Category Archives: Politics

Pro Big Corporate IRS: Agency Guts Whistleblower Program, Leaves Billions on the Table

It’s widely known among tax professionals that the US does little in the way of tax enforcement, and the little that it does do is directed against individuals and small businesses.

What is not so widely known is how deep the institutional bias is in the IRS in favor of letting big corporate tax cheats get away with it.

Conventional wisdom is similar to the rationalization of weak enforcement at the SEC: that the agency is afraid that if they go after big companies, they’ll have the penalties and fines challenged in court, and they’ll often lose by virtue of being outgunned by better lawyer (yes, Virginia, even if you have a solid case, that doesn’t mean you’ll win at trial). And top tax litigators are among the most highly paid legal talent. I’m not up on current rates, but in the mid 1980s, Sumitomo Bank fought the IRS on a $100 million assessment and won. Their attorney was a solo practitioner who charged $1000 an hour.

It turns out that the picture is vastly worse than that.

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Richard Alford: AIG Redux – How the Fed Usurped Congress

Yves here. Richard Alford, a former New York Fed economist, provides his assessment of the AIG bailout in light of some of the revelations in the AIG bailout trial. While many of his arguments have merit, I want to quibble with a couple of them.

The first is the size of the actual amount taken by AIG and the reason for the drawdowns. At the time AIG hit the wall, the amount it needed was first estimated at $50 billion to cover its credit default swaps portfolio and $20 billion for its securities lending. The Maiden Lane III vehicle that the Fed created to take the CDOs has a $62.9 billion face value, so we can use that as a rough and ready value, and the securities lending bailout costs rose to roughly $50 billion. But consider: those two together get you to only a bit over $110 billion versus the peak lending amount reported as just shy of $185 billion. And some of that ~$110 billion includes laundering a bank bailout through AIG, by not obtaining haircuts on the CDS on the Maiden Lane CDOs. So where did that say $80 billion go? It might be commercial paper or medium term notes during the very worst of the crisis, although with the Fed supporting AIG, you’d think investors would be see its paper as fine. We’re conferring with some close AIG watchers and may write up a discussion of what that AIG black hole consisted of.

Second is that at the end, Alford adopts a “what matters is looking forward,” as in preventing future crises. Yes, but we are great believers in post-mortems, particularly in light of the George Santayana saying, “Those who do not remember the past are condemned to repeat it.”

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The Financialization of Life

Yves here. One of the efforts the Naked Capitalism community has been engaged in is trying to understand and map our emerging political and economic order. Over the last four decades, massive changes have taken place in social values, in job security, in the importance of communities relative to other networks, like professional associations, and in the role of the state. Economists, social scientists, and laypeople have used various frameworks for describing this period. Understanding the driving process is important not merely for the purposes of description, but also for analysis, since a major question remains open: is this a last gasp of large-scale industrial capitalism, or is this the starting phase of a new economic order? We’ve tended to see this period as a self-limiting finance-led counter-revolution against the New Deal, but that may prove to be too optimistic a reading.

This Real News Network interview with Costas Lapavitsas, a professor in economics at the University of London School of Oriental and African Studies, takes a different perspective. Lapavitsas contends that financialization itself constitutes a new form of capitalism, which is supported by neoliberal ideology.

Independent of whether you fully agree with Lapavitsas’ framing, this talk gives a good overview of the major economic and political changes since 1970. His summary would be useful for those who could use a historical perspective on these shifts, or want a high-level understanding of the restructuring of modern economies without having to get too deep into the weeds. But even though this interview is designed to go down easily, it offers a lot of grist for thought.

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Why is the Boston Globe Covering Up for Gubernatorial Candidate Charlie Baker? (Updated)

Boston’s paper of record is effectively covering up for Massachusetts gubernatorial candidate Charlie Baker by failing to cover a growing pay to play scandal in New Jersey, with Baker as one of its central figures. David Sirota has been doing impressive sleuthing, and his latest report, which we’ll cover shortly, reveals that Chris Christie is persistine in his effort to hide information that presumably implicates Baker.

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Tom Englehardt Interviews Laura Poitras on Snowden and the Total Information Capture Approach to Surveillance

Yves here. This interview with Laura Poitras is a reminder of how the world has, and more important, hasn’t changed since the explosive revelations made by Edward Snowden less than a year and a half ago. Even though his disclosures produced a great uproar, with demands in the US, UK, and Europe for explanations and […]

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Bill Black: EU Austerity Witch Doctors Attack Each Other

As things go from bad to worse in the eurozone the putative adults have begun to fight openly in front of the kids.  The putative adults, of course, have refused to act like adults for six years and instead have lived in a fantasy world in which austerity – bleeding the patient – is the optimal response to a recession.  As many of us have been warning for six years, this is a great way to create gratuitous recessions and even the Great Depression levels of unemployment in three nations of the periphery with 100 million citizens.

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AIG Bailout Trial and the Deadbeat Borrower Defense

It’s déjà vu all over again.

I’m only starting to dig into the AIG bailout trial by reading the transcripts and related exhibits. That means I am behind where the trial is now. However, that gives me the advantage of contrasting what is in the documents with the media reporting to date. And what is really striking is the near silence on the core argument in this case.

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Saudis Deploy the Oil Price Weapon Against Syria, Iran, Russia, and the US

Asian stock markets continued to fall today, propelled at least in part by the adverse reaction to the Saudi announcement yesterday that they would let oil prices fall to $80 a barrel. And further reports indicate that the Saudis intend to keep oil prices low enough to force a realignment of prices not just among various grades of crude, but also for intermediate and long-term substitutes.

It is critical to remember that the Saudis have no compunction about imposing costs on other nations to maximize the value of their oil resource long term and hence the power they derive from it. Their oil price cut looks to be a strategic masterstroke.

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Gaius Publius: Are Democratic Leaders Already “Tea Partying” The Progressives?

Yves here. It’s good to see Gaius Publius, a regular fixture at AmericaBlog, now writing at Down with Tyranny, Howie Klein’s blog. Among other things, Howie helped raise funds for a 2010 MMT conference. As Lambert says, “He’s one of the good guys.”

There’s one small sour note in this otherwise fine piece, that of calling Elizabeth Warren a progressive. The fact that Gaius feels compelled to include her speaks to the dearth of individuals who can be accurately described as progressive in roles of any prominence in the Democratic party.

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Michael Hudson: Piketty vs. the Classical Economic Reformers

Yves here. This post by Michael Hudson is one entry from an issue of a journal critiquing Thomas Piketty’s Capital in the 21st Century. Hudson argues that even though Piketty’s findings about wealth accumulation over the centuries are useful, he nevertheless has done a great disservice by treating “wealth” as an undifferentiated lump. By contrast, classical economists differential between rentier behavior (such earning income from economically unproductive activities such as land ownership), financialization, and leveraged speculation on asset prices. Hudson argues that Piketty’s failure to probe the types of wealth and the impact of income-generation strategies for various types of wealth, as well as his failure to incorporate legal and political arrangements means his book tacitly supports the status quo. Inequality for him is a state of nature, not a function of how our economy is organized.

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