Misleading GAO Report of Corporate Taxes Paid

The vast majority (2/3 to 3/4) of BIG US corporations DO pay taxes, contrary to 'glass half-empty' impressions given by recent media headlines. ("Most Corporations Don't Pay Income Taxes: GAO" Congressional Quarterly CQPolitics CQ Today Online News Richard Rubin 8/12/08)

The United States Government Accountability Office (GAO) released Tax Administration: Comparison of the Reported Tax Liabilities of Foreign- and U.S.-Controlled Corporations, 1998-2005, GAO-08-957, July 24, 2008.

GAO graph Figure 1 shows that most large US-controlled corporations (USCC) did report tax liabilities.

Remember that a corporation might not have a profit every year. Note the graph's correlation to the 2001 recession.

45.1% of large USCC reported tax liabilities in all of the 8 years studied 1998-2005.

97.3% of large USCC reported tax liabilities at some time during the 8 years studied 1998-2005.

Remember that "corporations" include "pass-through" corporations such as "S corporations," Real Estate Investment Trusts (REIT), and Regulated Investment Companies (RIC). These pass-through corporations are not supposed to pay "corporate" taxes because they usually end with zero "corporate" profits because the profits pass through to the owners' individual income taxes. Taxes are paid on profits but the taxes on the profits show up on "individual" taxes rather than "corporate" taxes. "No corporate tax liability reported" might be misleading if the corporation owner paid the taxes as individual income.

Remember that Section 501(c)(3) corporations are non-profit. These non-profit corporations are not supposed to pay taxes because they are not supposed to have taxable profits. The government created the explosion of these no-tax corporations by requiring/encouraging people to create them to comply with government regulations and/or qualify for government grants.

Every "loophole" is there because a Congressperson put it there.

FDIC Fails. WaMu Bank Refuses to Cash Federal Check Backed by US Treasury?

The FDIC (Federal Deposit Insurance Corporation) fails across the board.

