The tax break for the rich wasn’t enough, the GWOT siphon on the US treasury isn’t flowing fast enough, CEO bonuses aren’t enough, usury is not unregulated enough, bankruptcy laws to ruin small borrowers aren’t predatory enough, the disparity between rich and poor is not obscene enough.
It’s not enough that the parasitic rich contribute only smoke and mirrors to the economy. Now the [investment] bank robbers are dropping even that pretext to demand that US taxpayers simply fork over the money. And don’t anyone try to follow them out.
Michael Hudson on paying for the bailout AND the fallout:
It is bad enough for the government to buy $700 billion of bad bank investments at prices that no private-sector investor has been willing to approach. This itself is an undeserved giveaway to the financial institutions that caused the problem by living recklessly in the short run. But making them – and indeed, helping them – pay back this gift with the aid of favorable tax and deregulatory policies will simply shift the cost off their shoulders onto those of bank depositors, credit-card users, mortgage borrowers and hapless pension-fund contributors to the money managers who have taken most of the current income in the form of commissions, salaries and bonuses to themselves. This will sharply add to the price of doing business in the United States, and specifically to the economy’s debt overhead by the banks making even more predatory loans.
It gets worse. In order for the existing junk mortgages to be “made good,” real estate prices must be raised further above the ability to pay for this year’s five million homeowners in arrears and facing default. Is this a good thing? Is it good to raise access prices for housing even more, forcing new homebuyers to go further into debt than ever before to gain access to housing? Mr. Paulson has directed the Federal Reserve, Fannie Mae, Freddie Mac and the FHA (Federal Housing Authority) to re-inflate the real estate market. They are to pump nearly a trillion dollars into the mortgage market.
Fiscal policy is also to be brought to bear to turn the real estate market around by pressuring cities and states to “help homeowners pay their mortgage debts” by cutting property taxes. The idea is to leave more revenue available for property owners to pay mortgage bankers. Unfortunately, this will oblige cities to make up these cuts by taxing labor and sales, running deeper into debt than they already are, or cutting back their spending on basic infrastructure, education and public services and continue shortchanging their pension funds. This is the price to be exacted to “protect the taxpayer’s interest” by bailing out irresponsible banks. The solution is to let them make even more money by acting in a yet more predatory way.
And:
The most egregious pretense is that the problem is only temporary, not structural. We are merely “freeing up” the market for new loans. This is precisely the opposite of what the classical economists meant by “free markets.” What America has is a bad debt problem, not a “liquidity” problem. There is no “illiquidity” when people refuse to buy a junk mortgage on a property worth only a fraction of the mortgage’s face value. Many of these bad mortgage loans are fraudulent. The Treasury bailout seeks to make $700 billion of fictitious financial claims “real” – that is, way overvalued as compared to their actual worth(lessness).
From Bruce Gagnon:
Actually, the bankruptcy laws can hardly be termed “predatory”, and the rich have been using them for decades….and so can you! Everything I said in my previous post on “Toxic Debt” is true, and now I want to tell you about “exemptions”. The Bankruptcy Code (11 USC 101 et. seq.) lists various categories of exemptions (things that you get to keep even if you file a BK), and allows each state to “opt out” of this list, and set forth its own. Colorado is fairly generous in protecting debtors. You get to keep the first $60,000 of equity in the house you live in ($90,000 if you are 60 or over), $5,000 in equity in one or more motor vehicles ($10,000 if you are 60 or over), $5,000 worth of household goods, $2,000 worth of jewelry, $2,000 for your personal library, $1,500 worth of clothing, $20,000 worth of business equipment and inventory, and your retirement plans and whole life insurance policies. These amounts are for each debtor, so if a husband and wife file together, each gets to claim these amounts (except on the house, which is just one exemption). In calculating these values, we look to what the stuff could actually sell for….yard sale values for the furniture, pawn shop values for the jewelry, trade in values for the vehicles. “Equity” is what you have in the house or car after deducting what you owe the bank. The net effect of all this is that it is the rare debtor in a Chapter 7 bankruptcy who has to give up ANY of his or her stuff. So join in the fun!
