traditional Credit Method provides a credit equal to 20% of the excess of qualified research expenses (QRE) for the current tax year over a statutorily prescribed base period amount. 

The ASC Method uses a base amount equal to 50% of the average annual qualified research expenditures claimed by a company for the three immediately preceding tax years. The excess of current year QREs over that base is then multiplied by 14% to determine the credit.  Special rules also apply for first-time credit claims and start-ups.

Available state R&D credits
Various energy-producing states offer R&D tax credits. Texas is now offering a sales and use tax exemption or a franchise tax credit related to qualified R&D activities. With the volume of industry activity taking place within the state’s Barnett Shale, Eagle Ford and Permian Basin areas as well as other locales, companies have considerable incentive to investigate the Texas R&D tax credit.

Colorado also hosts a thriving energy industry and offers a 3% R&D tax credit. Qualifying activities must take place within designated enterprise zones. Louisiana offers up to a 40% R&D tax credit for qualifying activities. North Dakota bases eligibility for its R&D tax credit on §41 criteria. The percentages for the credit vary, based on the particular tax year(s) for which the credit is being claimed.

State tax codes vary immensely and not all states with a substantial oil and gas industry presence offer an R&D tax credit. An oil and gas company needs to determine where it has state tax nexus and identify whether an R&D tax credit is available for that state.

After determining that activities may qualify for R&D tax credits at the federal or state levels, a company needs to ensure that internal processes exist for capturing those tax credits
.

Steps for capturing R&D tax benefits
Capitalizing upon potential R&D tax credit benefits begins with examining what company projects or functions have qualifying activities.

An upstream oil and gas company needs to examine how it maximizes return on investment regarding known reservoirs and how it extracts oil or natural gas, based on criteria defined by §1.174.2 and §41.
Such examination needs to consider analytics and intellectual property as well as equipment and physical processes.

A midstream sector pipeline company may have devised means to more efficiently monitor oil and natural gas flows or may have overcome adverse field conditions in placing a pipeline. Various processes for purifying or refining oil or natural gas may have been improved upon, thereby giving a downstream sector company a substantial business benefit.

Industry vendors likewise need to evaluate what internal projects and functions might include qualifying R&D activity.

When R&D activities are identified, a company needs to determine how such costs are tracked.
How are labor expenses tracked for internal employees? What about contractor and vendor expenses? What supplies or materials are used, and how are those costs recorded?

Such awareness enables a company to define what it can claim for an R&D tax credit. Applying the tax credit formula then takes into account a company’s historical QRE and gross receipts.

Individuals responsible for R&D activities should be interviewed. Those individuals can describe exactly what activities are taking place, what steps and processes are involved, and what costs are being incurred. Those interviews also help individuals gain awareness of how R&D activities may be defined and what activities need to be documented.

Conducting such internal analysis can be an expansive task. If necessary, company managers should consult with a tax advisor for assistance in both identifying and tracking R&D activity.


Potential tax return examination concerns
If a company’s R&D tax credit claims are examined and audited, several factors will be considered. The first is the nexus between costs and activities. A company needs to demonstrate that costs factored into the R&D credit claim are indeed relevant and incurred in direct relation to the attributed R&D activity.

The process of experimentation, which defines R&D activity, must be documented. That documentation must demonstrate the activities undertaken in the development initiative must consist of a process of experimentation.  A process of experimentation is any process that has the capability of measuring the effectiveness of more than one proposed design alternative related to the uncertainty being investigated.

The company must also be able to identify the business component being developed or improved, which can be a product, process, software, technique, formula or invention held for sale in use of the taxpayer’s trade or business.

While many state tax codes are based upon federal tax code, differences arise among tax jurisdictions. State tax credit criteria must also be evaluated to identify potential examination concerns.

The R&D tax credit supports long-term business aims
Oil and gas companies face considerable risks. Capitalizing upon potential business opportunities requires considerable capital investment, too. R&D activities are necessary to mitigate risks and to make capital investments as worthwhile as possible.


The R&D credit enables companies to realize substantial tax benefits from those activities. Companies must be aware of where such opportunities may exist, and what conditions must be met to meet requirements defined in §1.174.2 and §41. Supporting documentation must be compiled, too. While that requires ongoing attention, the immediate and long-term tax savings make that effort worthwhile.


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The excuse Republicans and Clinton neo-liberals use for lowering corporate taxes while having a $17 trillion national debt is that US corporations have the highest tax rate in the world and cannot be competitive.  THAT IS A LIE. THE AMOUNT OF CORPORATE TAX CREDIT AND SUBSIDY IN THE US HAS US CORPORATIONS THE LOWEST IN THE DEVELOPED WORLD.  Add to that trillions of dollars in corporate fraud and US corporations have moved taxation to the profit side of the accounting ledger!

'Who benefits: Pharmaceutical companies, high tech companies, engineers, agriculture conglomerates'.

Below you see the list of many of the topics on taxes I will address.  Keep in mind-----progressives do not mind help with business taxes for small and regional businesses----unfortunately most of the corporate tax laws do not apply to these domestic businesses we want to support.  Graduated Corporate Income looks to be one.  At the same time global corporations are disguising themselves are local by creating individual incorporations all over the US and with that comes this graduated corporate income tax break that they really shouldn't have. 

STOP ALLOWING GLOBAL AND NATIONAL CORPORATIONS USE THIS INCORPORATION LOOPHOLE TO AVOID PAYING TAXES.


Call me crazy but I do not believe US corporations only had $470 billion in foreign income.  One Wall Street bank probably does that much business in Asia in one quarter for goodness sake.  So, this designation of double-taxation as an excuse to receive these breaks on foreign income is bogus.

'What Did Corporations Pay Abroad on Their Reported Foreign Income? On IRS Form 1118, U.S. companies report their foreign taxable income.  The form also shows the amount of taxes they paid to foreign governments and breaks these numbers down by country and by industry. According to the most recent IRS data on Form 1118 (from tax year 2010), U.S. multinationals reported paying $128 billion in taxes on $470 billion in foreign taxable income. This represents an effective tax rate on foreign income of 27.2 percent'.



10 Big Corporate Tax Breaks, and Who Benefits

Iva Hruzikova/The Fiscal Times

By Sarah Stodola,The Fiscal TimesFebruary 9, 2011

U.S. corporations — like many Americans — exploit every available rule in the tax code to minimize the taxes they pay. The United States has one of the highest corporate tax rates in the world, at 35 percent (not including any state levies), yet the actual amount in corporate taxes that the government collects (“the effective tax rate”) is lower than those of Germany, Canada, Japan and China, among others. The reason is confusingly called “tax expenditures,” a doublespeak term designed to legitimize special interest tax breaks and loopholes.

Those ‘expenditures’ will cost the U.S. government $628.6 billion over the next five years, according to a 2010 report from the Tax Foundation.  With advice from the Urban Institute’s Eric Toder, one of the country’s foremost authorities on corporate tax policy, we assembled the 10 most costly corporate tax loopholes and who benefits from them.

10) Graduated Corporate Income
This policy places the first $50,000 of a corporation’s profit at a 15 percent tax rate, with higher profit levels garnering higher tax rates, until it tops out at 35 percent for taxable corporate income exceeding $335,000. The result is that an owner of a small corporation pays only 15 percent in taxes on the first $50,000 of profit, leaving more left over potentially for reinvestment and growth.
5-yr Cost to Government (2011-2015): $16.4 billion
Who benefits: Individuals that own small corporations.


9) Inventory Property Sales
Foreign income of American companies is taxed in the country in which it is generated, and the U.S. gives a tax credit for that amount in order to avoid double taxation. Some companies have accumulated a glut of such tax credits (the “inventory”), and in order to use them up, they artificially boost foreign income through a “title passage rule” that allows companies to allocate 50 percent of income from U.S. production sold in another country as income generated by that foreign country (the “property sales”).
5-yr Cost to Government: $16.7 billion
Who benefits: Multinationals with operations in high-tax foreign countries.


8) Research and Experimentation Tax Credit
Intended to spur research and development within companies, in its simplest form this break allows for a 20 percent tax credit for “qualified research expenses.” There are more complex applications, as well. Detractors complain that it is paying corporations to do research they would have done anyway.
5-yr Cost to Government: $29.8 billion
Who benefits: Pharmaceutical companies, high tech companies, engineers, agriculture conglomerates.


7) Deferred Taxes for Financial Firms on Certain Income Earned Overseas
Because most financial firms conduct their foreign operations as branches rather than as subsidiaries, as most companies in other industries do, they do not benefit from the tax breaks afforded to foreign subsidiaries. To compensate, this loophole enables financial firms to treat income from their foreign branches as if they were subsidiaries, along with all of the attendant tax benefits.
5-yr Cost to Government: $29.9 billion
Who benefits: Any financial firm with foreign operations.


6) Alcohol Fuel Credit
This is a tax credit for the production of alcohol-based fuel, most commonly ethanol, which is made from corn. The credit ranges from $0.39 to $0.60 per gallon. In theory, the credit is meant to encourage alternative forms of energy to imported oil. It is largely responsible for propping up the price of corn, and is extremely popular in corn-producing states like Iowa and Illinois.
5-yr Cost to Government: $32 billion
Who benefits: Food and agricultural conglomerates in the Midwest.

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I had to laugh out loud when, after Democrats lost control of the Senate and Barbara Milkulski lost her chair of appropriations committee said with such remorse------

NOW THOSE REPUBLICANS ARE GOING TO END ALL NEW DEAL PROGRAMS. 

Mikulski's district is Baltimore Maryland and Baltimore ended New Deal programs decades ago!  Corporations suck Baltimore's revenue like a vampire squid and pay no taxes.


FDR used the New Deal to redistribute wealth after the stock market crash that gave us the Great Depression.  He created a set of corporate and wealth taxes to bring back what was a mirror of the 2008 economic crash also brought by massive and systemic corporate fraud.  This New Deal tax program provided the American people justice by returning all of the wealth stolen in corporate fraud.  This filled the Federal and state coffers with money that fueled the Great Work Programs.  What better than to us money collected by taxes to recover corporate fraud to stimulate the US economy and create what was a first world nation with the finest in infrastructure.  THAT WAS WHAT THE NEW DEAL AND HIGH CORPORATE AND WEALTH TAXATION WAS ABOUT.

Flash forward to today----after yet the same attack on the US economy by massive and systemic corporate fraud and sadly we have Clinton and Obama neo-liberals working with the Republicans to dismantle all of the FDR New Deal programs.  Corporations today have moved taxes to the profit side of the accounting ledger.  The corporate tax breaks that Obama and Congressional neo-liberals have been speaking about since 2009 'as job creators' is what Obama and Republicans will do over the next two years.  Don't worry that the Senate changed hands this past election----the Senate was ready to do this in 2010 when we had control.  Bernie Sanders is the only candidate for President that speaks against dismantling New Deal.




ByJeff HadenMoneyWatch
December 7, 2011, 11:21 AM


How would you feel about a 94% tax rate?


Today is the 70th anniversary of the bombing of Pearl Harbor. One day later the U.S. declared war on Japan, and four days later declared war on Germany and Italy.

Declaring war was one thing, paying for the war another. World War II had massive worldwide consequences, but it also changed forever the way Americans -- and American businesses -- are taxed.

I asked William T. Zumwalt, a CPA from Tulsa, Okla., to describe the impact of World War II on taxes, both then and now:

If you think a 35% tax rate is high, try 94%.

The consequences of the attack on Pearl Harbor still reverberate today, in dozens of unseen ways -- including how Americans pay the taxes that support the national security apparatus that works to prevent such an attack from happening again.

The Roosevelt administration had been gearing up to support the war effort long before the actual attack. When bombers struck on December 7, 1941, taxes were already high by historical standards. There were a dizzying 32 different tax brackets, starting at 10% and topping out at 79% on incomes over $1 million, 80% on incomes over $2 million, and 81% on income over $5 million.

In April 1942, just a few short months after the attack, President Roosevelt proposed a 100% top rate. At a time of "grave national danger," he argued, "no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year." (That's roughly $300,000 in today's dollars).

Roosevelt never got his 100% rate. However, the Revenue Act of 1942 raised top rates to 88% on incomes over $200,000. By 1944, the bottom rate had more than doubled to 23%, and the top rate reached an all-time high of 94%.

World War II also marked the introduction of payroll withholding, which has become the secret to making today's tax system work. Imagine the administrative and accounting nightmares faced by small business owners suddenly required to calculate and withhold taxes.

Traditionally, the government had collected taxes in arrears when taxpayers actually filed their returns. But as the war accelerated, government couldn't wait for the new, higher taxes to increase revenue. That created a problem, though -- how could Americans afford to pay their 1942 taxes at the same time employers were withholding tax on 1943 income? To solve that problem, the Current Tax Payment Act of 1943 actually cancelled 75-100% of the lower of 1942 or 1943 individual tax liability.

Tax rates remained high for decades following the war. It wasn't until President Reagan took office in 1981 that the top rate dropped below 70%. Today's top rate of 35% is actually low by historical standards -- and tax collections are at post-war lows as well.

We still face real threats to our security, but military spending, which reached 42% of Gross Domestic Product in 1942, has fallen to just 6% today -- even accounting for wars in Iraq and Afghanistan.

The generation that fought the war is often called the "Greatest Generation." What would those who made such awesome sacrifices back then think of today's tax debates? Would they side with those who feel "taxed enough already" to support today's peacetime needs? Or would they side those who call for greater sacrifice from the wealthiest Americans?


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December 29th, 2014

12/29/2014

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Let's take this week to speak about tax policy at all levels of government.  It is important for both Republican and Democratic Party voters to understand where Bush and Clinton global corporations are going when they say they are all about lower taxes.  As we all know global corporations have allowed corporations to not only pay no taxes but are sending the taxes you and I pay to subsidize corporate profit.  This is the reason taxes on the working and middle class have gone sky-high under neo-con Erhlich  and neo-liberal O'Malley.  If you feed money to Wall Street someone has to pay.  If we keep allowing these global corporate pols to win elections these taxes will explode.  That is about what the American Revolutionary War was fought and won.  That is what Medieval Europe was about-----collecting taxes on the peasants to enrich the wealthy.  THAT IS WHERE GLOBAL CORPORATE POLS OF BOTH PARTIES ARE TAKING THE US.

I want to make one more comment on Wall Street fraud before moving on.  The ten  trillion of dollars in Wall Street fraud does not include the ten trillion of dollars in corporate frauds across all industries.  So, there is no revenue shortfall====our elected officials are simply aiding and abetting these fraud but blocking any justice. 

ALL OF MARYLAND'S POLS ARE GLOBAL CORPORATE POLS.

The first thing we have to know about corporate tax law is that our politicians write these laws that are written with loopholes and have as a goal to allow corporations to get out of paying taxes.  So, while Democrats in Congress cry foul at how US global corporations are avoiding paying taxes----they are writing the laws to allow this.  IT IS A SCAM.  Since Clinton neo-liberals have taken hold of the Democratic Party teamed with Republicans----corporations not only do not pay taxes----taxes are on the profit side of the accounting ledger!
  Maryland is one of the worst states for pols conspiring with corporations at the expense of its citizens AND YET THEY ARE RE-ELECTED EVERY TIME!

Today I want to show why the American people who think they are participating in the stock market never were----all that money tied to pensions and 401Ks were simply used as fodder to boost gains of the rich while any gains made by the average shareholder were lost over and over usually by deliberate Wall Street frauds.  National union leaders have tied US unions to this stock market and are part of killing people's savings and retirements as they know these investments are fodder and the investments promote growing corporations globally.

Let's look at the coming shareholder scam Wall Street has planned.....and how government coffers will again be fleeced by bond market fraud.


Opinions

Shareholders, public deserve tax transparency


(Peter Macdiarmid/Getty Images) By Catherine Rampell

Opinion writer August 21 Tax inversions. Double Irish with a Dutch sandwich. Spinning off tangible assets into real estate investment trusts. Son-of-BOSS shelters.

These are among the array of eye-glazingly complicated tax avoidance strategies adopted by America’s biggest companies. Each gets a moment in the sun when some enterprising journalist stumbles upon a particularly egregious example of its use; the public expresses outrage; policymakers denounce the behavior, which they themselves have incentivized; and then maybe Congress plays whack-a-mole trying to close the loophole. Then the public forgets, firms come up with inventively aggressive new strategies, and the pattern repeats.

Here’s a proposal to try to curb this cycle: Require all publicly traded companies to make their tax returns public. Period.

This is not a new idea. In fact, when the modern federal corporate income tax was introduced in 1909, it came with a requirement to disclose the returns. Such transparency mandates were fought over bitterly for the next couple of decades, and U.S. returns have been confidential since 1935.


The basic rationale behind tax transparency is that shareholders (and creditors and the general public) deserve to know what publicly traded companies are doing, particularly if complicated tax acrobatics are distorting their operational and investment decisions.
Today, publicly traded corporations must disclose some information about their accrued tax liabilities in Securities and Exchange Commission filings, but even tax experts find it nearly impossible to reconstruct what they actually pay from year to year, and to whom — let alone what kinds of intricate shelters they’ve crafted to be able to tell one audience (the public) that they’re hugely profitable and another (the Internal Revenue Service) that they’re barely scraping by.

The objections, on the other hand, tend to fall into three categories.

One is that disclosure will lead to a rash of misinformed analysis as the public tries to conduct amateur audits of firms’ tax returns, which can run many thousands of impenetrable pages. I am unsympathetic to this argument; the counter to bad information is more and better information. And given the massive defunding of the IRS in recent years, maybe it’s not so crazy to want more eyeballs — including those of outside tax experts — on companies’ tax filings.


The second objection relates to giving away trade secrets. But the strategies that companies employ to comply with the law should not be proprietary. If companies fear that disclosing tax returns would reveal non-tax-related competitive information, perhaps there is a way to allow for redactions. But I’m not convinced this is actually a risk.

The final objection is that disclosure could lead to more aggressive tax avoidance, not less. After all, firms might learn from one another about snazzy new ways to shelter income and feel pressure to be more aggressive tax-dodgers than they already are.

“All of a sudden you can easily check your competitors’ tax rates, and if yours is higher than theirs, that’s going to be a problem,” said Alex Raskol­nikov, a tax law professor at Columbia Law School. “You could end up in a race to the bottom.”


Perhaps, but another possible result is that, over the long run, companies invest fewer resources in tax avoidance, since they would be forced to share the fruits of their tax departments’ labors with free-riding competitors. And from a social welfare perspective, we want companies to focus their R&D on creating the next iPad, not on finding ways to make their iPad-generated profits magically disappear.

Under the current system, you really can’t blame companies for maintaining massive tax departments, which wade through our convoluted tax code in search of savings.


“Our U.S. code imposes on CEOs a fiduciary obligation to do the best by their shareholders, which very much includes minimizing taxes,” Ivo Welch, an economics and finance professor at UCLA’s Anderson Graduate School of Management, wrote me in an e-mail. “Arguably, a CEO who does not take advantage of a Double-Dutch when (s)he can and instead pays taxes can in principle be taken to court for neglect.”

And then we consumers — and our public officials — have the gall to accuse these firms of being unpatriotic.


Right now there is so little public understanding of how widespread tax avoidance is that individual companies with the misfortune of ending up in a reporter’s cross hairs are vilified, even when their actions are legal and quite commonplace. With more transparency, public discourse could shift away from shaming individual companies and toward shaming Congress for creating, and perpetuating, our terrible, convoluted, loophole-riddled tax system in the first place.
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The S Corporation status was the earliest attempt to left corporations from tax responsibility and it affects both shareholders and the American people.  Above we read that shareholders should be able to see whether the corporation it is invested is meeting its tax responsibilities because if not---the IRS can come after shareholder wealth for money a corporation cannot pay.  The conflict of interest we have today is shareholder wealth increases as corporate profits gain from not paying taxes.  Remember, Clinton neo-liberals and Republicans are committed to shareholder wealth so there is no incentive to audit corporations for payment.  Today, Obama has allowed hundreds of billions of dollars in corporate taxes go uncollected.  Shrinking our government coffers but boosting shareholder wealth.  If you are an ordinary investor with a pension fund----you may get some stock gain from corporate tax evasion but that lost revenue comes back to you in the form of higher taxes on the working and middle-class.  The only shareholders that gain from corporate tax evasion are those rich that do not pay taxes either.

The second aspect about S Corporations and why they are bad is that transferring corporate tax responsibility to shareholders made the process of auditing for compliance by shareholders harder and more costly and quite frankly I do not believe these shareholder taxes are paid by many shareholders.  Again, it is probably only the working and middle-class that claim their shareholder gains.


IF THE IRS DID ITS JOB AND AUDITED FOR SHAREHOLDER COMPLIANCE THERE WOULD BE NO PROBLEM WITH THIS ARRANGEMENT.  DID YOU KNOW THAT THE STATES CAN AUDIT AND REPORT THIS TO THE IRS BECAUSE STATES LOSE FUNDING WHEN THIS TAX EVASION HAPPENS.

If you are a shareholder and think this is OK---think who will be stockholders soon as US corporations become global and multinational----they will not want the public attached to these stocks----it will be only fellow corporate boards and CEOs owning each other's stock. 



S Corporations

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

To qualify for S corporation status, the corporation must meet the following requirements:

  • Be a domestic corporation
  • Have only allowable shareholders
    • including individuals, certain trusts, and estates and
    • may not include partnerships, corporations or non-resident alien shareholders
  • Have no more than 100 shareholders
  • Have only one class of stock
  • Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation (PDF) signed by all the shareholders. See the instructions for Form 2553 for all required information and to determine where to file the form.




Can IRS Go After Shareholders If a Corporation Owes Tax?


by Kevin Johnston, Demand Media


Corporations that cannot pay back taxes still owe the Internal Revenue Service. In the event the corporation cannot meet its tax obligations, the IRS may look at assets belonging to shareholders rather than the company itself. Though one purpose of forming a corporation is to shield owners from personal liability, in practice the IRS has the right to pursue tax payments from anyone that has ownership in the company.


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This is an example of ending the practice of Americans as stockholders.  Unions acting like Wall Street banks are heavily invested in the market and profiting off global corporations that are killing them.  So, a union worker making some money from stock investments while global corporations push them into poverty with wage and benefit cuts. 

IF A NATIONAL UNION LEADER ALLOWS WORKERS TO ATTACH TO A WALL STREET MARKET THAT IS KILLING THEM----THEY ARE WORKING FOR GLOBAL CORPORATIONS.

Inversion policy is more about Trans Pacific Trade Pact and how a global corporation will be allowed to operate in the US as it does overseas.  Most inversions are happening in developing nations.  Notice USA Today doesn't mention this because it is a Wall Street media outlet.  Inversion will allow what were US corporations----now multinational----to avoid paying taxes that are not collected in the nation they are registered.

DO YOU HEAR YOUR POLS SHOUTING THIS FOR SEVERAL YEARS?  IF NOT-----THEY ARE CLINTON WALL STREET GLOBAL CORPORATE NEO-LIBERALS WORKING TO END CORPORATE TAXATION AT GREAT LOSS OF REVENUE TO THE US.  IT WILL MAKE THE US  THIRD WORLD.


Getting a tax break for simply building a facility in the US eliminates taxes collected for property.  Obama and neo-liberals eliminated the tax on depreciation when Congress was controlled by a super-majority of 'Democrats'.....so, it a time when recovering massive corporate fraud of tens of trillions of dollars through taxation as was done by FDR after the Great Depression-----Clinton neo-liberals are joining Republicans in dismantling all corporate tax base.

CITIZEN SHAREHOLDERS ARE ALLOWED TO SEE ALL THEIR GAINS AS SHAREHOLDERS DISAPPEAR EACH ECONOMIC CRASH SO THERE IS NO REASON FOR THE 99% TO WANT TO PROTECT SHAREHOLDER WEALTH.

As you see, another pathway to retirement for working and middle-class is taken just as the subprime mortgage fraud caused lost homes and home value that many people considered their retirement.  It is good to see that Clinton neo-liberals are not being made to do this----they are pushing these policies.

Corporate inversions mean tax hit for shareholders

Kevin McCoy
, USA TODAY
3:57 p.m. EDT September 23, 2014(Photo: Medtronic)




Corrections & clarifications: An earlier version of this story misidentified Medtronic's proposed merger partner as Shire instead of Covidien in one reference to that deal.

For an investor who says he just dabbles in stocks, Minnesota doctor James Allen has succeeded far better than most.

By his estimate, Allen has accumulated a more than $1 million stake in Medtronic (MDT), the world's largest medical technology firm, headquartered not far from his home in the Twin Cities area.

He intended to continue holding the stock long-term, for retirement or other special needs. But his plan was unexpectedly upended in June. Medtronic announced it would undergo a corporate inversion by reincorporating its headquarters in Ireland after buying Dublin-based rival Covidien (COV) in a $42.9 billion cash and stock transaction.

The pending deal is expected to help Medtronic avoid billions of dollars of U.S. taxes on future foreign profits if the company opts to invest them in the U.S., such as by building new plants, funding research or buying back stock. The transaction could be complicated by new restrictions on inversions announced Monday night by the Obama administration.

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Hmmmmmm.....I wonder if Gross is deliberately allowing his global corporation PIMCO fall into bankruptcy because having been a heavy player in using pensions as fodder he led the final attack on pensions with this coming bond market crash with many pensions tied to this collapsing bond market.  Oh look----he is taking out the shareholders too!  You can bet the investment firms and Wall Street exited PIMCO as they will not be tied to it in this coming bond market crash.

Now, all Congressional pols know their policies were meant to implode the bond market and they also know this man is bailing to leave the 99% holding the costs that this corporation will incur as this coming bond market crash sends it into bankruptcy just as the AIG insurance corporation was targeted with the subprime mortgage loan fraud and sent into bankruptcy.  Both of these were huge global corporations so this bankruptcy will take the world's wealth just as AIG's bankruptcy did and it was all planned.

Bill Gross' Parting Gift to Fund Shareholders: Higher Taxes?

 By Dan Caplinger
November 3, 2014


Bill Gross. Source: PIMCO

The high-profile departure of Bill Gross from PIMCO to Janus Capital (NYSE: JNS  ) got plenty of headlines. Internal political upheaval at the bond-focused money-management firm finally led the billionaire fund manager to jump ship. Gross leaves behind a legacy of strong returns for longtime shareholders in funds like his flagship PIMCO Total Return Fund (NASDAQMUTFUND: PTTRX  ) . But as the end of the year approaches, shareholders could see most unwelcome news from the fund in the form of a substantial distribution of taxable capital gains.

The workings of mutual fund taxation can be outright confusing. But many experts are primarily concerned that a huge exodus of PIMCO Total Return shareholders in the wake of Gross' departure could have forced the fund to make massive sales of its assets -- and managing shareholders' redemption requests in such a way that would minimize the tax impact would have been challenging at best.

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Below you see how Obama and Congressional neo-liberals have moved as much wealth to the top as Bush using tax code and Federal 'stimulus' and bailout schemes.  This article comes from the idea of a tax reform that lowers taxes on the working and middle-class as tax fairness where I come from the idea that 35% is not too much and the reform such be solely on corporate taxation that reaches 70%.  This is of course what was done in FDR's time -----today we have Clinton neo-liberals and Republicans moving all the costs of government onto the middle and working class.  Federal and state taxation is on the rise.  In Maryland we had a Bush neo-con run on lowering taxes but watch----he'll take away one tax----say the 'rain tax' and then all of his tax policy will be about lowering corporate tax rate to make Maryland 'business-friendly'.


Obama and neo-liberals raised the capital gains tax a few years ago as they knew the stock market was being restructured to a global market.  As I show above---the American shareholder will be kicked aside and left with the costs of doing business.....taking most of the gains they thought they had built as a corporate shareholder.  Then, there will be no public stock options.  This was discussed in 2009 so all Congressional pols know this and have worked towards this----

BYE BYE ALL AVENUES OF SAVING AND RETIREMENT SAY CLINTON NEO-LIBERALS AND BUSH NEO-CONS!



'The reason: The federal code provides that there is no tax on capital gains or qualifying dividends for people in the 15% income tax bracket. That means that a Los Angeles married couple filing jointly for 2014 with $94,100 of adjusted gross income, all from long-term capital gains and qualifying dividends, would pay nothing — zero! — in federal income tax. But their California tax bill would be north of $3,000'



'In 1924 — a different era to be sure— industrialist-robber baron-Treasury Secretary Andrew Mellon wrote in support of treating wages more favorably than investments. “The fairness of taxing more lightly income from wages, salaries or from investments is beyond question,” he wrote. “In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man's life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mental and physical energy and the people whose income is derived from investments.”'


Op-Ed

A tax system tilted toward the rich The tax code started to tilt in the direction of favoring income from investments -- or favoring the 1%, if you will -- more than 20 years ago.

(Daniel Acker / Bloomberg) By Joseph Anthony

A couple living off investments has tax load just a little more than a third of what wage earners pay Congress managed to pass a tax bill in December — a great relief to tax professionals like myself. But what our legislators didn't do was address the fundamentally unfair way the United States taxes people who work for a living compared with people who live off of the earnings of their investments.

Our current system hits working Americans with punishing rates compared with what the investing classes are charged. A generation's worth of legislative twists have left our tax code so warped that during the coming filing season, one married couple bringing in $150,000 in total income from two jobs could find itself paying almost three times as much in federal income taxes as another couple that is alike in every way — except for the source of its income.

Leveling out the tax treatment of wages and investment incomes would increase the perceived and actual fairness of the tax code. -   The tax code started to tilt in the direction of favoring income from investments — or favoring the 1%, if you will — more than 20 years ago. In 1993, the year Bill Clinton took office, a married couple claiming the standard deduction — with no children, tax credits or other adjustments to income — and earning $75,000 apiece in wages, would have paid $35,650 in federal income taxes.

A similar couple, whose income came solely from long-term capital gains, would have gotten a small break thanks to what was then the 28% top rate on those gains. Their total tax bill, $34,158, would have been about $1,500 lower than that of the wage earners.

By 2000 — the year George W. Bush was first elected — the tax gap between wage earners and investors had already opened up. In that year, our two-wages couple would have paid $33,607 in taxes. They also would have paid that amount if all of their income had been from stock dividends; there was no preferential treatment for dividends at that point.

But the couple whose income came from long-term capital gains would have paid $23,025 in taxes — almost a third less.

Fast-forward to the 2014 tax season. Our two-income couple are still working full time to make the same $150,000 (not a farfetched scenario in our new-normal era of stagnant wages). After a decade's worth of inflation adjustments to their tax bracket, their tax bill is now $24,138.

And the couple living off of their investments? Their tax bill — whether their money came from long-term capital gains or qualifying dividends — has been slashed to $8,385, or a little more than one-third of the tax load on wage earners.

Don't Republicans have the stomach for tax reform? Some of my clients who get their money from unearned income find this discrepancy unbelievable when they compare their federal taxes to their state bills. During this tax season, I know I will have clients — in California and Oregon, where I live — who will pay more in state income taxes than they do in federal taxes. I may even have some clients who will be stunned to learn that they face a four-figure state tax bill while paying exactly zero in federal income taxes for the year.

The reason: The federal code provides that there is no tax on capital gains or qualifying dividends for people in the 15% income tax bracket. That means that a Los Angeles married couple filing jointly for 2014 with $94,100 of adjusted gross income, all from long-term capital gains and qualifying dividends, would pay nothing — zero! — in federal income tax. But their California tax bill would be north of $3,000.

