Another Jobs Summit Fantasy

  Another wasted day and another dollar down the drain.  As unemployment increases the only response that Obama has is another “Jobs Summit.”  [You may remember this past June’s Senate Democratic” Green Job Summit.”]  It would have been interesting if some of the participants had actually ever created any.  This group was woefully lacking of people that know how to create jobs and the organizations that make a living by figuring these things out like the US Chamber of Commerce, National Federation of Business and National Association of Manufacturers weren’t even invited.  Early reports indicate that not much happened short of more policy wonk talk and pontification.  Here you have an Administration that has made 92% of their appointments from those that never worked in the “private sector” organizing a meeting to discuss how to create jobs.  All this from a crowd that never had to “make a payroll?”  This is a world class irony.

I did notice that Sen. Kristen Gillibrand (D-NY) was proposing a “jobs tax credit” and I am sure that the Administration would try and take credit as a “tax cutter” if they ever implement one but they shouldn’t (implement one), let me explain.

First this particular iteration of the “jobs tax credit” was designed by the Economic Policy Institute which has a Board largely formed by Union Leaders, College Professors and a retread executive of the failed Lehman Brothers, in short a rich mixture of Democratic partisans who themselves never had to make a payroll.  In their collective wisdom they were recommending a “jobs tax credit” of 15% in 2010, 10% in 2011 and falling to 0% in 2012 and beyond.  In short if you hired someone presumably in 2010 you could take a tax credit of $7500 for a $50,000 job in 2010, $5000 in 2011 and of course nothing in 2012.  This means it actually costs you 85% in 2010, 90% in 2011 and 100% in 2012 and beyond along with all related “overhead” cost of employment such as insurance, retirement and whatever.  They “project” that this will create between 2 and 5 million jobs.  This is fatutously amusing.

I have been in the position over my career of having to “make” payrolls, hire people, prepare tax returns for those taking the tax credit and yes even taking said credit myself.  (thank you Uncle Sam)  I can honestly say that not on a single occasion did I or anyone I worked with even consider the “jobs tax credit” in making the “hiring” decision (maybe in the budgetary process).  This is not an anomaly, it is the bottom line.  I am certain that these “jobs tax credits” are not on their own responsible for a SINGLE reasoned job hire. 

When you read statistics each month and you read something like “employment shrank by (lets say) 495,000 jobs.”  This actually means that more people were “let go” than “hired.”  In every economic environment (good or bad) SOME people are hired and SOME are let go.  In good times the numbers favor the hiring and in bad times the numbers favor the firing.  The employers of those that are hired will take the jobs tax credit for sure and the government will take the credit for creating (as opposed to saving) jobs.  The result, however, is no impact on job creation but a huge cost to the Treasury to reward companies for hiring people that they would have been hired anyway.  NOBODY will hire somebody and pay 85%, 90% then 100% of salary plus “overhead” based on that nominal savings.  They must FIRST have confidence that they will need them in the long run, which is discouraged with every breath out of the administrations mouth continually promising tax raises for those making over some “arbitrary” limit ($250K i.e. small business), regulations and daily increasing the burden of government mandates.  If employers are convinced they will need new employees in the long run they will hire them regardless but they will pick up the boot along anyway.  Anyone that hires someone based on a jobs tax credit should be summarily fired, and somebody that doesn’t recognize this is fool.

This is not some esoteric business theory but Basic Business 101.  The only problem is that nobody in the Obama administration has taken that course in academia or more importantly real life.  I am shocked  that it isn’t intuitive to them anyway.  Senator Gillibrand has now also made it abundantly clear that she is a lightweight and I will impart to her along with others the title “fool.”  They are just trying to look like they care and are doing something until something else just happens.  This is sort of like re-arranging the furniture on the Titanic.