Yes, Michael, you are just too funny for words. The bankruptcy laws do equally apply to both rich and poor in the US just like the vagrancy laws do, too. Thanks for pointing out how evenly handed American law is applied.
Michael, what are the rules regarding running up a bunch of credit card debt or taking a second mortgage on one’s house before declaring bankruptcy?
Also, what about making out-of-country investments prior to filing?
Marie, it looks like you are interested in hiring a lawyer!
Hi Marie. There is a provision in the Code that charges fr “luxury goods” made within 90 days of the filing of the BK are presumed fraudulent, and thus would be non-dischargeable. So you need to wait at least 91 days after you charge that new breast augmentation or trip to the Riviera before you file your case. If the credit card company objects, and they lose, they will have to pay your attorney’s fee. If you take out a second mortgage to reduce your equity to the exempt amount, you’d better have a paper trail to show where the money went, hopefully toward living expenses, or toward the purchase an another exempt asset. As for offshore investments, the court looks to the situs of the investment itself to determine whether it is exempt…..if an account is exempt from creditors’ claims under Grand Cayman law, for instance, the court would have to accept that. A very neat exemption is contained under Florida law called “tenancy by the entireties”. With that, assets owned by husband and wife jointly are exempt from claims of creditors of either spouse individually (but not from claims of creditors they both owe money to). So the protocol would be to keep all credit accounts separate, buy a strip mall in Florida jointly, then the spouse with the biggest debt files the BK, and claims the entireties exemption on the strip mall. Any other questions?
Any other places besides Cayman to shelter assets from creditors? Like maybe Ecuador or Costa Rica or Argentina? I don’t really like islands 😉
And would the Florida investment have to be business-related? Or could it be a personal residence?
Michael, we might have to give you your own column to show us how to keep our hard-earned assets out of the pockets of Wall Street plunderers. How dare they get rich at our expense, and sun themselves in Cayman while we cough up a trillion dollars or more to bail them out?
Where is the relief for the individual homeowner whose ARM payments are going to skyrocket under the inflationary pressure that will soon be ours to endure, thanks to our government printing up mounds of paper and calling it “money.”
Tony, I have no plans to do anything drastic. But in the very least, I’d like to know how I can protect myself and my children from pillagers, should it come to that.
Marie, it is always wise to hope fo the best, but plan for the worst. That is what asset protection is all about. How do you think the “rich” stay that way?
I’m sure there are many countries that allow for protected foreign investments, but you would have to consult legal counsel in the country of your choice to determine the laws in effect there. The key is to fully disclose where your assets are when you file the BK, and properly claim all available exemptions. It is a violation of Federal law to fail to fully disclose assets, but there is no problem with converting nonexempt assets into exempt ones.
The Florida investment need not be business related; a beach house in Sanibel would be fine (but you could make that income-producing also!). Actually, under the Bankruptcy Reform Act of 2005, rich people are treated more harshly under the “means test”, which says that if you make more than the IRS median income for a family of your size, the court can dismiss your Chapter 7 (but you have the option to convert to a Chapter 13, where you have to make payments into a “plan”). The way around that is that the means test is not used unless your debts are primarily of the consumer type….so if you run up your business debts, you don’t have to do the means test. I have even heard of unscrupulous debtors getting divorced just prior to filing a BK for one spouse, as property settlements and alimony are considered super-priority items under the Reform Act, thanks to intense lobbyng by the feminists. Of course, I would never advise a client to do anything like that, but a successful doctor facing a big malpractice judgment could conceivably give all his assets and future income to his philandering wife before he files his BK. Such shenanigans!
‘Michael, we might have to give you your own column to show us how to keep our hard-earned assets out of the pockets of Wall Street plunderers.’
Yes, Marie, I’m sure they were. I wouldn’t want Wall Street to take away from you anything and neither would Michael, our friendly lawyer.
Michael, if you get too busy with all the bankruptcies comin’ down the pike, keep in mind that I’m a CPA and I’d be happy to crunch numbers and value assets for you.
