Working Life Jonathan Tasini's Ruminations on Work, The Economy, and Politics Wed, 20 Aug 2014 20:21:21 +0000 en-US hourly 1 Vultures Circling Argentina, Disconnect At The Fed Wed, 20 Aug 2014 20:21:21 +0000 It might look these events are completely unrelated but there is a tie between the extortion underway of Argentina courtesy of a hedge fund, on the one hand, versus the cluelessness at the Federal Reserve Board about what is actually happening to real people.

The vulture is Paul Singer, the hedge fund billionaire who runs Elliott Management. The very short story is that he won’t take a discount on bonds he holds from Argentina’s defaulted bonds–contrary to just about all the rest of the claimants who negotiated a deal with Argentina that would still hand them a nice tidy 300 percent profit.

Argentina is trying to get some legislation passed in the U.S. to help out but certainly this sums it up:

Argentina has refused to pay the holdouts, calling them vultures whose actions are akin to extortion, comments which were repeated by Mr. Kicillof on Wednesday. Both sides failed to reach a court-mediated settlement last month, and on July 30, Argentina slipped into a default after a $539 million interest payment to other bondholders was blocked.

On Wednesday, Mr. Kicillof said the government would extend the option to swap the original bonds with those to be issued under Argentine law to its holdout investors who did not participate in previous debt restructurings.

“Mr. Singer can come here and show up at the counter and receive payment, obtaining a 300 percent profit,” Mr Kicillof said. But, he added, “that isn’t enough for Mr. Singer because he’s a vulture.”

Now, over at the Fed, there is a different kind of vulture but one that also prays at the altar of the bond market. This little cabal of vultures thinks, well, things are doing so much better in the U.S. that the Fed should start raising interest rates:

An increasingly vocal group of dissenters, however, saw evidence that the Fed had nearly exhausted its ability to repair damage caused by the recession. They argued that the Fed must retreat quickly to maintain control of inflation.

…Some officials see all of this as evidence that the Fed is rapidly approaching the limits of its abilities. One voting member of the committee, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, dissented at the July meeting, arguing that it was time for the Fed to signal that it was getting closer to raising interest rates.

According to the minutes, some other officials who do not vote this year also were “increasingly uncomfortable with the committee’s forward guidance” that rates are likely to remain low for some time.

But, you can only view the economy as improving so much from the vantage point of the privileged, not from the seat of the regular person, millions of whom can’t pay the bills or find decent paying work.

The point is that, underneath both events, is the same problem: the financial mandarins still call the shots and are always looking for a way to fuck the regular person, whether s/he lives in Argentina or on Main Street U.S.A.

]]> 0 EXPOSED: Corp Taxes Are NOT High, U.S. Corps “world leaders in global tax avoidance strategies” Tue, 19 Aug 2014 12:02:29 +0000 I couldn’t help the “EXPOSED” start to the headline because, actually, this is no surprise. Citizens for Tax Justice has been making this case for a very long time (including here, just as one example). But, here’s another piece of evidence to try to undo that hard-wired, decades-long rhetorical nonsense about corporate taxes being too high in the U.S.

In an academic article, reported yesterday in The New York Times (and kudos for that), entitled “Competitiveness” Has Nothing to Do With It”, Edward D. Kleinbard of the USC Gould School of Law writes (and you gotta love the accessible kick-off):

In the movie Night After Night, a young and naïve coat check girl admires Mae West’s jewelry. “Goodness,” says the woman, “what beautiful diamonds!” – to which Mae West replies, “Goodness had nothing to do with it.”And so it is with the recent wave of corporate inversion transactions.2

Despite the claims of corporate apologists, international business “competitiveness” has nothing to do with the reasons for these deals.


Heather Bresch, the CEO of Mylan, a pharmaceutical manufacturer that is pursuing an inversion into a Dutch firm, effectively spoke for many other chief executives when she recently gave an interview describing herself as entering into the inversion deal only “reluctantly.”5 In her telling, she has abandoned hope that Congress will overhaul the Code to make U.S. companies “more competitive,” and therefore must pursue a tax-driven redomiciliation in the Netherlands against her patriotic instincts, and even though (and here is a point that Ms. Bresch forgot to mention) the merger will subject her firm’s taxable owners to capital gains tax. But all this is a false narrative: U.S. multinationals’ “competitiveness” arguments are almost entirely fact-free. [emphasis added]

Well, he meant to say: they lie.I invite you to read the entirety of his discussion of “stateless income” but the upshot:

In the international arena, U.S. multinational firms have established themselves as world leaders in global tax avoidance strategies, through the generation of stateless income. The result is that many well-known US multinationals today enjoy single-digit effective tax rates on their foreign income, and effective tax rates on their worldwide income far below the nominal 35 percent federal corporate tax rate.[emphasis added]

Essentially, Kleinbard eviscerates the nonsense about “competitiveness” as a reason for tax inversions. And, he, then, warns, in regards to tax inversions:

“…the case for action is urgent, both to protect the U.S. domestic tax base and to preserve existing law’s premises of how the international tax system is supposed to operate. Inversions are an immediate threat to fiscal stability, because they enable inverted firms to strip their U.S. domestic corporate tax base, and to use existing offshore cash to fund dividends or stock buy-backs to U.S. shareholders, which today cannot be done without paying U.S. tax. (I briefly discuss the risk of tax revenue hemorrhaging below.) And once a company has inverted, it is gone: the United States will find it difficult to undo the damage to the tax base in subsequent corporate tax reform.[emphasis added]

Corporate tax burdens are not too high and do not impede growth or competition. And as CTJ has pointed out, two trillion dollars is stashed overseas…that’s a far better money-laundering operation that organized crime.So, you ask, logically, why does this foolishness continue? It’s pretty simple: the political leadership of both parties just parrots this line, year after year. Yes, part of it has to do with political corruption (read: campaign finance system).