• The FDIC benefits the federal government--not the public--because the FDIC enables an inflationary monetary policy's inflation tax to be palliated by paltry bank interest. If the public distrusted banks, it would demand a sound, stable, non-inflationary money supply (and would use banks only occassionally for transfers (e.g. checks) a la Western Union, rather than as a desperate attempt to preserve the real value of personal savings against the inflation thief).
• The FDIC makes us poorer. Markets work best when people act rationally but the FDIC encourages people to keep pouring money into failing banks, making the final taxpayer cleanup more expensive. The FDIC subsidizes wealth destruction and moral hazard, financed by you (FDIC charges banks an insurance premium, a cost which banks pass on to customers). You get to pay TWICE, first through FDIC-imposed higher banking costs, and second through taxpayer-funded bailouts.
• The FDIC is supposed to impose these costs on us in exchange for the stability of preventing bank runs, yet the FDIC's takeover of IndyMac bank CAUSED a bank run (or at least worsened a run), so we get the worst of both worlds, first the risk-blind malinvestment of funding failing banks, followed by a destabilizing bank run anyway, with police being called to restore order.
• The FDIC's preemptive-war policy DEstabilized the market. The FDIC did NOT takeover a failed bank. It took over IndyMac BEFORE it failed, which means it took over a non-failed bank. The FDIC's heavy-handed tactics shocked and steamrollered customers by seizing and shutting IndyMac's main branch 3 hours early in the middle of normal business operations, "leaving customers stunned and upset. One woman leaned on the locked doors, pleading with an employee inside: 'Please, please, I want to take out a portion.' All she could do was read a two-page notice taped to the door." Even if IndyMac would have failed eventually, the FDIC's preemptive-war policy not only raises concerns about causing unnecessary problems but also creates a pernicious "crowding out" effect by preempting market solutions/buyouts with government hostile takeover of market share.
• The FDIC undermines the rule of law with vague, arbitrary changes and double standards that echo Watergate-style abuse of power. The FDIC warned banks that federal Regulation Z of the Truth in Lending Act might prevent banks from protecting their depositors and shareholders by preventing banks from issuing blanket freezes on borrowers' Home Equity Line Of Credit (HELOC) (FDIC letter Financial Institution Letters FIL-58-2008 6/26/08). Then, FDIC seizes IndyMac and one of its first actions is a blanket HELOC freeze BEFORE beginning case-by-case reviews. The FDIC apparently operates under the Nixonian Watergate-scandal I'm-above-the-law principle that, if the FDIC does it, it's not illegal.
• The FDIC failed as depositor insurance when it began trying to subsidize debtors at savers’ expense. FDIC Chairwoman Sheila Bair pushed partial defaults (“debt forgiveness” or “mortgage modification with principal write-down”) instead of preventing foreclosure by offering lower payments over a longer term at the price of a higher total paid. FDIC spin that giving away your savings is for your own good is professional fraud (fiduciary fraud or defalcation), like having your own defense attorney working for the prosecution to convict you. FDIC veered further into guaranteeing debt rather than savings with its new corporate welfare to subsidize corporate debt (FDIC backs Goldman Sachs’ $5 Billion in bonds, hat tip: Comrade Swan to Anonymous Monetarist). Why is FDIC insuring debtors instead of depositors? Sheila Bair does not even know what agency she works for and does not understand that the D in FDIC stands for deposit(s) (savings), not debt (not bond investors either). Someone should tell her at her exit interview after she is fired.
• The FDIC is supposed to police banks into prudence but the FDIC is itself a subprime lender. FDIC seized Illinois Superior Bank FSB in 2001 yet the FDIC continued to sell subprime loans. According to Wall Street Journal (WSJ), "It turns out that the U.S. government itself was one of the lenders giving out high-interest, subprime mortgages, some of them predatory, according to government documents filed in federal court. . . . With FDIC people supervising day-to-day operations, Superior funded more than 6,700 new subprime loans worth more than $550 million, according to federal mortgage data. . . . Hundreds of borrowers who took out Superior subprime loans on the FDIC’s watch — some with initial interest rates higher than 12% — have lost their homes to foreclosure, data on the loans indicate."
• The FDIC is now trying to muscle in on the payday-loan market with a pilot program of interest rates up to 36%, an interest rate that many laws and consumer advocates consider/considered usurious or predatory. (e.g. Section 687.02(1), Florida Statutes, provides that contracts for the payment of interest exceeding 18 percent per annum are usurious.[2] Interest exceeding 25 percent per annum is criminal usury).
• The FDIC failed in its psychological purpose of preventing animal-spirits speculative panics by offering government guarantees, as evidenced by (1) customer ignorance, confusion, and frustration about what is or is not insured, and (2) other banks refusing IndyMac checks even after the FDIC takeover: "MacPhee said a WaMu manager told her that under a new corporate policy, the bank was not accepting IndyMac checks. If a customer insisted on depositing the check, it could be eight weeks or more before the full amount would be accessible, she said she was told."
• The FDIC's guarantee failed because WaMu refused to cash the FDIC's check. The private bank IndyMac ceased operations on Friday 7/11 and the US federal government absorbed and replaced it with a new government entity, IndyMac Federal Bank: "'Come Monday morning, it will be business as usual for all insured customers,' said [FDIC Chief Operating Officer] John Bovenzi, who was placed in charge of IndyMac -- now named IndyMac Federal Bank -- after regulators seized the firm Friday." If Ms. MacPhee got her check Tuesday 7/15, she got a FEDERAL bank check--and WaMu refused it.

FDIC's Bovenzi cannot understand why people hesitate to take the government's Monopoly-money IOUs, lamenting that he is "deeply troubled by reports that there are financial institutions that are refusing to honor or are placing excessive holds on IndyMac Federal checks."

So much for the "full faith and credit" of the US government.
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FannieMae FreddieMac $5Trillion Bailout for Insolvency Crisis

Bernanke and Paulson Declare US Economy Doubleplusgood

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry "Hank" Paulson have tried to jawbone the financial bubble along with denials of recession and with pollyanish predictions of second-half recovery (if we are not in recession, recover from what?--oh yes, the "slowdown"). The "nothing to see here" denials continue despite all evidence to the contrary and even as they beg for expansive new powers.

