Why Should Taxpayers Give Big Banks $83 Billion a Year?

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This is another article on the downside of “too big to fail.”  After attaining “too big to fail” status, creditors know these banks will be bailed out by the U.S. government if and when they fail.  As such creditors to these large banks have reduced risk exposure.  According to the article, this amounts to about 0.8 percentage points or $83Billion a year that the top 10 banks save every year as a result of their “too big to fail” status.

Why not break these big banks up rather than letting them become too big and failing?

The article: http://www.bloomberg.com/news/2013-02-20/why-should-taxpayers-give-big-banks-83-billion-a-year-.html

 

Potential Facebook revenue stream or distraction from underlying economic problem?

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A recent article by The Economist describes how microlenders are using social media to assess creditworthiness.  However a prior article also by The Economist suggests microlending has been discredited.

The real problem, as outlined in Aftershock by Robert Reich, is that lending has expanded because wages of the 99% have remained stagnant or declined. More efficient lending and credit analysis is not what this world needs long term. What we need is wages of the 99% to rise so they do not have to borrow so much.

ASU seeks to end staff contracts

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As usual, my two or three cents before you jump into the article (20130116_ASU_Contracts):

The president of Arizona State University along with the administration are proposing ending one-year contracts for roughly 1/3 of benefits eligible employees.  Make no mistake, this means less job security combined with the already below-market wages for those employees.  Allow me to draw a parallel to corporate America:

Corporate America: Executives including presidents, CEOs, board members, etc. all look out for one another.  They take actions to maximize their compensation (big stock packages) and job security (expensive golden parachutes) while also taking actions to minimize pay of the labor force (anti-competitive agreements) and reduce their job security (little to no contracts).  Executive job security and high compensation come at the expense of the broader labor force.

ASU’s recent push: same thing.  Replace executives with “higher level university administration” and labor force with everyone else.

I hope everyone is beginning to see the trend in our current state of capitalism.  The few (1%) extract wealth from the many (99%) be it in a public-good taxpayer funded university (ASU), or a private industry company like HP (see recent post on Meg Whitman’s $30M+ in compensation while losing money for HP).  In both cases the 1% are able to maintain their high compensation and job security while suppressing the pay of the 99%.

The ASU president thinks it is a great idea to go performance-based and eliminate contracts.  Fine, why doesn’t he lead by tearing up his own contract and going performance based?    There is one problem: who evaluates the 1%?  In corporate america it is other 1%ers.  Will we see the same environment that we do in corporate america where “performance” is defined by those who are being evaluated?

Benmosche: AIG Paid America Back, But We Still Have To Consider Suing – Forbes

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Let me get this straight. AIG was going bankrupt and out of business. The federal government, with our taxpayer dollars, bailed AIG out and in return received 79% of a company that would have been worth less than $0 without intervention. Now AIG is considering suing the government because 79% represents a “wrongful taking” of the company? And the execs have and will continue to get their bonuses regardless?
I propose the largest possible boycott of anything related to AIG. If you have insurance with any AIG related company, switch to another company. If you own any AIG stock, sell it. If you have a mutual fund with any AIG holdings, sell it. http://www.forbes.com/sites/steveschaefer/2013/01/08/benmosche-aig-paid-back-taxpayers-but-we-still-have-to-consider-suing-them/

NYT: Too Much Wishful Thinking on Middle class taxes

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As you read this New York Times piece keep the following in mind:

  1. What about non wage income, that is, financial income from stocks, bonds, and other investments? Of the top 1 or 2 % wage income can be insignificant compared to the financial income. How many ceos “sacrifice” and receive salaries of $1?
  2. Stating the top 1% pay a larger percentage of taxes is incomplete. What percentage of total income does the top 1% receive? If you receive 50% of all income shouldn’t you pay 50% of all taxes?
  3. The author is a Harvard professor and advisor to the losing campaign of Mitt Romney. The fiscal cliff will cost Mitt Romney more dollars than any of us.
  4. No discussion on corporate welfare programs that are likely orders of magnitude larger than the social welfare programs criticized in the article.

http://mobile.nytimes.com/2012/12/30/business/on-middle-class-tax-rates-too-much-wishful-thinking.xml

LA Times – Sale of last AIG shares brings U.S. bailout profit to $22.7 billion

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Let me see if I understand the order of events: 1. AIG takes risky bets and the generate big compensation packages for executives 2. This big bets fail in a big way and taxes from hardworking U.S. Citizens are used to bail AIG out (government send cash to AIG in exchange for pieces of paper representing an equity interest) 3. The executives continue to receive big compensation packages during the bailout while lower level workers at AIG are laid off. 4. A conditions stabilized the government sold their pieces of paper to investors in exchange for cash. Wait a second! Does that set of investors, who transferred cash to the government, include the company AIG or their executives? I suspect not. I suspect it was your mutual funds and pension funds buying those pieces of paper from the government. So AIG receives our taxpayer dollars, pays executives bonuses, lays off workers, and then more money from working class America is used to buy pieces of paper with the AIG name on it from the government. Tangible advice: eliminate as much of your investment and interaction with AIG as possible. http://touch.latimes.com/#section/-1/article/p2p-73653959/