But, just as much of it has to do with the acceptance of the false line of idiotic rhetoric about the “free market”. For decades all we hear, from both parties, are the repeated stories about the “job creators” in the vaunted world of the “free market” who need tax breaks and “free trade” deals and all this other crap to remain “competitive”–even if the benefits of “competitiveness” never find their way into the pockets of the underpaid, poverty-stricken workers who are the source of the profits.

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Opera Deal Mon, 18 Aug 2014 16:48:47 +0000 There is a deal that prevents the NYC Opera from locking out its workers. Though hard to know right now what the deal is, there is still one mystery I’d still like to learn more details about.

A deal:

The Metropolitan Opera reached tentative agreements early Monday morning with the unions representing its orchestra and chorus after an all-night bargaining session, and called off its threat to lock out workers a little more than a month before the new season is set to open.

The agreements were announced shortly after 6:15 a.m. by Allison Beck, the deputy director of the Federal Mediation and Conciliation Service, after talks lasted long past the deadline of midnight Sunday that the Met had set for reaching a deal or locking out its workers.

I wrote about this recently and pointed out that the Opera’s operating deficits could be traced right back to the door of Peter Gelb, the general manager, who is paying paid quite nicely. So, this was worth waiting for:

The independent analyst chosen to explore the Met’s finances was Eugene Keilin, a founder of KPS Capital Partners who has long played a role in New York City’s finances, having served as chairman of both the Municipal Assistance Corporation, which was created to deal with the city’s 1975 fiscal crisis, and the Citizens Budget Commission.

Although the Federal Mediation and Conciliation Service announced Monday that “the report of the independent analyst brought in to review the Metropolitan Opera’s finances was nearing its completion,” it was unclear if a written report had been submitted.

Hopefully, we can get a look at that.

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Just Call It What It Is: Slave Labor Fri, 08 Aug 2014 19:43:23 +0000 You can try to call these conditions whatever you want. But, bottom line, this is for slaves.

Right under our New York noses:

In the early stage of the harvest season, Antonio, a farmworker in his 50s, picked peas from daybreak until sundown, 14 hours a day, six days a week, with an hour off each day for lunch.

“I’m tired,” he said, speaking through an interpreter. “Right now my knees hurt a lot because all day I work bending over or down on my knees.”

His workweek at a fruit and vegetable farm in Dutchess County will be even tougher in October when the apples are ready for harvest — many of which will be sold in New York City’s popular greenmarkets: He will no longer have Sundays off. For all that toil, he is paid $8 an hour, the minimum wage. The long hours are expected; there is no overtime pay.

While most American wage earners accustomed to a 40-hour week would be surprised at those conditions, for farmworkers in New York it is within the law.

The lack of overtime pay, as well as the absence of rights to disability insurance and collective bargaining, are artifacts of the exclusions of agricultural work from the federal wage, hour and labor relations acts of the 1930s that were adopted by most states and have seldom been changed. Only California, Colorado, Hawaii, Maine, Maryland, Minnesota and Oregon require time-and-a-half pay for overtime — though in some cases after 60 hours of work a week — and only a dozen states explicitly give farmworkers the right to unionize.

And those nice greenmarkets? All hip except:

Leanne Tory-Murphy, an outreach worker at Worker Justice Center of New York in Kingston, which arranged the interview with Antonio, said, “Overtime protections are put in place for a reason, so workers are not working themselves to the bone.” She takes issue with farms that sell at greenmarkets in the city and flaunt their healthful credentials but do not pay workers overtime.

“A code of conduct is not included under the umbrella of ethical eating,” she said. [emphasis added]

]]> 0 “Some will rob you with a six-gun, and some with a fountain pen”: A New Corporate Tax Scam Thu, 07 Aug 2014 20:43:53 +0000 I love that quote from Woody Guthrie (H/T to Citizens for Tax Justice for using it). Says it all, from the halls of the Chamber of Commerce to the corporate suites to the Congress. Today’s use of the fountain pen comes courtesy of another corporate scam to avoid taxes.

And the folks at CTJ explain how the corporate fountain pen is turning the Real Estate Investment Trust (REIT) into the newest tax dodge. First, what is an REIT?:

A REIT is to real estate what a mutual fund is to stock and bonds: a way for smaller investors to diversify their holdings by owning a share of a large pool of assets rather than owning individual stocks or properties directly. A REIT, just like a mutual fund, doesn’t pay an entity-level tax. Instead it distributes its income to the REIT shareholders who pay tax on their respective shares.
[emphasis added]

Except 75 percent of the trust’s biz has to be in real estate…uh, that’s why it’s called a “real estate investment trust”. But, corporations like Wal-Mart and Windstream Holdings, Inc. have now found a way to scam the taxpayers:

Windstream Holdings is a Fortune 500 company that, according to its website, “is a leading provider of advanced network communications, including cloud computing and managed services, to businesses,” and offers “broadband, phone and digital TV services to consumers.”It shouldn’t qualify as a REIT. As Windstream itself said, the company is putting its copper and fiber networks into the REIT along with “other” real estate.
Is Windstream in the business of providing communications services or owning and managing real estate? Is Corrections Corporation in the business of operating prisons or holding real property? Are casino operators in the business of real estate or emptying your wallet?
We don’t need these companies to spin off their “real estate” assets so small investors can own a piece. These companies are already publicly traded and investors can buy stock or mutual funds that hold the stock.[emphasis added]

Yeah, its boring lingo and complicated for the average person to wrap their brains around.Bottom line: it’s legal (yes) but a misuse, abuse, and, IMHO, a scam that robs us, the public, of revenue that should go to build society.