"Speeches by Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and JPMorgan Chase & Co. Chief Executive Jamie Dimon gave the market some reassurance about the financial sector. . . . The market was relieved to hear Bernanke say in a speech the central bank might extend its lending efforts to investment banks . . . Dimon said "the future is very, very bright," but that "I do think we have some very serious issues to face." . . . Paulson, meanwhile, made an upbeat assessment of the government's efforts to prevent the volume of mortgage foreclosures that touched off the credit crisis last year, although he also said he expects foreclosures to continue. . . . The Treasury secretary also said he was pleased at steps taken by Freddie Mac and Fannie Mae to raise money: "Fresh capital will strengthen their balance sheets and allow them to provide additional mortgage capital, as they balance their responsibilities to their mission and to their shareholders." . . . All that helped stocks stage a late-afternoon rebound after choppy trading throughout most of the session." ("Dow ends up 152 on decline in oil, Bernanke talk," Boston.com Associated Press (AP), 7/8/08)

Ignore That Iceberg, Crashing Sound, and the Water around Your Ankles

The Fed et al. are trying to keep the music playing and delay deflation long enough for insiders to dump their toxic waste onto the American taxpayer through the Term Auction Facility (TAF), Fannie Mae (Federal National Mortgage Association, FNMA), Freddie Mac (Federal Home Loan Mortgage Corporation, FHLMC), etc.

Government tactics are akin to getting Titanic's first-class passengers into the lifeboats, while coaxing average families out of the lifeboats by telling them that the ship is merely undergoing a temporary structural adjustment in a new flotation paradigm.

Bernanke and Paulson continued the farce in 7/11/08 Congressional testimony as a $5 Trillion insolvency crisis over Fannie Mae and Freddie Mac (which they had ignored for years) reminds us that the LAST people we want in charge of financial accounting are government.

This photo of Bernanke and Paulson in Congressional testimony (hat tip: Housing Panic) inspired the image further below:

Margin-Requirement Change Nuked Gold/Commodities--but Say Hello to Petro-Gold

Gold/Precious Metals/Commodities Correction Followed Margin-Requirements Change to Deleverage/Deflate Commodities Markets

Gold broke above $1,000 in the middle of March and threatened to move higher, but about March 19, in the most blatant manipulation yet, the private banking partners of the Federal Reserve (including J.P. Morgan Chase and Merrill Lynch) notified customers with leveraged commodity investments that the margin requirements for the leveraged accounts were being doubled. ... This forced many investors to instantly liquidate half of their commodity holdings. Commodity prices tumbled across the board ("Market Manipulation Points to Dollar Decline," By Patrick A. Heller, Market Update, Numismaster.com, 3/31/08).

Nuking half the leveraged money out of existence by fiat might turn the clock back a month or two in prices but it will not stop the forces underway.

The artificial drop in commodities prices because of the regulatory change will give an ephemeral boost to equities (imagine if margin requirements for equities suddenly were doubled) and mislead bulls to call a bottom to the stock market.

The purpose of the commodities' margin-requirement increase might have been psychological warfare to prop up equities and discredit the bears.

However, fundamentals have not changed and commodities demand continues to grow.

New Demand: Turning Petro-Dollars into Petro-Gold

1.5 billion Muslims soon will have a new way to buy gold and short the US dollar (and any pegged curreny such as the UAE Dirham) with a shariah-compliant gold ETF, soon to be launched by Dubai Multi Commodities Centre and World Gold Council, based in Dubai, "The City of Gold."

The reputed Plunge Protection Team (PPT) continues to fight the deflationary tide.

Federal Reserve Chairman "Helicopter Ben" Bernanke is a self-described, inveterate inflationist whose only reason for getting out of bed in the morning is to inflate the credit/money supply.

He probably was hired for just this reason and he will try every trick in the book plus invent a few more (legal or not) to prop up the housing, equities, and credit bubbles.

May God have mercy on his soul.
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New Deal, Sarbanes Oxley (SOX), Homeland Security, Resolution Trust Corporation (RTC) Recidivism: Financial Regulation Stupidity Roundup

Putting the government in charge of financial accounting is like putting the streetcorner wh*re in charge of public morals.