December 4, 2009 | Filed Under Economics, Fiscal Policy, Politics | 2 Comments 

Community Reinvestment Act of 1977 (a white paper)

     The Community Reinvestment Act of 1977 (CRA) which was designed to encourage mortgage credit though all areas not just wealthy areas was passed during the Carter Administration and subsequently managed by Jack Kemp during the Reagan Administration.  It was not designed to insure credit was made available to unqualified borrowers.  It wasn’t until 1994 during the Clinton Administration that this Act of Congress became a useful tool for activist organizations like Acorn (which is facing criminal investigation in many states) and Community Organizer Lawyers like Barack Obama to leverage it to the advantage of their political and activist goals.  Janet Reno staked out the new policy of the Clinton Administration which was to be a policy of rigorous enforcement: 

“No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”     

     The way the law was implemented was to deny banks the ability to grow or buy out other banks unless they were in deemed to be in “compliance” with the CRA and individual ad hoc groups were authorized and encouraged to bring legal action against the banks to enforce this action.  The lawsuits that were filed against the banks could literally bring all plans to a “standstill” on mergers or expanding their capital base.  The litigious nature of these groups caused many banks to “play ball” with them and approved very questionable loans and to concede to financial contributions in the multi-millions of dollars to organizations like Acorn to keep peace.  It was in reality a sort of a “protection” plan administered by the activist groups (especially Acorn) much like the Jesse’s Jackson’s Operation Push shakedown.  You had to pay up or they would drag you through the coals and label you as a racist.  In short the shoddy loan practices of the banks were forced upon them through this process, not corporate greed as advertised.

     In 1994 a Lawsuit against CitiBank was brought by Acorn (and soon to come association with activist Chicago lawyer named Barack Obama) in: 

Buycks-Roberson v. Citibank Fed. Sav. Bank Fair Housing/Lending/InsuranceDocket / Court 94 C 4094 (N.D. Ill.) FH-IL-0011 State/Territory Illinois,

and in 1995 such suit was granted “class action” status and Barack Obama joined the suit with his own clients in the following three Illinois cases he was personally representing against CitiBank and remained as a page one named attorney in the class action suit representing ACORN, et al.:

FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000.

     This case was to force CitiBank to abandon their loan policy of not making loans in risky markets and to risky borrowers.  The political pejorative for this was Red Lining.

     In 1997 CitiBank “settled” out of court after the Democrats in Congress at the behest of Acorn forced a reduction in mortgage loan standards for banks through coercion on Fannie Mae and Freddie Mac and then began “donating” large sums of money to ACORN and reversing their practice of “red lining” districts and borrowers that were not qualified for loans.  Enter James Johnson.

     James Johnson was the Chairman and CEO of Fannie Mae after previous political activity as serving as the Campaign Chairman of Walter Mondale’s failed 1984 Presidential bid.  It was during his tenure that the goals of Acorn and many activists in Congress such as Maxine Walters, Christopher Dodd and Barney Frank we’re supported by Fannie Mae by providing the ultimate backstop for Citibank’s agreement to issue what were risky loans by agreeing to guarantee those loans and in fact purchase the loans in many circumstances from CitiBank.  (We know now that  those loan guarantee and purchases resulted in the ultimate demise and conservatorship of Fannie Mae and Freddie Mac in 2008.)

     During this time (1991-1998) that Johnson was Chairman and CEO of the quasi Public organization (Fannie) he and Fannie reported that he was paid $6-7 million (wow for a quasi public corporation) but it was discovered by the Office of Federal Housing Enterprise Oversight (OFHEO) in 2004 that Fannie Mae had deferred $200 million in expenses in 1998 through the accounting techniques identical to that of Enron and WorldCom (I can say this being an accountant) to enhance the appearance of profits.  Since the current crowd of operators initiated a “bonus” program that was based on profits, millions of dollars of fraudulent bonuses were made available to Johnson, his successor Franklin Raines and Raines’ ultimate deputy Jamie Gorelick (Both Raines and Gorelick were Clinton appointees).  OFHEO also found that Johnson had misrepresented Johnson’s compensation as $6-7 million after the audit and found that it was actually $21 million (talk about Public Servants).  Johnson (along with Chris Dodd D-CT Chairman of the powerful Senate Banking Committee who originally said he didn’t know Angelo Mozilo, CEO of Countrywide Financial) received special “below market” loan approval on a private personal loan directly from Mozilo of Countrywide who was the first major domino to fall in the Sub-Prime housing market.  It was found that Mozilo had a personal list of people under his direct authority for obtaining special loan approval.  It was called his VIP list.