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Holder’s New (Bargain) Price For Bankers’ “Stay-Out-Of Jail” Card: $17 Billion Wed, 06 Aug 2014 22:40:53 +0000 Well, it gets a bit repetitive to write about this but it’s that or spacecrafts following comets(come to think of it, the comet stuff is much more fun). But, here we go again: bankers rip us off and all they need to do is sock it to the shareholders and customers and, presto, Eric Holder and his boss go home happy campers. The Treasury might get a little richer but nothing much will have changed.

Apparently, Bank of America–a really big, big player in the mortgage crisis primarily through its acquisition of Countrywide Financial Corp–has a deal (via WSJ website):

Bank of America Corp. and the Justice Department are close to a deal in which the bank will pay between $16 billion and $17 billion to resolve allegations of mortgage-related misconduct in the run-up to the financial crisis, according to people familiar with the matter.The bank has agreed to pay roughly $9 billion in cash to the Justice Department, states and other government entities, these people said, with additional money aimed at consumer relief, such as reducing mortgage balances for struggling homeowners.

If finalized, the agreement would set a record for fines and damages in a civil settlement between the U.S. government and a company. It would eclipse the $13 billion pact struck between the Justice Department and J.P. Morgan Chase & Co. in November over similar issues. Citigroup Inc. recently agreed to pay $7 billion to settle similar claims that it sold shoddy mortgage-backed securities ahead of the financial crisis.

Bank of America agreed to the outlines of a deal after a phone call Thursday between Chief Executive Brian Moynihan and Attorney General Eric Holder, people familiar with the matter said. For weeks, the bank refused to offer more than $13 billion, including cash and consumer relief, while the Justice Department was seeking $17 billion.

This comes on top of the court order just last week that fined Bank of America $1.9 billion as punishment for “a brazen fraud by the defendants”.It’s not a bad thing for some money to trickle back to homeowners but it’s a pittance if you line up the financial damage overall in lost jobs, lost pensions (money never to be recovered because of the time lost to accrue money to expected levels) and, of course,lost homes.

That figure is in the trillions of dollars of lost opportunity.

For that, these people deserved sever jail time.

For fuck’s sake, at the bare minimum, if there is going to be a fine, all to be paid by shareholders and consumers, and not a dime out of the pockets of the CEOs/managers, each of the CEOs who cut these deals, along with their senior management, should have been forced to resign. Otherwise, the same culture has been left in place–and the next crisis is just a matter of time.

Nothing has changed.

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Inequality Hurts Economic Growth. Well, Duh. No Surprise, S&P Late To The Party Tue, 05 Aug 2014 19:40:23 +0000 One response to this might be “better late than never”. Actually, the spin on this story neglects to actually talk about the role S&P actually played in the financial crisis. But, apparently, the geniuses at S&P have now figured out what any normal person would understand: when a few people get all the marbles, not much is left for the others.

So, first, here’s how the Times plays this:

Economists at Standard & Poor’s Ratings Services are the authors of the straightforwardly titled “How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide.” The fact that S&P, an apolitical organization that aims to produce reliable research for bond investors and others, is raising alarms about the risks that emerge from income inequality is a small but important sign of how a debate that has been largely confined to the academic world and left-of-center political circles is becoming more mainstream.


Then there are the economists in what can broadly be called the business forecasting community. They wear nicer suits than the academics, and are better at offering a glib, confident analysis of the latest jobs numbers delivered on CNBC or in front of a room full of executives who are their clients. They work for ratings firms like S&P, forecasting firms like Macroeconomic Advisers and the economics research departments of all the big banks.The key difference, though, is that rather than trying to produce cutting-edge theory, they are trying to do the practical work of explaining to clients — companies trying to forecast future demand, investors trying to allocate assets — how the economy is likely to evolve. They’re not really driven by ideology, or by models that are rigorous enough in their theoretical underpinnings to pass academic peer review. Rather, their success or failure hinges on whether they’re successful at giving those clients an accurate picture of where the economy is heading.

Well, the first part is a shrug.It’s the second part that is stupefying. S&P is hardly simply an academic, non-involved party that produces material not driven by ideology.

As I wrote almost two years ago, Standard & Poor’s was found to have “deceived” and “misled” 12 local councils in Australia that bought triple-A rated constant proportion debt obligations (CPDOs) from an intermediary in 2006.

And, for even longer, we’ve known that ratings agencies are not simply neutral agencies. They, indeed, are centers of corruption, which led the Justice Department to investigate more than three years ago whether S&P improperly rated dozens of mortgage securities in the years leading up to the financial crisis.

Indeed, finally, the Justice Department sued S&P (though, in my view, nothing was going to change because this was a civil suit and no high-ranking company official will pay for any crimes); the suit is currently in court.