Brace yourself for the onslaught of misguided New Deal II, Sarbanes-Oxley (SarbOx or SOX) II, Resolution Trust Corporation (RTC) II, or Homeland Security II:

• Financial Homeland Security: Treasury Secretary Henry Paulson incredibly considers the New Deal centralization to be too DEcentralized and proposes more centralized government control akin to the Homeland Security centralization that cost hundreds of billions of dollars for little or negative benefit (made things worse). The New York Times even described one aspect of Paulson's plan as a financial "SWAT team." UPDATE 4/13/08: "Federal Reserve staff move into offices of investment banks to monitor activities," The Times Online, Tom Bawden and Dearbail Jordan, 4/4/08.
• Nationalization of banks (Viva Hugo Chavez): The US federal government is researching "force majeure" hostile government takeovers of private companies and has contacted Norway and Sweden about their forced takeover tactics.
• Barack Obama (D-IL) supports centralizations similar to the Bush-Paulson plan. Obama specifically acknowledged his agreement with Bush's Paulson on increased regulation. Obama called for international regulation on a global scale, including the "Basel Committee on Banking Supervision, the International Accounting Standards Board, and the Financial Stability Forum."
• Hillary Clinton (D-NY) does not know what she is talking about when it comes to housing, economics, and finance--whether it is 3am or 3pm.
• John McCain (R-AZ) "will consider any and all proposals" for bailouts in the housing/credit crisis and seems intent on some type of regulation with only the details in question, despite the recent, misleading media surge about a laissez faire (hands-off) approach. UPDATE 4/1/08: McCain economic adviser and former Hewlett-Packard CEO Carly Fiorina confirmed that McCain opposes laissez faire and supports "appropriate reform" to empower government to pick winners and losers in the Great Housing Lottery.
• Chris Dodd (D-CT) and Barney Frank's (D-MA) Dodd-Frank bill to prevent foreclosures (which Bush might join to support) makes the usual mistakes and changes the rules in the middle of the game, creates moral hazard that increases future financial risk and cost, harms new homebuyers, and is probably another gravy-train jobs program for lawyers.
• Europe is planning to follow the United States into the inflationary abyss as the European Union (EU) Central Bank President Jean-Claude Trichet and Great Britain Bank of England Governor Mervyn King signal surrender to the US Fed's loose credit: "We're inching closer to the great global monetary easing," says Joachim Fels, co-chief economist at Morgan Stanley in London. Enjoy Bernanke's race to the bottom. Welcome to Zimbabwe.

All these grandiose schemes for New Deal II, Sarbanes-Oxley (SarbOx or SOX) II, Resolution Trust Corporation (RTC) II, or Homeland Security II are stupid and dangerous for the same reasons that all the decades of prior programs FAILED TO PREVENT THE CURRENT CRISIS (When will we learn?):

