“You wouldn’t worry so much about what others think of you if you realized how seldom they do.”
Please Sign-Up for Updates
Please Follow Me On:
Two giant global banks helped at least a dozen hedge funds skirt full tax payment on more than $100 billion worth of stock trades, according to a new congressional investigation made public Monday.
The probe by the Senate Permanent Subcommittee on Investigations will be the subject of a daylong hearing on Tuesday and also spells more trouble for the embattled Internal Revenue Service.
At issue is whether complex financial deals arranged by London-based Barclays Bank PLC and Germany’s Deutsche Bank AG deliberately helped hedge funds skirt U.S. tax laws for financial advantage and bend rules designed to protect the financial system from excessive borrowing to finance speculative bets.
The IRS in 2010 issued a warning against the financial instruments at question in the Senate probe, but roughly four years later, no additional tax money has been collected from the hedge funds involved, Senate investigators said…
The Senate report alleges that Deutsche Bank and Barclays conspired with the hedge funds to create a complex investment vehicle that gave the appearance of being a brokerage account like those used by ordinary Americans who play the stock market.
The difference, however, is that these accounts, called “basket options,” involved billions of dollars in rapid and constant computerized trading. The hedge funds, the report said, were taking short-term profits but being taxed as if they were ordinary investors holding stocks for a year or longer. They were taxed at a rate of 15 percent to 20 percent instead of the rate of ordinary income, which is as high as 39 percent….
“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”
U.S. Supreme Court Justice Louis Brandeis
“The great enemy of truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought.”
John. F. Kennedy
….Why then did “endanger[ing] the company” become Citi’s controlling officers’ paramount mortgage strategy despite Bowen’s copious, dead-on accurate warnings? Citi’s most senior managers, including former Treasury Secretary Robert Rubin, were personally put on written notice by Bowen that an extraordinary and growing percentage – eventually 80% – of Citi’s purchased mortgages were “toxic” and that it was reselling them through fraudulent “reps and warranties.” Unlike Holder, there is no conceivable dispute that every Citi officer warned by Bowen instantly understood the implications. There is only one logical answer – they knew that the accounting controlling fraud scheme Bowen described was a “sure thing” guaranteed to make them personally wealthy at the expense of Citi’s shareholders (and, absent a federal bailout, Citi’s creditors).
In response to these frauds Holder’s response is to fine the bank (Citi) – and to do nothing to the officers who grew wealthy by looting Citi’s shareholders. The fine, of course, will be paid by Citi’s shareholders – who were one of the primary victims of the controlling officers’ “toxic mortgages” fraud schemes…..
Yes I confess, I agree with David Stockman.
The central banks of the world are massively and insouciantly pursuing financial instability. That’s the inherent result of the 68 straight months of zero money market rates that have been forced into the global financial system by the Fed and its confederates at the BOJ, ECB and BOE. ZIRP fuels endless carry trades and the harvesting of every manner of profit spread between negligible “funding” costs and positive yields and returns on a wide spectrum of risk assets.
Moreover, this central bank sponsored regime of ZIRP and money market pegging contains a built-in accelerator. As carry trade speculators drive asset prices steadily higher and fixed income spreads steadily thinner—- fear and short interest is driven out of the casino, making buying on the dips ever more profitable and less risky. Indeed, the explicit promise by central banks that the money market rate will remain frozen for the duration and that ample warning of any change in rate policy will be “transparently” announced is the single worst policy imaginable from the point of view of financial stability. It means that the speculator’s worst nightmare—–suddenly going “upside down” due to a sharp spike in funding costs—-is eliminated by central bank writ….
At the present time, for example, 40% of all syndicated loans are being taken down by sub-investment grade issuers. This is materially higher than the 2007 peak, and is accompanied by an even more virulent outbreak of “cov-lite” credit terms. Indeed, upwards of 60% of these junk loans have no protection against debt layering and cash stripping by equity holders—-notwithstanding their nominal “senior” status in the credit structure. The obvious implication, of course, is that the Fed “easy money” is being massively diverted into leveraged gambling and rent stripping by the LBO houses. Three times since 1988 this kind of financial deformation has led to a thundering bust in the junk credit market. Why would monetary central planners, who allegedly watch their so-called “dashboards” like a flock of hawks, think the outcome would be any different this time?…”
Fitch Ratings says Canada’s real estate market is as much as 20 per cent overpriced and cautions the government may need to take more measures to slow down borrowing on homes.
Fitch is the second U.S. financial agency to sound the alarm on Canadian home prices in the past week, with the Morningstar research firm predicting a 30 per cent correction was possible over the next few years.
The latest warning comes as the Teranet–National Bank composite house price index for June showed prices rose 0.9 per cent from May and were up 4.4 per cent from last year.
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be exempt from any intellectual influences, are usually slaves of some defunct economist.”
John Maynard Keynes
Control of water as military asset:
James McCarthy has 30+ years in finance and private equity, corporate structuring and work-outs, and raising debt and equity as an investor, lender, investment manager, portfolio manager, financial advisor, corporate consultant, work-out consultant, and city planner. Clients have included domestic and offshore institutional investors, investment funds, hedge funds, high net worth investors, and private companies. I hold an MBA from Columbia University and a Master of City & Regional Planning from Rutgers University.
Special interests include green and sustainable design, resilience, passive energy design, waterfront, walkability, transit-oriented design, affordable housing, high-quality and innovative architecture and construction technology, mixed-use development, and the inclusion of public spaces and landscape architecture.