So, honestly, this feels like a PR ploy: someone at S&P wants to jump on top of the hand-wringing about inequality. No one is suggesting in this report any changes in the entire financial system.

If you read the report, it’s kind of a mish-mash of information–you could collect mostly using Goggle and a day’s work.

It has this pearl for example:

There is no shortage of proposals for tackling extreme income inequality. President Obama has proposed an increase in the hourly minimum wage to $10.10 from the current rate of $7.25, and the IMF recently called on lawmakers to boost the wage (though it refrained from suggesting a specific level). Managing Director Christine Lagarde said that doing so would help raise the incomes of millions of poor and working-class Americans and “would be helpful from a macroeconomic point of view” (58).An increase in the minimum wage would certainly carry with it short-term impacts, likely bringing 900,000 people above the poverty line in the second half of 2016–and, according to the CBO, lifting wages for 24 million workers at the next level above minimum wage. Fewer American households at or below the poverty line would also help bolster government balance sheets and likely improve state and local credit conditions.

But raising the minimum wage is not without negative consequences. Reduced labor demands resulting from higher wages could reduce potential hires by 500,000 jobs, according to CBO estimates (59). Further, while 49% of those workers making the minimum wage are under age 25, the CATO Institute reports that, of older workers (the other half of minimum wage earners), 29.2% live in poverty and 46.2% live near the poverty level, with family incomes less than 1.5 times the poverty line (60).

So, using the “on the one hand this but on the other hand that” approach, these people, who are so worried about inequality, raise the entirely inadequate proposal to raise the minimum wage–which would still leave millions in poverty and is truly meek–and, then, immediately, they try to undercut the campaign with the same bogus arguments foisted by its enemies…and those who lives just fine with inequality.It does not take a genius to know that when you rob minimum wage workers of $300 billion just in the past five years, and keep wages low and destroy unions, that people can’t afford to pay their bills and that hurts economic growth.

This isn’t an exercise needing academic research or more argument.

It’s all about political and economic power.

But, it is interesting that these people at the center of the corrupt system have to say something about inequality.

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Corp Tax Evading And Fleeing The Country? Fine, Kiss Your Federal Dollars Good-Bye Fri, 01 Aug 2014 13:17:57 +0000 Corporate tax inversions are getting a lot of ink now (thanks largely to the heavy lifting done by the Levin brothers–Carl in the Senate, Sander in the House, and Citizens for Tax Justice…not, respectfully, by the celebrity of the moment). The president has even spoken out a bit, though we will see whether that’s just mid-term elections political rhetoric. But, a related move is now on the agenda and I love the name: No Federal Contracts for Corporate Deserters Act.

Without a doubt, tax inversions should be stopped. But, in the meantime, an easy move would be to simply say: you wanna shift a huge piece of your profits abroad? Well, fuck you, don’t come knocking on the door of the taxpayers looking for federal contracts.

OK, so, Reps Rosa De Lauro and Lloyd Doggett, and Senators Dick Durbin and Carl Levin (there’s Carl again with actual action, not words), might not say it quite like I did. But, this will do:

“For too long we have let companies avoid their tax obligations at the expense of companies who pay their fair share,” DeLauro said. “Even worse, the federal government has been subsidizing this bad behavior, by continuing to reward inverted companies with lucrative federal contracts. These companies take advantage of our education system, our research and development incentives, our skilled workforce, and our infrastructure, all supported by U.S. taxpayers, to build their businesses. But when the tax bill comes due, they hide overseas. Yet suddenly, when federal contracts are being applied for, they are all as American as Uncle Sam once again. This has to stop.”“With every successful inversion, the tax burden increases on the rest of us to pay what the corporate inverter doesn’t,” said Durbin.  “The burden is made worse by allowing companies to profit off of federal contracts paid for by U.S. taxpayers, while those very companies run from their U.S. tax responsibility.  We should make permanent the long-standing ban on federal contracts for corporations that have renounced their American corporate citizenship.”

“Americans are rightly outraged at the wave of corporations seeking to abandon the U.S. to avoid their taxes,” Levin said. “We ought to put a stop to all inversions, but at the very least, we should stop these companies from receiving federal funding from the same American families who have to pick up the tax burden inverted companies shrug off.”

“Corporations that renounce their citizenship not only invert their business operations but pervert our laws,” said Doggett. “Those dodging their fair share of taxes should not be rewarded with taxpayer-funded government contracts.” [emphasis added]

It is kind of ludicrous: corporations that hide from the public when it comes time to pay for roads and other systems that lead to corporate profits have the gall to put out their hands when it comes to taking even more money from the public (which is essentially who pays for tax-funded federal contracts). Cut ‘em off.

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Some Sneakers Are Missing Fri, 01 Aug 2014 00:48:25 +0000 …Or else maybe Nike’s off-shore shell game has changed. In any case, there’s something fishy in Bermuda.

Citizens for Tax Justice drops the anchor (how many cliches can I use in one post?):

It’s far more common to see bare feet than sneakers on the streets and beaches of Bermuda, but major athletic footwear manufacturer Nike reports having six subsidiary companies on this island nation with population of about 65,000 people. That’s six less than the dozen it reported last year, but it’s still a lot.

….So what happened to the missing Nike subsidiaries? It’s possible that they were sold. But it’s also possible that the company simply hopes it can get away with not disclosing this potentially-embarrassing information going forward.