• Warren Buffet said that you make money when you buy, not when you sell. Likewise, you prevent foreclosure when you sign (or DON'T sign) the mortgage, not when you verge on default.
• The housing and credit bubbles are government policy (government intervention/activism caused the problem, with the 1990s Bill Clinton administration's pushing of subprime loans to low-income and minority borrowers by altering the anti-redlining 1977 Community Reinvestment Act, the 1990s-present Fed's easy-money monetary policy, the 2003 Office of the Comptroller of the Currency (OCC)'s use of the 1863 National Bank Act to protect and encourage risky loans by overriding and negating state "predatory lending" laws, Alan Greenspan's 2004 endorsement of "alternatives to the traditional, fixed-rate mortgage" (ARMs), Housing and Urban Development (HUD) and other federal agencies' decision by 2006 to ignore the looming, growing subprime problem, Ben Bernanke's 2007 drug-pusher tactics to keep America hooked on loose credit, Bush's "Ownership Society" policies to shoehorn subprime borrowers into home loans including the Bush/HUD/FHA/NAR "National Homeownership Month," Hillary's subprime mortgage connections, Barack Obama's ties to Fannie Mae scandals through his vice-president-(VP)-search-team advisor James A. "Jim" Johnson, the former Fannie Mae chief executive and lobbyist, etc.) so giving the government more powers is foolishly adding more foxes to the chicken coop.
• The greatest financial scandals and swindles are government-related accounting (Social Security, Medicare, Fannie Mae, Pension Benefit Guaranty Corporation (PBGC), breaking the $9 Trillion debt ceiling (legal limit) while the nation yawns) so putting the government in charge of financial accounting is like putting the streetcorner wh*re in charge of public morals.
• Paulson admits that his plan would not have prevented the current crisis and is not intended to address the current crisis, "Some may view these recommendations as a response to the circumstances of today. Yet, that is not how they are intended." Now is simply a convenient time to push an old wish-list of new government powers.
• Mental gymnastics break the back of logic when these plans try to ignore that not helping bad borrowers means not helping the worst problems while helping good borrowers means subsidizing the better-off.
• A bailout without moral hazard is impossible.
• Trying to avoid moral hazard is re-inventing the wheel: The Norwegian nationalization sacked bank staff and left shareholders with nothing, essentially letting poorly run firms first fail without moral hazard--which is exactly what the free market would do anyway without the "help" of nationalization if the government would step aside and compassionately do nothing for once, so nationalization does little more than let the government steal the assets.

Just say no.

One-year anniversary of my warning: Remember the Alamo.

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Ex-Soviet Lectures Bernanke on Free Markets

Russia has a pro-market flat tax while the United States clings to a Marxist progressive income tax.

Former Kazakhstan central bank Governor Grigori Marchenko criticized the interventionist US Federal Reserve:

Look at the last 20 years, said Marchenko, a former central bank governor of Kazakhstan, as he ticked off the bailouts in which the U.S. central bank played a role: Continental Illinois in the 1980s; the banks involved in the Latin American debt crisis; Long-Term Capital Management; the injection of liquidity after the Internet stock bubble burst in 2000.

"Those guys who have the wrong strategies get bailed out with taxpayers' money," Marchenko said, shaking his head. "It is not fair."

(International Herald Tribune, Karina Robinson, "Kazakh banker criticizes Fed's help of troubled banks," 3/28/08)

Tell Obama, Hillary, McCain, Bush, Bernanke, Paulson, Dodd, Schumer, etc. that America should be freer than the former Soviet Union:

No bailouts, mortgage-laundering, "transfers," "transitions," "assistance," "guarantees," or any other back-door euphemism to obstruct the free-market solutions.

Financial Homeland Security: Obama Tries Nationalizing Power Grab, Dodd Tries To Profit from Credit Crisis

“I hope we make money off of this.”--Senator Christopher Dodd (D-CT), Chairman of the Senate Banking Committee, speaking of the Federal Reserve's Bear Stearns bailout (National Public Radio (NPR) interview, 3/26/08)

Faustian Bargain Bailouts from Obama, Bush, and Dodd

Dodd, Obama, and Bush administration Treasury Secretary Henry Paulson all agreed to use the housing/mortgage crash and credit crisis as an excuse to expand government control over the economy:

“If an investment bank is going to start acting like a bank and get backups, then I think it begs the question, obviously, then shouldn’t there be some regulation of that, American taxpayer’s money is on the line, to what extent, how are you conducting your affairs and your business.” (Dodd)

"First, if you can borrow from the government, you should be subject to government oversight and supervision." (Obama)

On the current centralizing regulation orgy in Washington DC: "This is tectonic . . . We no longer want to have a balkanized response to a national crisis." (former SEC General Counsel Ralph Ferrara, Dewey & LeBoeuf LLP)

Financial Homeland Security: Politicians are making another power grab to control your life under the guise of compassion, protection, and "stability."

An Offer You Can't Refuse

Dodd-Bush-Obama's mafia-like "favors" require life-long subjugation worse than any mortgage loanshark. Read the fine print of government "help" to see the strings attached. Government "assistance" often takes advantage of travails to prey on the weak under the guise of compassion.

