Big Wall Street Firms Make Lame Excuse for Volcker Rule Non-Compliance, Ask for Additional Five Year Extension | naked capitalism

Anyone who knows bupkis about finance knows if you can’t sell a financial asset in three years (or more accurately, seven), particularly with public and private market valuations at record levels, the problem is not liquidity. It’s valuation. These banks are carrying these holdings on their books at inflated marks and don’t want to recognize losses……..

“It’s laughable that the biggest, most sophisticated financial firms in the world claim they can’t sell the stakes year after year,” said Dennis Kelleher, CEO of non-profit Better Markets. “Everyone else in America has to comply with the law and Wall Street should also.”

Source: Big Wall Street Firms Make Lame Excuse for Volcker Rule Non-Compliance, Ask for Additional Five Year Extension | naked capitalism

The “New Housing Crisis” – Not Enough Rental Homes? | Zero Hedge

The point here is that while the housing market has recovered – the media should be asking ‘Is that all the recovery there is?’

With 30-year mortgage rates below 4%, we should be in the middle of the next housing bubble with prices and home ownership rising. The question the media should be asking is “why?” Furthermore, what happens if the “bond market bears” get their wish and rates rise?

The housing recovery is ultimately a story of the “real” unemployment situation that still shows that roughly a quarter of the home buying cohort are unemployed and living at home with their parents. The remaining members of the home buying, household formation, contingent are employed but at lower ends of the pay scale and are choosing to rent due to budgetary considerations. This explains why household formation is near its lowest levels on record despite the “housing recovery” fairytale whispered softly in the media.

Housing-NetHouseholdFormation-072516

While the “official” unemployment rate suggests that the U.S. is near full employment, the roughly 94 million individuals sitting outside the labor force would likely disagree. Furthermore, considering that those individuals make up 45% of the 16-54 aged members of the workforce, it is no wonder that they are being pushed to rent due to budgetary considerations and an inability to qualify for a mortgage.

The risk to the housing recovery story remains in the Fed’s ability to continue to keep interest rates suppressed. It is important to remember that individuals “buy payments” rather than houses, so each tick higher in mortgage rates reduces someone’s ability to meet the monthly mortgage payment. With wages remaining suppressed, and a large number of individuals not working or on Federal subsidies, the pool of potential buyers remains contained.

The real crisis is NOT a lack of homes for people to buy, just a lack of enough homes for people to rent. Which says more about the “real economy” than just about anything else.

While there are many hopes pinned on the housing recovery as a “driver” of economic growth in 2013, 2014, 2015, 2016 – the lack of recovery in the home ownership data suggests otherwise.

Source: The “New Housing Crisis” – Not Enough Rental Homes? | Zero Hedge

Study: Top Bank Execs Saw the Crisis Coming and Sold Their Company’s Shares | naked capitalism

Would be shocking if we didn’t already know that it was true.

So much for the “whcouddanode” theory of the crisis.

Source: Study: Top Bank Execs Saw the Crisis Coming and Sold Their Company’s Shares | naked capitalism

Panama papers: “an old tradition of English piracy” | openDemocracy

Looking at the documents leaked from Mossack Fonseca and one thing is clear: Britain’s network is once again at the core. More than half of the companies listed in the documents are registered in the UK or its Overseas Territories, and Hong Kong plays a huge role.

Of course, this shouldn’t be surprising. Britain has for for a while now been thought to be the global capital for money laundering. And it’s no shock that nothing has been done about it. In 2010, two years after they crashed the global economy, the City paid for more than half of the Conservative party’s election campaign, helping (along with the aforementioned Lord Ashcroft) them limp them over the line, with a Lib Dem shaped crotch. Though, of course, Labour did little to regulate in the previous 13 years.

If we want to understand modern Britain, first we need to realise that our primary economic function in the world is probably our network of tax havens. After all, around $21tn is estimated to sit in offshore accounts, of which Britain’s territories are said to make up by far the biggest part. Our own GDP is only around $3tn.

Second, we need to get to grips with the serious claims about our role as the global money laundering capital: a function which pushes up the price of the pound, making other exports unaffordable (bye bye steel), and drives up the cost of houses in London and the South East, fuelling a vast speculative bubble which sucks investment out of the rest of the economy.

And third, we need to think about how this gradually dawning economic reality interacts with our politics: not through the obvious corruption of direct bribery, but through revolving doors between government and civil service, through old boy’s networks and friendship groups, through perfectly legal election donations and media domination.

Source: Panama papers: “an old tradition of English piracy” | openDemocracy

The World’s Favorite New Tax Haven Is the United States – Bloomberg

The U.S. “is effectively the biggest tax haven in the world” —Andrew Penney, Rothschild & Co.

Source: The World’s Favorite New Tax Haven Is the United States – Bloomberg

Massive leak reveals offshore accounts of world leaders | Center for Public Integrity

PANAMA PAPERS

An investigation published today by the International Consortium of Investigative Journalists and its media partners reveals the hidden workings of a secretive industry that banks and lawyers use to hide the financial holdings and dealings of powerful clients, including prime ministers, parliamentarians, plutocrats and criminals, according to a trove of leaked documents.

The files, known as the Panama Papers, exposes the offshore holdings of 12 current and former world leaders and reveals how associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies, according to the joint investigative project conducted by ICIJ, the German newspaper Süddeutsche Zeitung and more than 100 other news organizations around the globe. ICIJ is the international arm of the Center for Public Integrity.