One thing is clear: whatever else may have changed in the past year, Nike definitely still has substantial foreign cash stashed in low-tax havens. We know this because Nike is one of the relatively-few Fortune 500 companies that disclose how much tax it would pay on repatriation of its permanently reinvested earnings (PRE). The company estimates that if it repatriated its offshore cash, it would have a $2.1 billion tax bill on their $6.6 billion in PRE. This is a 32 percent tax rate, the implication of which is that they’ve paid about 3% on their offshore profits so far. And it’s hard to find a foreign tax rate that low outside of, say, Bermuda.


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“A brazen fraud by the defendants”=$1.9 Billion Fine For Bank of America Wed, 30 Jul 2014 19:27:04 +0000 One person who is a bit of a hero, I think, in this whole post-financial-crisis-the-bankers-got-away-with-it scam is Jed Rakoff, who sits in the Federal District Court of Manhattan. A few years ago, I wrote that Rakoff understood that the government, our government, and, in particular, the Securities and Exchange Commission, is not serious about holding people accountable for the robbery and greed and incompetence that led to the financial collapse, costing millions of people their jobs and obliterating trillions of dollars in wealth. As Rakoff said, it’s all a show. But, at least, when he can, Rakoff is trying to make it hurt–and, now, to the tune of a $1.9 billion fine against Bank of America.

Rakoff’s decision:

A federal judge has ordered Bank of America to pay nearly $1.3 billion in penalties for its role in defrauding Fannie Mae and Freddie Mac into buying thousands of  defective mortgages.The penalty handed down by Judge Jed S. Rakoff of the Federal District Court in Manhattan on Wednesday comes after a jury in October found Bank of America liable for selling the questionable loans to the government-sponsored entities in the run-up to the financial crisis.

The jury also found a top manager at Bank of America’s Countrywide Financial unit liable for the sale of the loans, which were originated as part of a program nicknamed the “hustle,” which linked bonuses to how fast bankers could originate loans.

The judge also fined the former executive, Rebecca S. Mairone, $1 million, for her role in the scheme.

I’ve read through his actual decision and he sums it up quite well:

Relatedly, if the victims had known that the defendants were lying to them about the quality of the loans produced by the HSSL process, they would never have purchased any of the loans so generated, or parted with any of their money, so the happenstance that some of the loans turned out to be of high quality would be irrelevant from a deterrence standpoint.[emphasis added]


While no analogy is perfect, a simple one will illustrate the point. If I sold you a cow for $100 saying it was a healthy dairy cow when I knew it had foot-and-mouth disease, you would in theory have a net loss of less than $100 since the cow would still be
worth something as dead meat. But if you had known the truth, or, short of that, had known that I as the seller was intentionally lying to you about a material matter, you would never have bought the cow in the first place, so your out-of-pocket loss of $100 is
really more reflective of the misconduct perpetrated upon you. Similarly, since I would have spent some money to purchase or raise the cow before I discovered it was diseased and duped you into buying it, my net gain from the sale would have been less than $100. But since you would have never purchased the cow from me if you knew that it had foot-and-mouth disease or that I had intentionally lied to you in trying to induce you to part with your $100, the $100 I received, that is, my gross gain, is far more reflective of the essential nature of my fraudulent
misconduct than my “net” gain.



In short, while the HSSL process lasted only nine months, it was from start to finish the vehicle for a brazen fraud by the defendants, driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole.[emphasis added]

I will say that I, and others, have long argued that these fines are not sufficient. Bankers needed to go to jail and, at the very least, lose their jobs–which, by in large, they have not. People like Jamie Dimon, et al continue to make huge amounts of money and never paid a price for their greed and/or incompetence. At the end of the day, these fines end up being paid by shareholders (like union pension funds) and customers (who will pay higher fees, partly because these costs are quietly passed on).But, that said, it’s good to have Rakoff saying it like it is.

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Short-Term Hype On The Economy Wed, 30 Jul 2014 15:28:33 +0000 Yipee, it’s up, the economy is “rebounding”, smile, celebrate…uh, well, not so fast.

The cheerleading:

The United States economy rebounded heartily in the spring after a dismal winter, the Commerce Department reported on Wednesday, growing at an annual rate of 4 percent from April through June.

In its initial estimate for the second quarter, the government cited major gains in inventories for private businesses as well as exports and personal consumption spending that added to the growth. Economists, who had been hoping for a full reversal of the first quarter’s decline, were thrilled with the second quarter’s numbers. The consensus forecast for G.D.P. was 3 percent.

In case you aren’t enjoying that buzzy feeling, don’t feel left out. First, wages still suck, so most people aren’t going to feel much has happened. This is the classic example of more stuff being made but it not translating into the pockets of most people.

And, as Dean Baker points out in an email:

While the 4.0 percent growth is a sharp turnaround, it was very much in line with expectations. It means that for the first half of the year, the economy the economy grew at less than a 1.0 percent annual rate. The economy will have to sustain a growth rate of more than 3.0 percent over the second half of the year just to reach 2.0 percent growth for the year as a whole. This means 2014 will likely be another disappointing year for growth. [emphasis added]

It’s a game of statistics…leaving most real people out.

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Not News: Banks CEOs Don’t Care About The Country Tue, 29 Jul 2014 13:02:01 +0000 Under the heading of “this is not surprising”, I’d put this news: bank CEOs are playing a central role in moving companies overseas–or, actually, just reincorporating them to dodge taxes. And all for the usual reason: nice fat bank fees that help underwrite the pay packages of Jamie Dimon and his gang–the same gang that wrecked the economy, but still have their jobs.