  How did we get to this point? No legislator ever campaigned saying, “Tax laborers more than investors!” But several changes in the code since the early 1990s, including lowered tax rates on capital gains and lowered rates on qualified dividends, have conspired to produce that result. My high-income clients were dismayed last year by the new 3.8% net investment income tax, which applies to joint filers with modified adjusted gross incomes of more than $250,000 ($200,000 for singles), but that affects relatively few filers and, perversely enough, applies to non-tax-advantaged income such as rentals, as well as to dividends and long-term gains.

Can Democrats support a simpler tax code with lower rates? Neither political party gets sole credit or blame. President George W. Bush was most aggressive about pushing such tax changes, but breaks for unearned income were also passed and extended under both the Clinton and Obama administrations. Supporters argued that lower rates would benefit retirees living on fixed incomes and also spur investments. But the Center on Budget and Policy Priorities says that almost half of all long-term capital gains in 2012 went to the top 0.1% of households by income. For the nearly 60% of elderly filers who had incomes of less than $40,000 in 2011, the lower rates were worth less than $6 per household.


In 1924 — a different era to be sure— industrialist-robber baron-Treasury Secretary Andrew Mellon wrote in support of treating wages more favorably than investments. “The fairness of taxing more lightly income from wages, salaries or from investments is beyond question,” he wrote. “In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man's life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mental and physical energy and the people whose income is derived from investments.”

Well, that's certainly not going to happen any time soon. But leveling out the tax treatment of wages and investment incomes would increase both the perceived and actual fairness of the tax code. It would eliminate preferences that distort investment and financial planning decisions. A fairer code might also increase respect for the system and improve tax collection rates overall.


Joseph Anthony is an enrolled agent and tax pro in Portland, Ore. He can be reached at joe@joethetaxguy.com.

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For those that did not notice this tax law on capital gains passed under the hoopla of Obama supposedly raising capital gains taxes on the rich......this new law seeks to eliminate capital gains taxation on sale of assets. Notice it is directed at working middle class stock holders. Since the goal of Clinton neo-liberals and Bush neo-cons with global corporations and market is to end the entire policy of public listing and options for stocks-----this is the segue way out of the business of stock market for you and me. With the bond market crashing all stocks will take the usual plunge so if I were you----I'd take this sellout because you will be taken soon anyway. Market value is best when you hold stocks long term----but global corporate pols are telling you ------citizens need not apply to the stock market----it will be privately held by the richest.


No capital gains due for some investors

By Kay Bell • Bankrate.com



You heard right. There's no -- nada, nothing, zilch, zero -- capital gains tax on the sale of assets held for more than a year.

But you might not have heard the full story.

Bob D. Scharin, senior tax analyst from the tax and accounting business of Thomson Reuters, calls the law that was made a permanent part of the tax code Jan. 2, 2013, "the ultimate tax rate reduction." But as is often the case with tax provisions, this modification comes loaded with restrictions.

First, the elimination of capital gains tax applies only to assets owned for more than a year. Short-term sales remain taxed at your ordinary tax rate.


Then there is a monetary cap.

And it's not for every investor. Some young investors have been expressly excluded from the zero percent option. Others, such as Social Security recipients, could find that untaxed capital gains might mean new or additional taxes on their retirement benefits.

So before you rush to your broker to sell all your stocks and mutual funds, check out the law's finer points and how they might or might not apply to you.


Cashing in on lower capital gains taxes

Long-term capital gains taxes were first eliminated for some low- and moderate-income individuals in 2008. This zero-tax break was made a permanent part of the tax code Jan. 2, 2013, when the American Taxpayer Relief Act was signed into law.


Ordinary income tax bracket

Long-term capital gains rate by tax year20072008 - 20122013 and beyond10 percent5 percent0 percent0 percent15 percent5 percent0 percent0 percent Income $400,000 or less for single taxpayers; $450,000 or less for married filing jointly taxpayers15 percent15 percent15 percent Income more than $400,000 for single taxpayers; more than $450,000 for married filing jointly taxpayers15 percent15 percent20 percent
Limited to lower incomes The first, and for most the biggest, hurdle to overcome is the earnings limit. Individuals in the two lowest tax brackets -- 10 percent and 15 percent -- can sell long-term assets and escape any capital gains taxes.

While the percentages are low, when you consider dollar terms, the amounts look a bit more feasible. The 15 percent bracket for tax year 2013 goes up to $36,250 for a single filer; $48,600 for a head of household; and $72,500 for a married couple filing a joint return.

Even if you make more than the maximum for your filing status, you still might be able to take advantage of the zero percent rate. The reason: The cutoff amounts are taxable income, not the larger adjusted gross income amount.

"People are used to having deduction phaseouts tied to adjusted gross income," says Scharin. "This one is geared to taxable income."







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December 27th, 2014

12/27/2014

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This will be it on Wall Street fraud for now.  I think I covered what was tens of trillions of dollars in corporate fraud and it has never come back because Clinton neo-liberals conspired with Bush neo-cons to fleece the US Treasury and people with no pathway to justice.  They must keep anyone out of office that thinks of rebuilding public justice and that is why, in states like Maryland, there is open election fraud and rigging to keep candidates in primaries with these platforms from being heard.

COME OUT AND GET ENGAGED IN POLITICS----WE CAN REVERSE THIS BY SIMPLY RUNNING AND VOTING FOR LABOR AND JUSTICE IN ALL PRIMARIES!


As I said, Clinton started the privatization of universities and the for-profit education corporations and below you see the same neo-liberals in Congress when Clinton did this are now part of the ring connected with the movement of almost a trillion dollars in Federal funding to these for-profit education corporations.  There is no doubt that Clinton neo-liberals set up the structures for these frauds and Bush simply allowed them to go wild.  Obama pretended he was going to change the structures that allow all this fraud but he never did.

'For-profit colleges are a kickback scheme where politicians enact favorable legislation and regulations that allow for-profit colleges to maintain access to student loans and grant money. The for-profit colleges then "give" a small cut of the federal money back to the politicians to enact favorable legislation'.

This is yet another trillion dollar corporate fraud that has yet to be recovered and Wall Street pols think they are going to stick it all with students and taxpayers===



TruthOut.org / By Danny Weil 

For-Profit Education Fraud Tied to Political Elite A bipartisan group of the nation's political leaders have close ties to for-profit college scams. Now, an $11 billion lawsuit is forcing some of them into the spotlight.



April 20, 2012  |           On Friday, April 13, 2012,

Courthouse News reported a class-action lawsuit by students filed in federal court against the Art Institute of California and its owner, Educational Management Corporation (EDMC). As reported in Truthout, Sen. Olympia Snowe's (R-Maine) husband, former governor of Maine John McKernan, is chairman of the board of EDMC and a former CEO of the company.  The company also faces an $11 billion false claims lawsuit by the federal government and 11 states.

The lead plaintiff in the class-action suit, Chinea Washington, claims The Art Institute of California, Hollywood, led her to believe that federal grants and loans would cover the entire $89,000 cost for a bachelor's degree in interior design.

In November 2011, after three years of study, Washington was provided notice by the "college" that she had reached the federal loan/grant aggregate limit of $52,340 and that it would cost $37,000 to complete the degree. Washington dropped out with $52,160 in debt. Because The Art Institute's credits are not transferable, Washington has been swindled out of $52,000 and three years of her life.


The only way to describe $89,000 for a four-year degree with non-transferable credits from a non-academic college is as a fraud and a swindle, and that characterization possibly fails to convey the frustration and downright victimization students like Washington must feel.


Like subprime mortgages, for-profit colleges are a scam driven by payment of commissions to sales staff known as recruiters. The payment of commissions to high-pressure salespeople is so central to the scam that the umbrella trade group for for-profits, the Association of Private Sector Colleges and Universities (APSCU), has sued the federal government to overturn its ban on incentive pay.


It cannot be stated strongly enough: for-profit colleges could not engage in the ongoing exploitation of students and theft of federal money without the direct cooperation and assistance of the federal government in what can only be termed an immoral economy. The same forces that demonize everything government does or attempts to do are busy feeding from the government trough. The hypocrisy is untenable, the federal subsidies unfathomable and the lack of criminal prosecution unconscionable.

For-profit colleges are a kickback scheme where politicians enact favorable legislation and regulations that allow for-profit colleges to maintain access to student loans and grant money. The for-profit colleges then "give" a small cut of the federal money back to the politicians to enact favorable legislation.

In the cases of Senator Snowe and Sen. Dianne Feinstein (D-California), their husbands have operated under the cover of their wives as they directly benefited, and continue to benefit from, their positions as shareholders in for-profit college companies. Snowe and Feinstein are accomplices in the ongoing evisceration and defrauding of citizen taxpayers and students, which explains the pair's complete silence on this matter.

The so-called ruling class of government officials and elected politicians, to which Feinstein and Snowe clearly belong, is little more than a gaggle of white-collar criminals which facilitates and benefits from the diversion of taxpayer money into private coffers. It all takes on the appearance of legitimacy. Unfortunately, this is not a victimless crime. Like Washington, thousands of students who attend these subprime institutions are left with tens of thousands of dollars of nondischargeable debt which ends up ruining their lives.

There is a vast network of former and current government officials who actively participate in the for-profit college swindle. Some of the conspirators are well known, and include: Mitt Romney, Rep. Virginia Foxx (R-North Carolina), John Kline (R-Minnesota), Alcee Hastings(D-Florida), Trent Lott (R-Mississippi), Lamar Alexander (R-Tennessee), Steve Gunderson (R-Wisconsin), Virginia Democratic Party Chairman Brian Moran, Snowe, Feinstein, Nancy Pelosi (D-California), and John Boehner (R-Ohio). The group also includes Obama administration officials and supporters such as Lanny Davis, Anita Dunn, Hilary Rosen, Anthony Miller and Charles Rose.


_______________________________________


This is the people's solution to getting rid of student loan debt-------MAKING WALL STREET WRITE OFF THE DEBT SINCE IT WAS FULL OF FRAUD AND PREDATORY AND SUBPRIME LENDING. This is indeed what would happen if we did not have a Congress full of Wall Street neo-liberals and neo-cons. The Robin Hood Tax is a solution for recovering Wall Street fraud all around----but discharging the debt from the end of Wall Street and not the Federal government is what WE THE PEOPLE WANT.

Think as well the LIBOR fraud that hits these student loans-----and these loans last for years.  That needs to be deducted as well.


Wednesday, Jul 3, 2013 08:45 AM EDT

Let’s abolish student loans altogether! A Robin Hood tax on Wall Street could make education free again for millions of Americans

Les Leopold, AlterNet

Anyone with a heartbeat knows that Wall Street took down the economy, killed millions of jobs and hasn’t had to pay a penny for the damage it caused. In fact we are paying them for crashing the economy in the form of trillions in bailouts and low interest loans.

Well, maybe it’s time for Wall Street to contribute, rather than siphoning off our wealth. How about a sales tax on all transfers of stocks, bonds, and derivatives in order to fund tuition-free higher education?

Why are high schools free but colleges aren’t?

Access to higher education is vital to our economy and to our democracy. Today a college degree or post-high school professional training are the equivalent to what a high school diploma provided and signified a generation ago. For over 150 years, our nation has recognized that tuition-free primary and secondary schools were absolutely vital to the growth and functioning of our commonwealth.

By the middle of the 19th century, New York City also provided free higher education through what would become the City College of New York. Hunter and Brooklyn colleges also were tuition-free, as was California’s rapidly growing post-WWII state college and university system. The GI Bill of Rights after WWII provided significant resources to over three million returning veterans to go to school tuition-free, which in no small part, helped to build American prosperity for the next generation. (Tuition was even provided if GIs attended private colleges and universities.) A further impetus to free higher education came as America fell behind the USSR during the Sputnik-era space race.

But the spread of free higher education stalled and then retreated precisely as Wall Street began to grab more and more of the nation’s wealth. As financialization transformed the economy starting in the late 1970s, average wages flattened while Wall Street incomes shot through the roof. At the same time taxes on the super-rich collapsed placing more and more of the burden on working people. Lo and behold, free higher education rapidly became “unaffordable.” Wall Street then swooped in with loans as students and their families loaded up on debt in order to gain access to higher education. This is the very definition of financialization.



As Student Loans Rise, the Rich Get Richer  

As student loan debt climbed ever higher, the super-rich continued to rake in more and more income, especially in comparison to the rest of us.

Many financial elites rose to riches by packaging and selling every kind of toxic asset imaginable. They made fabulous amounts as they pumped up the housing bubble, and then made even more as it imploded. It turns out that wealth was based on hot air, as well as plain old cheating. (See How to Make a Million Dollars an Hour for a detailed account.) So far, neither Wall Street nor its super-rich patrons have been forced to pay for the damage they caused.

 

How to Make Wall Street Pay

It’s not easy to tax the super-rich when they have their hooks so deeply into both political parties. However, the student debt crisis opens the door to force a provocative public debate:

  • Are we resigned to be vassals to Wall Street elites or can we redirect resources to invest in our young people?

  • Are we going to saddle our kids with decades of debt or are we going to make the Wall Street gamblers pay the damage they caused?

The financial transaction tax (aka Robin Hood Tax or Speculation Tax) hits hard at Wall Street gambling. A small sales tax on all financial transactions will come almost entirely from those who are gaming the system by rapidly moving money in and out of markets. Eleven European nations are about to institute such a tax and have found excellent ways to enforce it. (If you or affiliates don’t pay by using shell companies and other tricks, you don’t do business in our country.) England has had one on stocks for the past 300 years and it works just fine. Clearly, a sales tax would successfully collect from the super-rich.

Of course, you’ll hear Wall Street apologist moan and grown about how such a tax will kill jobs, steal from your pension funds, and rob your kids’ piggy-banks. All lies.

Unless you play with your 401k like a high frequency trader—which means you’ll be fleeced by them anyway—you won’t feel this tax. Neither will your pension funds, which are not supposed to churn your investments anyway.

As for jobs, when was that last time Wall Street produced real jobs on Main Street? They would just as soon finance a job smashing merger or the movement of jobs out of the country. The only jobs that would be hurt are a few at high frequency hedge funds that milk markets by making millions of automated trades per second. For the sake of financial stability and fairness, they should be put out of business anyway.

No, when it comes to hitting Wall Street elites, a financial transaction tax is just about perfect.

Let’s encourage Elizabeth Warren to take the next step

Senator Elizabeth Warren opened the door to this debate as she attempted to stop student loan interest rates doubling to 6.8 percent in July. On July 1, they doubled. She wants the Federal Reserve to loan money to students at the same rate it charges too-big-to-fail banks, which is next to nothing at 0.75 percent.

Of course, most politicians and pundits think she’s off her rocker. How dare she try to interfere with “market forces”? But as Ellen Brown of the Public Banking Institute shows in her excellent rejoinder (“Elizabeth Warren’s QE for Students: Populist Demagoguery or Economic Breakthrough?“), it makes economic as well as ethical sense to invest in our young people. In fact, it makes a whole lot more sense than propping up too-big-to fail banks that have grown even fatter since the crash.

But why have any student loans at all?

Why accept the perverse idea that students should saddle themselves with decades of loan repayments in order to gain access to higher education? Even with interest rates at 0%, we’re still asking students and their families to load themselves up with tons of debts in order to get access to the advanced skills and knowledge our economy and our democracy desperately need.

Isn’t it in the national interest to invest in our young people, rather than loading them up with debt?

Can we really beat the Street?

Maybe. It starts with having the nerve to ask for what we really want, rather than compromising before we start. Do we think Wall should pay reparations for what it has done to the economy? Do we think it fair to use that money to fund free higher education in order to rid our young people of crushing debt? If the answers are yes, we can start organizing.

The next step is to convince those working on the Robin Hood Tax to tie it to free higher education. That would allow financial transaction tax advocates to reach out to an enormous constituency—students and their families.

And yes, we also we need some organizational magic, not unlike what sparked Occupy Wall Street. Perhaps, websites like AlterNet.org can link up with like-minded media outlets and progressive groups to form a vast coalition of the pissed-off! Millions might be ready for that.

The anger toward Wall Street is there. The outrage over ever-rising student debt is there. Now is the time to connect the two and provide some extra organizational juice.


No one has a magic bullet and no one can guarantee success. But unless we try, we will guarantee that Wall Street and its Washington minions will continue to rip us off.

Surely we have enough creative energy to build another path.

___________________________________________


Below you see one side of the student loan debt forgiveness debate. Clinton neo-liberals and Bush neo-cons, knowing that any forgiveness will mean the Federal government will pay the debt to Wall Street----are pressing this idea of forgiveness as if it was good for the students. Corporate pols know many students will never be able to pay back these loans and with the coming economic crash-----most will definitely won't. So, to save the banks decades for pressing the impoverished for repayment of student loans----let's get another government bailout of Wall Street ----this time for fraudulently administered private student loans.

As this article states-----discharging these loans would place the Federal government in charge of what these Congressional pols are saying was corporate fraud.  They are setting the precedent for all of the other private for-profit education fraud to be discharged and sent to the taxpayers.  Never once did they say------prosecute these corporations for fraud and have them write-off the debt. 


Look at who the Congress people are in this article asking that the Federal government pay for the discharge and not a mention of recovering it as fraud and write-offs by banks......Clinton neo-liberals!


Supposedly, having the Federal government pay all of this fraud will make them more careful is the logic.



Senators Ask Dept. Of Education To Discharge Student Loans For Everest, WyoTech, Heald Students



By Chris Morran December 10, 2014


While Corinthian Colleges — the failing for-profit educator behind schools like Everest University, WyoTech, and Heald College — sorts out new owners for most of its properties, several thousand of the schools’ students are left in limbo, unsure of who is responsible for their education — and unsure if that pricey education is worth the huge loans they’ve taken out to pay for it. Yesterday, a group of a dozen U.S. Senators asked the Dept. of Education to consider giving these students a way out of their federal student loans.


The letter [PDF] points out that the law provides “avenues for relief from overwhelming debt taken on by students at duplicitous colleges,” but that it requires the Dept. of Education to flex its regulatory muscle to make those loan discharges happen.

“For this reason, we are writing to request that the Department… to utilize that authority and immediately discharge federal student loans incurred by borrowers who have claims against Corinthian.”

This would include students covered under pending suits filed by attorneys general in states like Massachusetts, California and Wisconsin. In fact, it may cover all Corinthian students nationwide, as the company is currently being sued by the federal Consumer Financial Protection Bureau.

These lawsuits have alleged, among other claims, that Corinthian misled applicants about graduation rates and job-placement statistics in an effort to convince them to take out high-priced student loans that are guaranteed by the federal government and which generally can’t be discharged, even in cases of bankruptcy.

The Dept. of Education has previously stated that borrowers may request a discharge by asserting that the loan isn’t legally enforceable on the basis of a claim against the school, but the Senators point out that “The process for doing so… is far from clear.”

And so they have asked the Dept. of Education to clarify whether the current pending state lawsuits against Corinthian are sufficient to demonstrate that a loan isn’t legally enforceable.

If so, would students in states where the attorney general hasn’t filed suit be able to use those other states’ claims to make the case for loan discharge?

The letter also requests information from regulators on how the Department can clear up the process for requesting a discharge.

There is also the question of whether affected student loan borrowers would be reimbursed for any amount already paid on a loan.

A rep for Corinthian tells the Wall Street Journal that the Senators are getting ahead of themselves by assuming that the allegations in the pending lawsuits are true.

“The authors of this letter take the deeply unjust position that the federal government should act on the basis of unproven allegations which are being vigorously contested in court,” explains the CCI rep. “Their logic is dismayingly clear: Anyone who has been accused of anything is presumed guilty.”

It’s not surprising that the Dept. of Education has been dragging its feet on clarifying its stance on loan discharges for CCI students, as there are potentially billions of dollars in loan principal and interest that could be lost.




______________________________________________
On top of the conspiracy to defraud in the actual process of providing Federally insured student loans----Wall Street was taking billions of dollars more in yet another fee for service scheme-----the Auction Rate Securities ARS.

So, beyond the fraud in delinquent student loan collection that is tacking on thousands of dollars in fees and service charges known to be fraudulent-----Wall Street tacked on these fees tied to ARS----over years this amount becomes noticeable for each individual student loan holder.
  Notice that this fraud is again aimed at government coffers and the public.

REMEMBER, WHEN A GOVERNMENT SUSPENDS RULE OF LAW IT SUSPENDS STATUTES OF LIMITATION!  WE WILL RECOVER THE PEOPLE'S WEALTH STOLEN BY CLINTON NEO-LIBERALS AND BUSH NEO-CONS!




'The rule of law cannot be arbitrary based on whether or not a financial giant is prosecuted and fails, or if men like Blankfein claim they are “doing God’s work” and “serving a social purpose.”
'


Today the INSIDER EXCLUSIVE “Goes Behind The Headlines” in

WALL STREET‘S $336 BILLION FRAUD –AUCTION RATE SECURITIES (ARS)


….. to examine how Brad Gilde, Founder of the Gilde Law firm is successfully pursing justice on behalf of victimized individual investors and organizations such as Student Loans Lenders, Port Authorities, Universities, Health Care Providers/Groups, Housing and Financing Agencies, etc. – Governmental and Quasi-Governmental entities…


…Many of whom were misled by Wall Street institutions including Morgan Stanley, Citigroup, Merrill Lynch and UBS AG who marketed these securities as being a safe investment, although it was later found otherwise and investors were misled. Many were told that the market for ARS , was "Completely safe. Completely liquid. Just another form of Triple-A rated cash equivalents”

What they failed to disclose to their clients was that the financial market was in serious trouble and only when the investors were told the then-$336 billion market was "frozen" in early 2008 did investors learn that it was a scam; underlying bonds and preferred stocks were not liquid at all, but distressingly long term.

This massive fraud perpetrated on America by the Wall Street gang in this Insider Exclusive Investigative TV Special …. is explained in easy to understand detail by Brad Gilde, who is successfully representing many of these victims.

Brad provides real insight into the criminal subculture of Wall Street and the shady dealings of wall street brokers and their handling of their clients who bought Auction Rate Securities ( ARS ) and then hung them out to dry…. when the market for them collapsed…and what victims can do about it now.

ARS interest rates were higher than money markets and were sold as “completely safe, liquid, Triple-A rated "cash equivalents," ….a deceptive sales pitch that lured hundreds of thousands of investors to buy the securities. While this is a classic 21st century tale of Wall Street greed and betrayal…. it is also a story of redemption and the life-altering struggle of American investors and others around the world who, in the end, are successfully fighting the Wall Street fraud-masters.

Remember, America is a nation of laws, and allegedly follows the rule of law implying that every citizen is subject to the law in contrast to the idea that the powerful and wealthy are above the law by divine right. However, the law is hardly applied without distinction in this country…. evidenced by the very small number of wealthy bankers and powerful financial leaders imprisoned for crashing the world’s economy during the financial meltdown of 2008.

Over the past couple of months, large financial institutions have begun being held accountable for cheating investors and earning billions of dollars in the process,….but aside from paying fines in plea bargains and possibly compensating bilked investors…. it is still impossible to jail a bank or a corporation. But, the people responsible for raping investors and stealing companies can be prosecuted and jailed… but sometimes it appears they are “too rich, too powerful, and too big to jail”.

In fact….Lloyd Blankfein, Goldman Sachs CEO, told an News interviewer that: “he believes banks have divine right to special treatment because they are “doing God’s work.” According to Blankfein, “We’re very important… we help companies to grow by helping them to raise capital. Companies that grow… create wealth….. And in turn, this allows people to create more growth and more wealth. It’s a virtuous cycle.”


Financial institutions may not face prosecution because they cannot go to jail, but the men and women committing fraud, money laundering, and deceiving investors can be criminally prosecuted and sent to jail. However, financial institutions can be forced to make restitution for billions and billions of dollars they stole from investors and struggling firms

The rule of law cannot be arbitrary based on whether or not a financial giant is prosecuted and fails, or if men like Blankfein claim they are “doing God’s work” and “serving a social purpose.” Five plus years after the meltdown of the largest fraud ever perpetrated on Wall Street …. the nightmare that defines the world of auction-rate securities goes on.

While Wall Street, Washington, and the media would very much like to leave the pain encompassing the ARS market largely in the rear view mirror…. for many individuals who still hold on to the hope that they may ultimately get repaid in full from these widely distributed “cash-surrogate” instruments, the pain and anxiety remain front and center.

Brad Gilde is one of the top auction rate securities lawyers in the nation who is successfully holding fraudulent brokers accountable, and helping victims to recover their money.


And….If you are one of the thousands of investors nationwide misled by an investment firm advising you on auction rate securities….. don’t remain in financial limbo, with your funds frozen in what you once were told was a safe cash investment

Brad Gilde has earned the highest respect from citizens and lawyers alike…. as one of the best Trial lawyers in Houston,…. In Texas….. and across America . His goals….. Not ONLY To get Justice for his clients…but to make sure Banks and Investment houses are held accountable. These successes drive him to help more people who had been harmed by Wall Street firms. Brad has built a substantial reputation by consistently winning cases other law firms have turned down. His amazing courtroom skills and headline grabbing success rate continue to provide his clients with the results they need……And the results they deserve.



_____________________________________________

Kaplan owned Washington Post and walked away with a fortune of fraudulent gains and no attempts to recover fraud has happened.  So, you have Wall Street and this for-profit education corporation conspiring to defraud the Federal government of billions of dollars just as Wall Street conspired with CitiBank to create subprime mortgage loans to defraud the Federal government-----and still no recovery of fraud.  Notice that many in Congress where clearly involved in the Insider Trading that came with the legislation that allowed all this to happen.  We could pay off all of the trillion dollars of student loan debt simply by recovering fraud.  CLINTON NEO-LIBERALS ARE TEAMED WITH BUSH NEO-CONS TO FLEECE THE AMERICAN PEOPLE FOR WALL STREET AND CORPORATE PROFIT.

This article is very long but please glance through.....it shows just one for-profit education corporation and the fraud----imagine how many of these corporations sprang up when Clinton came on board and how long over a decade of widespread fraud.

WHEN YOUR POLS PRETEND THAT AUSTERITY IS NEEDED TO PAY OFF A NATIONAL DEBT OF $17 CREATED BY ALL THIS FRAUD----THEY ARE TELLING YOU YOU HAVE NO RIGHTS AS CITIZENS AND WHAT IS YOURS IS MINE.


Scandal at The Washington Post: Fraud, Lobbying & Insider Trading


Rusty Weiss  —   March 8, 2012
 
In the summer of 2010, business columnist for The Washington Post Steven Pearlstein lifted the veil on the little-known company operating procedure that involves an incestuous relationship between his own employer, and the scandal-plagued, for-profit university known as Kaplan.1 In his column, Pearlstein made the argument that while personnel in the newsroom may have nothing to do with Kaplan, they most certainly have “benefited from its financial success.”



So what is it about Kaplan that has been so beneficial to Post employees? Aside from being one of the largest for-profit colleges in the country, Kaplan is not only a subsidiary of The Washington Post, up until recently it has been the single most profitable aspect of the company. In 2009, the year prior to the Pearlstein article, Kaplan accounted for 58% of the Post’s revenue and generated the bulk of company profits, while newspaper and magazine publishing—in other words, journalism—accounted for a mere 19% of revenue and operated in the red.2 In 2010, Barron’s estimated that the value of The Washington Post company was roughly $8.5 billion, and that Kaplan represented about $5 billion.3 So it was no surprise when Pearlstein stated that Kaplan “has provided the handsome profits that have helped to cover this newspaper’s operating losses.”

With a financial resumé like that, and status as the cash cow keeping the Post afloat, why wouldn’t CEO Don Graham be singing the praises of Kaplan University? Perhaps because there is a longstanding history of allegations of fraudulent practices, with hundreds of millions of dollars of profits diverted to Kaplan executives. Perhaps it’s also Kaplan’s generation of such profit on the backs of poor students and returning war veterans, preying on their vulnerabilities only to later reward them with degrees of questionable value, massive student-loan debt, and little employment opportunity. Perhaps it is Kaplan’s curious hiring of lobbyists to influence legislation at the state and federal levels, including a former Obama staffer, Anita Dunn, just as the heat was being turned up on for-profit colleges to rein in out-of-control practices.

Whatever the reasons, Kaplan remains part of an industry that provides little educational value for its students--and raises many questions about how it has compromised the integrity of The Washington Post newspaper.

Student Complaints

In 2010, Bloomberg investigative reporter Daniel Golden relayed the story of Keith Melvin, a disabled Iraq War veteran who had been awarded a medal for “outstanding dedication to duty.”4 Upon returning home from his tour of duty, Melvin sought to pursue collegiate studies in the legal field. He performed an online search, filled out forms, and was eventually contacted by Kaplan University. The university convinced Melvin that it could further his educational pursuits through a litany of phone calls and e-mails, pressuring him to commit. One selling point that sealed the deal? Kaplan’s relationship with the prestigious Washington Post Company.



“With Kaplan having its credentials backed by The Washington Post, I thought, ‘How can this go wrong?’” Melvin said. “It sounded too good to be true, and it was.”

A former admissions adviser for Kaplan explained how The Washington Post was used in their sales pitch to prospective students.

“One of the things that I always said was, ‘As you may know, Kaplan is owned by The Washington Post, a paper known for having really high ethics,’ he said. ‘As you can imagine, The Washington Post would never involve itself in anything that would reflect poorly on its reputation.’”

But the prestige and high ethics promised by a relationship with the Post never materialized.  Melvin learned the hard way, as have other students, that the Kaplan experience consists of “high prices, uneven performance and shady marketing practices.”5 Worse, the university, for all of its selling points, has a dropout rate of nearly 70%, and those who do graduate earn well below the national average for college graduates—outcomes not exactly befitting of a money-making juggernaut and its supposedly ethical parent company.

Unfortunately, Melvin’s experience is not an isolated incident. Targeting and recruiting veterans is such a common practice among for-profit colleges that it prompted Senator Dick Durbin of Illinois to introduce legislation which would eliminate the financial incentive for these colleges to aggressively recruit veterans into pricey programs.6 A report in the Chicago Tribune explains that “military veterans are being aggressively recruited… because of their lucrative forms of federal aid, such as GI Bill funds and Department of Defense tuition assistance benefits.” Such funds are not bound by the 90/10 rule, which bars the for-profits from deriving more than 90 percent of their revenue from the Department of Education’s federal student-aid programs.

Veteran enrollment helps Kaplan circumvent the 90/10 rule, because GI Bill benefits don’t count as government assistance under the law. Congress further aided the for-profit industry by granting a $2,000 exemption per student to the 90/10 rule. Kaplan reported that it “got less than 87.5 percent of its receipts from federal student grants and loans in the fiscal year ended Jan. 3, 2010,” just short of the 90% cap.7  Putting a cap on this source of federal money means placing a limit on the university’s ability to generate revenue. As it stands, the 90/10 limit threatens access to billions of dollars in federal student aid in the for-profit industry.