     It should be noted that Johnson subsequently served as Chairman of the John Kerry Vice President selection committee and was providing similar advice to Barack Obama after he secured the Democratic Presidential nomination.

     When Johnson left Fannie Mae in 1998  Franklin Raines was appointed by Bill Clinton as Chairman and CEO and took the financial scam to new heights.  He appointed as his deputy a loyalist from the Clinton Administration that had not one minute of financial education or experience Jamie Gorelick (the author of the Clinton policy of the “absolute wall of separation” between U.S. intelligence organizations which had substantial impact on the proverbial left hand not knowing what the right had is doing issue leading up to our intelligence gaffs on bin Laden and 911.  The US Government was not allowed to share intelligence information between the CIA, FBI and other intelligence gathers………….think about it and how devastating that result was.)

     With the settlement of the Class Action Lawsuit against CitiBank (the largest in the USA) and Fannie & Freddie taking all the loans you can present, banks like Citi and others based on these precedents wrote zillions in mortgages to unqualified buyers knowing that the Federal Government would “guarantee” re-payment and even purchase the loans.  Purchasing the loans became the game of the day at these quasi federal agencies since Raines had taken his remuneration package to the Board to have it tweaked to the number of loans that were written with the sweetener to obtain agreement by the Board of Directors was an offer of increase in their pay.  As a result during Raines tenure he was able to take out $90 million in bonuses and Jamie Gorelick (deputy) took out and additional $25 million.  Raines later settled out of court on a civil case for “cooking the books” but most of the settlement (about $3 million) was paid for by an insurance policy (paid for by Fannie) and a few hundred thousand dollars of other costs while allowing him to keep nearly all the $90 million.  [It is time for criminal charges to be pursued.]  You should know that Raines is today a financial consultant to the Obama campaign though after initially bragging about it they now deny it.

     The purpose of this “White Paper” is to shed light on what really was the template for the ultimate collapse of the mortgage industry in this country since thousand upon thousands of these unqualified loans were written.

     Barack Obama is still going around blaming Wall Street greed for the financial fiasco while the truth is that Wall Street bought into this program through the pressure of Freddie and Fannie when Freddie and Fannie took packages of these loans and turned them into “securities” that they could market to Wall Street.  This was all the result of a series of events of which Barack Obama played a significant role early on.  Wall Street (i.e. the investment banking community) bought into the commercial banking products because they had been pressured and they were told they were “riskless” by Franklin Raines (I heard the tape where he told the Congressional Banking Committee when asked about the degree of risk they represented he answered “riskless”).  The more they could securitize and push to the investment banking community the more cash they would have to buy more loans from the lenders and increase “bonuses,” and I should add that Obama was the second largest recipient of campaign contributions from Fannie Mae, only being topped by Christopher Dodd (Democrat-CT) Chairman of the powerful Senate Banking Committee.

      During House Financial Services Committee hearings in 2003 when the BUSH administration was becoming aware through OFHEO there were real problems with Fannie and Freddie and proposed regulatory legislation, a major row occurred in the House Committee by the minority leadership Barney Frank where he read the administration the riot act and as reported at that time by the New York Times (9-11-2003) the following statement:

Bush today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.  Significant details must still be worked out before Congress can approve a bill.  Among the groups denouncing the proposal today were the National Association of Home Builders (of course) and the Congressional Democrats who fear that tighter regulation of the companies. 