I’ve written several pieces recently about so-called “tax inversions” (including here). Even the president has been roused out of his turn-a-blind-eye to what the bankers do, expressing a fair bit of anger about the tax maneuver (whether he will really do something about it is another question).

But, the bankers are all over this as an income producer:

Jamie Dimon, the chief executive of JPMorgan Chase, recently said, “I love America.” Lloyd Blankfein, the chief executive of Goldman Sachs, wrote an opinion article saying, “Investing in America still produces the best return.”

Yet guess who’s behind the recent spate of merger deals in which major United States corporations have renounced their citizenship in search of a lower tax bill? Wall Street banks, led by JPMorgan Chase and Goldman Sachs.

Investment banks are estimated to have collected, or will soon collect, nearly $1 billion in fees over the last three years advising and persuading American companies to move the address of their headquarters abroad (without actually moving). With seven- and eight-figure fees up for grabs, Wall Street bankers — and lawyers, consultants and accountants — have been promoting such deals, known as inversions, to some of the biggest companies in the country, including the American drug giant Pfizer. [emphasis added]

Just another ho-hum day when patriotism gets shown the door in favor of pure greed.

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An Opera Diva Can Be A Union Buster, And Just As Dumb As A Corp Thug Mon, 28 Jul 2014 13:33:17 +0000 The tender landscape of art can often obscure labor nastiness, and stupidity, that rivals anything you’d find in the corporate world, with stupidity and greed part of the mix (take Arianna Huffington, grand narcissist, who is happy to leach off writers and make tens of millions along the way). Welcome to the New York Metropolitan Opera, folks, which, true to form, is trying to lay blame on its workers and threatening a lock-out, when mismanagement has been the order of the day.

The basic story is simple: Peter Gelb, the general manager of the Opera, has to figure out how to close a deficit that he created by his overspending and mismanagement. So, his answer: go after the workers. He’s threatening to lock out the workers this week (a tactic straight from the worst playbooks of union-busting corporate raiders), even as the union’s members have said they are willing to make some sacrifices–if Gelb the Greedy does a little self-inspection.

He could be mentally disturbed perhaps:

“If Peter Gelb thinks a lockout gives him ‘leverage’ in negotiations, he doesn’t understand the performers who work for him,” said Alan Gordon, executive director of the American Guild of Musical Artists, in a statement. “Someone who would hurt the very people who work for him by taking away their money and health insurance is a very disturbed individual, not a leader but a betrayer.”[emphasis added]

Perhaps…but certainly greedy. The union explained in a press release recently:

Across the board, opera employees are questioning why the Met is demanding pay and benefit cuts from employees while delivering raises to top management. Earlier this week, the Met’s 990 tax-reporting forms were released for 2012 (the most recent year available) showing that the opera company’s general manager, Peter Gelb received a 26 percent increase in pay and benefits. Gelb received $1.8 million that year in compensation according to the 990s. In a statement to the New York Times, the Opera’s spokesman Peter Clark said that Gelb has since taken a 10 percent cut in pay.Joe Hartnett, the IA’s Assistant Director of Stagecraft, termed this “a rebate on an overcharge,” and noted that Gelb used a similar maneuver during the last round of labor negotiations in 2009. “Nobody’s fooled when management gives themselves a 26% raise and then takes a 10% pay cut right before negotiations,” said Hartnett. “We’ve been waiting all week for an explanation of why the same management that has driven up costs and mismanaged the revenue stream deserves a raise, while the workers who actually produce the opera are being asked to take a pay cut. We’re still waiting.” [emphasis added]

And in this story:

“We consider the Met Opera our family,” says D. Joseph Hartnett of the International Alliance of Theatrical Stage Employees. He’s at the bargaining table for the six unions that represent the stagehands, wardrobe workers and box office personnel, among others. “We feel that, just as any family that has a budgetary crisis, everything needs to be on the table. And that includes Mr. Gelb’s spending. And if we’re being asked to tighten our belts, Mr. Gelb is gonna have to cut up some credit cards.”

Today, the union released a letter addressed to the Opera’s Board of Directors which talks about the people who work at the Opera and savings already realized:

As the deadline draws near for negotiating a new agreement that, if successful, will sustain the Metropolitan Opera for years to come, we are struck by how little of what is being said and written about the members of the lATSE reflects a true understanding of how much those of us working behind the curtain love this great art form and how deeply committed we are to its perpetuation.Like any love, ours cannot be measured solely in dollars and cents. We are not merely “the unions.” We are not only the backstage artists whose technical expertise, night in and night out, helps to make possible the world’s greatest opera. We are part of the Metropolitan Opera family, and our love of this family is why we believe that a solution for saving the Met lies in expanding the dialogue in our deliberations beyond a singular focus on work rules, wages and benefits.

….Our members hoped to bargain collaboratively in the spirit of family and the values shared by the Met Opera and its dedicated employees. Instead, we are being subjected not only to a narrow set of demands that ignores our commitment to achieving Mr. Gelb’s vision, but also to blindness to the savings that a more comprehensive deliberation might achieve.”

Aha…So, Gelb is no different than the greedy bankers, the Wal-Mart family, or any of the other miscreants who savage the middle class: it’s his pay and wallet first in line, and fuck the rest of the people.