While Kaplan targets and recruits veterans, in particular because of the federal funding opportunities, it certainly doesn’t restrict questionable tactics to these students. The student complaint board on their website shows over 130 current complaints by students at the college, ranging from general fraud, to misappropriation of funds, to “ignorant service.”8

In 2009, The Wall Street Journal reported on seven Kaplan campuses which had a three-year dropout rate over 30%, a clear indication that the university had been using aggressive marketing tactics to enroll students regardless of their ability to pay.9 Meanwhile, most students who do graduate discover that the grandiose promises of careers and large salaries were merely a sales ploy—and in fact, the product offered by Kaplan has substantially less value than that offered by traditional  public and private colleges.

A report from a leading for-profit research company explains that such universities are little more than “marketing firms who happen to market education.”10 A recent shareholder lawsuit against The Washington Post and its CEO Donald Graham was dismissed in December 2011 after the Post filed a motion to dismiss (pages 47-53).11 The lawsuit had alleged that the Post defrauded investors by engaging in deceptive and unethical business practices. The lawsuit was tossed, shockingly enough, because the motion to dismiss argued that the unethical practices were common knowledge, and therefore investors had not been misled. The Post essentially admitted that Kaplan had been running little more than a telemarketing scheme.12 In that filing, the Post stated that it was ‘no secret’ that the Kaplan Higher Education Corporation (KHE) operated under a business model that “depended upon the recruitment of low-income and minority students who were dependent upon federal loans and grants.” The Post concurred that the KHE was operating “football field sized call centers that made use of telemarketing techniques and sales goals.”

Marketing materials at Kaplan University show the depths to which recruiters were required to sink:

“If you can help them uncover their true pain and fear. If you get the prospect to think about how tough their situation is right now, if you talk about the life they can’t give their family right now because they don’t have a degree,” the flier instructs, “…You dramatically increase your chances of enrolling this prospective student. Get to their emotions, and you will create the urgency!”

With a university whose singular goal is to meet quarterly sales quotas by targeting low-income, minority, and veteran students, regardless of their ability to pay, it’s no wonder Kaplan’s business model results in consistent failure to serve the students they claim to help, along with consistently low graduation rates, high number of loan defaults, and a high level of dissatisfaction.

Executive Pay

Up until 2011, for-profit colleges had seen consistent double-digit growth in annual revenues, extracted from a litany of federal grants and loan programs under the Title IV program.13 The industry has been generating billions of dollars of revenue through predatory business practices akin to those in the subprime mortgage industry.14



For-profit universities earn money off the backs of service men and women, minorities, and low-income targets (some instances have recruiters seeking out prospective students in homeless shelters), with promises of government loans and grants, and post-graduation employment. At the same time, these colleges are using revenues obtained from the federal government to lobby politicians and weaken regulation. Politicians, backed by corporate influence, have facilitated the transfer of tens of billions of dollars of  public funds to these schools in the form of federal grants and loan programs. The result is a staggering level of profit with little of value provided to students or taxpayers.

So when a school like Kaplan pulls in  billions of dollars, who has benefitted the most?
  The very people who are perpetuating the money-making scheme—the executives.

Between 2003 and 2008, executives at Kaplan received stock option payouts of $289 million dollars—nearly half of the school’s entire operating income during the same time frame.15,16 In 2003, Kaplan handed over $119 million in executive pay, more than double the university’s operating income that year, which came in at $58 million.

Nowhere is such lavish compensation more personified than with the case of Jonathan Grayer, former head of the Kaplan education unit, who resigned in 2008.17 Grayer’s resignation, after 17 years at the school, resulted in a $76 million severance package.18 The package included a $20 million bonus paid out in November of 2011, more than the university’s entire third quarter operating income of $18 million.

Meanwhile, The Washington Post, which reported over $6 million in losses during that same quarter, closed a majority of regional news bureaus, and was charged by The Washington Post Guild with “unjustly laying off employees and targeting employees of color.”19,20,21 Recently, they announced the buyout of up to 48 newsroom staff as a cost-cutting measure.

More importantly, under Grayer’s direction, Kaplan and the Post have been involved in the aforementioned shareholders lawsuit, more than a dozen whistleblower lawsuits, and have been the focus of multiple state and federal investigations.22

It can therefore be concluded that the Post did not reward Grayer based on academic performance, but rather on his ability to generate revenue for the company—ignoring the ethical quandary that his leadership created.

Government Regulation

Last summer, The New York Times reported that the Department of Education and Congress had placed Kaplan and other for-profit institutions under the microscope, because of their recruiting practices and high loan-default rates. The Education Department issued final regulations which will go into effect next July, “requiring career college programs to better prepare students for ‘gainful employment’ or risk losing access to the federal student aid that, on average, provides more than 85 percent of their revenue.”23



Further regulatory efforts will take effect in 2014, but will provide little protection for low- income students to avoid being shackled with unaffordable debt that cannot be discharged through bankruptcy.24 In fact, the 2014 regulations instituted by the Department of Education allow for schools like Kaplan to continue generating funds off the backs of students and taxpayers, allowing colleges to have a loan default rate of up to 40% in any one year, and up to 30% over 3 years.

Lobbying Against Regulation

Despite the announcement of weak regulatory measures, recent years have seen bi-partisan support in Congress against such regulations, and overall support for the controversial industry. The list of high-profile names that support these for-profit organizations include presidential candidates Ron Paul and Mitt Romney, Speaker of the House John Boehner, Dianne Feinstein, Jesse Jackson, and Nancy Pelosi.25,26 Last year, Pelosi broke rank with her party and voted to keep billions of dollars in federal student aid flowing into the coffers of for-profit colleges.27 Boehner backed deregulation of the online learning industry, supporting the removal of a law known as the 50 Percent Rule back in 2006, eliminating legislation that had protected students by limiting how many could enroll in online courses.28  The rule was actually put in place back in 1992 in an attempt to curb waste and abuse of federal student aid programs by for-profit colleges. Repealing the 50% rule opened up the floodgates for online enrollment, allowing these colleges to acquire further capital from Wall Street for expansion.

The Obama administration has attempted to rein in for-profit colleges by imposing tighter regulations and limiting the role of private companies in student lending. They vowed to stop for-profit colleges from luring students with false promises. A New York Times article described it as “an opening volley that shook the $30 billion industry” where “officials proposed new restrictions to cut off the huge flow of federal aid to unfit programs.”

However, opposition to such regulations has continued to be an across-the-aisle effort, with Democrats and Republicans alike having accepted funds from such institutions, while simultaneously advocating on their behalf, ignoring the ongoing threat to veterans and low-income students.

Kaplan in particular has come under fire from liberal Democrats and the administration itself, for allegedly conning students into taking out federal loans for a mostly worthless education.  During The Washington Post Company’s annual meeting in 2011, Chairman Donald E. Graham acknowledged that his company had been hurt by congressional hearings and negative publicity over Kaplan’s controversial business practices.29 Representatives of stockholders have been repeatedly asking about the future of the company if profits are further cut by government regulation, with some suggesting that the Post may try to sell Kaplan in order to avoid further losses.

So what does one do when their billion-dollar cash cow is threatened? Lobby lawmakers to water down regulations on your behalf, of course.

While Graham refused to name any members of the House or Senate that he had personally lobbied during the annual meeting, there is little doubt that the Post has pulled out all of the stops in order to survive financially and stall regulations that would affect Kaplan. Graham called scrutiny of for-profit colleges an “unusual situation,” and assured shareholders that Kaplan had changed its ways in an attempt to prevent students from being saddled with too much debt, and nothing to show for it. Such lobbying hasn’t been limited to Graham’s speeches at shareholder meetings.

Roll Call had reported last year that “…Kaplan University, which is owned by the Washington Post Co., paid $110,000 to Akin Gump Strauss Hauer & Feld in the first quarter of this year to lobby on the issue and $90,000 to Ogilvy Government Relations.”30 At the end of 2011, funds directed to lobbying efforts were at their highest level ever for The Washington Post, topping out at $1 million, including a final tally of $210,000 to Akin, Gump et al, and $180,000 to Ogilvy.

Source: Open Secrets Blog

Cliff Kincaid of Accuracy in Media reported on the ties between these lobbying firms and lawmakers on both sides of the aisle:31

“Vic Fazio, a former Democratic Congressman from California, is a leader on the Akin Gump team, while GOP operative Wayne Berman leads the Ogilvy effort. The Washington Post Co. has also retained the Democrat- connected firm of Elmendorf Ryan to make its case.”

When adding in Elmendorf Ryan’s $160,000, over half-a-million dollars was spent on three major lobbying firms, with the singular goal of easing federal regulations related to Kaplan’s questionable business practices.



The Post, however, ramped up its lobbying efforts with the hiring of former White House communications director, and good friend to President Obama, Anita Dunn. Dunn played a key role in shaping the Kaplan message that abuse and misconduct were not industry-wide, while aiming to “blunt the impact” of the proposed regulations. She assured The New York Times that, while she has visited the White House roughly 80 times since her departure, she did not speak to colleagues about the issue.32

A major target of the Post and other education companies’ lobbying efforts has been the so-called “gainful employment” rules—rules that seek to tie the cost of higher education programs to the amount of money a graduate can expect to earn and loan repayment rates.

The resolution was designed to reduce the number of higher education loans that are going into default. Youth Today reported that in the first quarter of 2011 alone, “The Washington Post and its subsidiary Kaplan Inc. spent a total of $490,000 on lobbying, including paying five different lobbying firms,” focusing specifically on the gainful employment rules. The New York Times reported that the Post had spent a whopping $1.6 million in lobbying Congress on the gainful employment regulations alone. Bloomberg reported that, “publication of that rule was delayed last year, following a lobbying effort by for-profit colleges.”33

Donald Graham even took the unusual step of writing an editorial for The Wall Street Journal, which urged the White House to change the rules to “avoid disaster for low-income students.”34  A mere two months later, Graham threatened to impose his own disaster upon these same students, attempting to bully Congress into modifying the 90/10  rule, warning that he was willing to raise tuition rates on the financially struggling student body if they did not comply.

In the end, efforts to rein in regulations on the Kaplan money machine were successful and the threat of a major crackdown posed by the gainful employment rules had been averted after lobbying by Washington insiders. On June 2nd, rules handed down by the Department of Education had been significantly weakened.

The Times described it as such:

“…after a ferocious response that administration officials called one of the most intense they had seen, the Education Department produced a much-weakened final plan that almost certainly will have far less impact as it goes into effect next year.”


Millions From Insider Trading

In the summer of ’09, The Wall Street Journal did an exposé on for-profit colleges and their default rates, which featured the following statement:35

“For-profit schools are favorite targets of short-sellers, or investors who try to profit on bets that stocks will fall, and many have focused on default rates. For-profit schools receive more than $16 billion annually in federal student aid, and taxpayers are on the hook for loan losses.”

And with the recent victory at the lobbying table, the Graham family itself benefited after they had successfully kept their money-making machine intact.

In the days after the Obama administration announced a watered down version of the gainful employment regulations, stocks in every publicly traded college corporation rose, with some soaring in gains by over 20%.36 The message had been delivered—significantly weakened regulations would have little bearing on the industry’s profitability.

Armed with the knowledge that Kaplan’s stock rose after the regulation package was introduced, Post Chairman Donald Graham, sold off 24,000 shares in trusts benefitting family members, totaling $12 million. The timing raised eyebrows but the reasons seem clear, as Washington Post Company stock had jumped 9% immediately following reports of the new regulations, while settling back to near-average prices shortly thereafter.37



More curious was Graham’s insistence three months after the stock sales that “I have not sold a share of Washington Post Company stock in over 30 years nor has any trust for my benefit.”38 While the June selloff was not for Graham’s personal benefit, he did perform the transaction on behalf of his family’s trust.

As for the family stock selloff, Graham explains that, “I am also a trustee of several trusts for the benefit of other members of my family. From time to time, these family members who also started out life heavily concentrated in Post stock have asked their trustees to sell stock when, for example, they want to buy a house.”

But the claim of sporadic stock sales for occasional large purchases simply doesn’t ring true.  The Graham family has a history of multimillion dollar stock sales over the past four years, in which several of the transactions mimicked the post-regulation stock sale, with prices plummeting after the selloff. For instance:39

  • In April and May of 2008, the Graham family sold $29 million in stock at an average of roughly $675 per share, and within days the price dropped to $585 per share. (Chart A)
  • In August and September of that same year, the Graham family sold another $14 million in stock, then watched the stock price plummet from $600 per share to $400 per share.  (Chart A)
  • The aforementioned stock sale of $12 million this past summer was at a cost of $420 per share, dropping 100 points three weeks later, when quarterly reports showed a decline in yearly income of 50%.  (Chart B)
  • Publisher Katharine Weymouth—who is Don Graham’s niece—sold $45,000 in stock in June of 2011.
Chart A. Source: Market Watch, Wall Street Journal

Chart B. Source: Market Watch, Wall Street Journal

Additionally, according to a Daily Censored report last year, $20 million in sales were allegedly executed on behalf of Don Graham’s ex-wife’s in April of 2008.

Considering the Graham family’s apparent ability to predict major drop-offs in the company’s stock, one has to wonder about the legality of what appears to be insider trading taking place. At best, Donald Graham has not been honest in telling the media that the family only sells stock when it comes time to buy a house. They sell when they see the most potential for profit. With the post-regulatory stock sale, it is clear that the Graham family prospered by dropping stock immediately after the regulations were announced, possibly with knowledge in hand that future reports would show a year over year income drop of 50%.

Insider knowledge of Kaplan’s business performance, and The Washington Post stock value has been incredibly beneficial to the Graham family.

Summary

The Washington Post has seen a decline in newspaper circulation and journalistic business that they have been almost solely reliant on the success of their cash generating education business, Kaplan University. Chairman of the Post Company Don Graham has willfully turned a blind eye to allegations of fraudulent business practices, excessive student debt and hardship, and exorbitant executive compensation at the for-profit college. At the same time, Graham has actively engaged in lobbying to help generate profits on the backs of the very students he claims to serve, and also engaged in suspicious stock trading that has greatly benefited his family.

Even worse, The Washington Post remains a supposedly reputable staple of the mainstream print media, while refusing to report on one of its own despite media coverage from many other sources. The Post’s failure to report nearly all adverse news about Kaplan even prompted its former Ombudsman, Andrew Alexander, to write a piece which argued that the “Post needs to beef up its coverage of allegations against Kaplan.”40

Any company, such as Kaplan, that has been subject to so many government investigations and lawsuits, would be reported on by most responsible news organizations. Why does the Post bury its head in the sand on the Kaplan story, and is Graham personally responsible for suppressing such information?

It’s a question The Washington Post has yet to answer.







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December 26th, 2014

12/26/2014

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I will spend a few more days on Wall Street fraud and then head to tax policy.  Remember, neo-cons and neo-liberals are playing tag team for Wall Street -----neo-liberals are not being held hostage by Republicans.  The bond market fraud coming soon was written and executed by Obama and Congressional neo-liberals as Bush and neo-cons brought the subprime mortgage frauds.  Neo-liberals could be recovering tens of trillions of dollars in corporate fraud but they deliberately allow the fraud to stay with the rich.  This coming economic crash will have Republicans like Larry Hogan allowing all the credit bond fraud to stay with the investors and watch as the public schools, public housing, and public projects tied to credit bonds be handed to the same Wall Street investment firms just as Anthony Brown would have.

I've spoken often about pension fraud and subprime mortgage fraud so won't do so this time, both involving trillions of dollars in Wall Street fraud so, with those and the LIBOR and interest rate swap frauds you can see the ten trillion in corporate fraud right there----and that is just the banking industry.  As the articles from last time state-----our Federal, state, and local officials CAN BE DOING SOMETHING TO STOP AND RECOVER FRAUD----only as in Maryland they are silent and doing nothing but working for Wall Street.


Wall Street-Caused Financial Collapse Cost $12.8 Trillion


www.corporatecrimereporter.com/news/200/costofwallstreet...

Since the Wall Street caused financial collapse was triggered more than four years ... $12.8 trillion. ... trillions of additional government dollars were spent, ...


Let's look at what is widely considered the FED's Wall Street fraud and this is what makes the FED 'crony and criminal' in the eyes of the world.  It was deliberate action taken by Bernanke to bailout Wall Street from what was massive fraud -----nothing noble about that.  As I state over and over, the FED's QE policy is a fraud in itself as the FED spends $4-5 trillion so far in buy-backs of  toxic subprime mortgage loans from Wall Street banks under the guise of re-capitalization.  As the article below states----any debt the FED incurs will become a debt for the taxpayer as it will be taken from the US Treasury.  When the FED says it is making profits from their dealing that go to the Treasury making it sound as it they are paying back the debt they are creating ------THAT IS A LIE!  The American people will have taken tens of trillions of debt from FED actions all to maximize Wall Street profit-----and it is the FED's mission to create a stable US economy and full employment. 

GREENSPAN AND NOW BERNANKE HAVE DONE THE OPPOSITE AT TREMENDOUS HARM TO THE AMERICAN PEOPLE AND WHAT SHOULD BE TERMED TERRORISM AND TREASON.

For those in Baltimore take a look at the bailout of AIG and Maiden Lane II and III----had AIG been allowed to go bankrupt as it should----HighStar, the spinoff of AIG that took all of AIG's assets just before the 2008 crash----would have been a loser as well as creditors would have come to it for their money.  Who are the major shareholder's of HighStar----profiting from the massive subprime mortgage fraud illegally?  Ivy League universities like Johns Hopkins.  So, the article below has a tangled web of conspiracy to defraud the American people that comes home to Baltimore! The only way these Maiden Lane bailouts were paid off were via the FED's free money zero % interest fueling of mergers and acquisitions overseas bringing those profits and payoffs and the bundling of foreclosures of tens of millions of American homeowner's homes brought to foreclosure often from the crash and lack of recovery......both of which were the sum-total of the Wall Street BULL market from 2009 to today and that is why 95% of the market's profits went to the 1%!

WHEN YOUR POL STATES THAT STATE AND LOCAL GOVERNMENT COFFER'S ARE EMPTY AND THEY HAVE TO MAKE THESE DEALS----THEY ARE LYING!


Please look at the study referred to in this article----remember, this study only collects data that it can access-----it is widely believed that the FED spent more.



Bernanke's Obfuscation Continues: The Fed's $29 Trillion Bail-Out Of Wall Street


Posted: 12/14/2011 9:08 am EST Updated: 02/13/2012 5:12 am EST


Since the global financial crisis began in 2007, Chairman Bernanke has striven to save Wall Street's biggest banks while concealing his actions from Congress by a thick veil of secrecy. It literally took an act of Congress plus a Freedom of Information Act lawsuit by Bloomberg to get him to finally release much of the information surrounding the Fed's actions. Since that release, there have been several reports that tallied up the Fed's largess. Most recently, Bloomberg provided an in-depth analysis of Fed lending to the biggest banks, reporting a sum of $7.77 trillion. On December 8, Bernanke struck back with a highly misleading and factually incorrect memo countering Bloomberg's report. Bloomberg has largely vindicated its analysis.

Any fair-minded reader would conclude that Bernanke's memo to Senators Johnson and Shelby and Representatives Bachus and Frank is misleading. One could even conclude that it is not just a veil of secrecy, but rather a fog of deceit that the Fed is trying to throw over Congress.

He argues that the sum total of the Fed's lending was a mere $1.2 trillion, and that it was spread across financial and nonfinancial institutions of all sizes. Further, he asserts that the Fed never tried to hide the bail-outs from Congress. Both of these assertions fly in the face of the facts available (as the Bloomberg response makes clear).

As Bernanke notes, analyses of the bail-out variously put the total at $7.77 trillion (Bloomberg) to $16 trillion (GAO) or even $24 trillion. He argues that these reports make "egregious errors," in particular because they sum lending over-time. He also claims that these high figures likely include Fed facilities that were never utilized. Finally, he asserts that the Fed's bail-out bears no relation to government spending, such as that undertaken by Treasury.

All of these assertions are at best misleading. If he really believes the last claim, then he apparently does not understand the true risks to which he exposed the Treasury as the Fed made the commitments.

There are a number of issues that must be understood. First, the Fed quibbles about the differences among lending, guarantees, and spending. For the purposes of this blog I will accept these differences and call the sum across the three "commitments." In spite of what Bernanke claims, these do commit "Uncle Sam" since Fed losses will be absorbed by the Treasury. (The Fed pays profits to Treasury, so if its profits are hurt by losses, payments to Treasury are reduced. If the Fed should go insolvent, the Treasury will almost certainly be forced to recapitalize it.) I do, however, agree with the Chairman that a tally should not include facilities that were created but not utilized (there were several of them, and the tally I present below does not include any facilities that were not used, nor does it include "guarantees").

Second, there are (at least) three different ways to measure the Fed's bail-out. One way would be to find the day on which the maximum outstanding Fed commitments was reached. According to the Fed, that appears to have been about $1.5 trillion sometime in December 2008. I'm willing to take Bernanke at his word. Fair enough, if we want a good measure of the maximum Fed exposure to credit risk, that is probably as good as we will find.

Another way would be to take the total of commitments made over a short period of time -- say, a week or a month. That would be a measure of systemic distress and would help to identify the worst periods of the GFC (global financial crisis). Obviously, this will be a bigger number and will depend on the rate of turn-over of Fed loans. For example, many of the loans were very short-term but were renewed. Bernanke argues that it is misleading to add up across revolving loans. Let us say that a bank borrows $1 million over night each day for a week. The total would be $7 million for the week. In a period of particular distress, the peak weekly or monthly lending would spike as many institutions would be forced to continually borrow from the Fed. Bernanke argues we should look only at the lending at a peak instant of time. While that measures the Fed's risk, it does not tell us how much intervention was required.

And that leads to the final way to measure the Fed's commitments to propping up Wall Street: add up every single damned loan, guarantee and asset purchase the Fed made to benefit banks, banksters, real Housewives on Wall Street, fraudsters, and their cousins, aunts and uncles. This gives us the cumulative Fed commitments.

The final important consideration is to separate "normal" Fed actions from the "extraordinary" or "emergency" interventions undertaken because of the crisis. That is easier than it sounds. After the crisis began, the Fed created a large alphabet soup of special facilities designed to deal with the crisis. We can thus take each facility and calculate the three measures of the Fed's commitments for each, then sum up for all the special facilities.

And that is precisely what Nicola Matthews and James Felkerson have done. They are PhD students at the University of Missouri-Kansas City, working on a Ford Foundation grant under my direction, titled "A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis." To my knowledge it is the most complete and accurate accounting of the Fed's bail-out. Their results will be reported in a series of Working Papers at the Levy Economics Institute (www.levy.org). The first one is titled "$29,000,000,000: A Detailed Look at the Fed's Bail-out by Funding Facility and Recipient."

Here's the shocker. The Fed's bail-out was not $1.2 trillion, $7.77 trillion, $16 trillion, or even $24 trillion. It was $29 trillion. That is, of course, the cumulative total. But even the peak outstanding numbers are bigger than previously reported. I do not want to take any of their fire away -- interested readers must read the full account. However, I will use their study as the source for a brief summary of total Fed commitments.

Here I am only going to focus on the final measure of the size of the bail-out: the cumulative total. This is not directly comparable to the Fed's $1.2 trillion estimate, which is peak lending.

I will post more on the important research done as part of this Ford Foundation grant; in coming blogs I will also explain why all Americans should be horrified at the Fed's actions, and by Bernanke's continued attempt to cover-up what the Fed has done.

When all individual transactions are summed across all facilities created to deal with the crisis, the Fed committed a total of $29,616.4 billion dollars. This includes direct lending plus asset purchases. Three facilities -- CBLS, PDCF, and TAF -- overshadow all other facilities, and make up 71.1 percent ($22,826.8 billion) of all assistance. Totals (in billions) and percent of total, by facility are as follows. Any outstanding loans are in in parantheses.

Term Auction Facility: $3,818.41, 12.89%
Central Bank Liquidity Swaps:10,057.4 (1.96), 33.96%
Single Tranche Open Market Operation: 855, 2.89%
Terms Securities Lending Facility and Term Options Program: 2,005.7, 6.77%
Bear Stearns Bridge Loan: 12.9, 0.04%
Maiden Lane I: 28.82, (12.98) 0.10%
Primary Dealer Credit Facility: 8,950.99, 30.22%
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility: 217.45, 0.73%
Commercial Paper Funding Facility: 737.07, 2.49%
Term Asset-Backed Securities Loan Facility: 71.09, (.794) 0.24%
Agency Mortgage-Backed Security Purchase Program: 1,850.14, (849.26) 6.25%
AIG Revolving Credit Facility: 140.316, 0.47%
AIG Securities Borrowing Facility: 802.316, 2.71%
Maiden Lane II: 9.5 (9.33) 0.07%
Maiden Lane III: 24.3, (18.15) 0.08%
AIA/ ALICO: 25, 0.08%

Totals $29,616.4, 100.0%


Source: "$29,000,000,000,000: A Detailed Look at the Fed's Bail-out by Funding Facility and Recipient" by James Felkerson, forthcoming, Levy Economics Institute, based on data analysis conducted with Nicola Matthews for the Ford Foundation project "A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis".

_______________________________________

It's hard to wrap your head around the amount of fraud the FED is connected to but the figures above are separate from the ones below------the QE fraud.  Keep in mind Clinton Wall Street neo-liberals and Bush neo-cons as well as Wall Street thinks this mechanism was a success and a model for coming economic crashes----like the one around the corner!

Again, to the entire world----it all is labelled fraud.  The FED never had this kind of action in its mission----it is crony and corrupt targeting huge aid to a few individual corporations all under the guise of TOO BIG TO FAIL----which has been proven time and again not to be true.


Good Riddance To QE: It Was Just Plain Financial Fraud


Nov. 11, 2014 2:15 PM ET


QE has finally come to an end, but public comprehension of the immense fraud it embodied has not even started. In round terms, this official counterfeiting spree amounted to $3.5 trillion— reflecting the difference between the Fed’s approximate $900 billion balance sheet when its “extraordinary policies” incepted at the time of the Lehman crisis and its $4.4 trillion of footings today. That’s a lot of something for nothing. It’s a grotesque amount of fraud.


The scam embedded in this monumental balance sheet expansion involved nothing so arcane as the circuitous manner by which new central bank reserves supplied to the banking system impact the private credit creation process. As is now evident, new credits issued by the Fed can result in the expansion of private credit to the extent that the money multiplier is operating or simply generate excess reserves which cycle back to the New York Fed if, as in the present instance, it is not.

But the fact that the new reserves generated during QE have cycled back to the Fed does not mitigate the fraud. The latter consists of the very act of buying these trillions of treasuries and GSE securities in the first place with fiat credits manufactured by the central bank. When the Fed does QE, its open market desk buys treasury notes and, in exchange, it simply deposits in dealer bank accounts new credits made out of thin air. As it happened, about $3.5 trillion of such fiat credits were conjured from nothing during the last 72 months.

All of these bonds had permitted Washington to command the use of real economic resources. That is, to consume goods and services it obtained directly in the form of payrolls, contractor services, military tanks and ammo etc; and, indirectly, in the form of the basket of goods and services typically acquired by recipients of government transfer payments. Stated differently, the goods and services purchased via monetizing $3.5 trillion of government debt embodied a prior act of production and supply. But the central bank exchanged them for an act of nothing.


_________________________________________
Remember, Bernanke just spent these several years buying toxic mortgage loans off of banks----but did not touch any from the Federal program that acted as a cesspool for the last fraudulent loans....flash-forward to today and here comes another round of low-income housing funding with no oversight and accountability heading out just as the economy is ready to crash yet again!


If you remember, Wall Street used Freddie and Fannie as the receptacle for all of the toxic subprime mortgage loan fraud imploding it along with AIG insurance corporation as the end all for the massive Wall Street fraud.  Is was Obama and Congressional neo-liberals who in 2009 should have made Wall Street write off all of what we know was hundreds of billions of dollars in fraud handed to these Federal Housing Programs-----but as with all the other frauds Obama allowed the fraud to stay with Wall Street and taxpayers paid for that billions of dollars in fraud.  Now, with Wall Street yet to pay trillions of dollars in this same mortgage fraud Obama has his Housing Agency using taxpayer money to subsidize low-income housing rather than using the recovered fraud.  As this article shows----yet again, taxpayers are going to feel the losses as the bond market crash sucks all revenue from Federal, state, and local government coffers.  So this will again end with a low-income program crashing with hundreds of billions of taxpayer money lost.

  IT IS SIMPLY A MECHANISM TO MOVE TAXPAYER MONEY TO WALL STREET----IT IS NOT A MECHANISM TO AID LOW-INCOME FAMILIES.


As you see below the housing frauds are continuing with Obama determined that taxpayers will shoulder all of the costs of the subprime mortgage fraud and again, as with the last frauds of the 2000s-----organizations for low-income housing support these deals they know will ultimately end badly for these families.  It moves taxpayer money to the banks by the trillions!

There is an article at the end that shows a Chinese government corporations coming to NY to build low-income housing -----guess who will get these Federal subsidies?  That's right-----foreign investment firms.


Keep in mind that Freddie and Fannie made a bundle off of the foreclosure re-bundling.....selling the homes of people given Freddie loans back to the people creating the subprime mortgage fraud.  Then look at where all those Freddie profits went----back to the Treasury which is now under constant attack by corporate fraud and subsidy.  ABSOLUTELY NONE OF THIS TAXPAYER REVENUE IS COMING BACK TO THE PEOPLE!  Look as well at the low-income housing advocates demanding money come to this project.  I have not heard one low-income housing advocacy group demanding justice from this entire fraud that killed their constituents.  Keep in mind this decision is coming just as the economy is about to crash yet again.  No doubt contracts will be signed for all this money just as we head into a Depression.  Note the Republicans calling this move dangerous-----all of this policy is Republican policy for moving public wealth to the rich!

DEMANDING MONEY WITHOUT ACCOUNTABILITY IS NOT HELPING THE PEOPLE FOR WHOM THESE GROUPS ADVOCATE.  THIS DEAL WILL PLACE THESE LOW-INCOME FAMILIES INTO THE SAME TEMPORARY HOUSING CONDITIONS.



Fannie, Freddie to Begin Payments to Affordable Housing Funds Fannie and Freddie Will Send 0.042% of Every Dollar in New Mortgage Purchases to the Funds


. Bloomberg News By Joe Light Updated Dec. 11, 2014 5:09 p.m. ET

The regulator of Fannie Mae and Freddie Mac ordered the mortgage companies to begin giving potentially hundreds of millions of dollars a year to a pair of affordable-housing funds, pleasing low-income-housing advocates but sparking anger among groups that say they are worried about the risk to taxpayers.

The two funds, one administered by the Department of Housing and Urban Development and one by the Treasury Department, enable states and other bodies to get money to build low-income rental housing or to rehabilitate existing housing.

In letters to the chief executives of Fannie and Freddie on Thursday, Federal Housing Finance Agency director Mel Watt lifted a suspension of payments to the funds put into effect in 2008, when Fannie and Freddie teetered on the brink of collapse.

The companies returned to profitability in 2012 and Mr. Watt wrote in the letters that “circumstances have changed [since the suspension was implemented] and the temporary suspension is no longer justified.”

The decision is the latest move to use Fannie and Freddie to bolster housing affordability. On Monday, Fannie and Freddie unveiled details of new programs that will allow some borrowers to get mortgages with down payments of as little as 3%, rather than 5%.