Maybe we could trade services? Pro bono privato?
And, Tony, I’ve met Michael — in fact I FOUND Michael when I wandered on to his driveway to look at a car — and he is lovely and quirky and very sharp. The fact that he’s an attorney with libertarian political leanings is no reason to dismiss him. We need a little Ayn Rand to counter your Karl Marx. After all, there is nothing more pointless than a one-sided blog.
Well I’m glad that Michael the Libertarian Lawyer does post here from time to time, and I don’t dismiss the guy at all. Kudos for pluralism though I’m a little bit peeved that Bob Barr couldn’t find it in his cold Libertarian heart to stand with Cynthia, Ron, and Ralph together against the Big Guys some. So I am glad that Michael is here willing to help us out at NMT when his capitalism drives the entire planet bankrupt.
Au contraire, mon ami Tony. The only thing that has saved us from the wretched totalitarianism of FDR socialism over the past century has been the thin strand of capitalism left standing in this dreary mixed-economy welfare state. The current crisis is the direct result of too much government intervention in the affairs of business. Cut government to the bone, and watch what we can do!
Marie, I’d be happy to crunch some numbers with you, and value whatever assets you might possess. Just remember, as a CPA, you have a legal obligation to report any gains to the IRS, with proper deductions for business expenses.
Michael, your Libertarianism has it ass backwards once again. Only Libertarians would actually think that it is too much regulation that is doing The System in!??? It’s actually Big Business foxes guarding the hen house that is responsible for the current financial crisis. One wonders how you made it through Law School even?
And apparently you don’t know all the history behind the rise of the subprime mortgage industry. In 1992, the Democrat-controlled Congress mandated that Fannie and Freddie increase their pruchases of mortgages of low and middle income borrowers. Under Clinton, the entire federal government put massive pressure on banks to grant more mortgages to the poor and minorities. Andrew Cuomo, head of HUD under Clinton, investigated Fannie Mae for racial discrimination, and proposed that 50% of Fannie’s and Freddie’s portfolio be made up of loans to low and moderate income borrowers by the years 2001. Banks were encouraged to consider nontraditional criteria of credit-worthiness, such as welfare payments and unemployment benefits. By 1999, Los Angeles Times reporter Ron Brownstein hailed the Clinton administration’s affirmative action lending policies as one of the “hidden success stories” of Clinton, stating that “black and Latino homeownership has surged to the highest level ever recorded”.
Now, food-stamp-backed mortgages have collapsed, and you blame the “greedy capitalists”??? The Democrats and liberals set an affirmative action time bomb under their watch, which has now gone off.
Yeah right, Michael. In your alternate universe of Funny Land, it was the nasty liberals twisting the poor banks, the unorganized and naive insurance companies, and kicking decent, All American Free Marketeers in the teeth with communistic regulations that sapped the vitality straight out of America’s core spirit, Unbridled Capitalism. Sure, that’s it! (Hear the laughter, Pal?)
How did you pass Law School when you spent so much of your time reading and believing in Fairy Tales, Michael? I honestly don’t know? Personally, in the spirit of doing away with communistic regualtions, I think that we need to do away with the Law altogether. It hampers Free Market capitalism through undo regulation. Plus it puts millions of Americans into unproductive lines of work, like yours.
Don’t you see the humor in you being both a lawyer and yet also against any sort of regulated capitalism, Michael? I do.
It gets worse. In order for the existing junk mortgages to be “made good,” prices must be raised further above the ability to pay for this year. Yeah!!! send those greed bastards to us and we’ll exploit them! http://www.greedypeople.com
Now that you, some of you anyway, are finally beginning to grasp that the reason for increasing prices is increasing demand coupled with no commensurate increase in SUPPLY, perhaps it is time for you to take another step into the real world that those of us with functioning synapses are forced to share with you, Yeah!!! send those greed bastards to us and we’ll exploit them! http://www.greedypeople.com
Thanks for the links to the promo codes…. NOT.
I am interested in purchasing No Thanks To The Rich poster immediately. Please advise size and cost and discount.