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Marvin Miller Will Not Be Mentioned, And So Baseball Continues To Deny Its Labor History Fri, 25 Jul 2014 16:48:22 +0000 Sunday there will be yet another ceremony at the National Baseball Hall of Fame–and it will be, without anyone saying so, a ceremony that continues the despicable behavior towards the one man who did more to change baseball outside the lines than perhaps any single individual: Marvin Miller. Despicable because, simply because Marvin Miller built the players’ union into a serious union, the owners have refused to vote him into the Hall of Fame. It’s even more despicable because, after Miller died at age 95 in November 2012, you would think that people would have an ounce of decency, a bit of humanity, to tamp down the animosity enough to be big and do the right thing. But, they have not.

I’ve had a small obsession for a number of years about somehow getting Miller his due, largely because his story is the story of the power of unions and of the transformation of peoples’ consciousness.

I have loved baseball since I was a kid. Just for the game itself. But, as I got older, and worked as a labor activist/writer and generally politically engaged person, it was baseball, and other sports, that quite clearly were the great connector: you can walk into any meeting, any union hall, any community, sit down with someone you never met and begin to forge some relationship with a simple sentence: “How about that no-hitter last night?”…

Before Miller arrived in 1966 to take over as executive director of the players association, baseball players were effectively the property of the teams they played for–-they couldn’t leave of their own accord to play for another team. Their pensions were crappy and they basically had very little bargaining power.

Miller transformed the union–and the entire industry–largely by engineering what would become free agency, but, in the bigger sense, he made the Players Association into a union.

There is a forward and introduction in Miller’s fascinating 1991 autobiography, “A Whole Different Ball Game: The Inside Story of Baseball’s New Deal” (I proudly own an autographed copy). The amazing Studs Terkel writes:

Marvin Miller, the founding executive director of the Major League Baseball Players Association, came along and not only changed the rules of the game but brought an end to the age of innocence: for some of our finest athletes, it was a liberating experience. They discovered that “union” was not a dirty word. They discovered a sense of community. One of the most aspects of this book concerns ballplayers, including the stars, fighting not only for themselves, but for the old-timers as well as for the kids yet to come. In these days, when union-busting is the fashion of the day, and mean-spiritedness the new religion, this is pretty thrilling stuff.Marvin Miller, I suspect, is the most effective union organizer since John L. Lewis. Though the times may be out of joint for trade unionism, though “scab” is no longer a dirty word in too many quarters, something remarkable has happened to our pro athletes: they have discovered where the body is buried, who gets what and who earns what he gets. And it began with the baseball players.[emphasis added]

Bill James, who is probably the leading baseball statistician, wrote, in part:

If baseball ever buys itself a mountain and starts carving faces in it, one of the first men to go up is sure to be Marvin Miller……Miller’s battle was not for himself, but for what he saw as being right, the right of players to control their own careers and participate in the enormous wealth generated by major league baseball. He worked hard to keep the spotlight off himself and on the issues, on the absurdity of the status quo–but the simple fact that so little was know about him, as a man, enabled his opponents to patin onto him whatever image they chose. He courted enmies among the wealthy and powerful and became the target of their animus. Because he attacked the settled issues of power, it was so easy to portray him as powerful. The irony of Miller’s greatness is that he became larger than life by trying hard not to be, by trying simply to slip into the role he had created for himself.

One of the most powerful weapons used against unions is to essentially write them out of history: children don’t learn about unions in schools. Most politicians only mention unions when they are slumming for a check for their campaigns or they promise to put on sneakers and walk picket lines when elected but somehow that promise is forgotten once the election is over; they talk great rhetoric about the “middle class” but you almost never hear, unprompted and certainly not in front of crowds outside a union hall, a great speech about unions and their central place in making a healthy economy.Now, the refusal, posthumously, to pave the way for Miller’s induction is a continued denial of labor’s role. I am still hopeful that maybe this campaign might still take off…in the near future.

Most sports “journalists” ignore this story. I use “journalist” quite loosely because, largely, they avoid the social aspects of sports particularly when it comes to labor rights. It doesn’t fit with the narrative–and most of them are beholden to teams and leagues for access so they came their mouths shut (come to think of it, they aren’t much different than political journalists these days…but I digress).

Murray Chass of The New York Times had a strong column on Miller back in 2007 on the occasion of the snub of the day:

The National Baseball Hall of Fame has become a national joke. Its latest electoral contrivance elected three former executives to the Hall yesterday, none named Marvin Miller. Making the committee’s decision even worse, one of the three is named Bowie Kuhn.For any committee of 12 supposedly knowledgeable baseball people to elect Kuhn, Barney Dreyfuss and Walter O’Malley and not Miller defies reasonable and logical explanation.

Of the three men elected by this newfangled panel, O’Malley deserves the honor because by moving his Brooklyn Dodgers to Los Angeles 50 years ago, a move for which he is still reviled in Brooklyn, he opened the entire country to baseball. The new geography made a significant impact on Major League Baseball.

Few men, if any, however, made as significant an impact as Miller on Major League Baseball. You don’t have to like what he did to recognize that impact. The game today is what it is in great part because of what Miller did as executive director of the players union from 1966 through 1983.

I hope, probably in vain, that someone like Joe Torre would use the moment on Sunday of his well-deserved induction to at least mention Marvin Miller’s role. After all, Torre was, during his playing years, an active union rep for his team (Atlanta). A few years ago, I traveled to Major League Baseball’s winter meetings to try to drum up support among players for Miller’s induction. I saw Torre, and asked him: isn’t it time? His response: no doubt (Though, after handing him a card, I never heard from him subsequently).