And in the direct quotable words of Barney Frank (ranking Democrat-MA on the Financial Services Committee)

“These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis,”  “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” 

     Don’t you find it interesting that Barney Frank and his cohorts in the House and the Senate are blaming the Bush administration for “lack of regulation?”  It didn’t start there nor end there.  In January of 2005 the Senate introduced a bill titled “Federal Housing Enterprise Regulatory Reform Act of 2005 S. Bill 190.  This bill could well have brought the practices of Freddie and Fannie into check and regulation.  This bill had 3 Republican sponsors including John McCain and zero Democratic sponsors, but in the Senate you need 60 votes to move legislation and the Democrats made it clear (on party lines) that they would not support this legislation. [But of course the lie being told is that it was Bush, McCain and the Republicans that resisted regulation of the financial industry.  They only need to repeat this lie 29 more days to where it won’t matter so much when the truth finally comes out.     It is time for the Republicans to get with it and start to defend their conduct over the past 10 years on this issue and illustrate that it was nearly a 100% operation of the Democrats to thwart regulation which is directly opposite of what they are saying now.  There are many other instances where the administration attempted to bring these matters under control and were thwarted by the Democrats.     This financial disaster is the direct and proximate result of the bastardization of the Community Reinvestment Act by the Democrats in the 1990’s in order to extend their “social engineering” to the financial markets.     Please serve as a counter force to the largest and most sinister scam, in my opinion, that is being thrust on the American public.  Share this narrative about the “bailout” (which I supported) as a direct result of the Democratic meddling in the mortgage community and Congressional Oversight role for the past 10 years.  They would have you believe they are trying to help out Bush after his financial policies failed.  The biggest financial problem we have ever had since the Great Depression is a direct result of socially engineered housing policies of Clinton and Banking Oversight Policies of the Democrats in Congress…………..period.  The Democrats are flat out lying about this every day and it needs correction.  And I’ll tell you that any body that knows what actually went on will not want to debate this issue.

October 5, 2008 | Filed Under American Left, Economics, Fiscal Policy, Politics, Presidential Politics, The Left | 16 Comments 

There You Go Again………..

charles-rangel.jpg In borrowing a phrase from Ronald Reagan in the second presidential debate with Jimmy Carter on 10/28/80 (corrected) I will apply it this time to the tired strategy of the Democrats proclivity to raise taxes every time they get in control.  You may also recall that at least partial credit has been given for Reagan’s win during the second presidential campaign to the debate with Walter Mondale where Mondale stated that he would raise taxes on Americans if he won, he lost big time.

Now the Democratic Chairman of the House Ways and Means Committee, Charles Rangel, is planning broad and sweeping changes to the tax system with the centerpiece being a 4% to 4.6% surtax on earning in excess of $150,000-$200,000.  You know the “rich” that they keep talking about that are not paying their “fair” share.  [I am not going to debunk this here again today with that endless stream of statistics that demonstrate that this is a lie.]  This tax increase will also have the impact of raising taxes on investments. Now that is a real smart move and all this is just a test for an additional slew of taxes that they will propose after they win the Presidential Election of 2008.  The scariest thing is that they will probably start spending that post election money now since they are so sure they will win it.

Another thing is that this is being falsely touted as a Surtax (which would be a percentage increase to the normal tax).  What this amounts to is an additional two tax brackets in the existing tax structure.  It also has the negative effect of further increasing the “marriage penalty” built into our tax structure.

But let me say this.  I believe that Economists and Statisticians (at least the honest ones) understand that raising taxes doesn’t always produce more income.  It is a more reliable precursor for provoking a recession.

I want to shout this from the rooftops once again……….You don’t establish income tax policy in order to fund what ever projects you are desirous of.  You establish tax rates to maximize federal revenue without regards to spending preferences.  After you establish the rate that will optimize economic growth and consequently revenues you can turn to the budget side of the matter and debate spending priorities with the income that tax policy will produce, again understanding that not all spending is equal in terms of its simulative effect on the economy.

I really think it is time for the Democrats retreat from this age old political strategy that only serves to insure the “economic cycle” of boom and bust and cause greater deficits in the long run turn to a consistent and simulative tax philosophy.  Even their constituency would be much better off if that were to happen, but the Democrats ace in the hole is that their constituency really doesn’t understand this.  This is all about protecting their incumbency.  Hence they again turn to divisive political rhetoric and wrong headed tax policy.  For a deeper explanation of this overall tax proposal by Rangel go HERE.