The files — which total more than 11.5 million documents — contain new details about major scandals ranging from England’s most infamous gold heist in 1983, an unfolding political money laundering affair in Brazil and bribery allegations currently convulsing FIFA, the body that rules international soccer and is under investigation by the U.S. Justice Department.

Source: Massive leak reveals offshore accounts of world leaders | Center for Public Integrity

Bernie Sander’s Plan to Tame Wall Street Riles Team Clinton

Sanders points out: “Three out of the 4 largest financial institutions (JP Morgan Chase, Bank of America and Wells Fargo) are nearly 80 percent bigger than before we bailed them out. Incredibly, the six largest banks in this country issue more than two-thirds of all credit cards and more than 35 percent of all mortgages. They control more than 95 percent of all financial derivatives and hold more than 40 percent of all bank deposits. Their assets are equivalent to nearly 60 percent of our GDP. Enough is enough.”

Source: Bernie Sander’s Plan to Tame Wall Street Riles Team Clinton | Common Dreams | Breaking News & Views for the Progressive Community

Warren Buffett is a phony: Every liberal’s favorite billionaire is actually cut-throat, not cuddly – Salon.com

Buffett’s brand is progressive, and Democrats love to bask in his endorsements. The reality is very different

Source: Warren Buffett is a phony: Every liberal’s favorite billionaire is actually cut-throat, not cuddly – Salon.com

Punish the Bankers! | Foreign Policy

Timely article given recent article in NY Times (An S.E.C. Settlement With Citigroup That Fails to Name Names) wherein Citi agrees to pay a $180 million settlement plus $726 million in investor compensation and yet the SEC not only doesn’t hold any individual responsible – it doesn’t even name them. Talk about moral hazard.

The sentencing of the trader Tom Hayes for his part in the Libor scandal caused many a sharp intake of breath on London’s Canary Wharf.…

Source: Punish the Bankers! | Foreign Policy

NYC: Real Estate Tax Breaks for Oligarchs

How nauseating: NYC provides tax support to billionaires:

New York City’s method of assessing property values is so out of whack that the buyer of the most expensive apartment ever sold — a $100 million duplex overlooking Central Park — pays taxes as if the place were worth just $6.5 million.

With controversial tax breaks granted to the One57 condo tower, the total property tax bill for the spectacular penthouse is just $17,268, an effective rate of 0.017 percent of its sale price.

By contrast, the owner of a nearby condo at 224 E. 52nd St. that recently sold for $1.02 million is paying an effective rate of 2.38 percent, or $24,279, according to data compiled for The Post by the Revaluate.com real-estate information website.

(via ZeroHedge)         

 Tax Breaks for Oligarchs: The $100 Million NY Apartment With A Property Tax Rate of o.017%

Crony Capitalism or Government Doing Its Job

Since Adam Smith, capitalist economists (for the most part) have agreed that government (or other social institutions) should fill the gaps that the private sector can not address or would not do so as efficiently and/or effectively as the public sector. The Ex-Im Bank is a government agency that provides credit support to U.S. exporters. A major beneficiary is Boeing – airplanes being one of the U.S.’s largest export industry. Supporters argue that the Ex-Im Bank supports jobs, economic growth, helps the U.S. trade balance, and actually generates a profit to the Treasury while doing so.

While critics are correct that the program may create trade distortions, other countries have similar programs so a unilateral disarmament by the U.S. wouldn’t level the playing field but simply tilt in more in favor of non-U.S. producers such as Airbus.

In addition part of the Ex-Im Bank’s role is to help small companies enter the international market and I would argue that there is a gradient between trade promotion and trade distortion.

Legitimate criticisms include one by Delta that the U.S. government is providing a subsidy via Boeing/Ex-Im Bank to foreign airlines who then have a competitive advantage over U.S. airlines causing economic harm (including job losses) in that industry. Thus the impact of the Ex-Im Bank needs to be measured not just on the primary effects but also on the secondary effects. An also interesting issues is raised in the Comments section of the Bernstein column by Roger Anderson who points out that in recent years Boeing has had a negative federal income tax rate while competitor General Dynamics has paid at a 29% tax rate. So just how large is the real subsidy of Boeing and is it fair to its U.S. competitors?

So will Congress address this complicated issue with the intelligent nuanced analysis that it deserves? Probably not. Joe Nocera of the NY Times reports on Rep. Hensarling’s view of the Ex-Im Bank:

Representative Jeb Hensarling, a Republican from Texas who is chairman of the House Financial Services Committee, gave a speech to the Heritage Foundation. Hensarling is a Tea Party favorite. His core view is that better government is less government, and that there is nothing government can do that the private sector can’t do better.

Hensarling’s speech was about economics, which, of course, meant it was about wasteful government subsidies and “crony capitalism.” He tossed off what he felt were examples of each — the failure of Solyndra; the continued existence of Fannie Mae; the bailouts of Wall Street and the auto industry — before landing on a government organization that he described as being the “poster child of the Washington insider economy and corporate welfare.”

“Its demise,” he went on, “would clearly be one of the few achievable victories for the Main Street competitive economy left in this Congress. I believe it is a defining issue for our party and our movement.

The Latest Tea Party Piñata

As if there are Mom & Pop stores selling jetliners and jet fighters in the local strip mall.

Cantor and Crony Capitalism | Jared Bernstein | On the Economy.

Banks Helped Hedge Funds Skirt Taxes

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….

Read more here: http://www.mcclatchydc.com/2014/07/21/233975/senate-panel-banks-helped-hedge.html#storylink=cpy

WASHINGTON: Senate panel: Banks helped hedge funds skirt taxes | Economy | McClatchy DC.