Personally, I will not watch the induction ceremony, nor set foot in the Hall of Fame (which is not a far drive away) until Marvin Miller is inducted. It would feel like scabbing, crossing a picket line. Certainly, it would feel like ignoring a small, and invisible to most, dab of venom running through the building, an ugly stain that divides–and that is not what baseball should be about.

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Obama: Companies “cherry-picking the rules, and it damages the country’s finances” Fri, 25 Jul 2014 01:56:07 +0000 I detect a president who thinks he’s found a very potent political argument. Having gone soft on the bankers, letting all the big fish skate after wrecking the economy, the president has figured out that people just won’t stand for a tax system that leaves regular people holding the tab while CEOs figure out how to screw the public, day after day. And, so, he’s now personally calling for an end to so-called tax “inversions”

I’ve written about this over the past few months, and a big tip of the hat to Sen. Carl Levin and his brother Rep. Sander Levin who have companion bills to stop so-called tax “inversions” (and another tip of the hat to Citizens for Tax Justice, which has been pushing the issues).

As Levin put it:

The issue we seek to address is known technically as “corporate inversion.” The details of inversions sound complex, but the principle is not. Inversion means avoiding potentially billions of dollars in U. S. taxes by changing a corporation’s address, for tax purposes, to an offshore location. What we have here is a tax avoidance scheme, an enormous loophole that allows companies to avoid billions in taxes without any significant change in where they operate, where their profits are generated, or the location of the executives who manage and control these corporations. A recent prominent example involves Pfizer, a U.S. drug company, and AstraZeneca, a U.K.-based competitor. This proposed corporate takeover – which Pfizer makes abundantly clear is largely about avoiding U.S. taxes – has gotten a lot of attention the attention, and for good reason. It would cost the United States about $1 billion a year in tax revenue. But this is not about just two companies. This is not about just one merger – even a merger that could shove billions of dollars in tax burden onto U.S. taxpayers. The Pfizer-AstraZeneca deal is just the latest example of abusive inversion deals. You cannot pick up a newspaper’s business section these days without reading about what Reuters has called “a wave of tax-driven overseas deal-making.” Some companies that believe in meeting their tax obligations are under competitive pressure to invert. It is clear that dozens, perhaps scores of companies are preparing to file their change-of-address cards, and in doing so, avoid billions in U.S. taxes. That burden doesn’t just go away. Either our remaining constituents must pick up the tab, or the loss of Treasury revenue adds to the federal deficit.[emphasis added]

More from CTJ:

The loophole in the current law allows the company resulting from a U.S.-foreign merger to be considered a “foreign” corporation even if it is 80 percent owned by shareholders of the American corporation, and even if most of the business activity and headquarters of the resulting entity are in the U.S.In theory, once a corporation is “foreign,” any profits it earns in the U.S. remain subject to U.S. taxes, but offshore profits are not. But inversion also makes it easier for a corporation to avoid U.S. taxes on its U.S. profits. This is because corporate inversions are often followed by “earnings-stripping,” which makes U.S. profits appear, on paper, to be earned offshore. Corporations load the American part of the company with debt owed to the foreign part of the company. The interest payments on the debt are tax deductible, officially reducing American profits, which are effectively shifted to the foreign part of the company.

And, so, now the president has seen the light. Just today in Los Angeles, he called for an end to tax inversions:

President Obama on Thursday called for Congress to strip away tax advantages that have encouraged a rush of mergers and acquisitions that give companies an overseas base while they maintain their presence in the United States.In an appearance at a technical college that was intended to focus on job training, the president used unusually harsh language to describe American companies that acquire overseas companies to relocate for tax reasons, known as inversions. He said they were renouncing their American citizenship by “cherry-picking” the nation’s tax laws at the expense of ordinary taxpayers.

“These companies are cherry-picking the rules, and it damages the country’s finances,” Mr. Obama said. “It adds to the deficit. It sticks you with the tab to make up for what they are stashing offshore.”

“I don’t care if it’s legal — it’s wrong,” he said, prompting the audience to boo the companies taking advantage of the practice.[emphasis added]

Welcome to the party, Mr. President. About time.And if these guys are smart, they’ll take this theme and bang it in every state where there is a close Senate race.

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$300 BILLION Robbery of Workers And Counting: Why We Need $20-An-Hour Minimum Wage Thu, 24 Jul 2014 19:44:31 +0000 Tick, tick, tick, tick…every minute that goes by is another minute workers are being robbed–in particular, those people forced to work for the slave-like minimum wage. And if you looked back just five years, there’s a price tag to that robbery: over $300 billion.

My friends over at the truly progressive Center for Economic and Policy Research came up with a terrific running calculator that we should stick on every union website and every progressive site:

This second clock shows how many dollars America’s minimum wage workers have lost since July 24, 2009 if the minimum wage had instead been raised to its 1968 level and then kept pace with inflation since then. Every second it shows how much more money they’re losing, as long as the federal minimum wage remains below its historical peak.

As I sat down to write this piece, the calculator was ticking towards $301 billion…

The clock easily documents the legalized slavery and legalized robbery millions of workers have to endure.

My only disagreement with CEPR is that the minimum wage hikes should be tied to PRODUCTIVITY not inflation–as I explained here in my argument for a campaign for a $20-an-hour minimum wage.

Either way, though, this tells the story quite well.

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