Critics contend that decisions on down payments and on giving money to the funds could make Fannie and Freddie vulnerable in the event of another downturn. Proponents of the moves have said they will provide a much-needed boost to efforts to lower housing costs.

Fannie and Freddie will make a payment to the funds each year of 0.042% of the unpaid principal balance of their new mortgage purchases in the previous year. If not for the suspension, the companies together would have made a payment of about $500 million in 2014, based on 2013’s volume. After Mr. Watt’s decision, the first payment won’t be made until early 2016.

Rep. Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee, said his panel would call Mr. Watt to testify after Congress reconvenes in January. He called the move a “lump of coal in the stocking of every American taxpayer.”

In the meantime, the decision is a victory for low-income-housing advocates, who have sought the funding for years.

The Fannie-Freddie funding mechanisms for the funds are of special value to low-income-housing advocates, since they don’t need consistent appropriations from Congress. The budgets of other sources of low-income-housing money, such as the Department of Housing and Urban Development, have come under pressure in recent years.

“We are thrilled,” said Sheila Crowley, president of the National Low Income Housing Coalition. “This is the first new money for housing production for extremely low income people” in years, said Ms. Crowley, whose organization estimates that there were more than 10 million renter households in 2012 with income generally below 30% of their area’s median.

Fannie and Freddie don’t make loans. They buy them from lenders, wrap them into securities and provide guarantees to make investors whole in case of default.
The companies were put into a conservatorship by the government in 2008 and received almost $188 billion in bailout money. Since 2012, they have been required to send nearly all of their profits to the U.S. Treasury, and as of the end of 2014 will have paid more than $225 billion.

The provision for Fannie and Freddie to make payments to the funds was established as part of a broader bill meant to stem the housing crisis in 2008. But the payments were almost immediately suspended by then-FHFA Director James Lockhart as the companies’ losses mounted.

As the companies returned to profitability, the FHFA came under increased pressure to lift the suspension. The National Low Income Housing Coalition and others last year sued the FHFA to force it to reinstate payments. That lawsuit was thrown out in September by a federal district court judge who said that the plaintiffs didn’t have standing to bring the suit.

On the other hand, many Republican lawmakers have repeatedly asked Mr. Watt to leave the suspension in place, citing the taxpayer backing of the companies and continuing legislative efforts to overhaul them.

“It is beyond irresponsible to restart these affordable-housing allocations without first dealing with the underlying problems at Fannie Mae and Freddie Mac,” said Sen. Bob Corker (R., Tenn.) on Thursday. Mr. Corker had been one of the primary proponents of a bill to overhaul the housing-finance system that stalled in May.


_________________________________________________

As we all know, Obama and Congressional neo-liberals join Republicans in allowing foreign corporations and in the case below the Chinese government to launder all of the wealth stolen in fraud from their nation's citizens just as China and nations overseas are allowing Wall Street and US corporations to launder the tens of trillions of dollars looted from the US Treasury usually in real estate deals. Consider that the goal for these global corporate pols is to end all public programs and that included public housing. So, when a Chinese corporation is handed public housing with the goal of it becoming private-----just how does China take care of its low-income citizens? Well, that is what this policy has as a goal----

Meanwhile, all of the wealth stolen from corporate fraud and corporations paying no taxes is what has left these US communities crumbling and third world. A once thriving first world nation brought to its knees by Clinton neo-liberalism. Trans Pacific Trade Pact will allow these Chinese real estate corporations to operate in the US as they do in China. So, think Mumbai and its slums right outside of uber-rich city centers and that is the goal of Clinton neo-liberals and Bush neo-cons.


WOW!!!!!  Just in time for Freddie and Fannie -----the Federal Housing Agencies for low-income housing to give all kinds of taxpayer money to foreign corporations just before a coming economic crash-----AND THIS CHINESE CORPORATION HAS A HISTORY OF THE WORST OF THIRD WORLD SLUM--LORDING COMING TO NYC AND LA----AND A CITY NEAR YOU----YES, BALTIMORE!


A PAY-TO-PLAY FOR GLOBAL US CORPORATIONS WANTING TO SET UP IN THESE FOREIGN NATIONS!


Americans get third world slum landlords and global US corporations get to set up Goldman Sachs branches in China!


The Chinese government is building affordable housing in Brooklyn China's latest overseas investment project.


(Getty/Spencer Platt) SHARE Written byLily Kuo@lilkuo ObsessionChina's Transition December 16, 2014

 Executives from one of China’s largest state-owned property developers broke ground this week on a mixed-income housing project in a somewhat unlikely locale: the hipster haven of brownstone Brooklyn. “We are committed to doing everything we can to keep this neighborhood diverse, affordable and accessible for all New Yorkers,” said I-Fei Chang, head of Greenland Holdings Group’s US expansion. Chang has said in the past that a range of incomes of residents is “what makes a city successful.”

1 Greenland’s affordable housing venture in Brooklyn, 298 apartments in an 18-story building in Prospect Heights, is part of a larger 15-tower apartment project in Atlantic Yards, (now rebranded “Pacific Park) adjacent to the Barclays Center, which will cost an estimated $4.9 billion to build. Half of the 298 units are supposed to be for families that make as low as 40% of the median income for the area—that’s about $33,560 for a family of four. Here’s where the development sits within the neighborhood:

Not surprisingly, the deal is likely less about neighborhood altruism and more about Chinese property developers’ drive to expand overseas. Greenland has invested about $20 billion in 13 cities outside of China since last year, and is just one of many mainland developers taking advantage of China’s loosening restrictions on overseas direct investments to get into US real estate. The Atlantic Yards project marks the largest overseas investment by a Chinese property developer to date.

It’s too bad that Chang’s comments about diverse and accessible housing don’t seem to apply to Greenland’s home base in China. Shanghai, where the company is based, and other Chinese cities have some of the least affordable housing in the world, pushing families and single workers into slum-like villages, overcrowded group apartments, and even underground homes. In China, Greenland is best known for building a 636-meter (2,087 feet) skyscraper for luxury apartments and office space in Wuhan. It will be China’s tallest skyscraper.

New York City is just one locale on Greenland’s list. The company is also building a $1 billion complex for hotels, apartments and luxury condos in downtown Los Angeles, and its chairman Zhang Yuliang said this week that it is looking to expand in its existing markets (paywall).




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December 24th, 2014

12/24/2014

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LIBOR fraud involved interest rate fixing and today we talk about another fraud using interest rates-----INTEREST RATE SWAPS.  Another trillion dollar fraud for Wall Street that has yet to see any justice.


If you think the financial frauds by Wall Street have slowed since a 'Democrat' has come to office ----you don't understand the word Democrat.  Obama is a Wall Street Clinton global corporate neo-liberal -----not a Democrat and as you would guess when a pol works for Wall Street and since all of the massive and systemic financial fraud has gone without justice-----Wall Street has super-sized the fraud.  Below you see this interest rate swap scam and the Chicago School system----but remember the fraud I have been speaking to-----municipal credit bond fraud that finances public school building projects with the goal of having those school projects default into the hands of private investors----this will take trillions of dollars of public assets and real estate and it is all planned and deliberate.  THESE POLS KNOW WALL STREET DEALS ARE FIXED AGAINST THE PUBLIC---THAT'S WHAT THEY DO---PROFIT AT ANY COST.  The State of Maryland with a Wall Street neo-liberal O'Malley doubled-down on Wall Street deals for development after the 2008 crash knowing the financial system is criminal----


'These political decisions have determined that virtually all interest rate swaps between local and state governments and the largest banks have turned into perverse contracts whereby cities, counties, school districts, water agencies, airports, transit authorities, and hospitals pay millions yearly to the few elite banks that run the global financial system, for nothing meaningful in return'.

Please take time to watch this video-----Ellen Brown is a great financial analyst and an activist for the Public Banking system.  You'll see two people speaking of banks as everyone should----in terms of being criminal and cartels.  If your pols are not calling the financial industry criminal and a cartel---but rather continues to work with them----that pol is a Wall Street global corporate pol.....GET RID OF THEM.



Wall Street Confidence Trick: How Interest Rate Swaps Are Bankrupting Local Governments



Ellen Brown
March 20, 2012
www.webofdebt.com/articles/interestrateswap.php

Far from reducing risk, derivatives increase risk, often with catastrophic results.

Derivatives expert Satyajit Das, Extreme Money (2011)

The “toxic culture of greed” on Wall Street was highlighted again last week, when Greg Smith went public with his resignation from Goldman Sachs in a scathing oped published in the New York Times. In other recent eyebrow-raisers, LIBOR rates—the benchmark interest rates involved in interest rate swaps—were shown to be manipulated by the banks that would have to pay up; and the objectivity of the ISDA (International Swaps and Derivatives Association) was called into question, when a 50% haircut for creditors was not declared a “default” requiring counterparties to pay on credit default swaps on Greek sovereign debt.

Interest rate swaps are less often in the news than credit default swaps, but they are far more important in terms of revenue, composing fully 82% of the derivatives trade. In February, JP Morgan Chase revealed that it had cleared $1.4 billion in revenue on trading interest rate swaps in 2011, making them one of the bank’s biggest sources of profit. According to the Bank for International Settlements:

[I]nterest rate swaps are the largest component of the global OTC derivative market. The notional amount outstanding as of June 2009 in OTC interest rate swaps was $342 trillion, up from $310 trillion in Dec 2007. The gross market value was $13.9 trillion in June 2009, up from $6.2 trillion in Dec 2007.

For more than a decade, banks and insurance companies convinced local governments, hospitals, universities and other non-profits that interest rate swaps would lower interest rates on bonds sold for public projects such as roads, bridges and schools. The swaps were entered into to insure against a rise in interest rates; but instead, interest rates fell to historically low levels. This was not a flood, earthquake, or other insurable risk due to environmental unknowns or “acts of God.” It was a deliberate, manipulated move by the Fed, acting to save the banks from their own folly in precipitating the credit crisis of 2008. The banks got in trouble, and the Federal Reserve and federal government rushed in to bail them out, rewarding them for their misdeeds at the expense of the taxpayers.

 How the swaps were supposed to work was explained by Michael McDonald in a November 2010 Bloomberg article titled “Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire”:

In an interest-rate swap, two parties exchange payments on an agreed-upon amount of principal. Most of the swaps Wall Street sold in the municipal market required borrowers to issue long-term securities with interest rates that changed every week or month. The borrowers would then exchange payments, leaving them paying a fixed-rate to a bank or insurance company and receiving a variable rate in return. Sometimes borrowers got lump sums for entering agreements.

Banks and borrowers were supposed to be paying equal rates: the fat years would balance out the lean. But the Fed artificially manipulated the rates to the save the banks. After the credit crisis broke out, borrowers had to continue selling adjustable-rate securities at auction under the deals. Auction interest rates soared when bond insurers’ ratings were downgraded because of subprime mortgage losses; but the periodic payments that banks made to borrowers as part of the swaps plunged, because they were linked to benchmarks such as Federal Reserve lending rates, which were slashed to almost zero.

In a February 2010 article titled “How Big Banks' Interest-Rate Schemes Bankrupt States,” Mike Elk compared the swaps to payday loans. They were bad deals, but municipal council members had no other way of getting the money. He quoted economist Susan Ozawa of the New School:

The markets were pricing in serious falls in the prime interest rate. . . . So it would have been clear that this was not going to be a good deal over the life of the contracts. So the states and municipalities were entering into these long maturity swaps out of necessity. They were desperate, if not naive, and couldn't look to the Federal Government or Congress and had to turn themselves over to the banks.

Elk wrote:

As almost all reasoned economists had predicted in the wake of a deepening recession, the federal government aggressively drove down interest rates to save the big banks. This created opportunity for banks – whose variable payments on the derivative deals were tied to interest rates set largely by the Federal Reserve and Government – to profit excessively at the expense of state and local governments. While banks are still collecting fixed rates of from 4 percent to 6 percent, they are now regularly paying state and local governments as little as a tenth of one percent on the outstanding bonds – with no end to the low rates in sight.

. . . [W]ith the fed lowering interest rates, which was anticipated, now states and local governments are paying about 50 times what the banks are paying.
Talk about a windfall profit the banks are making off of the suffering of local economies.

To make matters worse, these state and local governments have no way of getting out of these deals. Banks are demanding that state and local governments pay tens or hundreds of millions of dollars in fees to exit these deals. In some cases, banks are forcing termination of the deals against the will of state and local governments, using obscure contract provisions written in the fine print.

By the end of 2010, according to Michael McDonald, borrowers had paid over $4 billion just to get out of the swap deals. Among other disasters, he lists these:

California’s water resources department . . . spent $305 million unwinding interest-rate bets that backfired, handing over the money to banks led by New York-based Morgan Stanley. North Carolina paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employees. Reading, Pennsylvania, which sought protection in the state’s fiscally distressed communities program, got caught on the wrong end of the deals, costing it $21 million, equal to more than a year’s worth of real-estate taxes.

In a March 15th article on Counterpunch titled “An Inside Glimpse Into the Nefarious Operations of Goldman Sachs: A Toxic System,” Darwin Bond-Graham adds these cases from California:

The most obvious example is the city of Oakland where a chronic budget crisis has led to the shuttering of schools and cuts to elder services, housing, and public safety. Oakland signed an interest rate swap with Goldman in 1997. . . .

Across the Bay, Goldman Sachs signed an interest rate swap agreement with the San Francisco International Airport in 2007 to hedge $143 million in debt. Today this agreement has a negative value to the Airport of about $22 million, even though its terms were much better than those Oakland agreed to.

Greg Smith wrote that at Goldman Sachs, the gullible bureaucrats on the other side of these deals were called “muppets.” But even sophisticated players could have found themselves on the wrong side of this sort of manipulated bet. Satyajit Das gives the example of Harvard University’s bad swap deals under the presidency of Larry Summers, who had fought against derivatives regulation as Treasury Secretary in 1999. There could hardly be more sophisticated players than Summers and Harvard University. But then who could have anticipated, when the Fed funds rate was at 5%, that the Fed would push it nearly to zero? When the game is rigged, even the most experienced gamblers can lose their shirts.

Courts have dismissed complaints from aggrieved borrowers alleging securities fraud, ruling that interest-rate swaps are privately negotiated contracts, not securities; and “a deal is a deal.” So says contract law, strictly construed; but municipal governments and the taxpayers supporting them clearly have a claim in equity. The banks have made outrageous profits by capitalizing on their own misdeeds. They have already been paid several times over: first with taxpayer bailout money; then with nearly free loans from the Fed; then with fees, penalties and exaggerated losses imposed on municipalities and other counterparties under the interest rate swaps themselves.

Bond-Graham writes:

The windfall of revenue accruing to JP Morgan, Goldman Sachs, and their peers from interest rate swap derivatives is due to nothing other than political decisions that have been made at the federal level to allow these deals to run their course, even while benchmark interest rates, influenced by the Federal Reserve’s rate setting, and determined by many of these same banks (the London Interbank Offered Rate, LIBOR) linger close to zero.
These political decisions have determined that virtually all interest rate swaps between local and state governments and the largest banks have turned into perverse contracts whereby cities, counties, school districts, water agencies, airports, transit authorities, and hospitals pay millions yearly to the few elite banks that run the global financial system, for nothing meaningful in return.

Why are these swaps so popular, if they can be such a bad deal for borrowers? Bond-Graham maintains that capitalism as it functions today is completely dependent upon derivatives. We live in a global sea of variable interest rates, exchange rates, and default rates. There is no stable ground on which to anchor the economic ship, so financial products for “hedging against risk” have been sold to governments and corporations as essentials of business and trade. But this “financial engineering” is sold, not by disinterested third parties, but by the very sharks who stand to profit from their counterparties’ loss. Fairness is thrown out in favor of gaming the system. Deals tend to be rigged and contracts to be misleading.

How could local governments reduce their borrowing costs and insure against interest rate volatility without putting themselves at the mercy of this Wall Street culture of greed? One possibility is for them to own some banks. State and municipal governments could put their revenues in their own publicly-owned banks; leverage this money into credit as all banks are entitled to do; and use that credit either to fund their own projects or to buy municipal bonds at the market rate, hedging the interest rates on their own bonds.

The creation of credit has too long been delegated to a cadre of private middlemen who have flagrantly abused the privilege. We can avoid the derivatives trap by cutting out the middlemen and creating our own credit, following the precedent of the Bank of North Dakota and many other public banks abroad.

________________________________________________

As you see below the dealings with Wall Street have gone so far to corruption that having pols that deal with Wall Street now is a sign of corrupt politicians.  Everyone has known since mid-2000s that the deregulation and consolidation of the financial industry was now creating a systemically criminal industry.  Betting on every single transaction-----fees and defaults, leveraging at the same time they know they are imploding the economy.  The FED manipulating in ways never done all to the benefit of Wall Street. State and local governments do not have to be involved in this.  As the article stated---the first thing honest pols would have done after 2008 is create Public Banking to protect people as we get a handle on the banking cartel. If the FED really needed to bring interest rates done to zero to 'save the banks'----they are responsible to protect people who would be hurt by that manipulation----not just let people get soaked. 

Below you see that public officials had to know these deals are bad for the public as they do with the Baltimore School Building financial deal-----and as the article below says, these corporate politicians are deliberately not seeking justice when they could win back this lost revenue.  The entire system is run just like PAY DAY LOANS......at taxpayer and citizen expense.

THAT'S A CLINTON WALL STREET GLOBAL CORPORATE NEO-LIBERAL AND A BUSH WALL STREET GLOBAL CORPORATE NEO-CON FOR YOU!


THIS IS HOW YOU KNOW ALL OF THIS IS ORCHESTRATED AND DELIBERATE.


This article is long but please glance through it to see similarities to things happening in your neck of the woods.


Monday, Nov 24, 2014 08:30 AM EST
Elias Isquith  SALON


Wall Street’s taxpayer scam: How local governments get fleeced — and so do you

A trick Wall Street uses with municipal finance is to make it seem complex. It isn't -- here's what you should know


Jamie Dimon, Rahm Emanuel (Credit: Reuters/Yuri Gripas/Larry Downing)


The news was buried somewhat by all the hubbub over President Obama’s executive orders and the (manufactured) scandal over Jonathan Gruber (aka, History’s Greatest Monster) but earlier this week, a movement to rein in Wall Street took a step activists hope is just the first of many. Galvanized in part by a recent blockbuster investigation on the damage done by a series of  loans taken from Wall Street by Chicago Public Schools — which have not panned out and which Mayor Rahm Emanuel is trying to disown — opponents of Wall Street’s “predatory loans” demanded action, using a new report from the Roosevelt Institute as a guide.

Titled “Dirty Deals: How Wall Street’s Predatory Deals Hurt Taxpayers and What We Can Do About It,” the report is an in-depth look at one of Wall Street’s most insidious but overlooked practices that also tackles how government officials can fight back — assuming, of course, that they’re interested. Earlier this week, Salon called Roosevelt Institute fellow Saqib Bhatti to discuss his findings and recommendations for what those concerned about Wall Street malfeasance can do next. Our conversation is below and has been lightly edited for clarity and length.

Could you explain to me what the relationship is like between Wall Street and municipal governments? Or is it too varied to say there’s any single dynamic?

There are, of course, some nuances from place to place, but in general there are some broad trends. The relationship between municipalities and Wall Street is largely broken because there’s a very strong imbalance of power that exists or, at least, is perceived to exist. Banks typically set the rules of the game. They make recommendations for different types of deals municipalities should be doing, they pitch deals to them. Typically, municipalities may bargain around the margins but largely accept the rules as they’re set by Wall Street.

When I say there’s a perception of imbalance of power I use that word because, in reality,
municipalities could have a lot more power if they chose to wield it. If they actually chose to play hardball or question some of the underlying assumptions that Wall Street brings into various municipal finance deals, they could potentially fight to get a better deal or to question the entire framework around how some fees are structured and so forth.

And why is it that municipal governments even go down this road, dealing with banks? What makes this so irresistible?

The reality is that there really is a revenue crisis in our country that’s really affecting city and local governments. Over the course of the last 35 years it’s been very hard to raise revenue, and so there are real budget problems that exist. Typically, what this means is that cities and states regularly have to borrow money and often the pitch from banks is, “Here’s a way you can borrow for less!” or “Here’s a way you can save some money!” That’s typically how it’s framed, as an exciting new product that can save you money. But what often isn’t factored in there is that new product could have a lot of risks built-in, and those risks actually have a dollar value and a real cost.

And those would be the “predatory deals” you refer to in the report’s title. How are you defining a “predatory” deal?


I think a predatory deal is one that really takes advantage of the vulnerabilities in the customer. I’d say they are typically characterized by high costs, high risks, high levels of complexity, and they’re often designed to fail or designed in a way where the bank is not concerned if they do fail.


Do officials tend to know that these deals are structured in such a disadvantageous way? Do they think that for whatever reason they’ll make it work or outsmart the banks? Or do they often not know what they’re getting into?


One of the big problems is that often the banks really downplay the risks or misrepresent the likelihood of the risks occurring. Often, government officials are really not aware that the risks could actually materialize. One of the things that’s featured prominently in the report is interest rate swaps. With interest rate swaps, in particular, one of the big problems was that there’s all sorts of risks that were embedded in the deals, and in the paperwork there’s all these disclosures that say these risks exist, but when the banks actually pitched the deals the pitch said not to worry about those risks. Or they would make projections of all the money the city could save but those projections were all based on none of those risks materializing.

Especially with products that are relatively new, that are not widely understood and where, frankly, in many cases they haven’t been around long enough to really understand what all the risks are, there is this huge problem that exists.
The risks just are not disclosed on a level that they should be and in reality, that’s not just unethical, it’s also illegal and violates the Fair Dealing Standards of the Municipal Securities Ruling Board.

So to take this more into the here-and-now, can you tell me a bit about a recent news story or event that involves this issue?

There was a great Chicago Tribune investigation last week that looked at financial schemes that Chicago public schools (CPS) got into. CPS took out a series of auction rate securities, which they then linked together with interest rate swaps, and the idea was, it was pitched to CPS as a way to get a cheaper interest rate than taking out a traditional fixed-rate bond. A hypothetical example would be that if you were to take out a fixed-rate bond it might cost you 8 percent and the banks were basically saying that if you do this complicated scheme that involves all these auction rate securities and interest rate swaps and a few other things, you can essentially lock in a synthetic fixed rate of 6 percent, which is cheaper than 8 percent, and so you can save some money.

The problem was that there were a lot of risks associated with this. For instance, the 6 percent was not really a 6 percent. The synthetic fixed was actually not fixed because there were other variables in there that made it so that you weren’t really getting a fixed rate. There are traditional costs that were not properly represented to CPS. One of the other problems that existed in particular was that when the banks projected cost savings, they compared the deal to a more expensive one that CPS wouldn’t have gotten, so in this case it’s as though they made a cost-saving projection that was predicated on the idea that CPS would pay 9 percent otherwise, when, in reality, CPS would have paid 8 percent. They inflated the cost of the alternative to make it seem like a better deal.


There are a number of similar things that went on. One of the problems that eventually surfaced in those deals was that the auction rate securities market completely froze up.
When that happened, the variable interest rate on the underlying bonds actually skyrocketed. At the moment at which Bank of America in 2007 underwrote some of these auction rate securities deals, Bank of America officials were already aware of the fact that the market was headed for a meltdown — that’s an exact quote from the Tribune, “headed for a market meltdown” — and did actually still underwrite the deal for CPS to get these auction rate securities and didn’t warn CPS of this fact. That risk was not actually disclosed to CPS.


In reality, the bigger thing is that — and this is the part that’s often lost on public officials, unfortunately — when Wall Street banks are pitching deals their No. 1 goal is not to save money for taxpayers. Their No. 1 goal is to maximize profits for themselves. In this hypothetical situation where a bank says, “You can get a fixed rate for 8 percent or a synthetic fixed for 6 percent,” the reason they’re steering you towards the 6 percent deal is that they get to charge more fees because that deal is more complex. In a traditional fixed-rate bond, if the interest rate is 8 percent the banks get to charge some fees upfront for underwriting the bond but that interest, over time, is going to the bondholders and not back to the banks. In a synthetic fixed-rate structure, the interest that’s going to go to bondholders is much, much lower and the rest of the money is actually going to the banks.

The reason why they push you into these structures that have more complex transactions and more individual deals built into them is that with each of these deals, banks get to charge fees and collect more of that money for themselves instead of it going to bondholders or anywhere else. That’s the piece that’s often lost on public officials, is that no, the bank is not looking to do you a favor. They’re looking to maximize their own profits and, ultimately, those profits are coming at the expense of taxpayers.

OK, so how do people end up experiencing this in their everyday lives? Obviously no one wants to see their tax dollars wasted, but that’s a somewhat abstract transaction — a few numbers on your monthly check or what have you. How does it become more tangible, the downside?

I think it has a huge impact. For example, the Detroit Water Department in 2012 had to pay $547 million in penalties to terminate interest rate swaps. Now more than 40 percent of the water bill that people pay in Detroit actually goes towards paying off that termination fee, and it’s hit the Water Department hard so now the Water Department is actually shutting off the water of Detroiters who have missed just a couple of payments on their bill. In the meantime, they’re actually paying out $547 million in fees to banks on these deals.

There is strong reason to believe that if the Detroit Water Department pursued legal claims against the deals that they could have recovered some of that money, but instead of trying to recover the $547 million they’re turning off the water on low-income, working-class people of color who are already struggling to get by.

In Chicago we’ve seen the impact of these finance deals in school closings. in Chicago we had the largest school closing in the history of the country when 50 schools were closed last year, presumably to save money.
Based on CPS’ own estimates, each school closing would have saved up to about $800,000, and in the meantime the school system is paying out $36 million a year on its interest rate swaps. The Tribune estimated that this complex financing structure with auction rate securities is going to end up costing the school system $100 million more than if it had chosen a fixed-rate traditional bond, and that’s actually a conservative estimate because it only looks at a small number of the deals that CPS has
.

You mentioned before that municipal officials have more control over this situation than they either think or want us to believe. What are some of the tools they could be using?

There’s a couple. There are some legal angles here, which is that for many of the deals that have taken place there have been a clear law-breaking risk. That’s a case with things like the illegal manipulation of the LIBOR interest rates, that’s happened with the way a lot of these auction rate securities and interest rate swaps were pitched and the risks misrepresented. There are some clear legal angles there, you can file for an arbitration with the Financial Industry Regulatory Authority under the Fair Dealing Standards of the Municipal Securities Ruling Board. You can also sue for state-based claims for breach of contract and fraud, where applicable.

Beyond that, there’s some bigger stuff overall, which is just not done very often. Cities and states could actually play hardball with Wall Street. In reality, there are a lot of different fee structures, deal structures, that exist only because they’re not really pushed back on, ever. For example, bond underwriting fees are typically a percentage of the total amount that’s being issued, but in reality it’s not any more work for a bank to underwrite a $200 million bond than it is to underwrite a $100 million bond and they get to make twice as much money. There’s no reason why that’s the case; there’s no reason why it’s a percentage, but if any one city were to try to buck that trend, they would say, “That’s just not how it works.”

The reality is that the market is not preordained. Right now, Wall Street sets the terms of the market and cities and states negotiate around the margins. What we need is to turn that on its head. If we actually had cities and states saying, “Here are the rules that we’re going to operate by because this is what works for taxpayers,” and Wall Street can take it or leave it, if they actually stand by that they can move the market. American taxpayer dollars are still one of the largest pools of capital that exist in the country, in the world.

The city of Los Angeles currently has a campaign where they’re trying to reduce their fees. The city of Los Angeles is the second-largest city in the country. It also has a huge pension fund and many different agencies that it controls. If you actually have the city of Los Angeles take a hard line that says, “We won’t do business with any banks that don’t abide by this set of rules or that don’t put the interests of taxpayers first,” then they can actually change the way Wall Street deals with them. If you have enough cities getting together and saying they’ll do that, that can have an impact.

In 2012 the Oakland city council managed to pass a resolution to boycott Goldman Sachs because they wouldn’t renegotiate an interest rate swap. The city of Oakland by itself is relatively small, but if you had Oakland, Los Angeles, Chicago, Chicago Public Schools, New York, the New York Metropolitan Transportation Authority, all of these different bodies with interest swaps, if they were to pass similar resolutions they could renegotiate these interest rate swaps in a heartbeat. There’s this power of numbers and we need cities and states to more effectively use their leverage as customers of Wall Street to renegotiate our relationship.


The report has a few recommendations for how government officials and citizens can address this problem. What are they?

One is that we need greater transparency around the financial health of our cities; we need to know how much money we’re paying out every year on financial years, and we need greater transparency in terms of the deals that we’ve entered into and the risks that are contained within them.

Secondly, we need accountability … [if] we learn that the banks have broken the law, we need to actually litigate against them and get back the money they’ve taken from us. We need to hold them accountable, and then even where there is not illegal behavior, but there is unethical behavior, we need to use our leverage as customers of Wall Street to hold them accountable and try to get a better deal.

Thirdly, we need to try to reduce fees, again using our leverage as customers of Wall Street.

The fourth recommendation is something I call “collective bargaining with Wall Street,” which is the idea of having cities and states across the country band together and try to change the conditions and terms that Wall Street operates under to better reflect the interests of taxpayers.

Fifth is creating more public options for financial services. There are many types of financial services like investment management or debt management that cities and states could do themselves for cheaper and they need to start thinking about developing those capacities.

Finally, the last recommendation of the report is to create publicly owned banks. We currently have one of these in the U.S., which is the Bank of North Dakota, and we need to look at the option of creating more publicly owned banks either at the city, state or county levels.

Say you’re a voter who cares about this issue but isn’t really so wonky and numerically inclined. What are some red flags or good signs, in terms of rhetoric, that people should be paying attention to when they’re deciding whom to support in local government?


Any politician who says, “All of our deals are fine” — that should be a red flag. Anyone who says, “We’re sophisticated and we know what we’re doing” — that should be a red flag. Anyone who tries to obscure what’s going on by muddling it in complexity, to make it hard to understand — that should be a red flag. What we should be looking for is people who can actually talk about this in a way that makes sense.

One of the tricks Wall Street has when it comes to municipal finance and when it comes to finance more generally is to make things seem overly complex, so complex that people stop caring and believe they can’t possibly understand it. That’s not actually the case. In reality, most of these things can be understood and can be talked about in plain English, and what we really need is more elected leaders who are willing to break these things down and talk to voters about them in a way that they can understand and that can offer real, common-sense solutions that don’t take a finance degree to understand. At the end of the day, this stuff does not need to be so complicated. Anyone who’s promising another complicated financing scheme as a solution is probably not actually going to be able to deliver on that because the more complex you get, the more heavily weighted things are in the banks’ favor.

The key words we should be looking for from politicians is that we shouldn’t need key words. They should just be able to talk about solutions that actually make sense to the average person and make it clear that they’re actually going to hold banks accountable for these deals they’ve already gotten into and make sure we’re having good, plain, vanilla banking going forward that will make sure we get the best deals.


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December 23rd, 2014

12/23/2014

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'Why LIBOR is Important: All kinds of loans and interest rates are based on the LIBOR rate, so manipulating bids on transactions means that people may have unfairly overpaid for everything from mortgages to credit cards. At the same time, government investments, which may be in the billions of dollars, would also have been skewed by LIBOR. If major banks conspired to manipulate rates, they could have made billions over the course of the crime, which could stretch back decades'.