Obama's national and international centralization of financial control subjects you to more, intrusive, Big Brother "supervision" even if you DO NOT borrow but rather simply because you CAN borrow--and the government might unilaterally declare you able to borrow even if you do not want the credit line.

Obama copied his cousin Bush by claiming only to "update" or "modernize" for the "21st Century."

Dodd laughably tried to claim that government action did not cause the economic problems by saying, “No one can make a case here that this happened because of overregulation," even though Not One Cent provides numerous examples of government regulation causing the current problems.

To summarize, the government tries to run the economy, creates a disaster, blames the disaster on you, claims that the disaster proves that the government wasn't running your life enough, demands that you surrender more rights to qualify for "help," and uses your misery to increase its profit and power over you.

Given that the credit bubble was government policy in the first place, when will Financial Homeland Security's Global War on Savings declare saving to be a terrorist act?

Update 10/15/08: Bailout Mafia force companies to take bailout.

"Too Big To Fail" Financial Suicide Terrorism

The Bear Stearns bailout by the Federal Reserve with its $29 billion loan and guarantee is one more example of the "too big too fail" bluff perpetrated on us.

The spoiled sense of entitlement to other people's money is matched by Bernanke's and the Fed's gullibility or complicity in the extortion.

Reject "The System" Trick

Bernanke and the Fed talk in circles about how the Fed does not intend to bailout certain investors but it does bailout "the system" and it might bailout certain investors while bailing out the system but that does not count as a bailout of certain investors:

"It is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences of their financial decisions. But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy." (Ben S. Bernanke, "Housing, Housing Finance, and Monetary Policy," At the Federal Reserve Bank of Kansas City's Economic Symposium, Jackson Hole, Wyoming, 8/31/07)

Do not be fooled by the claim that we "have to" save any company. There was a time when that company did not exist. The company might not be able to live without us, but history already has proved that we can live without that company.

Bernanke's Fed Punishes Commodities: Burn the Bears

Bernanke Lashes the Anti-Bubble Heretics

Federal Reserve Chairman Ben Bernanke burned stock-market short-sellers with his first Wall Street bailout in August 2007 and again on March 18, 2008 with his less-than-expected 75 basis-point (75bps) Federal Funds target interest-rate cut.

The Fed temporarily pulled the rug out from under bears who had stampeded into commodities to escape equities.

The government's surreal attempts to argue that the economy is fine contrast sharply with the harsh reality of Bernanke panicking the Fed target rate down to 2.25% (negative real interest rate) and your emergency Chinese Payday Loan known as the Bush stimulus package (falsely called a "tax rebate" check).

Suppress Dissenters who Question the Overleveraged House of Cards

Bernanke is developing a habit of sniping the shorts, akin to firing into the crowd to try to keep the growing mob from storming the barricades.

Bernanke's Mortgage-Laundering: Fed Accepts Mortgage Securities

Ben Bernanke’s Federal Reserve Mortgage-Laundering Scheme Lays Groundwork for Inflationary Wall Street Bailout

The Federal Reserve again loosened its collateral requirements, this time to accept commercial real estate mortgages and mortgage securities, beginning 3/27.

• The Fed’s reckless move to accept mortgage products (when it is an unknown extent of bad mortgages that is precipitating the current global credit crunch) sets the stage for nationalizing the losses and sticking the taxpayer with the bill.


• The insidious tactic allows the Fed to take mortgages at a high, stated value and later “discover” a lower value, the difference being a loss to the Fed but free money to the firms that unloaded the toxic waste onto the Fed.


• Giving out higher value Treasuries in exchange for lower value mortgages also means that the actions would not be “sterilized” (money-supply neutral) but would be “accidentally” inflationary.


• The Fed’s decision also puts the Fed in the absurd position of entering the real estate business. As Jim Rogers quipped, soon Federal Reserve Chairman Ben Bernanke will be flying around in his helicopter to collect rents.

The Fed might as well start accepting Milton Bradley Monopoly boardgame deeds as collateral. I expect citizens to ask Bernanke and their Congressional representatives to pay cash or Treasuries in exchange for printed Monopoly deeds such as Baltic Avenue or St. Charles Place.