What's the main difference between this bill and the one that was rejected last week? Is it just the pork offerings including a tax credit for racetrack owners and makers of wooden toy arrows?
The arrow thing is popular with pork pokers, but what it is doing is correcting an accidentally applied tax.
In 2004 there was a small $0.39 excise tax levied on weapons. Unfortunately, $0.30 target arrows are considered weapons under the law so they got a 130% tax accidentally levied on them.
Any politician or journalist that grouses about arrow makers getting special handouts is either uninformed or attempting to deceive you. I recommend you ignore them as a source of future information.
I don't know the details of the bill, but wouldn't it have been better to reclassify the target arrows as non-weapons then? This way, the accidental tax would no longer apply.
In Brazil, there is a e-legislative solution based in Zope called SAPL (Sistema de Apoio ao Processo Legislativo or Legislative Process Support System). It's quite functional and it's installed in a lot of different legislatures across the country. I have met the team and briefly worked on some possible extensions for it.
And, BTW, it's open source, so, if you want to play with it, you can.
It may be correcting an accidentally applied tax, but do you _really_ want to start talking about how the tax code is broken. I mean gee, that conversation could go on for a long time.
They are not attempting to deceive anybody. The issue is the bank bailout, not arrows, not AMT, not anything else stuck in there to sweeten the pot. The fact that people are pointing out how much CRAP has to go into a bill to get it passed into law is germane and important to know.
Last week it was presumed that the bill would pass. So there wasn't a big incentive for every credit-starved business and bank to spend time calling congresspeople and lobbying for it, or for something like it.
That changed over the last week, as articles like this one came out:
So there's been another week to form the consensus: The bill sucks, but the problem is real, and there's no clearly differentiated, politically viable, non-sucky alternative that will arrive in time.
The moral of this story, as with so many stories, is that the right way to deal with dire emergencies is to avoid causing them in the first place.
The quants are going to go to town on this one. This bill gives the SEC authority to suspend the practice of marking to market. Bad idea. That makes this bill just a big money giveaway in practice. Transfer of wealth basically.
Further, the FDIC is already running low on funds, we should be slow to make new promises when we are already uncertain with regard to meeting present obligations.
Additionally, raising the limit on FDIC insurance will make it harder to determine when a bank is in trouble. Now I am not naive, I am sure that was the idea behind raising the limit in the first place. But the less educated among us actually believe this was done to protect their money.
Lastly, $150 billion in tax cuts? These people really need to get some cost accountants.
The SEC already had the authority to suspend mark-to-market accounting. This bill just re-affirms it. Furthermore, mark-to-market is an accounting technique.It may result in fraud but there is no "transfer of wealth" about it. Furthermore, if history is any indication, corporations can always cook their book if they really want to.
The FDIC is indeed running low on funds and raising the limit at this point in time is a bad idea. However, the FDIC limit does not hide the financial health of a bank or have any direct impact on it for that matter. The limit governs what happens to customer deposits after the bank fails. Having a higher limit may indirectly help troubled banks by placating their depositors and convincing said depositors that their money is safer.
About the tax cuts. The $150 billion is a drop in the bucket. If you really want to bring costs in line, take a very hard look at Social Security, Medicaid, Medicare, and Defense spending. Everything else (except now this bailout) is a rounding error compared to those.
Accounting fraud is exactly what will make this whole thing degenerate into a transfer of wealth. Think about it, they can cook the capital ratios so that not only the bonds, but now even those CDS's that they have are worth X, when they would fetch Y at market. This gives them more liquidity, yes. But it is an illusion. Those CDS's are still as precarious as they were before, so are the now revalued bonds that they carry. Nothing changes, except the balance book. Add to this a guaranteed market for these assets, the taxpayer and surely you must see the potential for fraudulent profit taking in this scenario.
Early indications that a bank needs to be looked at comes to the FDIC because people with more than $100000 start moving excess money to different banks. FDIC starts to look at them, and that is where the lowest form of all quants comes in. The "shorter". They get wind. I don't know how, but you and I both know it always happens, and the bank's stock starts a death spiral. Putting more pressure on their capital ratios, which have to factor in cheap stock now. Also, in fractional reserve banking, the fees charged by the FDIC to the banks SHOULD depend on the amount that the FDIC is insuring accounts for. There is NOTHING in the bill about raising fees. I'm sure we can all imagine that fees will probably not be raised, as the idea is to help with liquidity, not hinder it. So right there the banks just got something for nothing in terms of insurance. Helping their financial position appear safer.
Maybe we are talking about two different things. Could you please explain why you believe this does not help the banks to appear financially healthy longer?
If you consider $150 billion a 'drop in the bucket' then salud! I think $150 billion here, $150 billion there, and pretty soon you are talking about real money. Consider the possibility that you believe it to be a small amount because you agree with this bill. What if we gave $150 billion to fund welfare? How about we give $150 billion to fund the salaries of H1B workers? Or we blow $150 billion on 2 toilets for stealth bombers? Is it still a drop in the bucket?
Because accounting standards make financial reports readable by standardizing them for the audience (investors). Furthermore, accounting standards make it harder to cook the books, just never impossible.
The main difference is the four days in between that has allowed insiders to buy up quality stock that was free-falling and that will presumably recover now.
You don't really know much about Warren Buffet. He is famous for paying unusually high taxes compared to his peers because he thinks it is the right thing for people in his position to do.
I know [who he is] and besides this he is almost a financial saint. Still, he backs this bailout and will make huge profit on it. Oh, and the bailout favors his other investments.
Being foreign, the bailout favors me as it helps my savings indirectly. But it is the largest scam in history.
AFAIK Buffet would support a bailout that involved buying assets at fair market value because he thinks the government could make a lot of money. He said that not buying at market value and instead giving the banks whatever they ask for these assets will likely lead to a wasted 700b. So at least in theory he supports doing the right thing.
I don't know anything about his involvement with Goldman, but maybe he realized the government will do the wrong thing anyway so he might as well profit from it.
I don't know anything inside or specific but I have read some books on buffet. He invests in good companies that are below market rates. His generally buys companies that have sound financials and will continue to make money. He also likes companies that make simple products (razor blades, furniture, not technology : ).
Buffet has gone on record multiple times (cnn, print interviews) saying he would be the person who buys the mortgages from the banks and resales them later if he could get a 700 billion dollar or comparable loan.
The mortgages are current artificially low because everyone is scared. If you can buy them low and sell them once the fear is gone, you could make a ton of money.
People will make money on this situation, the government will completely mess up some aspects of this, articles will be written 'exposing' all the problems.