I've spoken at length about the subprime mortgage loan fraud so I won't go into that here other than to remind it involved trillions of dollars in fraud----not the few hundred billions we have received as settlements----that went right back to the banks as development subsidy.  So, when I say tens of trillions of dollars----I MEAN TENS OF TRILLIONS OF DOLLARS IN FRAUD.  Today I want to look at LIBOR fraud-----one of the largest frauds in history that again involved trillions of dollars in fraud and government officials are allowing this fraud to disappear.  Below you see an article that shows another judge ruling for the banks and look at what she is killing while doing it-----SHE SAYS THIS IS NOT AN ANTI-TRUST OR RICO CRIME.

The SEC, the FED, and US Justice Department, and all agencies with power of prosecution have for a decade or more used the model of settlement for small amounts with no charge.  These cases are all settled as civil cases.  The small amount of settlement is tied to a law that Congress passed that caps the award in fraud to a small amount over the total of fraud.  Maryland has this cap as well.  That creates the situation of not being able to use financial penalty as a deterrent in these fraud cases and of course corporations simply build these small settlements into their operating costs.  Allowing our government officials on the other hand to arbitrarily decide in the name of the American people to settle without charge is another matter. WE THE PEOPLE DECIDE THAT.  We decide that when we vote for a Presidential candidate that runs as a progressive wanting to hold corporations accountable as Obama did.  What we got as we know is a pol that serves as center right working for global corporations and Wall Street.  Obama appointed people to head these agencies tasked with oversight and accountability that protects banks from losses.

The point with the cap of financial awards on fraud is this----almost none of the actual fraud is found----it doesn't even look as if they looked for fraud.  It appears they simply agreed on an amount to pay and approved it so the settlement closed the window of Statute of Limitation.  We know there are trillions of dollars in fraud----they pay a few hundred billion.  That is not justice and it does not end there.  All those trillions in fraud not included are still waiting for Due Process and Equal Protection.  It's important to know that these small settlements are not meant for the citizens victimized-----it is simply a way to keep one corporation from undermining competition with another.

  THESE ARE CORPORATE SETTLEMENTS TO LEVEL THE GROUND FOR COMPETITION.

You see, global corporate pols have already eliminated the paths to justice for the American people because Trans Pacific Trade Pact does not recognize people as citizens with rights.  That is what these failures of justice mean and your pols know this. 

DO YOU HEAR YOUR POL SHOUTING THAT THIS JUSTICE SYSTEM DOES NOT MEET THE CONSTITUTIONAL GUARANTEE OF EQUAL PROTECTION AND DUE PROCESS?  IF, NOT----THEY ARE GLOBAL CORPORATE POLS---GET RID OF THEM!

The article below shows how captured US courts are as regards a reasonable expectation of justice by the American people. All LIBOR claims against banks come to New York City's Manhattan Federal Court and guess what? The judges appointed to a Federal Court in Manhattan probably have a slight bias to Wall Street. This of course has happened across all industries as corporate cases of fraud always seem to be settled in courts connected with these industries. What this ruling states is that it will be hard if not impossible to approach this massive LIBOR fraud through the most logical way----class action lawsuits. This can be appealed but.....

THE AMERICAN PEOPLE MUST DECLARE THIS A SUSPENSION OF RULE OF LAW. THESE RULINGS ARE NOT JUSTICE----THEY ARE NOT DUE PROCESS----AND COURTS OF LAW ARE NOT ALLOWED TO BE DESIGNED WITH SUCH BIAS.

Baltimore's wealthy think all this is a hoot as a PERESTROIKA of American's wealth is simply stolen with no justice with Baltimore's pols working as hard as they can to set the public up for these losses.




'Only investors with enormous holdings, in other words, have an economic rationale for pursuing fraud or contract claims against particular panel banks'


  What remains of Libor litigation with antitrust, RICO knocked out?


By Alison Frankel April 1, 2013  Reuters


Make no mistake: A 161-page ruling late Friday by the New York federal court judge overseeing private litigation stemming from manipulation of the benchmark London Interbank Offered Rate (Libor) has devastated investor claims that they were the victims of artificially suppressed Libor rates. U.S. District Judge Naomi Reice Buchwald of Manhattan ruled that owners of fixed and floating-rate securities do not have standing to bring antitrust claims against the banks that participated in the Libor rate-setting process, even though some of those banks have admitted to collusion in megabucks settlements with regulators. If that result, which Buchwald herself called “incongruous,” weren’t bad enough, the judge also cut off an alternative route to treble damages for supposed Libor victims when she held that federal racketeering claims of fraud by the panel banks are precluded under two different defense theories.

Buchwald’s opinion didn’t address every Libor case that’s been filed, since she only ruled on bank motions to dismiss two class actions (one by owners of Libor-pegged securities and the other by derivatives traders) and individual claims by Charles Schwab entities. She held, moreover, that some claims based on the banks’ supposed violations of the Commodity Exchange Act may go forward, although she also said she had doubts that Eurodollar contract traders would ultimately be able to tie losses to misconduct by the Libor banks.
But unless and until the 2nd Circuit Court of Appeals reverses Buchwald, Libor antitrust and RICO claims in federal court seem to me to be dead.


That’s because Buchwald’s ruling is based on her interpretation of the law, not on facts
.
The judge said investors simply couldn’t show that any injury they received from manipulation of the Libor process was the result of anticompetitive behavior by panel banks because the rate-setting process was collaborative, not competitive. (In that process, 12 or so banks would report their own interbank borrowing rate to Thomson Reuters, which would calculate the daily mean rate to be disseminated by the British Bankers’ Association.) And though plaintiffs argued that the banks colluded to suppress Libor in order to lower the interest rates they would have to pay on securities pegged to the interbank rate, Buchwald said that the manipulation was not designed to hamper competition between the banks, which she said was a necessary element of antitrust standing.

“Even if we were to credit plaintiffs’ allegations that defendants subverted this cooperative process by conspiring to submit artificial estimates instead of estimates made in good faith, it would not follow that plaintiffs have suffered antitrust injury,” she wrote.
“Plaintiffs’ injury would have resulted from defendants’ misrepresentation, not from harm to competition.”


As for RICO claims (which were only asserted by Schwab and not by the classes), the judge said in a broad holding that they are barred both under the federal law precluding investors from transforming securities fraud allegations into racketeering suits and under the U.S. Supreme Court’s ruling in Morrison v. National Australia Bank that U.S. laws don’t apply outside of our borders unless Congress so specified.
Buchwald rejected arguments by Schwab’s lawyers at Lieff Cabraser Heimann & Bernstein that the banks’ misrepresentations were directed at investors and that not all of them related to securities. And even if that were true, Buchwald held, the RICO case would be impermissible under Morrison, which has been read by courts in the 2nd Circuit to preclude racketeering cases in which the illegal enterprise was based overseas. In Libor, the judge said, rate-reporting decisions were made by banks all over the world, but the center of the enterprise was London, where the British Bankers’ Association is located.

Buchwald didn’t dismiss the antitrust or RICO counts with prejudice, but I don’t think there’s much chance that the claims can be revived through an amended complaint with additional facts because Buchwald didn’t even dig into investors’ specific allegations. I doubt the classes will waste their time with an amended complaint. Instead, the plaintiffs may file a motion for reconsideration, arguing that the judge misapplied the law on horizontal price-fixing. Buchwald said that even if the classes can show a price-fixing conspiracy among competitors – a so-called “per se” violation of antitrust laws – investors must separately show that their injury was due to the defendants’ anticompetitive behavior.
Class action lawyers, on the other hand, had contended that because collusion by competitors is inherently illegal under federal antitrust laws, they have standing to sue regardless of whether their injury was due to dampened competition or simply to rate-rigging. If lead counsel from Hausfeld and Susman Godfrey, which represent the broadest class of investors, don’t persuade Buchwald to change her mind (or if they decide not to bring a motion for reconsideration), you can expect their argument at the 2nd Circuit to turn on the trial judge’s interpretation of standing to sue for injuries in a horizontal price-fixing conspiracy.

Meanwhile, the other Libor cases in federal court are likely to remain on hold. Under the rules for multidistrict litigation, the federal judges who oversee such cases have transferred every case filed in federal court (as of mid-February) to Buchwald for pretrial proceedings. Last August she said she would stay all of the other suits until she ruled on the banks’ motions to dismiss the class actions since her analysis of those motions would affect the other Libor cases. Some plaintiffs whose cases have been transferred to Buchwald have since filed motions contending that they’re not covered by the class actions, usually because they’ve brought state-law and federal racketeering claims in addition to the federal antitrust claims asserted by the classes. Buchwald has not said how she’ll handle the additional suits now that she has tossed federal antitrust causes of action (as well as California state-law antitrust claims), and two plaintiffs’ lawyers in the follow-up cases told me they’re still trying to figure out what to do. The simplest solution would be for the other cases before Buchwald to remain stayed until there’s a more definitive finding from the 2nd Circuit on the antitrust standing question.

Plaintiffs whose cases haven’t yet been transferred to Buchwald – such as the Federal Home Loan Mortgage Corporation, which sued Libor banks in March in federal court in Virginia – may fight transfer to her court,
but the MDL rules are pretty clear that Libor suits in federal court go to her.

But for all of the doors closed by Buchwald’s ruling on Friday, there are a couple left open, albeit only a crack. I’ve mentioned that the judge left alive some claims under the Commodity Exchange Act, whose statute of limitations gets a thorough 40-page going-over by the judge. (I’m not kidding: 40 pages.) Securities investors have a more favorable cutoff date for claims than derivatives investors under the Supreme Court’s 2010 ruling in Merck v. Reynolds.
So even if buyers and sellers of Libor-pegged securities can’t bring antitrust claims, they may still be able to sue panel banks for securities fraud under the federal Securities Act or under state common laws,
said Daniel Brockett of Quinn Emanuel Urquhart & Sullivan. (Caveat emptor: Quinn Emanuel, which has been pushing its Libor securities fraud theory since February, seems to be eager to represent clients with Libor securities claims.)

As Brockett pointed out in an interview with me on Monday,
 Buchwald’s opinion strongly implies that the facts alleged by Libor plaintiffs are better suited to fraud and misrepresentation suits than to antitrust claims. “There was a fraud here,” he said. “Fraud claims are viable as long as the statute hasn’t run.” So too, he said, are claims that individual banks on the Libor panel breached swaps contracts with individual investors. (In the Virginia suit filed last month, Freddie Mac brought such breach-of-contract claims against Bank of America, Barclays, Citigroup and several other banks.) Depending on choice-of-law clauses in the contracts, investors could have up to six years (under New York state law) to bring common-law fraud or contract cases against banks that sold them Libor-pegged securities.

There’s a catch, of course, in that these cases would have to be filed by individual investors who can show that they relied on misrepresentations about Libor’s legitimacy. (If there were a viable securities class action on behalf of owners of Libor-pegged securities, which aren’t traded on stock exchanges, you can bet that it would already have been filed.) Only investors with enormous holdings, in other words, have an economic rationale for pursuing fraud or contract claims against particular panel banks. But Quinn Emanuel and at least one other big securities fraud firm I talked to believe such investors are out there.


If the 2nd Circuit upholds Buchwald, the Libor litigation may end up resembling securities litigation over mortgage-backed securities. After federal courts narrowed the standing of lead plaintiffs, MBS class actions ended up being much smaller than investors’ lawyers originally expected. The 2nd Circuit subsequently expanded standing for lead plaintiffs in MBS class actions, but in the meantime individual investors in mortgage-backed notes, including German banks that held tens of billions of dollars of MBS, brought their own suits in state and federal courts. We’re still waiting to see how profitable those cases turn out to be.


_____________________________________________

The individual consumer has no way of knowing if these interest rates paid on all kinds of products are being calculated right so we cannot know we are losing money illegally.  State and local governments like Maryland and Baltimore had tied public deals to these LIBOR schemes which the judge above is saying will lead to no recourse.  The fact that banks overseas cannot be pursued under anti-trust or RICO means they are open to fleece other nations with no legal recourse.  This all plays to the definition of ANTI-TRUST.   Remember I spent the day talking about how global corporate pols define it a products and prices and not size of institution or danger to economic stability.  It is ridiculous to think Anti-Trust does not protect citizens from institutions being too large to fail or too large to provide oversight and accountability----THIS IS NOT AN INTERPRETATION OF THE LAW----IT IS A RE-WRITE.  If we look only at product availability and prices, we all know products with interest are all the same----there is price-fixing.  It was a violation of Anti-Trust that allows these global banking groups to work out of sight in conspiracies that defraud.  An International bank has already become too large and our national laws unable to protect the American people from these crimes.  THEY SHOULD NOT BE DOING BUSINESS IN THE US IF THEY ARE NOT TO ABIDE BY US LAWS.  As the judge stated Congress passed a law that says Anti-Trust does not go beyond our border----this was done to protect global corporations committing crimes overseas that ultimately harm the American people.  DO WE THE PEOPLE HAVE EQUAL PROTECTION IF CONGRESS CAN PASS LAWS THAT PRECLUDE THAT PROTECTION? 

OF COURSE NOT----CONGRESS CANNOT PASS LAWS THAT LEAVE AMERICANS UNABLE TO ACCESS JUSTICE.



Those following financial journalism have known about the trillions of dollars stolen in LIBOR fraud for years. This article makes it sound new----what Clinton neo-liberals and Obama have done is allow absolutely nothing be done about how these vital financial transactions are monitored. Take the Wall Street ratings corporations like Moody's and Standard and Poor-----when it was found they were ground zero in the subprime mortgage fraud there was talk about reforming the rating system-----AND NOTHING WAS DONE-----THESE RATING AGENCIES WERE NOT PENALIZED AND THEY OPERATE AS NOTHING HAPPENED. So, too with LIBOR. What is worse is that Obama and Clinton worked these entire years after the crash helping write Trans Pacific Trade Pact with policy that completely eliminates any banking regulation worldwide. So, we know Congress has absolutely no real intent with the Financial Reform Bill.

DO YOU HEAR YOUR POLS SHOUTING THAT TRANS PACIFIC TRADE PACT SEEKS TO TOTALLY DEREGULATE GLOBAL BANKING AND THAT NO JUSTICE HAS HAPPENED FROM FINANCIAL FRAUDS? IF NOT, GET RID OF THEM AT ALL LEVELS OF GOVERNMENT!


Below you see an article that addresses this new 'manipulation' policy that the financial industry has been clever to create-----not clever but devious----as it has never been done before because everyone knows it harms the economy.  Since we have people in government that live to harm the US economy-----Clinton Wall Street neo-liberals and Bush Wall Street global corporate neo-cons----we are seeing the FED and these  banking groups pulling policy schemes out of the closet that should not see the light of day. Keeping financial measures 'ARTIFICIALLY LAW'  as the FED is doing to interest rates and inflation rates------even as those rates are not really low------is what creates the BUBBLE.  As this article states----this artifically low LIBOR for a decade has fueled the coming economic crash to the point of disaster.  Add to that the FED's ARTIFICAL inflation and interest rate and the global financial market will not only collapse----but with a BIG BANG.



  6/03/2014 @ 1:51PM

This New Libor 'Scandal' Will Cause A Terrifying Financial Crisis


  Two years ago, a major scandal rocked the world after it was revealed that big international banks had long been manipulating the Libor interest rates to fraudulently boost their profits. As outrageous as the Libor rate-fixing scandal was, it pales in comparison to another Libor “scandal” that is occurring at this very moment, but has received virtually none of the attention that it rightfully deserves. The ultimate fallout of this much larger, little-known Libor “scandal” will be nothing less than an international financial crisis.

The next two sections explain the basics of Libor and the rate-fixing scandal, but can be skipped for those who are already familiar with it.

   What Is Libor? 

“Libor” is an acronym that stands for “London Interbank Offered Rate,” which is a benchmark interest rate that is derived from the rates that major banks charge each other for loans in the London interbank market. Each day at 11:30 am London time, banks report their estimated borrowing costs to Thomson Reuters, which publishes the average of these estimates in the form of the Libor benchmark interest rate. The Libor is calculated for five different currencies and seven different maturities up to one year.


As the world’s most important benchmark interest rate, the Libor is used as a reference rate for hundreds of trillion dollars worth of commercial and consumer loans, derivatives, and other financial products across the globe. Libor-based loans are quoted using the Libor rate plus a certain number of basis points, which depends primarily on the particular lending institution, the type of loan, and the borrower’s creditworthiness. For example, a loan’s interest rate may be quoted at “157 basis points over 1-year Libor”, which equates to 1.57 percent plus the current 1-year Libor rate. The 1-year U.S. dollar Libor rate is currently 0.535 percent, so the loan in this example would have an interest rate of 2.105 percent.



The Libor Rate-Fixing Scandal Explained  

In June 2012, a scandal ensued after it was revealed that major banks – particularly Barclays, UBS, Rabobank, and the Royal Bank of Scotland – had been manipulating the Libor for their own benefit since at least 1991. As mentioned earlier, the Libor is used as a reference rate for hundreds of trillions of dollars worth of derivatives – a market that is dominated by big banks.
Traders at numerous banks had colluded with each other to submit fraudulent daily Libor rate submissions so that they could boost the profits on their derivatives positions as well as create the illusion that the banks were in a healthier financial condition than they actually were during the Global Financial Crisis.

Because of the large notional amount of derivatives and loans that banks hold, even minuscule changes in the Libor rate can equate to millions of dollars worth of profits or losses. For example, Citigroup stated that it would have generated $936 million in net interest revenue in the first quarter of 2009 if interest rates fell by 25 basis points or .25 percentage points, and $1.935 billion if rates fell by 1 percent. A Barclays trader’s instant messages that surfaced during the Libor scandal investigations showed that traders could earn ”about a couple of million dollars” for every .01 percent that Libor was manipulated in their favor.

The derivatives market is a zero-sum game in which there is a loser for every winner, so all of the fraudulent profits that banks and traders earned from manipulating the Libor came at the expense of other unwitting parties that were on the other side of their trades. Many of these losing counterparties were not savvy speculators or banks, but parties such as U.S. municipal governments that lost approximately $10 billion on their derivative hedges and U.S. homeowners who paid higher mortgage rates as a result of the manipulations. In addition to the realized financial losses, Libor manipulation harmed the integrity of the global financial system and served as another confidence blow at a critical time during the financial crisis.

After a lengthy and ongoing investigation into the Libor scandal, U.S. and European authorities have fined the institutions that were involved with the manipulation a total of $6 billion and pressed criminal charges on twelve people so far. According to an estimate by securities broker and investment bank Keefe, Bruyette & Woods, the guilty institutions may eventually pay approximately $35 billion in legal settlements in addition to regulatory fines.


This Is The Real Libor Scandal  

Amid all of the attention that the Libor rate-fixing scandal has received, the world is completely overlooking a far worse Libor “scandal” that has been occurring right under our noses this entire time. Though the Libor rate-fixing scandal is certainly no trivial matter, the losses caused by it amount to a few tens of billions of dollars, which is ultimately a drop in the bucket compared to the size of the global economy and financial system. In addition, as dramatic as the term “rate-fixing” sounds, the Libor manipulations only moved the Libor rate by a few basis points (basis points are .01 percentage points) for just a few brief moments at a time. The Libor manipulations did not move the rate by significant magnitudes such as from 5 percent to 2 percent, for example.

The vastly worse Libor “scandal” that I am referring to is the fact that the Libor has stayed at record low levels for the past half-decade, which is helping to fuel a massive economic bubble around the entire world that will end in a devastating financial crisis that will be even worse than the Global Financial Crisis. Instead of causing a few tens of billions of dollars worth of losses like the Libor rate-fixing scandal, the “Libor Bubble” will gut the global economy by trillions of dollars.
_____________________________________________
You notice that the judge ruling on LIBOR cases has eliminated most pathways the public has to receive justice and that with this judges ruling----it will be only the wealthy that will pursue this as fraud and misrepresentation.  As with Maryland Attorney General Doug Gansler who settled the subprime mortgage fraud of trillions of dollars for $25 billion----simply sitting by and allowing the US Justice Department to settle for a canned amount they pulled out of their hats-----the current Maryland Attorney General Frosh will do the same thing. Make no mistake----if these pols were raising cane over this the courts would be fearful of these rulings.  It is main street yet again that will be victim with no justice.

This video reminds the citizens of Baltimore that City Hall places its citizens in the hands of Wall Street fraud at every turn and Baltimore Development Corporation makes these Global banks the center of downtown Baltimore development. This happens because Baltimore City Hall works for Johns Hopkins and Baltimore Development Corporation and not the citizens of Baltimore. NO DEMOCRATIC PARTY IN BALTIMORE-----JUST LOTS OF POLS WORKING FOR NEO-CONSERVATIVE JOHNS HOPKINS AND WALL STREET! Mayor Rawlings-Blake was first out of the lineup of mayors pretending to seek justice since she and O'Malley have tied the city to billions of dollars in losses to Wall Street in one deal after the other. Fast forward to today----even the small settlements that have been made are being sidetracked by courts.

POLS ARE NOT FIGHTING FOR FRAUD RECOVERY IF THEY ARE NOT SHOUTING LOUDLY THAT THE SYSTEM IS RIGGED AND KEEP BRINGING THE PUBLIC BACK TO THESE WALL STREET DEALS!

Remember, in the past this never happened because we had politicians that worked for the American people.  Taking these mechanisms out of the hands of banks is of course the solution ------and that would have happened had we not had a captured Democratic Party.  Simply voting these Wall Street Clinton global corporate neo-liberals out of the people's Democratic Party will reverse this and

WE THE PEOPLE WILL SEEK JUSTICE BECAUSE WHEN A GOVERNMENT SUSPENDS RULE OF LAW IT SUSPENDS STATUTES OF LIMITATION!



If your pols are saying----WE DIDN'T SEE THAT COMING-----they are lying.  Anyone watching and reading financial journals has known Wall Street has been systemically criminal and would not have partnered with Wall Street deals to begin with.  As we see in Maryland and Baltimore-----these pols are doubling down on Wall STreet deals and every candidate for Governor of Maryland except me were committed to these Wall Street development deals.  That is how you know these pols are working for global corporations and not you and me!


Please take time to listen to this video and read the transcript....this is all illegal and we can reverse this!

LIBOR Scandal More Than Fraud - Whole Game is Rigged



Costas Lapavitsas: From multimillion dollar losses by cities like Baltimore to pension fund losses and much more, the LIBOR interest rate scandal shows that such mechanisms must be taken out of the hands of banks and be run in public interest -   October 3, 14



Costas Lapavitsas is a professor in economics at the University of London School of Oriental and African Studies. He teaches the political economy of finance, and he's a regular columnist for The Guardian.



PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this week's edition of The Lapavitsas Report on Economics with Costas Lapavitsas, who now joins us from London.Costas is a professor of economics at the School of Oriental and African Studies at the University of London. He's a member of Research on Money and Finance, and he's a regular columnist for The Guardian newspaper.Thanks, Costas.


COSTAS LAPAVITSAS, PROF. ECONOMICS, UNIV. OF LONDON: Pleasure to be here, Paul.


JAY: So what have you been working on this week?

LAPAVITSAS: I think one of the most interesting things to hit the news this week is the Libor manipulation case and the fine that has been imposed on the large British bank RBS for manipulating the Libor.I think we need to talk a little bit about this so that people understand the significance of it, because it hasn't really been widely appreciated by the public.Now, the Libor is not a real interest rate. It's a benchmark. It's a benchmark that is set privately by the banks and in secret. There's a committee of banks that does that. On the basis of the Libor, a whole host of other interest rates that are charged to people for their mortgages, to businesses, and so on are determined.Now, the case and the fine imposed on RBS has discovered, has found that actually RBS has been colluding with brokers and others to manipulate the Libor. This is a criminal dimension. And they've been charged. The British government—.


JAY: Hang on one sec. Just for people that haven't followed this story at all, just a little more on why this matters so much.

LAPAVITSAS: This matters enormously for a number of reasons. As I said to you, as I said, this is not a real interest rate; this is a benchmark. If the banks determine the benchmark in an untruthful way, then they can influence a whole host of other prices, and they can influence the receipts they make from people to whom they've lent money and from the various transactions they make in the derivatives markets. For the banks, the ability to manipulate the Libor is a key mechanism to make extra profits, basically. And they've got this ability to do it because they set the Libor privately and in a special committee, which they run themselves.Now, the British government is making out that this is a criminal act, which it is, of course, because collusion with the aim of making extra profits is criminal. The point is, however—and this is something that the British government wishes to keep quiet—it isn't simply criminality here. It looks as if the entire game is rigged from beginning to end. In other words, it isn't simply collusion and illegality. The game is rotten. And it is rotten for two reasons, I would argue. First, the banks have got an incentive to present falsely low rates, because they in this way appear to be stronger than their competitors. And the banks have got an incentive to manipulate the rate sometimes up, sometimes down, because they make different payments in this way on their derivatives portfolio. The banks, then, have got clear incentives to manipulate it, and they signal their incentives to each other. So this committee doesn't work. It doesn't work systematically in the public interest; it works in the interest of banks. This is becoming increasingly clear, and this is going to be big news, I think, in the months to come, because, of course, there are more banks that would be hit—that will be charged fines in the months ahead.

JAY: How did we get to a situation that a group of banks, most of them private, or maybe all of them privately owned, get to determine what is essentially the most influential rate in the globe? I mean, in theory, central banks are supposed to establish rates, I would have thought.

LAPAVITSAS: Central banks establish the rates at which they themselves lend to the banking system. However, there is also a private market for funds. There's the money market. And in the money market, banks interact with each other and work out the rate at which they lend to each other. This is the most important price in the financial system. It's more important than the rate at which central banks lend to banks. It's the most important financial price. And presumably, in a neoliberal free-market system such as the one we've got today, it ought to be set through the free competition among the financial institutions. It isn't. And that's the significance of this. This rate is actually manipulated. These banks have got a secretive committee. They work out the rate, which is the Libor. They don't transact at this rate—this is a benchmark. And they announce it on a daily basis. They manipulate it. They handle it. And by manipulate it, they affect all other actual interest rates at which people undertake [unintel.] transactions.

JAY: Now, just to make this concrete for people, a city like Baltimore claims it's lost millions of dollars that could have been spent on schools or roads or housing or whatever, and they've lost this money, they claim, because of this fraudulently set Libor rate. But how does that work? Why is Baltimore out money because of what some bankers are doing on this committee?

LAPAVITSAS: Because the prices Baltimore would have been charged on various loans it took or on derivatives transactions it engaged in—I don't really know the particulars of the Baltimore case, but the prices it would have been charged and the rates it would have been charged would have been false. They would have not have been true rates. They would have been based on the Libor, a premium would have been added to the Libor, and the Libor rate that would have been used as the base for this would have been a false, manipulated rate. And by manipulating it, the banks would have seen to it that money would have gone into their coffers, that their coffers would have gone up. It's a hidden, silent transfer of income and wealth from the public in general to the banks. It's arguably one of the biggest scams in the history of finance.

JAY: And Baltimore's leading a class action lawsuit of various cities, with Baltimore being the lead city, suing these banks to try to recover this money.

LAPAVITSAS: They're right to do so. As I said, I mean, there is obviously outright criminality in some respects, because these banks have been proven to have colluded with one another to handle—they manipulate the rate directly. But the point I repeat is that criminality aside, it looks as if the entire game is rigged, that the banks actually can know how to handle and manipulate the rate without actually directly colluding with each other. And that's what's wrong about it, and that's what's bad about it, because it shows that the so-called free market in finance simply doesn't work. I want to stress the importance of this. You see, neoliberalism and free markets, which is the mantra that we've been listening to and hearing for decades, pivots on the banks and the financial system. This is where it's supposed to be free. This is the markets, these are the markets, and the institutions are supposed to be as free as possible. Well, they're not. They're actually managing this rate, manipulating this rate in their own interests. And they are doing it through a private meeting. You know, Adam Smith wrote more than two centuries ago that when you let capitalists meet in a nontransparent way on a regular basis, then they will do two things: they will defraud the public and they will raise prices. He argued that two centuries ago. Well, there you are. When you let banks meet on a daily basis, privately, without transparency, without public scrutiny, what they will do is to manipulate this key rate, the fundamental rate of the financial market, to make extra profits. That's what they've been doing. This is one of the biggest scandals, as I said before, in the history of finance. It's about time the public realized what's happening and demanded intervention.

JAY: Alright. Thanks for joining us, Costas.

LAPAVITSAS: Thank you.

JAY: And thank you for joining us on The Real News Network.


__________________________________________

This last article shows how the national news media assumed from the beginning of this scandal's exposure that crimes were obvious and proving this would be the simplest of court proceedings.  AND IT SHOULD BE.  Then alongs comes a New York judge to rule out most avenues for justice with an 'interpretation' that cannot even be held seriously.



Since this fraud came to light almost nothing has happened as justice for this LIBOR fraud. Even the few cases that did end in a settlement have since been dismissed by courts. As you see below this fraud was huge and systemic and the American people have no way to prove it is not still happening. Global corporate pols are still discussing how to fix this even as Trans Pacific Trade Pact seeks to eliminate all bank regulations for the world's banks. Any state in the US that ties itself to Wall Street financial instruments-----and Maryland and Baltimore are soaked in these deals----have pols who know citizens are being fleeced by these deals---GET RID OF THESE WALL STREET POLS----ALL MARYLAND POLS ARE WALL STREET POLS!




'But this time it's different and here's why: The sheer volume of contracts based on LIBOR defies the imagination. Estimates vary, but $500 trillion seems reasonable. Even if the banks lied by as little as one-tenth of 1 percent, that percentage applied to $500 trillion multiplied by the six years of the fraud comes to $3 trillion stolen from customers'.


LIBOR Fraud May Be the Mother of All Bank Scandals An estimated $1.5 trillion was stolen from customers in the LIBOR scandal.

By James Rickards July 23, 2012 | 4:30 p.m. EDT US News and World Report

 
  Barclays PLC and its subsidiaries will pay about 453 million US dollars to settle charges that they tried to manipulate interest rates that can affect how much people pay for loans to attend college or buy a house. Britain's Barclays is one of several major banks reportedly under investigation for such violations.


Investors have by now heard of the LIBOR scandal engulfing the banking industry. LIBOR stands for the London Interbank Offered Rate. To some it may be just the latest entry on a list of bank frauds and blunders in recent years, from mortgage scams to MF Global and the London Whale.

In fact, this may be the mother of all scandals--the one that finally leads to criminal charges and the insolvency of major banks. The fraud is breathtakingly easy to understand once past a small amount of jargon. Indeed, the simplicity of the fraud is the greatest threat to the perpetrators because here at last is a fraud that is easy for juries to understand and for prosecutors to prove.

LIBOR is the interest rate at which top-tier banks in London offer to lend to each other on an unsecured basis. The loans are usually short term, typically a day, a week, or several months. Historically the banks in the LIBOR market were among the strongest credits in the world and this type of lending was considered extremely low risk. As a result, LIBOR was among the lowest interest rates available in the market. Other interest rates including corporate loans were benchmarked to LIBOR and expressed as a spread, such as LIBOR plus 1 percent. LIBOR became the base rate used in calculating a vast number of other products and transactions.




