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“Politically Worrisome”: What Are The Worst Things We Could Find In Romney’s Tax Returns?

Mitt Romney’s campaign is taking heat for declining to disclose more than the two most recent years’ worth of his tax information. Even conservative commentators such as The Washington Post’s George Will and the Weekly Standard’s Bill Kristol are saying it’s past time to come clean. Of course, members of Romney’s team, unlike their friends on the outside, presumably know what the documents would reveal, so we should probably assume that they have fairly good reason not to release them. Could the criticism Romney would suffer over the contents of the returns be worse than the criticism he’s getting for not disclosing them? Here are some guesses about legal — but potentially embarrassing — things in Romney’s tax returns:

Profits from the financial crash

The vast majority of American families lost wealth in the housing bust of 2007-09 and the financial crisis that came in the middle of it, and millions lost jobs or earnings. But it was possible for a canny or lucky investor to profit from the chaos — especially for a wealthy individual with access to unusual financial products. Maybe Romney made a lot of money through bets on skyrocketing foreclosures or well-timed investments in bailed-out banks. There’s nothing wrong with smart financial planning, but making money on the crash could be awkward for a politician. There’s a tension between promising to make things better and profiting off human misfortune.

A low tax bill because of the crash

There’s also the possibility that Romney’s investments lost some value during the crash years and that he combined this with aggressive exploitation of loopholes to pay a strikingly low tax bill. One rumor was that he managed to pay nothing in taxes, something his campaign has denied. But would paying $2.75 really look all that different from paying $0? A super-low tax bill would turn Romney into the poster child for President Obama’s very popular “Buffett rule” proposal, which aims for a minimum tax level on high-income individuals.

Swiss bank amnesty

We know from the tax documents Romney has released that he once had a Swiss bank account, a fact that the Obama campaign has played up in ads. But his 2010 tax return did not include a Report on Foreign Bank and Financial Accounts form (“FBAR” to accountants) detailing his offshore investments. In 2009, the Swiss government began to relent on its traditional banking secrecy rules, and banks turned over information about tens of thousands of American tax scofflaws to the U.S. government. To help deal with the crush, the IRS staged a limited-time amnesty in 2009 for American citizens with previously non-disclosed foreign accounts to pay their back taxes without penalty. It’s possible that earlier tax documents or the 2010 FBAR would show that Romney took advantage of the amnesty. While legal, this would amount to a problematic confession of past wrongdoing.

None of the above

The possibilities are endless. Romney’s vast wealth has already provided plenty of campaign fodder — from his car elevator to his proposed $10,000 bet with Texas Gov. Rick Perry during a debate — so almost any additional details about his finances would add fuel to the fire. But the most likely candidates for compromising revelations could relate to the 2008-09 period. Romney isn’t disclosing his 2006 or 2007 taxes, but by his own two-year standard he would have had to if he had won the 2008 Republican nomination. That makes the time between his presidential runs — a period that coincides with major upheavals in financial markets and bank secrecy practices — far and away the most likely window for something more politically worrisome than a reputation for reticence.

 

By: Matthew Yglesias, The Washington Post, July 20, 2012

July 22, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

“No Bank Bailouts”: Tea Partiers Take Contributions From Bailed Out Banks After Opposing Bank Bailouts

Tea Party-backed candidates swept into Washington in 2010 on a wave of opposition to bank bailouts. Now that they’re in Washington, however, their campaigns are drowning in campaign cash provided by the very banks that benefited from the Troubled Asset Relief Program.

The 10 freshmen Republicans on the House Financial Services Committee who have Tea Party backing have taken more than $100,000 from the political action committees affiliated with JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs — the nation’s five largest banks — Bloomberg reports:

Yet the anti-bailout fervor that drove the messaging of Republican candidates during the campaign cycle of 2009 and 2010 has dissipated, and those same lawmakers are now collecting money from the firms bailed out by President George W. Bush’s $700 billion Troubled Asset Relief Program. […]

The political action committees of those institutions have distributed $169,499 through March 31 to the campaign coffers of the 10 freshman Tea Party-backed lawmakers on the House Financial Services Committee, according to an analysis of campaign finance disclosure records.

The Tea Party hasn’t succeeded in ending “too big too fail” because they haven’t tried. Though the five biggest banks are now bigger than they were before the financial crisis, the Tea Party members haven’t proposed a single piece of legislation to limit their size. Instead, they’ve focused on repealing financial reform and blocking efforts to protect consumers from Wall Street’s predatory practices.

Multiple Democrats have proposed legislation to cap the size of large banks, while others have proposed new ways to unwind large banks without taxpayer-funded bailouts should they collapse. The efforts have drawn no support from the Tea Party. “No more bailouts,” Tea Party Express’ website proclaims. The candidates it and other Tea Party organizations backed in 2010, however, apparently no longer feel the same way.