October 25, 2007 | Filed Under American Left, Fiscal Policy, Taxes | 8 Comments 

Don’t Let the Left (and their politicians) Lie to you

irs-logo.jpg 

UPDATE 8/26/2007:  I wanted to add that nobody “took the bait” at least not yet.  That bait was the first sentence of this post “Which readers of NSL have believed that the 2003 “Bush” tax cuts were a tax cut for the rich and have not served the “non-rich”  (I won’t say poor)?  Now I know that M2 has been temporarily pulled away from this blog for the most part along with his particularly acerbic comments on my posts, comments and comments of some of NSL’s readers, but cummon I would have thought somebody would have jumped in and said “see you are like the rest of the “fat cat” Republicans in that you don’t “see” (such as Hillary often states) the poor in America.  My response is, Oh yeah, I see them, they just aren’t particularly germane to this discussion. 

The reason for this is because the poor in America (and a lot of others) don’t pay income taxes at all.  What I do see and see as pandering nonsense is the lefts proclivity to discuss tax policy in the United States through a prism which they see as some type of un-just treatment of the poor.  Not only do the poor not pay taxes at all, the “working poor” actually get a refund (and not a small one) of taxes that they didn’t even pay to begin with through the Earned Income Tax (EIT).  You would think that basic civil honesty would at least force these politicians to recognize to the population as a whole that this is basically welfare on the federal level and not tax policy. 

As I have stated in other posts that the spending priorities of the country should be debated in Congress and the EIT is one that should stand on the merits of its own debate apart from the tax policy of the United States.  This is just another way that the left continues to “confuse” voters with the question of good tax policy.  I’ll assure you that the next time the tax code takes front and center stage in the debate on the policy of the United States that they (the left) use the Tax Code and it shaping as a campaign tool to insure their continued re-election.   

The Democrats in Congress will not even mention the facts of this recent WSJ article (summarized below) as they continue to debate the question as though the evidence is not in already.  They are the one’s that said in 2003 that the tax cut of Bush would not cause a recovery in the economy which was in recession, but would do further damage to it.  Hmmm……… :-)  

I am considering offering a reward for the first reader that will remind NSL after the next tax debate if the whole process ensues with any tacit acknowledgement by the Democrats (left leaning Democrats) that the statistical results are in and have proven their sloganeering and campaigning rhetoric wrong again.  This is not a matter of conservative opinion, but of recorded fact………..read on……..

ORIGINAL POST:  Which readers of NSL have believed that the 2003 “Bush” tax cuts were a tax cut for the rich and have not served the “non-rich”  (I won’t say poor)?  As a result of these tax cuts the burden of tax revenue has intensified on the “rich.”  According to the Wall Street Journal HERE the statistics for 2004 are in and the Richest 1% paid 35.7% of all taxes based on income and without the 2003 tax cuts they would have paid only 30.5%.    Read more

August 24, 2007 | Filed Under Economics, Fiscal Policy, Taxes | 15 Comments 

The Most Honest, Ethical & Open Congress (ever)

The Club for growth news is reporting that the Democratic Chairman of the House Appropriations Committee David Obey (D-Wis.) is going to keep all earmarks (pork spending) out of the spending bills so the conservatives won’t have the opportunity orchestrate a grass roots effort to squelch them (so much for Democratic government).  This is to frustrate the likes of Jeff Flake’s (R-Arizona) effort last year to stand against earmarks embarrassing Democrats and even some Republicans.

But don’t worry he will be re-inserting this pork spending into the conference report that will be immune from amendment and deliver all the pork he cares to order up.  I hope the President has his veto pen nearby.  And just think, this all while we were promised  “the most honest, ethical, and open Congress in history” by Speaker Nancy Pelosi. Isn’t this special……..? 

June 8, 2007 | Filed Under Fiscal Policy, Politics, The Left | 7 Comments