LIBOR is set by a committee of banks sending their estimates of the rate at which they could borrow to a trade association. The banks on the committee are among the largest in the world including J.P. Morgan, Citibank, and Bank of America. The trade association would discard the highest and lowest rates and average the rest to arrive at the official LIBOR. This would then be published on financial news services. Payments due under LIBOR transactions would be calculated using that published rate.

We now know that some of the banks on the committee lied about the rates for a period of six years from 2005 to 2010, perhaps longer. The lies had two purposes. The first was to make money for the bank by lowering what it had to pay on LIBOR-based contracts. This is a kind of direct theft from customers. The second reason involved hiding the fact that some banks were being asked to pay high rates during the Panic of 2008. This is considered a sign of distress. By lowering the reported rate, the banks were made to appear healthier than they were and committed a fraud on the market as a whole.

We also know that regulators acted as aiders and abettors of the fraud by ignoring clear signs, including admissions by the banks themselves, that the rates were rigged. Regulators passed vague proposals back and forth about the need to improve practices instead of calling law enforcement agencies to investigate and prosecute the crimes.




One might expect that the scandal will follow the familiar pattern of bogus bank contrition, slaps on the wrist, large but not life-threatening fines, and pious promises not to do it again soon to be ignored. In short, it's just another scandal.

But this time it's different and here's why: The sheer volume of contracts based on LIBOR defies the imagination. Estimates vary, but $500 trillion seems reasonable. Even if the banks lied by as little as one-tenth of 1 percent, that percentage applied to $500 trillion multiplied by the six years of the fraud comes to $3 trillion stolen from customers. Cutting that amount in half to allow for the fact that some customers benefited from the fraud while others lost still gives implied damages of $1.5 trillion, greater than the combined capital of all of the too-big-too-fail banks in the United States. Taken to the full extent of the law, these damages are enough to render a large segment of the global banking system insolvent. These damages will be pursued not by regulators, but in private lawsuits by class action lawyers.

Bank defendants in cases like this typically ask a judge to dismiss the case because the claims are too vague. However, the facts in this case have already been made plain by Barclays, which is the one large bank to settle its case with the regulators. Once the plaintiffs get past the motion to dismiss, they begin discovery, which gives the class action lawyers access to internal E-mails, tape recordings, depositions, and other books and records of the perpetrator banks. Based on small glimpses of the doings at Barclays, the communications of the other major bank LIBOR trading desks could be shocking.




This kind of private legal process takes years to play out. In the meantime, some arrests and criminal charges by the government seem likely. In the end, legislatures may have to intervene to limit total damages to avoid the destruction of the too-big-too-fail banks. In this sense, the LIBOR litigation may come to resemble the tobacco litigation where the big tobacco companies embraced a government-backed deal with damages of over $200 billion to avoid eventual bankruptcy in the face of state and private lawsuits.

Of course, the insolvency of a major bank in the face of LIBOR rate rigging charges cannot be ruled out. In that case, good riddance. The big banks have perpetrated a crime wave longer than that of Bonnie and Clyde. If it has taken the law this long to catch up with them, it's better late than never.

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LIBOR crime is not Anti-Trust or RICO???????  REALLY???????


The Racketeering Influenced and Corrupt Organizations (RICO) Act


is a group of federal laws passed by the United States Congress in 1970 to deal with organized racketeering activity. RICO law is specifically directed at individuals or organizations involved in systematic, long-term illegal activities. It increases criminal penalties and allows civil claims to be pursued by injured parties against individuals, businesses or groups for actions taken as part of a criminal organization. An individual can be charged with racketeering under RICO statutes if, within a 10-year time frame as part of a criminal enterprise, he or she commits two crimes from a list of 35 detailed in the act.

Of the 35 crimes that form the body of RICO law, eight are state crimes and 27 are federal. Bribery, gambling, murder, arson, extortion, prostitution, counterfeiting, drug dealing, acts of terrorism and kidnapping are among the 35 crimes. It also is possible to prosecute white-collar crimes under RICO law. Embezzlement and obstruction of justice appear on the list, as do mail, wire, bankruptcy and securities fraud.

Ad The RICO Act originally was legislated to prosecute the Mafia and others involved in organized crime, but over time, the definition of what constitutes racketeering activity has expanded. Consequently, the application of RICO law has broadened to include a variety of individuals, organizations and activities. Among other enterprises, RICO law has been applied to drug cartels, street gangs, corrupt police departments, political parties, protest groups, terrorist organizations, corporations, managed care companies, bankers and insurance and securities firms.

Both criminal and civil punishments exist for violations of RICO law. A convicted defendant may be sentenced to as much as 20 years in prison for each racketeering count and/or fined up to $250,000 US Dollars. In addition, the defendant forfeits all rights over the enterprise and any gains derived from the racketeering activity. Defendants also may be sued in civil court, where a plaintiff may be awarded as much as three times the amount he or she lost. The intent of the many punishments and penalties is to completely cripple and eliminate the organized criminal enterprise involved.

Legislation equivalent to RICO law is found in countries other than the United States. Australia, Canada and New Zealand have similar legislation and regulations. The International Criminal Police Organization (Interpol) has developed a standardized definition for RICO-like crimes. In spite of this, the implementation and enforcement of RICO legislation varies widely around the world. Generally, most countries cooperate with the United States in the prosecution of RICO crimes only when their own laws have been broken.



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December 22nd, 2014

12/22/2014

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This week, between celebrating Solstice, Christmas and New Year I want to bring you news of Wall Street and financial deregulation ----sorry, Citizens Oversight does not have time to bring Tidings of Cheer in a totalitarian takeover!

Last time I showed how the credit bond policies are being used to deliberately set the public sector up for losses of public assets with the coming economic crash.  Obama and Clinton neo-liberals did this for the same reasons Bush and neo-cons set up the housing industry for collapse with the subprime mortgage loan fraud.  In both cases it is deliberate, willful public malfeasance on the part of our elected officials and it is done with malice. 

THIS IS ALL THAT IS NECESSARY FOR FILLING IN COURT CLAIMS AGAINST THE GOVERNMENT.  MARYLAND ASSEMBLY WITH THE GOVERNOR ARE WORKING WITH BALTIMORE CITY HALL AND THE MAYOR TO FLEECE THE PUBLIC.

I have blogged about HARP mortgage program before-----showing that HARP legislation was passed in 2009 as a way to help main street but was not even really implemented until 2012 after most Americans who were underwater had gone into foreclosure.  This was the period where the FED policies of QE lowered the housing interest rate so those tens of millions of houses heading into foreclosure could be bundled and sold just as toxic subprime mortgage loans were-----to investment firms by bulk.  The people creating the subprime mortgage fraud that took a record number of working and middle-class homes-----ergo their retirement investments----super-sized their profits in this foreclosure re-bundling policy ----policy written and passed by neo-liberals acting just as the neo-cons.  Luckily, as the article below states only a few million homeowners fell into this real estate trap as HARP is now advertised on TV ads just as subprime mortgage loans were in 2006 and 2007 -----just before the 2008 crash.  Get these HARP loans with almost no restrictions!  Just before this coming economic crash in 2015.  Look, the program ends in 2015 because------the FED's ending of QE will make interest rates climb very high making these policies moot.  So, the policies are geared towards setting up the American people to lose wealth and to send that wealth to Wall Street just as the credit bond financial instrument and our public schools.

Let's look at the HARP fraud----and it is fraud-----when the government conspires to place citizens in harm's way-----



The Home Affordable Refinance Program (HARP) is down to its last two years. U.S. homeowners have until December 31, 2015 to use the popular "Obama Refi".


 However, rising home value may render HARP's last quarters moot.

Underwater mortgages are less essential to U.S. housing as compared to when HARP launched last decade. Despite current mortgage rates making their best levels in nearly six months, U.S. homeowners are requesting fewer "high-LTV" loans and, in many states, the median LTV request is dropping.

Unless HARP 3 passes in 2014, there will likely be fewer HARP closings nationwide.




HARP : Refinance Without Mortgage Insurance The Home Affordable Refinance Program was first announced in February 2009 as part of that year's economic stimulus.

The economy had just emerged from its largest financial crisis since the Great Depression of 1929. Some major financial institutions had failed (e.g.; Lehman Brothers); some had been forced to merge (e.g.; Merrill Lynch); and, others were required to seek federal aid from the government (e.g.; AIG).

There was little confidence among U.S. investors. Stock markets sank, falling 54% before finally bottoming out March 6, 2009.  Home values fell, too, as a sudden over-supply of homes combined with a dearth of qualified buyers to send prices spiraling downward.


Meanwhile, as all of this was happening, mortgage markets were entering what we now know to be the biggest Refinance Boom of all-time. For the first time in history, mortgage rates had dropped below 5 percent as investors sought "safe" assets.

Unfortunately, few homeowners were eligible to claim such low rates.

The sinking housing market reduced the respective home equity U.S. homeowners held so mortgage applicants typically found themselves applying for loans for which the loan-to-value exceeded 80%.

LTVs over 80% required private mortgage insurance (PMI), for which the cost offset the savings of refinancing to a low rate.

That is, until HARP.


When the government launched the Home Affordable Refinance Program, it included a clause which allowed homeowners to refinance without incurring new PMI. Homeowners whom had initially made a 20% downpayment, but had since lost that equity, could refinance without have to pay PMI, irrespective of their current loan-to-value.


Similarly, homeowners who initially had made a 10% downpayment but now found themselves owing more than their home was worth, would be able to refinance without an increase to their existing PMI coverage.

HARP reached 1 million households between 2009-2011. Then, in early-2012, the government the loosened the Home Affordable Refinance Program to expand its reach.


Dubbed HARP 2.0, the second iteration made HARP refinancing simpler and faster. An additional 1 million HARP loans closed in 2012 and close to another one million closed in 2013.

However, the pace of HARP closings is slowing and, as home values continue to climb, the Home Affordable Refinance Program may run its course naturally.
 By the end of 2015, the HARP program may no longer be needed at all.


Short of Mel Watt passing HARP 3.0, the Home Affordable Refinance Program may be on its way out.

Are You Eligible For HARP? Since 2009, the Home Affordable Refinance Program has been a boon for underwater homeowners. The typical HARP homeowner saves 25% on average via a HARP refinance. How much would you save with HARP?

Checked your mortgage online, and get started with rate quote. See how much money you can save with a refinance before your home values rise too high to take advantage.


_______________________________________

When politicians place the same industry in charge of a supposed main street bailout that created massive fraud and stole trillions of dollars through the the mortgage industry----you can bet those politicians are working against the American people.  That is indeed what both Bush and now Obama are doing-----setting the public up to be fleeced.  They do that not because they are Democrats or Republicans----they do that because they are Wall Street global corporate pols.

As you see below-----the relaxation of requirements in 2012 mirrors Bush's relaxation of terms in the subprime mortgage fraud.....and in 2014 the warnings are WATCH FOR BAD CHARACTERS PUSHING HARP-----just as was the warnings for subprime mortgage loans in 2006-2007.  Wall Street and their pols are pretending that nothing saying the public cannot be duped by 'greedy' bankers but that is not true----public officials are not allowed to pass laws with the intent to do just that.  As with the credit bond deals with our public school building----written just so the default will send those public schools and property to the investors tied to them----these policies written for subprime mortgage loans and now HARP are written just to catch people into deals that these pols know will harm them AND THAT IS PUBLIC MALFEASANCE AND FRAUD.




Obama HARP Refinance 2014


November 18, 2014

What sort of things have you heard about Obama HARP Refinance 2014? Do you hear rumors about how it can fix your debt overnight? Or did you hear that it is all a scam? If you want honest, reliable answers about Obama HARP Refinance 2014, this article will spell it all out for you.It is important that you read the fine print of any Obama HARP Refinance 2014 loan before agreeing to it. For instance, let’s say you get a home equity loan. Should you default on this loan, your lender can take your home from you. Prevent this from occurring by reading the fine print.

If you’re trying to pay down your debt, try borrowing a bit from your 401(k) or other employer-sponsored retirement account. Be careful with this, though. While you’re able to borrow from your retirement plan for low interest, failing to pay it back as you agreed, losing your job, or being unable to pay it all back, the loan will be considered dismemberment. Your taxes and penalties will then be assessed as for why funds were withdrawn early.

Have a clear payoff goal in mind. Rushing to get the lowest interest rate is not the best and only way to pay off your debts quickly. Consider how you can pay off your monthly debts in approximately 3 to 5 years. This helps you get out of debt and raises your credit score.



Before going with any specific Obama HARP Refinance 2014 company, check their records with the Better Business Bureau. There are a lot of sketchy “opportunities” in the Obama HARP Refinance 2014 business. It’s easy to go down the wrong path if you aren’t careful. The BBB and its reports can help you weed out the bad from the good. As you can see by reading this article, there is a lot to know about Obama HARP Refinance 2014. Without doing your research, it can be a great burden to you. The above article provided you with helpful Obama HARP Refinance 2014 information. Be sure to use this advice as your guide when dealing with this venture.



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Let's look back to an article from 2010 when we were in the midst of all this foreclosure action.  You can see that the original HARP was doing almost nothing as it was written as an interest reduction plan and not a principal reduction plan.  Remember, banks were guilty of trillions of dollars in financial frauds that could have easily been recovered in part by writing down the principles of these mortgages.  THAT IS WHAT RULE OF LAW WOULD HAVE DONE.  It's like FDR placing a 90% tax on corporations because they were guilty of the same frauds that brought the US the Great Depression.  Because the American people allow global corporate pols to control politics----we are stuck with pols only continuing to fleece the American people.

Foreclosures -- an American tragedy


Published 3:39 pm, Wednesday, January 27, 2010 By Bob and Judy Mori


Last week it was reported that 2.8 million homes were lost to foreclosure in 2009. This brings such actions to over 5 million homes that had previously been lost to foreclosure since 2007. Over the next five years there are forecasts that this number could grow to over 15 million homes. This is an American tragedy that in our opinion is of epic proportions.

Back in 2007 when this problem started to exponentially grow, most of the foreclosures were the result of sub-prime loans, interest-only loans and option adjustable-rate-mortgage loans that became too expensive for the homeowner when the interest rate was reset. Today that is not necessarily the case. A prime reason homeowners are losing their homes today is because of our economy in which people, through no fault of their own, are losing their jobs and cannot find new ones. The reported unemployment today is at 10 percent, but the real unemployment is around 17 percent when you include those who have given up trying to find a job or have had their unemployment benefits come to an end. The December reported unemployment for Connecticut is 8.9 percent, up from 8.2 percent in November. On Jan. 22, the government announced that unemployment rose last month in 43 states, including Connecticut.

To date, the major response that has come from Washington has been the Home Affordable Modification Program. The goal of this program is that by the end of 2012, it will have helped up to 9 million homeowners keep their homes by reducing their monthly mortgage payments primarily by lowering their loan's interest rate. This initiative calls for homeowners to first be enrolled in a three-month trial modification program in which they have to demonstrate that they can stay current with their reduced mortgage payments. If they succeed, they then get a permanent reduction.


The results of HAMP to date are abysmal. As of Dec. 31, only 853,700 have been enrolled in the trial modification program and of these, only 66,465, or 7.7 percent, have qualified for the permanent reduction.
And already a significant number of the 66,465 homeowners have started to default on their reduced mortgage payments.

When you read the stories about foreclosures, they almost always talk only about the number of homes being foreclosed on. As Realtors, we are in these homes on a continual basis. And, what we see are not just homes that have been foreclosed on, but families and individuals who have been displaced from what for most is their most cherished possession, their home.


Something needs to be done to stop this tremendous toll that families and individuals have to bear. Possibly the only real solution will be a program to reduce loan principals, not just interest rates. We know that some will say, "Why should I pay taxes so that someone else's loan principal can be reduced?" To those people we say, "You are already paying a price for foreclosures." In 2009 the median sale price of a single-family detached home selling in Fairfield County was $430,000, down 14.0 percent from the median sale price of $500,000 in 2008, which in turn was down 10.3 percent from the median sale price of $557,540 in 2007. For New Haven County, the numbers are $225,000 in 2009, down 11.8 percent from $255,000 in 2008, which in turn was down 7.3 percent from $275,000 in 2007.

One of the prime components of these price drops is foreclosures. Over the past three years, foreclosures have occurred and are continuing to occur in every town in both counties. Local foreclosures negatively impact the value of every home in the town. So yes, we are already paying for foreclosures with the decrease in the value of our homes. Getting rid of local foreclosures would be one of the instrumental factors in returning the equity we have lost to our homes.


However, what really needs to be done is that the unemployed need to be able to find new jobs. Without employment, no bills, including mortgages, get paid. Mortgages not being paid lead to foreclosures.

In 1992, Bill Clinton rode into the White House on the slogan, "It's the economy, stupid." This caught the attention of the media, of everyday Americans and of the politicians in Washington. Suddenly everyone focused on the economy and as a result we entered in a period of almost historic economic growth for the country.

It seems to us that this is the approach that is needed now. Someone with standing and whose voice will be heard and listened to needs to come forth with "It's all about jobs, stupid."

This issue needs to dominate our attention. Politicians in Washington and business and banking leaders need to fully realize the daily joy they experience of being able to go home every night to the same house they went home to last night. For the nearly 11,000 families and individuals who lose their homes on a daily basis to foreclosure, they cannot go home to that same house tonight, and tomorrow their children cannot go to the same neighborhood school because they no longer live in the neighborhood.

From the numbers above, one can calculate that for every permanent loan modification last year, 43 families or individuals lost their home to foreclosure. Don't these numbers seem backwards to you? They certainly do to us.

Foreclosures are an American tragedy and it needs the full attention and awareness of all of us to get it fixed. Yes, "It's all about jobs, stupid."

Bob and Judy Mori are Realtors. They live in Trumbull.



_________________________________________________

HARP was never about helping main street----it was always about finding yet another way to move taxpayer money to Wall Street via yet another financial policy that pretended to help the struggling working and middle-class homeowners that were left.  Remember, tens of millions of home were lost to foreclosure during the 2008-2011 period ----and it is very likely these few million tying their homes to these HARP deals will lose their homes after the coming economic crash----which is the goal.  Again, the American people are not being negligent or greedy in making what are ordinary financial arrangements-----they are doing what has always been sound financial investment.  They simply did not know the 2008 crash would take the normal financial environment away as will the 2015 crash and they did not know that Bush neo-cons and Clinton neo-liberals were passing policy designed to deliberately place citizens into these positions.

So, while the FED created QE to remove toxic subprime mortgages to recapitalize banks by moving bad debt from these banks to the FED-----while this activity lowered housing interest rates to a new low just as those tens of millions of foreclosed houses were being bundled and sold by investment corporations----

NONE OF THIS HAD ANYTHING TO DO WITH BUILDING A STABLE ECONOMY-----IT IS WHAT CREATED THIS COMING CRASH.

STOP ALLOWING GLOBAL CORPORATE POLS CONTROL OUR POLITICAL PARTIES----GET RID OF THESE INCUMBENTS.  ALL OF MARYLAND POLS ARE GLOBAL CORPORATE POLS!



Obama's HARP Is Music to Bankers' Ears

BY Shanthi Bharatwaj | 03/30/12 - 06:11 AM EDT NEW YORK (TheStreet) --

For once, banks with exposure to mortgages can actually look forward to some earnings upside.

Nomura analyst Brian Foran expects the latest version of the government's
Home Affordable Refinance Program -- dubbed HARP 2.0 -- to offer a major revenue tailwind to banks in the mortgage origination business , much bigger than the market is currently anticipating.

Refinancing volume is likely to rise with HARP now accounting for 20% to 40% of bank applications. Banks also stand to benefit from gain on sale of HARP loans, which command a stronger premium in the market.

In all, HARP could offer as much as $12 billion in mortgage banking revenue upside to the industry, according to Nomura, offsetting the negative impact of lower interest rates on interest income.


In October last year, the government revised guidelines to the HARP program. Borrowers with loans backed by Fannie Mae (FNMA)and Freddie Mac (FMCC) with a current loan-to-value ratio of 80% and above can get their loans refinanced, widening access to underwater borrowers who owe substantially more than their homes were worth.


In the previous version, the program had a ceiling on the loan-to-value ratio at 125%.

The loan must have been sold before May 2009, the borrower must be current on their mortgage and must have made no late payments in the past six months.

Banks have reported a pickup in activity since the launch of the program, although the real surge in refinancing has kicked in only in March, when the industry moved to automated underwriting on these loans. HARP is particularly active in states where there are significant number of homes underwater including Arizona, Nevada and Florida. Refi volumes in these states are up 61%, 71% and 49% respectively in February over January, according to the report.


Foran believes that the latest version of HARP could target as much as 1.5 million home loans in a base case scenario or even 2 million in a high case and that the government's estimate of 1 million loans might be conservative.


___________________________________________

People who read the financial journals know the coming economic crash will not only be as deep as a Great Depression but interest rates will go sky high because the FED can know long manipulate the figures and what was already high inflation will grow higher. So, as this article states-----the value of homes will once again fall and sales of homes stagnate----just as this crash creates another round of higher unemployment.  Those people tied to HARP will be the first to go-----and those middle/working class people with homes as retirement investments will see that value disappear further.

Remember, we never really recovered from the last crash----they just pretend we have so this coming crash will really take the US economy down.  Moving real estate back into the hands of these wealthy investment firms is key to moving the nation to third world status and each economic crash takes more of the American people's wealth. 

THESE CRASHES ARE ALL DESIGNED TO DO JUST THIS----THANKS TO CLINTON GLOBAL CORPORATE NEO-LIBERALS AND BUSH GLOBAL CORPORATE NEO-CONS.


Again, this is not just an Obama failure-----it is the American people who allow these Bush and Clinton Wall Street pols to control the political parties.  Who supports Clinton neo-liberals every election?  National labor and justice organizations. 

WE CAN REVERSE THIS IF WE REPLACE OUR NATIONAL LABOR AND JUSTICE LEADERSHIP WITH PEOPLE NOT TIED TO GREED!


Why Another Great Real Estate Crash Is Coming



By Michael Snyder, on August 1st, 2013

       There are very few segments of the U.S. economy that are more heavily affected by interest rates than the real estate market is.  When mortgage rates reached all-time low levels late last year, it fueled a little “mini-bubble” in housing which was greatly celebrated by the mainstream media.  Unfortunately, the tide is now turning.  Interest rates are starting to move up steadily, even though the Federal Reserve has been trying very hard to keep that from happening.  A few weeks ago, when Federal Reserve Chairman Ben Bernanke suggested that the Fed may start to “taper” the rate of quantitative easing eventually, the bond market had a conniption and the yield on 10 year U.S. Treasuries shot up dramatically.  In an attempt to calm the market, the Fed stopped all talk of a “taper” and that helped settle things down for a brief period of time.  But now the yield on 10 year U.S. Treasuries is starting to rise aggressively again.  Today it closed at 2.71 percent, and many analysts believe that it will go much higher.  This is important for the housing market, because mortgage rates tend to follow the yield on 10 year U.S. Treasuries.  And if mortgage rates keep rising like this, another great real estate crash is inevitable.

This wasn’t supposed to happen.  Federal Reserve Chairman Ben Bernanke said that he could use quantitative easing to control long-term interest rates.  He assured us that he could force mortgage rates down for an extended period of time and that this would lead to a housing recovery.

But now the Fed is losing control of long-term interest rates.  If this continues, either the Federal Reserve will have to substantially increase the rate of quantitative easing or else watch mortgage rates rise to absolutely crippling levels.

Three months ago, the average rate on a 30 year mortgage was 3.35 percent.  It has shot up more than a full point since then…

Mortgage buyer Freddie Mac said Thursday that the average on the 30-year loan rose to 4.39% from 4.31% last week. Rates are a full percentage point higher than in early May.

And as the chart below shows, mortgage rates have a lot more room to go up…



As mortgage rates go up, so do monthly payments.

And monthly payments are already beginning to soar.  Just check out this chart.

So what happens if mortgage rates eventually return to “normal” levels?

Well, it would be absolutely devastating to the housing market.  As mortgage rates rise, less people will be able to afford to buy homes at current prices.  This will force home prices down.

To a large degree, whether or not someone can afford to buy a particular home is determined by interest rates.  The following numbers come from one of my previous articles…

A year ago, the 30 year rate was sitting at 3.66 percent.  The monthly payment on a 30 year, $300,000 mortgage at that rate would be $1374.07.

If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage at that rate would be $2201.29.


Does 8 percent sound crazy to you?

It shouldn’t.  8 percent was considered to be normal back in the year 2000.

And we are already seeing rising rates impact the market.  The number of mortgage applications has fallen for 11 of the past 12 weeks, and this has been the biggest 3 month decline in mortgage applications that we have witnessed since 2009.

Rising interest rates will also have a dramatic impact on other areas of the real estate industry as well.  For example, public construction spending is now the lowest that it has been since 2006.

And I find the chart posted below particularly interesting.  As a Christian, I am saddened that construction spending by religious institutions has dropped to a stunningly low level…



So what does all of this mean?

Well, unless interest rates reverse course it appears that we are in the very early stages of another great real estate crash.

Only this time, it might not be so easy for the big banks to swoop in and foreclose on everyone.  Just check out the radical step that one city in California is taking to stop bank foreclosures…

Richmond is the first city in the country to take the controversial step of threatening to use eminent domain, the power to take private property for public use. But other cities have also explored the idea.

Banks, the real estate industry and Wall Street are vehemently opposed to the idea, calling it “unconstitutional” and a violation or property rights, and something that will likely cause a flurry of lawsuits.

Richmond has partnered with San Francisco-based Mortgage Resolution Partners on the plan. Letters have been sent to 32 servicers and trustees who hold the underwater loans. If they refuse the city’s offer, officials will condemn and seize the mortgages, then help homeowners to refinance.

If more communities around the nation start using eminent domain to stop foreclosures, that is going to change the cost of doing business for mortgage lenders and it is likely going to mean more expensive mortgages for all the rest of us.

In any event, all of this talk about a “bright future” for real estate is just a bunch of nonsense.

You can’t buy a home if you don’t have a good job.  And as I wrote about the other day, there are about 6 million less full-time jobs in America today than there was back in 2007.


You can’t get blood out of a stone, and you can’t buy a house on a part-time income.  The lack of breadwinner jobs is one of the primary reasons why the homeownership rate in the United States is now at its lowest level in nearly 18 years.

And we aren’t going to produce good jobs if our economy is not growing.  And economic growth in the U.S. has been anemic at best, even if you believe the official numbers.

We were originally told that the GDP growth number for the first quarter of 2013 was 2.4 percent.  Then it was revised down to 1.8 percent.  Now it has been revised down to 1.1 percent.

So precisely what are we supposed to believe?

Overall, since Barack Obama has been president the average yearly rate of growth for the U.S. economy has been just over 1 percent.

That isn’t very good at all.

But remember, the government numbers have been heavily manipulated to look good.

The reality is even worse.

According to the alternate GDP numbers compiled by John Williams of shadowstats.com, the U.S. economy has continually been in a recession since 2005.

And now interest rates are rising rapidly, and that is very bad news for the U.S. economy.

I hope that you have your seatbelts buckled up tight, because it is going to be a bumpy ride.


_____________________________________________

Tens of millions of homes were lost to the American people since the crash of 2008 from subprime mortgage loan fraud and as we all know----there has been no justice in the trillions stolen by banks through these frauds.  We are getting ready for the next economic crash----this time it is Obama's HARP that replaces Bush's subprime mortgage fraud that will take yet more American homeowners down.  I always shout that our national labor and justice leaders are captured by these Clinton Wall Street neo-liberals working with Bush neo-cons to fleece labor and justice----and this article shows one reason why the organizations that should be shouting FOUL are actually teamed with the worst of banking institutions.

Banks like Wells Fargo-----known to be the worst in targeting people of color with fraudulent loans were allowed to 'donate' to groups like NAACP for 'financial counseling' while the people actually victims of fraud received nothing. Fast forward to today----HARP is tying homeowners to the same kinds of mortgage instruments that will cause homeowners to lose their homes in this coming economic crash.  THE SAME BANKING INSTITUTIONS ARE BEHIND HARP AS WERE BEHIND SUBPRIME MORTGAGE LOANS.  A DEMOCRAT WOULD NOT ALLOW THESE POLICIES AND WOULD BE SHOUTING FOUL!  GET RID OF GLOBAL CORPORATE NEO-LIBERALS.



Why the NAACP should get off the Wells Fargo bandwagon




Opinion by Dr. Boyce Watkins | April 30, 2010 at 7:01 PM

According to the Federal Reserve, African-Americans were three times more likely to receive higher priced loan products than non-Hispanic whites in 2005 and 2006. More than half of the high-priced loans issued to African-Americans during 2006 are now at risk of foreclosure, being over 60 days past due. Black home ownership, which had seen dramatic gains in the early part of the decade, hit a sharp decline as a result of the foreclosure crisis. We have started to move backward.

One of the alleged culprits in this multi-billion dollar scandal is a company called Wells Fargo. Wells Fargo has been sued by state and local governments around the nation for allegedly engaging in massive amounts of predatory lending, which has devastated black and brown communities everywhere. Terrible bank loans, combined with widespread unemployment in the black community, have served to destroy hundreds of billions of dollars in wealth in a matter of months.

You can imagine my shock when I learned that Wells Fargo, the company accused of squashing the financial security of millions of African-Americans, is now listed as one of the title sponsors of the NAACP’s annual convention this July.

Not only is such a partnership unacceptable on the surface, there are quite a few reasons for many of us to be skeptical of an organization (the NAACP) that drops a lawsuit against a company and soon after has the company appearing as a major donor. Not a good look for the NAACP, a group that is already accused of having sold itself to corporate America, arguably becoming socially impotent in the process.

When blogger Faye Anderson brought the Wells Fargo sponsorship to my attention, I didn’t automatically buy into the hype. I didn’t and do not want to believe that the NAACP would sell itself to a company accused of being one of the greatest vultures in the African-American community since the advent of slavery. I don’t know Ben Jealous personally (we’ve only crossed paths), and it’s not that I am important enough for the NAACP to acknowledge (I’m just a lowly professor with a big mouth), but I remain hopeful that they can provide a thorough explanation for what might turn out to be quite an embarrassing debacle. Black people deserve a chance to know what in the heck is going on.

Partnering with Wells Fargo is not a problem in itself, since it may be the case that the company is working with the NAACP to improve its way of doing business. That’s a good idea, but the question becomes whether the suspicious bank needs to make right with the NAACP, or instead find redemption with the millions of African-Americans who lost their homes. Another star-studded gala or extravagant NAACP Awards show does nothing for those who’ve become homeless or bankrupt because of the predatory lending practices allegedly committed by Wells Fargo. That’s like a child molester hurting 200 kids in the neighborhood and then being granted sainthood by the local priest. The NAACP’s fiduciary responsibility to protect the interests of the black community must play a role in the nature and transparency of the Wells Fargo settlement. They can’t get around this fact.

I am not standing with the Tavis Smiley campers who want to attack NAACP President Ben Jealous — or anyone who participated in the meeting with President Obama last month. There are some who stand to cast instant judgment on the nature of this partnership, presuming the very worst at first glance. I believe this is wrong.