By: Travis Waldron, Think Progress, April 30, 2012

May 1, 2012 Posted by | Banks | , , , , , , , | 1 Comment

Soaring Inequality: “It’s Time To Take The Crony Out Of Capitalism”

Whenever I write about Occupy Wall Street, some readers ask me if the protesters really are half-naked Communists aiming to bring down the American economic system when they’re not doing drugs or having sex in public.

The answer is no. That alarmist view of the movement is a credit to the (prurient) imagination of its critics, and voyeurs of Occupy Wall Street will be disappointed. More important, while alarmists seem to think that the movement is a “mob” trying to overthrow capitalism, one can make a case that, on the contrary, it highlights the need to restore basic capitalist principles like accountability.

To put it another way, this is a chance to save capitalism from crony capitalists.

I’m as passionate a believer in capitalism as anyone. My Krzysztofowicz cousins (who didn’t shorten the family name) lived in Poland, and their experience with Communism taught me that the way to raise living standards is capitalism.

But, in recent years, some financiers have chosen to live in a government-backed featherbed. Their platform seems to be socialism for tycoons and capitalism for the rest of us. They’re not evil at all. But when the system allows you more than your fair share, it’s human to grab. That’s what explains featherbedding by both unions and tycoons, and both are impediments to a well-functioning market economy.

When I lived in Asia and covered the financial crisis there in the late 1990s, American government officials spoke scathingly about “crony capitalism” in the region. As Lawrence Summers, then a deputy Treasury secretary, put it in a speech in August 1998: “In Asia, the problems related to ‘crony capitalism’ are at the heart of this crisis, and that is why structural reforms must be a major part” of the International Monetary Fund’s solution.

The American critique of the Asian crisis was correct. The countries involved were nominally capitalist but needed major reforms to create accountability and competitive markets.

Something similar is true today of the United States.

So I’d like to invite the finance ministers of Thailand, South Korea and Indonesia — whom I and other Americans deemed emblems of crony capitalism in the 1990s — to stand up and denounce American crony capitalism today.

Capitalism is so successful an economic system partly because of an internal discipline that allows for loss and even bankruptcy. It’s the possibility of failure that creates the opportunity for triumph. Yet many of America’s major banks are too big to fail, so they can privatize profits while socializing risk.

The upshot is that financial institutions boost leverage in search of supersize profits and bonuses. Banks pretend that risk is eliminated because it’s securitized. Rating agencies accept money to issue an imprimatur that turns out to be meaningless. The system teeters, and then the taxpayer rushes in to bail bankers out. Where’s the accountability?

It’s not just rabble-rousers at Occupy Wall Street who are seeking to put America’s capitalists on a more capitalist footing. “Structural change is necessary,” Paul Volcker, the former chairman of the Federal Reserve, said in an important speech last month that discussed many of these themes. He called for more curbs on big banks, possibly including trimming their size, and he warned that otherwise we’re on a path of “increasingly frequent, complex and dangerous financial breakdowns.”

Likewise, Mohamed El-Erian, another pillar of the financial world who is the chief executive of Pimco, one of the world’s largest money managers, is sympathetic to aspects of the Occupy movement. He told me that the economic system needs to move toward “inclusive capitalism” and embrace broad-based job creation while curbing excessive inequality.

“You cannot be a good house in a rapidly deteriorating neighborhood,” he told me. “The credibility and the fair functioning of the neighborhood matter a great deal. Without that, the integrity of the capitalist system will weaken further.”

Lawrence Katz, a Harvard economist, adds that some inequality is necessary to create incentives in a capitalist economy but that “too much inequality can harm the efficient operation of the economy.” In particular, he says, excessive inequality can have two perverse consequences: first, the very wealthy lobby for favors, contracts and bailouts that distort markets; and, second, growing inequality undermines the ability of the poorest to invest in their own education.

“These factors mean that high inequality can generate further high inequality and eventually poor economic growth,” Professor Katz said.

Does that ring a bell?

So, yes, we face a threat to our capitalist system. But it’s not coming from half-naked anarchists manning the barricades at Occupy Wall Street protests. Rather, it comes from pinstriped apologists for a financial system that glides along without enough of the discipline of failure and that produces soaring inequality, socialist bank bailouts and unaccountable executives.

It’s time to take the crony out of capitalism, right here at home.

By: Nicholas D. Kristof, Op-Ed Columnist, The New York Times, October 26, 2011

October 27, 2011 Posted by | Banks, Class Warfare, Conservatives, Consumers, Corporations, Economic Recovery, Financial Reform, GOP, GOP Presidential Candidates, Government, Income Gap, Lawmakers, Middle Class, Mortgages, Republicans, Unions | , , , , , , , , , | Leave a comment

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