But the NAACP must do the following in order to make things right with this deal they’ve made with Wells Fargo:

1) The NAACP needs to give us all a thorough explanation: I’m not talking about a vague statement regarding how you’re going to work with Wells Fargo to ensure that they engage in fair lending practices. Yea, yea, yea. That sounds as watered down as the words of a wealthy third-world dictator who allows Exxon Mobile to extract all of the nation’s resources. There must be specifics on exactly what Wells Fargo is going to do for the black community, since this partnership with the NAACP gives the company the right to brag to its shareholders, the court of law and the general public about how they are such a wonderful friend to the African-American community. Wells Fargo is certainly no friend of mine, nor are they a friend to my grandfather, who lost his home after 40 years due to predatory lending. Thus far, Wells Fargo has only stated in the New York Times that it does not have any immediate plans to change its lending practices. Does this imply that the company feels that it’s done enough already?

2) Full disclosure of the NAACP and Wells Fargo’s financial relationship is an absolute must, and Wells Fargo needs to cough up some of their ill-gotten gains from the black community. By stoically refusing to share financial details of their deal with Wells Fargo, the NAACP is giving itself a terrible look. The amount of the NAACP sponsorship by Wells Fargo should be disclosed, as well as all logic relating to how the deal came to be in the first place. It may also make sense to create some institutional infrastructure to help people restructure their Wells Fargo loans, or receive loans that they need in order to fund small businesses. Wells Fargo needs to put its money where the NAACP’s mouth is; a small donation to the organization simply will not do.

As a Finance Professor, the reason I wrote the book, Black American Money was to explain that it is almost impossible to fight against oppression while taking money from entities that are owned and run by those who are doing the most harm to your constituents. If a woman is being beaten by her husband but continues to remain financially dependent on the man who is abusing her, she undermines her ability to either leave the marriage or demand the respect she deserves. By taking money from the highest bidder without seriously considering what the donor is demanding in return, the NAACP opens itself up to accusations of corruption and ineffectiveness in our community. The fox should not be given access to the chicken coop, no matter how many gifts he bears. Some people should never be allowed to buy your friendship.

Dr. Boyce Watkins is the founder of the Your Black World Coalition and the initiator of the National Conversation on Race. For more information, please visit BoyceWatkins.com>







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December 20th, 2014

12/20/2014

0 Comments

 
Below you see a definition of yet another Wall Street financial instrument that the Maryland Assembly and Baltimore City Hall allows the public to be tied to and as we have seen since the 2008 crash-----every aspect of these financial instruments are filled with fraud.  From using Credit Default Swaps to insure what they all know will be toxic investments and then allowing taxpayers to pay 100% on the dollar of insurance-----to LIBOR connected to all these deals----to REIT that pretends to sell property tax debt to shareholders who then are supposed to pay that property tax BUT DON'T REALLY.....below you see the coming fraud that will take out the public sector and of course Maryland is heavily leveraged with credit bond leverage.  Whether Erhlich as a neo-con or O'Malley as a neo-liberal----the intent is to give corporations a way to escape paying taxes, to assure they will not lose any of their investment while the taxpayer ends up soaked with the losses from the financial agreement to what once was public property.  This is why you see so many of these NON-RECOURSE debt deals by the State of Maryland and City of Baltimore for development on public land.  Think of the private stakeholders partnered with the state and city in these credit bond deals to rebuild our public schools.  The only collateral in these deals is the real estate the schools occupy and then the finished, mostly taxpayer-funded rebuilding of these schools.  You notice these pols guilty of public malfeasance had these deals expedited and construction was immediate ----because they are racing with the timing of this coming bond market collapse.  As it shows with an example of the FED using non-recourse debt issued to JPMorgan at the time they knew Bear Stearn was heading to bankruptcy as one of the worst in the subprime mortgage fraud----JPMorgan took control of Bear Stearns assets and the FED absorbed the losses.  Well, the FED didn't because the Clinton neo-liberal Congress sent taxpayer money to the FED to cover the losses and JPMorgan received all the assets remaining of Bears Stearn for no cost. This was all the work of our former Treasury Secretary Geithner.  He was taken from the New York FED to head of all our money----after committing this one fraud amongst many.

THIS WAS A FRAUD AGAINST THE AMERICAN PEOPLE NO DOUBT.

The point with Maryland and its use of these financial instruments---is that these pols know ahead of time that the taxpayer is going to get fleeced and they do it because they work for Wall Street profit and move taxpayer money to any format that does this.  O'Malley was tapped to run for President because of his commitment to throwing Baltimore and then Maryland taxpayers and public sector employees under the bus for these Wall Street profits.  We still haven't recovered the Wall Street fraud against the State of Maryland from the 2008 crash and these deals we see below will set the public up yet again for losses from financial instruments along with a large amount of public real estate....AND IT IS ALL PREMEDITATED. 

If the debt is non-recourse-----the debtor is treated as having sold the property for the outstanding balance of debt (not just its fair market value).  If the debt is non-recourse none of the gain is treated a COD income and thus prevents the debtor from receiving relief from one of the section 108 exclusions.  


' For the "Non-recourse" loan, you do not have the same problem as the collateral used will stand on its own. If you cannot pay it back, the lender simply takes control of the collateral pledged. They will not have the option to take you to court for the unpaid balance'.


So, when a brand new school in a underserved community defaults in this crash-----the assessment will ignore fair market and pay the entire costs.  WHO IS THE DEBTOR WITH THESE BALTIMORE CITY SCHOOL DEALS?

THIS IS PUBLIC MALFEASANCE AND FRAUD AND WE WILL PURSUE THIS WHEN THE COLLAPSE COMES AND THEY TELL US OUR PUBLIC SCHOOLS ARE NOW OWNED BY THESE PRIVATE STAKEHOLDERS.




'Non-recourse debt is typically used to finance commercial real estate, shipping or other similar projects with high capital expenditures, long loan periods, and uncertain revenue streams. It is also commonly used for stock loans and other securities-collateralized lending structures. Since most commercial real estate is owned in a partnership structure (or similar tax pass-through), non-recourse borrowing gives the real estate owner the tax benefits of a tax-pass-through partnership structure (that is, loss pass-through and no double taxation), and simultaneously limits personal liability to the value of the investment.


A non-recourse debt of $30 billion was issued to JPMorgan Chase by the Federal Reserve in order to purchase Bear Stearns on March 16, 2008. The non-recourse loan was issued with Bear Stearns's less liquid assets as collateral, meaning that the Federal Reserve will absorb the loss should the value of those assets be below their collateralized value'.

It states that the State is not responsible to repay these bonds----but collateral will be taken.  It's just a give-away of public assets to pay-to-play politics.


The Maryland Economic Development Corporation


(MEDCO) functions under the provisions of Title 10, Subtitle 1 of the Economic Development Article of the Annotated Code of Maryland.

The legislative purposes of MEDCO are to: relieve unemployment in the State; encourage the increase of business activity and commerce and a balanced economy in the State; help retain and attract business activity and commerce in the State; promote economic development; and promote the health, safety, right of gainful employment and welfare of residents of the State.

The General Assembly intends that MEDCO operate and exercise its corporate powers in all areas of the State; exercise its corporate powers to assist governmental units and State and local economic development agencies to contribute to the expansion, modernization, and retention of existing enterprises in the State as well as attraction of new business to the State; cooperate with workforce investment boards, private industry councils, representatives of labor, and governmental units in maximizing new economic opportunities for residents of the State; and accomplish at least one of its legislative purposes and complement existing State marketing and financial assistance programs by owning projects, leasing projects to other persons, lending the proceeds of bonds to other persons to finance the cost of acquiring or improving projects.


MEDCO structures its financings on a non-recourse basis.
The State of Maryland, any State agency and MEDCO are not responsible for the repayment of the bonds that are issued by MEDCO. The repayment of MEDCO bonds is limited to the revenues generated by the applicable project.

_________________________________________


'In the event of a default, the lender will simply take possession of the SPE. There is no need to foreclose on the real estate or other property, assign contracts, etc., saving the lender a great deal of trouble'.

I focus on Baltimore City public school building in this credit bond dealing scam on the public---but the number of public projects tied to these deals is huge.  As it says above----in case of default the property tied to the credit bond will simply transfer to the lender----or developer usually.  It is deliberate that the State takes this non-recourse because it makes sure that these developers only get the property and not sue the state for more money.  Consider----over $1 billion in State funding for these Baltimore City Schools plus dedicated state and city money.  That taxpayer money is now being spent as quickly as possible on these selected schools and will no doubt be finished by the time of the bond market crash next year.  So that developer, for the up-front cost of planning and design, will get a newly renovated public school with the property for next to nothing.  You know what that developer partnership will want to do with those public schools because they have to earn money off of these investments----they will create private charters operating for profit.  We want everyone to know that Maryland Assembly pols and Baltimore City Hall knew all of this was the plan before any of this moved forward-----as did the leadership of organizations created to push this forward.

All that had to be done to rebuild these schools was recover the billions lost to the Baltimore economy over a few years to fraud----recovery of funds already owed the city from the State of Maryland to the subprime mortgage loan settlement.  Taxpayers in Baltimore paid property taxes ten times over that could have rebuilt those schools.  No-----they had to tie them to a Wall Street financial instrument so public assets could end up in private hands.  I personally tried to get the list of stakeholders in this school building process and the Mayor's Office, the Comptroller's Office and the State of Maryland so far has pretended a list does not exist.


Use non-recourse financing to spur development


April 8, 2013 at 8:00 AM

Infrastructure is the backbone of any prosperous regional economy. Power, communication and transportation systems lay a necessary foundation for economic development, and when underdeveloped, can be a major brake on growth.

As the Lehigh Valley continues to grow and recover, the strength and quantity of local infrastructure projects will be a key element in the region’s overall outlook.

The most difficult hurdle most infrastructure projects must overcome is securing initial financing. One locally under-utilized financing structure that can be beneficial to all parties involved in a project – and act as an avenue to secure funding for some projects that otherwise might never have been built – is non-recourse project financing.

Non-recourse project financing is a financing strategy that is ideally suited to certain infrastructure and industrial projects: in which the earnings of a project serve as the source of funds for repayment of a loan, the assets of the project itself serve as the collateral for the loan and the loan is not otherwise guaranteed by the developer.

The basic structure of a non-recourse project financing is relatively simple. A developer will undertake the early stages of development – identifying a potential market, securing a site and doing preliminary environmental and permitting work. The developer will form a special purpose entity solely to undertake the particular project in question, which will hold the real estate, permits and all other assets relating to the project.

The SPE will then usually enter into negotiations with a primary off-taker for the product or service generated by the project
. The off-taker will be the entity which will be buying the ultimate output of the project, e.g. the local utility for a power project or the municipality for a water or sewage facility.

STRONG OFF-TAKER IS CRUCIAL

A strong off-taker is a key element in most non-recourse project financings, as it is the off-taker’s credit which is often the most important element of the lender’s credit analysis.

Once the preliminary work is done, the developer will seek financing.
Lenders often prefer early involvement in a project, as they can then have input on the off-take contract and any key supply contracts before they are signed.

Once the off-take contract has been signed and a potential revenue stream is identified – or if no off-take contract exists, the lender is satisfied that a strong and quantifiable market exists for the project’s output – the lender or lending group will make a loan directly to the SPE, with no or limited guarantees and security coming from the developer parent company.

The primary security will be a stock pledge over the SPE itself. In the event of a default, the lender will simply take possession of the SPE.
There is no need to foreclose on the real estate or other property, assign contracts, etc., saving the lender a great deal of trouble.

This is acceptable to the lender because a guaranteed revenue stream exists for the completed project. The lender would be able to sell the project or bring in a project manager to run it. The credit analysis the lender will perform depends on the strength of the project itself, and the credit-worthiness of the off-taker – who in any event is the ultimate source of the funds that will be used to repay the loan (not the developer).

CREDIT SUPPORT

Of course, no lender will be willing to finance the entirety of a project with no credit support from developers or third parties. A variety of means exists to provide lenders greater security and comfort that they will ultimately see a return on their investment.

Equity contributions from developers are universal, and it is quite common to require developers to fund cost overages, or a certain percentage of cost overages, with additional equity.

There is a number of creative ways to look to third parties for credit support, as well. Depending on the project, funding and guarantees may be available from a variety of government entities, the off-taker or construction entity willing to provide additional credit support. Or, some other third party with a current or future interest in the project may be willing to step in to provide credit support.

While the interest rate on a non-recourse loan will be higher than the rate on a conventional full-recourse obligation, the off-balance sheet nature of the loan allows developers to avoid tying up all their capital in one project, and to largely mitigate the risks of a catastrophic project failure.

It allows smaller developers to secure financing they otherwise would have been unable to obtain, and ultimately, it allows more projects to be built.

Non-recourse project financing can be an important engine of economic growth, and it is one the Lehigh Valley has not yet fully harnessed. An opportunity exists for those who will take advantage of it.





____________________________________________

Below you see the enthusiasm portrayed by Developer Tom Bozzuto-----who in my personal opinion builds uninspiring  buildings----for this Wall Street or as he states----Market-based techniques.  No doubt Bozzuto is one of the stakeholders who will attain ownership of these public properties when the bond market crashes.

The problem for the citizens of Baltimore as I have shown is that all development is tied to decades of leverage, tied to global corporations that really bring no value to the city, and all of the city revenue is being directed to projects based on how it can maximize profits for a select few and not how all of this works well for the citizens that pay taxes.


EDUCATION PRIVATIZATION SAY BALTIMORE COMMUNITY FOUNDATION!


That no doubt comes from Tom Wilcox's past life of boarding schools and Harvard.



Rebuilding schools, rebuilding Baltimore

Thousands are choosing city life; if we build better schools, they will stay


February 04, 2013|By Tom Wilcox, Wes Moore and Tom Bozzuto



Over the last 10 years leaders from the private, public and nonprofit sectors have begun to transform Baltimore's approach to its future. Traditional public subsidies have given way to strategic investments and tough decisions, using market-based techniques to reform our schools, rebuild our population, and make our neighborhoods safe, clean, green and vibrant.

Now, the General Assembly must do its part to strengthen the city's future by passing legislation to reshape how the city makes improvements to its public school buildings. The city's plan is straightforward and achievable: act aggressively now to build or rebuild our school buildings and give every child in the city a welcoming school environment that will help engage them in learning.

It is a proposal that will help kids, create a stronger school system, bolster the city's prospects for growth and benefit the entire state.


Legislators must be reminded that Baltimore has already taken many hard steps to improve its educational system. A "choice" system gives middle and high school students the opportunity to "vote with their feet," with dollars following those students to the best-performing schools. A union contract sets a national standard for holding teachers and principals accountable for their students' performance. And focused initiatives have increased the high school graduation rate and the number of preschoolers who are "ready for school." And schools that fail to meet increasingly rigorous standards are being closed.

These steps and more show that our civic and private leaders are serious about creating great schools that will change the trajectory of inner-city youth while attracting the middle class families necessary to any city's success.


Now, the focus is on providing a physical environment in Baltimore schools comparable to that in schools across Maryland. The legislative proposal to revamp the school system's capital process would lead to major and accelerated improvements in our school buildings, benefiting kids, teachers, staff and families.

The school system has done its homework, commissioning a study that put a price tag on infrastructure needs in every school building in Baltimore, and it has developed a plan that would shutter buildings, cut or merge programs, and renovate or rebuild 136 buildings.

The city schools bond financing plan to rebuild its inadequate infrastructure may be the best opportunity that Baltimore has had in a generation to cement its revitalization.
Under the plan, an independent entity would be created to borrow significant funding through a bond issue to jump-start much-needed capital improvements, and use state and local funding to repay the bonds. It's important to note that the plan requires no extra money from the state, just a commitment to stand by current annual commitments. The timing is perfect. Interest rates are low; construction costs are manageable.

This effort in the General Assembly must be viewed not simply as a bricks-and-mortar educational initiative.
Rather, it is part of a comprehensive effort to push for major changes that can move Baltimore forward and restore the city's role as an economic engine for Maryland.

The signs of momentum are apparent, whether it's ongoing downtown development, the bustling rental market driven by young professionals' interest in city life, or the emerging high-tech economy fueled by robust educational, medical and federal institutions. Across the city, private sector initiatives such as Healthy Neighborhoods Inc. are reestablishing "middle neighborhoods" that have wonderful assets but need a boost to continue to strengthen.

The bottom line is that thousands are choosing city life. If we can improve the schools they will stay. These young people can, by themselves, fulfill Mayor Rawlings-Blake's modest goal of attracting or developing 10,000 new taxpaying citizens.

The nonprofit Teach For America already pledged to fulfill 10 percent of the mayor's goal by helping their teachers engage in neighborhood leadership opportunities as they develop lasting ties with our city.

Such commitments from the nonprofit sector must be met by similarly ambitious initiatives from the public sector that enhance city life and build a business-friendly environment.

We have pressing goals: reducing crime, building a better transportation infrastructure that supports employment opportunities, and fostering an energetic business environment. But perhaps overriding them all is the need for a strong school system that will attract new families and new employers.

There is more hard work ahead to capitalize on the educational progress already achieved, but we can take a major step forward right now by changing how we build our schools.

A quarter century ago, state leaders overcame a host of issues to finance and build not one but two stadiums, leading to the winning seasons we now celebrate. Surely we can come together now to give our youth and our city and state the future they deserve.

Tom Wilcox is President of the Baltimore Community Foundation. Wes Moore is a best-selling author and host on the OWN television network. Tom Bozzuto is Chairman and CEO of the Bozzuto Group. All are trustees of the Baltimore Community Foundation.






_____________________________________________

As MEDCO states----it is a corporation built from Maryland Assembly legislation to control who gets what funds.  Because of its quasi-governmental status the public finds it impossible to get access to who these private stakeholders are with these deals.  We had a lawsuit over the State Center in Baltimore that O'Malley was desperate to tie to a credit bond deal before the coming bond market crash that happened only because one developer knew the details and was fighting another developer-----THE PUBLIC HAD NO ABILITY TO SEE WHAT WAS HAPPENING.  These deals almost always end up as pay-to-play where connected corporations get the business as well as the stakeholders that end up with the real estate.

YOUR MARYLAND ASSEMBLY POLS DO THIS TO THE CITIZENS IN MARYLAND AND THEY ARE RE-ELECTED EVERY ELECTION.  GET RID OF THEM!  BILLIONS OF DOLLARS ARE LOST IN MARYLAND EACH YEAR TO THIS LEVEL OF FRAUD.



These are the people appointed to be the voice of development that taxpayers in Maryland do not have.  See why the Governor and Mayor's Office must stay in the hands of a team-player!  THIS IS WHY IT MUST CHANGE.




MEDCO


Chairman
Mr. Martin G. Knott, Jr.
President
Knott Mechanical, Inc.
Baltimore City
Term expires: 6/30/2015



Vice Chairman
Mr. Douglas Hoffberger
President
Keystone Realty Company, Inc.
Baltimore County
Term Expires: 6/30/2015


Treasurer
Mr. Scott Dorsey
President
Merritt Properties, LLC
Baltimore City
Term Expires: 6/30/2016

Chairman Emeritus
Mr. Leonard Sachs
Baltimore City

Mr. David H. Michael
The Michael Companies, Inc.
Prince Georges County
Term expires: 6/30/2014

Mr. Frederik Riefkohl
Senior Vice President
CSA Group
Anne Arundel County
Term Expires:  6/30/2015

The Honorable Secretary of MD Department of Business and Economic Development (Designate)


The Honorable Secretary of MD Department of Transportation (Designate)

Mr. Robert C. Brennan
Executive Director and Secretary

Mr. Frederick J. Puente
President
Blind Industries and Services of Maryland
Baltimore City
Term expires: 6/30/2016

Mr. Hebert D. Frerichs, Jr. Esq.
Partner
Venable, LLP
Baltimore, MD
Term expires: 6/30/2014

Ms. Barbara G. Buehl
Allegany County Department of Tourism
Term Expires: 6/30/2016

Ms. Jennifer R. Terrasa, Esquire
Member, Howard County Council
Term Expires: 6/30/2014

Ms. Anita Jackson
Chief of Staff
Baltimore Gas and Electric
Baltimore County
Term expires: 6/30/2016

* Board Members serve until reappointed or until a successor is appointed.


300 E. Lombard Street, Suite 1000
Baltimore, MD 21202
ph. 410-625-0051
fax: 410-625-1848


___________________________________________

Baltimore Development Corporation


History

The Baltimore Development Corporation (BDC) and its predecessors have existed in some form since 1959. The Baltimore Development Corporation was formed in 1991 through the merger of three nonprofit organizations with different areas of service but similar economic development goals. In 1996, a private sector Board of Directors was appointed and BDC took on its current operational structure.




Board Room Baltimore Development Corporation provides meeting agendas as well as an archive of minutes from board meetings for download on the Board Minutes & Agendas page.

BDC Board of Directors Members 2014 Mr. Arnold Williams, CPA Chairman Mr. Greg Cangialosi CEO, Mission Tix Co-Founder, Betamore Mr. Augie Chiasera President M&T Bank

Ms. Armentha “Mike” Cruise President & CEO The Aspen Group, Inc.

Clinton R. Daly Partner Brown Advisory

Mr. Gilberto de Jesus, Esquire Board of Directors Maryland Hispanic Chamber of Commerce

Ms. Deborah Hunt Devan Attorney Neuberger, Quinn, Gielen, Rubin & Gibber, P.A

Mr. Jeffrey Fraley Vice President of Operations Fraley Corporation

Mr. Paul T. Graziano Commissioner Dept. of Housing & Community Development

Mr. Gary J. Martin President and CEO Municipal Employees Credit Union of Baltimore, Inc. (MECU)

Mr. Kenneth V. Moreland Vice President & Chief Financial Officer T. Rowe Price

Mr. Henry Raymond Director Department of Finance

Mayor Kurt L. Schmoke President University of Baltimore

Mr. Colin Tarbert Deputy Mayor Office of Neighborhood and Economic Development

Ms. Sharon R. Pinder Director Mayor’s Office of Minority and Women-Owned Business Development

Mr. Brian K. Tracey Senior Vice President Bank of America Merrill Lynch
Tax Credit Investments

Ms. Christy Wyskiel Senior Advisor to the President Johns Hopkins University



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December 19th, 2014

12/19/2014

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I will talk about elections this weekend and start Monday on Wall Street financial policy and where that has taken America.  What I want everyone to take away from my posts is that

WE THE PEOPLE CAN REVERSE THIS GLOBAL CORPORATE CAPTURE VERY EASILY.  WE SIMPLY NEED PEOPLE TO ENGAGE.


Two things would downsize global corporations right away and both are simply reinstating Rule of Law.  First, we recover the trillions of dollars in corporate fraud and that will downsize global corporations and next we enforce Sherman Anti-Trust Laws rather than having pols and appointments who write excuses for mergers that have no basis in truth.  If your pols are not shouting that these anti-trust laws are not being enforced

THEY WORK FOR GLOBAL CORPORATIONS---GET RID OF THEM.  ALL MARYLAND POLS ARE GLOBAL CORPORATE POLS.



'Monopolies

Section two of the Sherman Act prohibits monopolies, attempts to monopolize, or conspiracies to monopolize. A monopoly is a form of market structure where only one or very few companies dominate the total sales of a particular product or service. Economic theories show that monopolists will use their power to restrict production of goods and raise prices. The public suffers under a monopolistic market because it does not have the quantity of goods or the low prices that a competitive market could offer'.





In conclusion, I agree with Zepher Teachout:

'There are also reasons to think an antitrust policy focused on size and power makes good economic sense. Despite economic theorizing, bigger companies are not always more efficient companies. And even if they were, there are important societal efficiencies that go beyond whether individual companies operate cheaply or produce low-cost products. As Bert Foer of the American Antitrust Institute recently testified before Congress, we can choose to use competition policy to help prevent much of the systemic risk that has crippled our economy. By focusing more on size and concentration, we might be able to avoid collapse, unplanned nationalization, and bailouts'.



What are the Sherman Antitrust and Clayton Acts?

In the late 1800’s and early 1900’s, the U.S. government struggled with anti-competitive practices between businesses. Part of the concern was related to artificial pricing practices that harmed consumers. In response to these monopolies, cartels, and trusts, Congress passed two major pieces of legislation:  The Sherman Antitrust Act and the Clayton Act.

The Sherman Antitrust Act

Passed in 1890, the Sherman Antitrust Act was the first major legislation passed to address oppressive business practices associated with cartels and oppressive monopolies.  The Sherman Antitrust Act is a federal law prohibiting any contract, trust, or conspiracy in restraint of interstate or foreign trade.

Even though the title of the act refers to trusts, the Sherman Antitrust Act actually has a much broader scope. It provides that no person shall monopolize, attempt to monopolize or conspire with another to monopolize interstate or foreign trade or commerce, regardless of the type of business entity.

Penalties for violating the act can range from civil to criminal penalties; an individual violating these laws may be jailed for up to three years and fined up to $350,000 per violation. Corporations may be fined up to $10 million per violation. Like most laws, the Sherman Antitrust Act has been expanded by court rulings and other legislative amendments since its passage. One such amendment came in the form of the Clayton Act. 

The Clayton Act

The purpose of the Clayton Act was to give more enforcement teeth to the Sherman Antitrust Act. Passed in 1914, the Clayton Act regulates general practices that may be detrimental to fair competition. Some of these general practices regulated by the Clayton Act are: price discrimination, exclusive dealing contracts, tying agreements, or requirement contracts; mergers and acquisitions; and interlocking directorates. 

The Clayton Act is enforced by the Federal Trade Commission (FTC) and the Department of Justice (DOJ). Many of the provisions of the Clayton Act set out how the FTC or DOJ can respond to violations. Other parts of the Clayton Act are designed to proactively prevent anti-trust issues. For example, before two companies can merge, they must notify the FTC and obtain approval prior to the merger. The Clayton Act also created exemptions from enforcement for certain organizations, the most significant being labor unions.


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Notice this article was written in the Reagan Administration as neo-liberalism was pushed mainstream.  'Trustbusting was a law created by farmers and small businesses inept and afraid of REAL BUSINESS MINDS say neo-liberals'.  Indeed, at the time this article was written small farmers were being wiped out by BIG AG which became GLOBAL AG.  Small businesses have been wiped out by BIG BOX and GLOBAL BIG BOX.  We now have a captured, crony, criminal, unaccountable globally controlled economy with huge unemployment.  So, ignoring Anti-Trust killed the US economy and US consumers....the very reason these laws were written.  The idea that whoever is in power can pick and choose which Constitutional laws to enforce does not work IN A RULE OF LAW EQUAL PROTECTION NATION.  They cannot simply decide to ignore anti-trust laws.

They know that and when the FTC and US Justice Department approves these mergers----they allow excuses for how the merger will be good for competition and the consumer THAT NO ONE BELIEVES.  IT IS PROPAGANDA.

We can reverse all of these deals by simply reinstating Rule of Law.  Public malfeasance and duplicity in wrongful contract does not hold up.  Citizens should be outside every courtroom that might decide to rule against the American people on these issues.  Global corporate pols have passed laws that send these cases to particular courts that then are staffed with judges that rule for corporations----

STOP ALLOWING THEM TO FIX OUR COURT SYSTEM AND DEMAND EQUAL PROTECTION AND RULE OF LAW!


This was written by an historian that also wrote a book on MADE IN THE USA.  The failure to enforce Anti-Trust laws is the very reason we lost all of our industries.

Trustbusting And The Images Of An Earlier Time


October 30, 1986|By Thomas V. DiBacco.

One of the most salutary, unheralded developments in recent years is that trustbusting has gone the way of the wind. To be sure, the Justice Department and the Federal Trade Commission sometimes put their feet in the way of proposed mergers, but the breaking up of large corporations is dead--except, of course, in those rare situations like the telephone industry where one company controls virtually everything.

The Sherman Antitrust Act of 1890 was a bad law, conceived by farmers and uncompetitive small businesses who wanted to keep their world unchanged. They defied obvious realities, such as that the large corporation could effect economies of scale; small retailers even campaigned against extending the nation`s mail system in the early 20th Century because it would benefit Sears, Roebuck & Co. and its catalogue business.

Even worse, the notions of the farmer and small retailer toward what was monopolistic drew upon emotion rather than sensible criteria. Take one example: The first multi-unit big business in the United States was Western Union, which grew in the wake of Samuel F.B. Morse`s pioneering work with the telegraph in 1844. By 1857 there were six telegraph companies controlling the industry, a few years later there were three and by 1866 there was only Western Union. To be sure, there were subsequent attempts to cut into Western Union`s monopolistic position, but all failed and no major antitrust movement arose.

At the same time, the nation`s numerous railroads would come under rigorous legislative scrutiny. The first federal regulatory measure, the Interstate Commerce Act, came in 1887, three years before the Sherman Antitrust Act. And no industry was more the object of antitrust action in subsequent years than the railroads.

Some analysts might suggest that the telegraph industry would raise little antitrust fervor because it created a vast communications system that made economic sense. The rails, on the other hand, were spread without much rhyme or reason throughout the land, creating enormous frustrations for users, such as farmers, who claimed their lines were too few and expensive.

Maybe so, but one cannot disregard the emotional aspects of popular democracy in the late 19th Century. Just as today, Americans lived to some degree by images as well as reality.

The image of the railroad--belching black smoke, deafening all other sounds, killing livestock and people before technology came to its rescue--was not likely to leave Americans emotionally neutral. In addition, the railroads looked massive, and so were readily associated with wealth.

The vision of the telegraph industry, on the other hand, was that of a small, green-visored telegrapher tapping away in a small office. Unlike the railroad`s steel rails, a thin telegraph line could not conjure up much emotion. Even the recent break-up of AT&T was led by competitors rather than consumers.

So let`s not mourn the end of trustbusting, a democratic notion whose history merits rich obscurity.

Thomas V. DiBacco is a historian at the American University, Washington, D.C. His book, ``Made in the U.S.A.: The History of American Business,`` will be published by Harper & Row in March.


____________________________________________

'The judge who wrote this opinion? Clarence Thomas, who took Judge Bork's place on the D.C. Circuit after Bork resigned. Thomas was joined in the opinion by Ruth Bader Ginsburg. Justice Sotomayor has used applied Bork reasoning in antitrust cases when she sat on the 2nd Circuit Court of Appeals. Elena Kagan has agreed that the Bork/Posner drive to incorporate neoliberal economics into antitrust law is necessary. During her confirmation hearings she said "it’s clear that antitrust law needs to take account of economic theory and economic understandings."


If the American media educated as to the issues that really matter------not whether a pol supports a higher minimum wage but are they neo-liberals who do not value anti-trust laws and thus embrace global corporations that break these anti-trust laws.  That is what we would have known about Obama had any media outlet educated voters during the election. Obama is from The Chicago School of Law that is ground zero for neo-liberal economic policy and law.  Take a look at the names in the article on anti-trust policy over the decades to see why people are nominated for court ====especially the Supreme Court====and you see how neo-liberalism and the dismantlement of anti-trust has been the goal of court appointments especially for Obama.  Everyone says----even Republicans -----that we do not have free market economics----we have a crony economics and that happened when Sherman Anti-Trust laws were ignored.




Sun Jan 09, 2011 at 06:58 PM PST

Robert Bork's influence over antitrust law

by brooklynbadboy for Daily Kos



When President Reagan nominated Judge Robert Bork to the Supreme Court in 1987, a political war began. Judge Bork had been a circuit judge on the District of Columbia Court of Appeals, which could be considered the second most powerful court in the nation. Although he was 60 years
old, his influence over ultra-conservative jurisprudence became well known at the time of his nomination. He is one of the founding fathers, so to speak, of originalism. Democrats feared that his confirmation would shift the court so far to the right that it would be decades before balance could be restored. That political war was fought mainly over Judge Bork's stance on Roe vs. Wade, a war which President Reagan lost. Fierce opposition from Democrats like Ted Kennedy and some Republicans like Arlen Specter, led to Bork being rejected by the Senate 58 to 42. Anthony Kennedy was confirmed unanimously in his wake. Judge Bork resigned his seat on the DC Circuit the following year, leaving his colleague on the court Antonin Scalia to carry the battle flag for another time. But Judge Bork's influence didn't fade. He is still held in high esteem by conservative legal scholars over such matters as federalism, original intent, and other matters. But his influence over another body of law is deep, pervasive and is playing out across the nation in ways that will probably be felt for generations.

After serving as Solicitor-General for Presidents Nixon and Ford from 1973 to 1977, Bork wrote a book that has had a lasting influence on the American economy. The Antitrust Paradox is Robert Bork's magnum opus. Along with Judge Robert Posner's seminal book Antitrust Law(1976), the influence that Bork's book has had on modern competition law in the conservative era is difficult to overstate. Both men are associated with the so-called Chicago School of neoliberal economics with its heavy emphasis on deregulated markets and the rational choice theory. Conservative legal minds like George Priest at Yale have praised his influence:

Virtually all would agree that the Supreme Court, in its change of direction of antitrust law beginning in the late 1970s, drew principally from Judge Bork's book both for guidance and support of its new consumer welfare basis for antitrust doctrine.

Liberal legal minds like Zephyr Teachout have written about Bork's influence as well:

The spirit of antitrust has been eviscerated over decades by people like Robert Bork, who argued that antitrust had to be about "efficiency," as if efficiency was a nonpolitical, objective idea we all might measure.

The D.C. Circuit Court of Appeals made Bork's doctrine official in a 1990 ruling in United States vs. Baker Hugues, which was a Clayton Antitrust Act enforcement action brought against Texas oil services company Baker Hughes. That influential ruling solidified the Chicago School's influence over antitrust enforcement by holding:

The Supreme Court has adopted a totality-of-the-circumstances approach to the statute, weighing a variety of factors to determine the effects of particular transactions on competition. That the government can establish a prima facie case through evidence on only one factor, market concentration, does not negate the breadth of this analysis. Evidence of market concentration simply provides a convenient starting point for a broader inquiry into future competitiveness...

The judge who wrote this opinion? Clarence Thomas, who took Judge Bork's place on the D.C. Circuit after Bork resigned. Thomas was joined in the opinion by Ruth Bader Ginsburg. Justice Sotomayor has used applied Bork reasoning in antitrust cases when she sat on the 2nd Circuit Court of Appeals. Elena Kagan has agreed that the Bork/Posner drive to incorporate neoliberal economics into antitrust law is necessary. During her confirmation hearings she said "it’s clear that antitrust law needs to take account of economic theory and economic understandings."


While Justice John Paul Stevens is now considered a liberal champion, his primary, if lesser known, achievement on the court was initiating the embrace of Robert Bork's antitrust reasoning. When President Ford appointed Stevens to the Supreme Court in 1976, replacing traditional antitrust crusader William O. Douglas, he had already spent 20 years as an antitrust lawyer in Chicago. He taught antitrust law at the University of Chicago, where many other Chicago School neoliberals had ensconced themselves. He had been recruited there by the dean of the University of Chicago Law School, Ed Levi. After serving as a Nixon appointment to the 7th Circuit Appellate Court, he came highly recommended to President Ford by now Attorney-General Ed Levi and one other: Ford's Solicitor-General, Robert Bork.

Ford appointed Stevens to the Court in 1976. Shortly thereafter, the Court began to take Chicago School ideas seriously, ultimately completely overturning antitrust doctrine in a movement that continues today.

It is difficult to overstate Stevens' contribution. At the time of his appointment, the development of antitrust doctrine for four decades had consisted of the continuous expansion of per se rules prohibiting a wide range of practices: price-fixing and territorial restrictions; group boycotts; tying arrangements; predatory pricing; and resale price maintenance, among others.

When John Paul Stevens' position on antitrust law is the left-most position, that is clearly indicative of a fundamental transformation of applied law. It happened quickly and the scope and effect of it has been breathtaking. And Robert Bork was right at the center of making it happen.


While I don't want to get into heavy legal theory in this piece, I'll try to summarize quickly how Judge Bork's views changed the nature of enforcement of antitrust law and then move to the effects these changes are having on our economy. This is not a scholarly essay, but rather a polemic. My goal in describing how Judge Bork's views affect America is political, not exclusively legal in nature.

In a 2007 paper published at Berkeley, antitrust scholars Johnathan Baker and Carl Shapiro get to the heart of the matter:

The past forty years have witnessed a remarkable transformation in horizontal merger enforcement in the United States. With no change in the underlying statute, the Clayton Act, the weight given to market concentration by the federal courts and by the federal antitrust agencies has declined dramatically. Instead, increasing weight has been given to three arguments often made by merging firms in their defense: entry, expansion and efficiencies.

The primary effect that Judge Bork had on antitrust enforcement is changing the standards by which antitrust actions are brought and decided. The basic point of Judge Bork's book is that the determinative factor of when and how an antitrust action should be decided should be economic rather than political. This is why the factors determining the use antitrust powers are decidedly financial in nature: Are there any barriers to entry? Is the consumer paying higher prices than usual? The fixation on consumer choices and prices, rather than market concentration and number of actors is the basic fundamental difference between modern and classical antitrust enforcement. This is why you have not and will not see a breakup of a major corporation in America today no matter how large or how concentrated its market share. In simpler terms, it does not matter if Wal-Mart is the sole source of food in your county as long there are a wide variety of products, the prices are low and in theory someone else could open up a store. No barrier to entry? Wide variety? Low prices? Monopoly approved.

The original spirit of competition law in America, however, was decidedly political. Senator John Sherman of Sherman Antitrust Act fame, put it this way:

If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life.

Justice William O. Douglas, writing in a 5-4 dissent in United States vs. Columbia Steel, however, may have put the purpose of antitrust law better than anyone else:

"We have here the problem of bigness. Its lesson should by now have been burned into our memory by Brandeis. The Curse of Bigness shows how size can become a menace--both industrial and social. It can be an industrial menace because it creates gross inequalities against existing or putative competitors. It can be a social menace...In final analysis, size in steel is the measure of the power of a handful of men over our economy...The philosophy of the Sherman Act is that it should not exist...Industrial power should be decentralized. It should be scattered into many hands so that the fortunes of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men...That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it."

That isn't an economic argument about consumer prices or market efficiency. Justice Douglas' argument for antitrust law was moral/political and it was not uncommon in his time.

The 1950's and 1960's were what might be considered the "golden age" in classical antitrust enforcement. During that era, the use of the Sherman, Clayton, and Robinson-Patman Acts inter alia, were buttressed by the Celler-Kefauver Act. Those bills allowed the Federal Government to aggressively limit mergers, intervene in concentrated markets and combat anti-competitive behavior with the heavy hand of consent decree regulation. While the era did not bring about a great deal of break-ups, the corporations knew there was a tough cop on the beat. The problem with these laws, however, was that they were so broad that they left a great deal of discretion over enforcement to the executive branch and the courts. What would happen if both institutions developed a very different view of "bigness" than John Sherman or Justice Douglas?

The "golden age" ended partly because of the tremendous legal influence of Robert Bork. His view of competition law fit neatly with the ascendancy of neoliberal economic thought. New antitrust enforcement guidelines were written by successive conservative administrations, whose members accepted Bork & Posner's thinking on the subject. Antitrust actions declined on both number and scope. The few actions that were brought were on the most obvious price-fixing and the like. Next, lawyers who accepted or in some cases enforced Bork's views were appointed to the district and appellate bench. Even nominally liberal judges appointed by Bill Clinton accepted the economic view of antitrust law and focused their concerns solely on consumer prices, product choice, etc. Mergers that in the 1950's would have completely rejected were approved.

You need only look at the recent history of Bank of America since 1980 to see the effects of the lack of meaningful antitrust enforcement. In the first thirty years of the conservative era, Bank of America was allowed by antitrust enforcers to become so gargantuan, that it's failure posed a direct threat to the entire national economy. So huge in fact, that only the government could bail it out as it approached failure in 2008. While Judge Bork and his ilk would likely point to the benefits of "free checking" and "national ATM coverage" to the consumer, classical antitrust enforcers would look at the size and concentration of an entity that large and conclude it's massive size poses an excessive risk to society as a whole. Taxpayers now know costly "the problem of bigness" can be.

When one considers the Citizens United ruling within the context of the dominant laissez-faire thinking among antitrust lawyers, it is easy to understand why large corporations have become the dominant institutions in American life. While there was a strong progressive and labor movement in the early part of the 20th Century to act as a counterweight to to the "robber barons" and "trusts," today no such movements exist. Perhaps progressives had thought the laws they worked so hard for, laws expressly designed to curb the size and concentration of corporate power, had largely made monitoring such things no longer imperative. But antitrust law was just a much a fundamental element of economic justice for the middle class as the labor movement. Even in cases where the trust busters failed, the people could see that there were people in government who were on their side, protecting the weak from the strong. But the conservatives planned ahead and planned well. Their victory was so complete, the Bush Administration didn't bother trying to enforce even the relatively lax Bork antitrust rules. And now, things are so far diverted from their original purpose, that Obama Administration's more robust antitrust action is firmly ensconced in Chicago School-style enforcement. Without traditional antitrust laws, or a labor movement, and unlimited corporate spending on elections, who or what will bring balance to the forces corporate power have over the people and their government?


In conclusion, I agree with Zepher Teachout:

There are also reasons to think an antitrust policy focused on size and power makes good economic sense. Despite economic theorizing, bigger companies are not always more efficient companies. And even if they were, there are important societal efficiencies that go beyond whether individual companies operate cheaply or produce low-cost products. As Bert Foer of the American Antitrust Institute recently testified before Congress, we can choose to use competition policy to help prevent much of the systemic risk that has crippled our economy. By focusing more on size and concentration, we might be able to avoid collapse, unplanned nationalization, and bailouts.


To get there, we will either need a new body of competition law, or new teaching to undo the effects of the influential Robert Bork.



_____________________________________________


'This article explores the right of the people to be free from government granted monopolies or from what we would today call “Crony Capitalism.”  As this article has shown, however, “the constitutional guarantee of liberty deserves more respect—a lot more.”


The research paper below has a great overview of the history of corporate monopoly in American history.  Take a look---it is too long to post in entirety.  What we know is that the US Constitution does not allow for the merging of US corporations to the extent that has happened and it occurs because we elect pols that ignore the Constitution.  We are now watching as these global corporate pols manufacture reasons why global corporations are good for the public and economy -----


Northwestern University School of LawNorthwestern University School of Law Scholarly CommonsFaculty Working Papers2012

Monopolies and the Constitution: A History of Crony Capitalism



Steven G. CalabresiNorthwestern University School of Law, s-calabresi@law.northwestern.eduLarissa Price


CONCLUSION

While the evils of state granted monopolies in England did not lead to an antimonopoly provision in the federal constitution, there is ample evidence that the right to be free from government monopolies is deeply rooted in this country’s history and tradition. The English fear of monopolies was a fear that Americans experienced under colonial rule, and it provided one of many justifications put forward for American independence. The Antifederalists spoke out against monopolies, and Federalists such as James Madison discussed the issue with Thomas Jefferson and George Mason during the debates on the Constitution. During the ratification of the federal Constitution, six states even requested the inclusion of an antimonopoly clause as an amendment to the Constitution. In addition, Congress is only given enumerated power to create monopolies in the Patent and copyright context, which implies that Congress lacks such power in other contexts. Moreover, the Privileges and Immunities Clause of Article IV may very well have recognized a constitutional right to be free from partial or discriminatory laws. Two states had antimonopoly provisions in their constitutions at the time of the founding, and many more states added antimonopoly provisions to their constitutions during the nineteenth century due to the Jacksonian concern about monopolies. This thread of Jacksonian thought was adopted by the Abolitionists and then by Reconstruction era Republicans who argued that the institution of slavery was itself a particularly perverse monopoly. The antimonopoly argument thus played an important role in the writing of the Fourteenth Amendment, which for the Radical Republicans was a ban on all systems of class-based legislation, of exclusive privileges, and of monopolies

All of this evidence—from Seventeenth Century England, from the colonial period, from the experience in the states, and from the framing of the Fourteenth Amendment--makes it clear that there is a strong antimonopoly tradition in U.S. constitutional law.The fact that inrecent times the federal courts have, for the most part, relegated cases involving economic regulations to limited “rational basis” review, however, has meant that until recently challenges to laws on antimonopoly grounds were unlikely to be successful. This may change now that the rational basis test has been employed to strike down classifications on the basis of sex, sexual orientation, and mental retardation, and now that the Takings Clause is experiencing a revival at the level of the U.S. Supreme Court. Despite the post New Deal rational basis mindset, this article has shown that state antimonopoly clauses in particular have proven to be important for striking down a number of economic regulations that grant special privileges to some at the expenseof others—licensing requirements, taxes designed to benefit preferred industries, monopolies to do business with the government, and price controls designed to benefit insiders. Antimonopoly clauses can also be used to strike down laws such as licensing requirements where the court finds that the laws grant special privilege absent any health and safety concerns. Challenges to state laws on antimonopoly grounds have been made recently, such as with a law governing Maryland horse massages and with the Texas horse floating cases discussed in Section III. The right to compete, and more fundamentally, the right to earn an honest living, is a basic right embodied in U.S. constitutional law. There is substantial evidence, from the English and colonial history, from debates on the federal constitution and its ratification, from the history of the Fourteenth Amendment, and from state constitutional law, to show that this is the case. However, the longstanding use of rational basis review has meant that the courts have too often surrendered to a legislative process that is dominated by well-entrenched interest groups seeking monopoly rents from the state. It means that fundamental economic liberties too often go unprotected by the courts. In short, the use of rational basis review has meant that “property is at the mercy of the pillagers.”  As this article  has shown, however, “the constitutional guarantee of liberty deserves more respect—a lot more.”


________________________________________
Please take time to understand the intended effects of the Affordable Care Act.  It seeks to consolidate and deregulate the health industry just as Clinton's policies to consolidate and deregulate the financial industry.  What will become global health systems will control every aspect of health care.  IT WILL BECOME A MONOPOLY.

The discussion below is a good start----it takes a business viewpoint but the arguments are laid out.  The fact is that ACA sets the stage for violations of anti-trust and with global corporate pols in office all of this will be ignored. 

IT MATTERS HAVING CLINTON GLOBAL CORPORATE POLS CONTROLLING THE PEOPLE'S DEMOCRATIC PARTY.  NATIONAL LABOR AND JUSTICE LEADERS BACKING THESE NEO-LIBERALS ARE NOT WORKING FOR AMERICAN FAMILIES.



Sherman Antitrust Act versus Affordable Care Act: FTC's successful merger challenge in the matter of St. Luke’s Hospital of Idaho

29 APR 20142:00 PM - 3:15 PM (UTC-05:00) Webinar

In a widely reported decision, the FTC has successfully challenged the merger between St. Luke’s Hospital of Idaho and Salzer Medical Group, resulting in a federal court ruling that the merger would violate US antitrust law. DLA Piper is pleased to present a webinar discussing the ramifications of this significant case.

Webinar Playback
Presentation Slides
AMONG THE TOPICS:

  • Overview of the intersection between the Affordable Care Act and the Sherman Antitrust Act
  • Summary of the St. Luke’s matter, including the district court’s rulings on market power, cost efficiencies and reimbursement rates
  • Cost efficiencies and related risks under the ACA that were at issue
  • What next? Antitrust and health care takeaways
SPEAKERS
Carl Hittinger, Co-Chair, US Antitrust and Trade Regulation Group

Steve Goff, Co-Chair, Health Care Sector

Downloads
Presentation Slides
Webinar Playback



____________________________________________
WE THE PEOPLE can reverse this global corporate takeover very easily.  Simply running and voting against Clinton neo-liberals will send them packing.  Then we will have pols shouting for Rule of Law.  Rule of Law itself will downsize US global corporations.  First, there is the recovery of trillions in corporate fraud that will downsize these fraud- bloated corporations.  Then there is the Anti-Trust laws in the Constitution that will break apart these unlawful mergers and acquisitions.  Remember, it is the FED and Treasury that regulates banks and is allowing all the financial frauds and the President and a Clinton neo-liberal Senate appointed these agency heads.  It is the FTC---Federal Trade Commission and the US Justice Department----Eric Holder ----that stops mergers that violate anti-trust.  Again, these are Clinton neo-liberal appointments approved by a neo-liberal Senate who are ignoring anti-trust laws.  WE ALL KNOW THESE MERGERS ARE CREATING MONOPOLIES.


'Still, the act was a far-reaching legislative departure from the predominant laissez-faire philosophy of the era'.

If courts are stacked with Bork neo-liberal judges then a politician and citizens stand outside and shout that such rulings are not to be interpreted from the intent of this law.
  This is very boring but it gives the law as it is written.  Think about Clinton allowing the telecommunications industry to merge after the ATT breakup.  Flash forward to today and we have Verizon and Comcast each flooding advertising offering the same things for the same price.  The cable competition is now disappearing with the last approved merger of Comcast.

  HOW IS THIS COMPETITION AND HOW IS PAYING $200 A MONTH PRICE AFFORDABILITY.  WALL STREET ANNOUNCED THAT WHEN CABLE GOES THOSE PRICES WILL GO TO $400 A MONTH.




Sherman Anti-Trust Act


Also found in: Dictionary/thesaurus, Medical, Financial, Encyclopedia, Wikipedia.

Sherman Anti-Trust Act The Sherman Anti-Trust Act of 1890 (15 U.S.C.A. §§ 1 et seq.), the first and most significant of the U.S. antitrust laws, was signed into law by President Benjamin Harrison and is named after its primary supporter, Ohio Senator John Sherman.

The prevailing economic theory supporting antitrust laws in the United States is that the public is best served by free competition in trade and industry. When businesses fairly compete for the consumer's dollar, the quality of products and services increases while the prices decrease. However, many businesses would rather dictate the price, quantity, and quality of the goods that they produce, without having to compete for consumers. Some businesses have tried to eliminate competition through illegal means, such as fixing prices and assigning exclusive territories to different competitors within an industry. Antitrust laws seek to eliminate such illegal behavior and promote free and fair marketplace competition.


Until the late 1800s the federal government encouraged the growth of big business. By the end of the century, however, the emergence of powerful trusts began to threaten the U.S. business climate. Trusts were corporate holding companies that, by 1888, had consolidated a very large share of U.S. manufacturing and mining industries into nationwide monopolies. The trusts found that through consolidation they could charge Monopoly prices and thus make excessive profits and large financial gains. Access to greater political power at state and national levels led to further economic benefits for the trusts, such as tariffs or discriminatory railroad rates or rebates. The most notorious of the trusts were the Sugar Trust, the Whisky Trust, the Cordage Trust, the Beef Trust, the Tobacco Trust, John D. Rockefeller's Oil Trust (Standard Oil of New Jersey), and J. P. Morgan's Steel Trust (U.S. Steel Corporation).

Consumers, workers, farmers, and other suppliers were directly hurt monetarily as a result of the monopolizations. Even more important, perhaps, was that the trusts fanned into renewed flame a traditional U.S. fear and hatred of unchecked power, whether political or economic, and particularly of monopolies that ended or threatened equal opportunity for all businesses. The public demanded legislative action, which prompted Congress, in 1890, to pass the Sherman Act. The act was followed by several other antitrust acts, including the Clayton Act of 1914 (15 U.S.C.A. §§ 12 et seq.), the Federal Trade Commission Act of 1914 (15 U.S.C.A. §§ 41 et seq.), and the Robinson-Patman Act of 1936 (15 U.S.C.A. §§ 13a, 13b, 21a). All of these acts attempt to prohibit anticompetitive practices and prevent unreasonable concentrations of economic power that stifle or weaken competition.

The Sherman Act made agreements "in restraint of trade" illegal. It also made it a crime to "monopolize, or attempt to monopolize … any part of the trade or commerce." The purpose of the act was to maintain competition in business. However, enforcement of the act proved to be difficult. Congress had enacted the Sherman Act pursuant to its constitutional power to regulate interstate commerce, but this was only the second time that Congress relied on that power. Because Congress was somewhat uncertain of the reach of its legislative power, it framed the law in broad common-law concepts that lacked detail. For example, such key terms as monopoly and trust were not defined.
In effect, Congress passed the problem of enforcing the law to the Executive Branch, and to the judicial branch, it gave the responsibility of interpreting the law. Still, the act was a far-reaching legislative departure from the predominant laissez-faire philosophy of the era.

Initial enforcement of the Sherman Act was halting, set back in part by the decision of the Supreme Court in United States v. E. C. Knight Co., 156 U.S. 1, 15 S. Ct. 249, 39 L. Ed. 325 (1895), that manufacturing was not interstate commerce. This problem was soon circumvented, and President Theodore Roosevelt promoted the antitrust cause, calling himself a "trustbuster." In 1914, Congress established the Federal Trade Commission (FTC) to formalize rules for fair trade and to investigate and curtail unfair trade practices. As a result, a number of major cases were successfully brought in the first decade of the century, largely terminating trusts and basically transforming the face of U.S. industrial organization.

During the 1920s, enforcement efforts were more modest, and during much of the 1930s, the national recovery program of the New Deal encouraged industrial collaboration rather than competition. During the late 1930s, an intensive enforcement of antitrust laws was undertaken. Since World War II, antitrust enforcement has become increasingly institutionalized in the Antitrust Division of the Justice Department and in the Federal Trade Commission, which over time, was granted greater authority by Congress. Justice Department enforcement activities against cartels are particularly vigorous, and criminal sanctions are increasingly sought. In 1992, the Justice Department expanded its enforcement policy to cover foreign company conduct that harms U.S. exports.


Restraint of Trade

Section one of the Sherman Act provides that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations is hereby declared to be illegal." The broad language of this section has been slowly defined and narrowed through judicial decisions.

The courts have interpreted the act to forbid only unreasonable restraints of trade. The Supreme Court promulgated this flexible rule, called the Rule of Reason, in Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619 (1911). Under the Rule of Reason, the courts will look to a number of factors in deciding whether the particular restraint of trade unreasonably restricts competition. Specifically, the court considers the makeup of the relevant industry, the defendants' positions within that industry, the ability of the defendants' competitors to respond to the challenged practice, and the defendants' purpose in adopting the restraint. This analysis forces courts to consider the pro-competitive effects of the restraint as well as its anticompetitive effects.

The Supreme Court has also declared certain categories of restraints to be illegal per se: that is, they are conclusively presumed to be unreasonable and therefore illegal. For those types of restraints, the court does not have to go any further in its analysis than to recognize the type of restraint, and the plaintiff does not have to show anything other than that the restraint occurred.

Restraints of trade can be classified as horizontal or vertical.
A horizontal agreement is one involving direct competitors at the same level in a particular industry, and a vertical agreement involves participants who are not direct competitors because they are at different levels. Thus, a horizontal agreement can be among manufacturers or retailers or wholesalers, but it does not involve participants from across the different groups. A vertical agreement involves participants from one or more of the groups—for example, a manufacturer, a wholesaler, and a retailer. These distinctions become difficult to make in certain fact situations, but they can be significant in determining whether to apply a per se rule of illegality or the Rule of Reason. For example, horizontal market allocations are per se illegal, but vertical market allocations are subject to the rule-of-reason test.

Concerted Action

Section one of the Sherman Act prohibits concerted action, which requires more than a unilateral act by a person or business alone. The Supreme Court has stated that an organization may deal or refuse to deal with whomever it wants, as long as that organization is acting independently. But if a manufacturer and certain retailers agree that a manufacturer will only provide products to those retailers and not to others, then that is a concerted action that may violate the Sherman Act. A company and its employees are considered an individual entity for the purposes of this act. Likewise, a parent company and its wholly owned subsidiaries are considered an individual entity.

Evidence of a concerted action may be shown by an express or written agreement, or it may be inferred from Circumstantial Evidence. Conscious parallelism (similar patterns of conduct among competitors) is not sufficient in and of itself to imply a conspiracy. The courts have held that conspiracy requires an additional element such as complex actions that would benefit each competitor only if all of them acted in the same way.

Joint ventures, which are a form of business association among competitors designed to further a business purpose, such as sharing cost or reducing redundancy, are generally scrutinized under the Rule of Reason. But courts first look at the reason that the Joint Venture was established to determine whether its purpose was to fix prices or engage in some other unlawful activity. Congress passed the National Cooperative Research Act of 1984 (15 U.S.C.A. §§ 4301-06) to permit and encourage competitors to engage in joint ventures that promote research and development of new technologies. The Rule of Reason will apply to those types of joint ventures.

Price Fixing

The
agreement to inhibit price competition by raising, depressing, fixing, or stabilizing prices is the most serious example of a per se violation under the Sherman Act. Under the act, it is immaterial whether the fixed prices are set at a maximum price, a minimum price, the actual cost, or the fair market price. It is also immaterial under the law whether the fixed price is reasonable.

All horizontal and vertical price-fixing agreements are illegal per se. Horizontal price-fixing agreements include agreements among sellers to establish maximum or minimum prices on certain goods or services. This can also include competitors' changing their prices simultaneously in some circumstances. Also significant is the fact that horizontal price-fixing agreements may be direct or indirect and still be illegal. Thus, a promotion or discount that is tied closely to price cannot be raised, depressed, fixed, or stabilized, without a Sherman Act violation. Vertical price-fixing agreements include situations where a wholesaler mandates the minimum or maximum price at which retailers may sell certain products.

Market Allocations

Market allocations are situations where competitors agree to not compete with each other in specific markets, by dividing up geographic areas, types of products, or types of customers. Market allocations are another form of price fixing. All horizontal market allocations are illegal per se. If there are only two computer manufacturers in the country and they enter into a market allocation agreement whereby manufacturer A will only sell to retailers east of the Mississippi and manufacturer B will only sell to retailers west of the Mississippi, they have created monopolies for themselves, a violation of the Sherman Act. Likewise, it is an illegal agreement that manufacturer A will only sell to retailers C and D and manufacturer B will only sell to retailers E and F.

Territorial and customer vertical market allocations are not per se illegal but are judged by the Rule of Reason. In 1985, the Justice Department announced that it would not challenge any restraints by a company that has less than 10 percent of the relevant market or whose vertical price index, a measure of the relevant market share, indicates that collusion and exclusion are not possible for that company in that market.

Boycotts

A boycott, or a concerted refusal to deal, occurs when two or more companies agree not to deal with a third party. These agreements may be clearly anticompetitive and may violate the Sherman Act because they can result in the elimination of competition or the reduction in the number of participants entering the market to compete with existing participants. Boycotts that are created by groups with market power and that are designed to eliminate a competitor or to force that competitor to agree to a group standard are per se illegal. Boycotts that are more cooperative in nature, designed to increase economic efficiency or make markets more competitive, are subject to the Rule of Reason. Generally, most courts have found that horizontal boycotts, but not vertical boycotts, are per se illegal.

Tying Arrangements

When a seller conditions the sale of one product on the purchase of another product, the seller has set up a Tying Arrangement, which calls for close legal scrutiny. This situation generally occurs with related products, such as a printer and paper. In that example, the seller only sells a certain printer (the tying product) to consumers if they agree to buy all their printer paper (the tied product) from that seller.

Tying arrangements are closely scrutinized because they exploit market power in one product to expand market power in another product. The result of tying arrangements is to reduce the choices for the buyer and exclude competitors. Such arrangements are per se illegal if the seller has considerable economic power in the tying product and affects a substantial amount of interstate commerce in the tied product. If the seller does not have economic power in the tying product market, the tying arrangement is judged by the Rule of Reason. A seller is considered to have economic power if it occupies a dominant position in the market, its product is advantaged over other competing products as a result of the tying, or a substantial number of consumers has accepted the tying arrangement (evidencing the seller's economic power in the market).

Monopolies

Section two of the Sherman Act prohibits monopolies, attempts to monopolize, or conspiracies to monopolize. A monopoly is a form of market structure where only one or very few companies dominate the total sales of a particular product or service.
Economic theories show that monopolists will use their power to restrict production of goods and raise prices. The public suffers under a monopolistic market because it does not have the quantity of goods or the low prices that a competitive market could offer.

Although the language of the Sherman Act forbids all monopolies, the courts have held that the act only applies to those monopolies attained through abused or unfair power. Monopolies that have been created through efficient, competitive behavior are not illegal under the Sherman Act, as long as honest methods have been employed. In determining whether a particular situation that involves more than one company is a monopoly, the courts must determine whether the presence of monopoly power exists in the market. Monopoly power is defined as the ability to control price or to exclude competitors from the marketplace. The courts look to several criteria in determining market power but primarily focus on market share (the company's fractional share of the total relevant product and geographic market). A market share greater than 75 percent indicates monopoly power, a share less than 50 percent does not, and shares between 50 and 75 percent are inconclusive in and of themselves.

In focusing on market shares, courts will include not only products that are exactly the same but also those that may be substituted for the company's product based on price, quality, and adaptability for other purposes. For example, an oat-based, round-shaped breakfast cereal may be considered a substitutable product for a rice-based, square-shaped breakfast cereal, or possibly even a granola breakfast bar.

In addition to the product market, the geographic market is also important in determining market share. The relevant geographic market, the territory in which the firm sells its products or services, may be national, regional, or local in nature. Geographic market may be limited by transportation costs, the types of product or service, and the location of competitors.

Once sufficient monopoly power has been proved, the Sherman Act requires a showing that the company in question engaged in unfair conduct. The courts have differing opinions as to what constitutes unfair conduct. Some courts require the company to prove that it acquired its monopoly power passively or that the power was thrust upon them. Other courts consider it an unfair power if the monopoly power is used in conjunction with conduct designed to exclude competitors. Still other courts find an unfair power if the monopoly power is combined with some predatory practice, such as pricing below marginal costs.

Attempts to Monopolize

Section two of the Sherman Act also prohibits attempts to monopolize. As with other behavior prohibited under the Sherman Act, courts have had a difficult time developing a standard that distinguishes unlawful attempts to monopolize from normal competitive behavior. The standard that the courts have developed requires a showing of Specific Intent to monopolize along with a dangerous probability of success. However, the courts have no uniform definition for the terms intent or success. Cases suggest that the more market power a company has acquired, the less flagrant its attempt to monopolize must be.

Conspiracies to Monopolize

Conspiracies to monopolize are unlawful under section two of the Sherman Act. This offense is rarely charged alone, because a conspiracy to monopolize is also a combination in restraint of trade, which violates section one of the Sherman Act.

In accordance with traditional conspiracy law, conspirators to monopolize are liable for the acts of each co-conspirator, even their superiors and employees, if they are aware of and participate in the overall mission of the conspiracy.
Conspirators who join in the conspiracy after it has already started are liable for every act during the course of the conspiracy, even those events that occurred before they joined.

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    Cindy Walsh is a lifelong political activist and academic living in Baltimore, Maryland.

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