Ponzi scheme victims get to write off 95% of losses – Welcome to the American Ponzi scheme

April 5, 2009 · Posted in Big Business Ripoffs, Financial Crisis, Political Figures, Political Issues, Thoughts on the economy · Comment 

This is a sad sad day for the American taxpayer.  Apparently, the United States tax system is officially only in place to take money from stupid Americans and make every possible exception for those tax payers who have the power to manipulate our representatives.

I sympathize with people who were swindled by criminals, I hate that people in this world try to skate through life by stealing from others.  The world would be a much happier place, if these types of people would simply vanish.  However, none of the investors who were victims of criminals has earned even $1 dollar of my money or yours.

Am I missing something or has the U.S. tax system somehow morphed into a nanny state system?  I for the life of me cannot figure out how or why U.S. taxpayers deserve to become victims of these Ponzi scheme criminals, but that is exactly what is happening if we us non-victim money to bail them out.

Over the last 100 years there have been numerous scammers and thiefs who stole countless dollars from millions of Americans, but I do not recall a single instance where their grief and suffering somehow became all of American’s problem.  But you take one high flying Wall Street banker, and an elaborate scheme to steal from his influential clients, and all of the sudden we all have to bail them out.

Again, I have sympathy for those who lost money by the heartless acts of criminals, but our congress is no better than Bernard Madoff when it comes to robbing Peter to pay Paul, with absolutely no regard for the little tax payer who keeps their engine of greed running.

Here is an article that discusses the tax break, if you want to read the facts, instead of my rant.

WASHINGTON — The Internal Revenue Service announced unprecedented tax relief for victims of Ponzi schemes, saying many of those affected could deduct up to 95% of their losses immediately.

The move, which corresponded with a congressional hearing on the issue Tuesday, represents a significant relaxation of longstanding limits on tax relief for victims of investment scams. It reflects the pressure officials are feeling to help individuals who have been hurt in the current financial crisis, particularly at a time when public resentment is growing over the billions of dollars the government is directing into troubled banks and other big corporations.

The IRS action drew praise from lawmakers, who have been pondering legislation to help victims of swindlers such as Bernard Madoff, who has pleaded guilty to securities fraud and other charges, after confessing to running a $65 billion Ponzi scheme. “It’s a rare day when someone can be happy with the IRS,” said Sen. Charles Schumer (D., N.Y.) at the hearing held by the Senate Finance Committee.

The IRS guidance is more favorable to victims than prior positions the agency has taken, said Robert Willens, a New York tax adviser.

In broad terms, the IRS said Ponzi scheme victims who aren’t suing to recover their losses can generally deduct up to 95% of their qualified losses — minus any potential recoveries from insurance or the Securities Investor Protection Corp. — in the year the fraud is discovered. Those pursuing third-party recoveries can deduct 75% of relevant investments, after potential recoveries. The Securities Investor Protection Corp., or SIPC, is an organization designed to help investors at failed brokerage firms.

The IRS said victims wouldn’t be subject to limits that apply to personal casualty or theft losses and could carry back net operating losses five years to offset taxes paid, or forward 20 years. Under prior rules, many investors had to subtract $100 and 10% of their adjusted gross income from their loss deductions, and could carry back losses only three years, or forward 20 years.

In another change, the IRS said investors can include their principal, as well as any so-called phantom income they have received over the years, in their theft-loss deductions. Previously, the IRS allowed some Ponzi scheme victims to deduct only their principal as a theft loss, not phantom income.

The changes left open a number of questions, including how to help people who had invested in Ponzi schemes through nontaxable accounts such as Individual Retirement Accounts. People who invested indirectly through feeder funds potentially face a more complex situation in getting relief under the changes.

Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, said he was concerned that the guidance would “encourage tax cheats to take abusive deductions.”

IRS Commissioner Douglas Shulman said any taxpayers who seek the new relief must file special forms identifying themselves as Ponzi victims. That will make it easier for the IRS to monitor claims and “look behind these, so we don’t have a lot of fraud,” he said.

The government has also limited tax-loss claims by individual investors that apply to normal losses from trading, due to concerns that it could result in a large loss of government revenue. But Sen. Maria Cantwell (D., Wash.) Tuesday said Congress should consider liberalizing those rules to help more consumers.

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A very basic breakdown of stimulus plan – part deux

February 16, 2009 · Posted in Finance, Financial Crisis, Government, Political Issues, Politics, Thoughts on the economy · Comment 

Dollar puzzleNo one is going to lead their local economics club in a lecture about the stimulus after reading this breakdown, but in the spirit of bar talk it will at least make you sound like you know what you are talking about.  So read it, yawn, read it and yawn.  I believe it is a two yawn breakdown, but for fast readers it may only be a one.

Here you go -

Taxes:

The recovery package has tax breaks for families that send a child to college, purchase a new car, buy a first home or make the ones they own more energy efficient.

Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year. Couples would get up to $800. In 2010, the credit would be about $7.70 a week, if it is spread over the entire year.

The $1,000 child tax credit would be extended to more low-income families that don’t make enough money to pay income taxes, and poor families with three or more children will get an expanded Earned Income Tax Credit.

Middle-income and wealthy taxpayers will be spared from paying the Alternative Minimum Tax, which was designed 40 years ago to make sure wealthy taxpayers pay at least some tax, but was never indexed for inflation. Congress fixes it each year, usually in the fall.

First-time homebuyers who purchase their homes before Dec. 1 would be eligible for an $8,000 tax credit, and people who buy new cars before the end of the year can write off the sales taxes.

Homeowners who add energy-efficient windows, furnaces and air conditioners can get a tax credit to cover 30 percent of the costs, up to a total of $1,500. College students — or their parents — are eligible for tax credits of up to $2,500 to help pay tuition and related expenses in 2009 and 2010.

Those receiving unemployment benefits this year wouldn’t pay any federal income taxes on the first $2,400 they receive.

___

Health insurance:

Many workers who lose their health insurance when they lose their jobs will find it cheaper to keep that coverage while they look for work.

Right now, most people working for medium and large employers can continue their coverage for 18 months under the COBRA program when they lose their job. It’s expensive, often over $1,000 a month, because they pay the share of premiums once covered by their employer as well as their own share from the old group plan.

Under the stimulus package, the government will pick up 65 percent of the total cost of that premium for the first nine months.

Lawmakers initially proposed to help workers from small companies, too, who don’t generally qualify for COBRA coverage. But that fell through. The idea was to have Washington pay to extend Medicaid to them.

COBRA applies to group plans at companies employing at least 20 people. The subsidies will be offered to those who lost their jobs from Sept. 1 to the end of this year.

Those who were put out of work after September but didn’t elect to have COBRA coverage at the time will have 60 days to sign up.

The plan offers $87 billion to help states administer Medicaid. That could slow or reverse some of the steps states have taken to cut the program.

___

Infrastructure:

Highways repaved for the first time in decades. Century-old waterlines dug up and replaced with new pipes. Aging bridges, stressed under the weight of today’s SUVs, reinforced with fresh steel and concrete.

But the $90 billion is a mere down payment on what’s needed to repair and improve the country’s physical backbone. And not all economists agree it’s an effective way to add jobs in the long term, or stimulate the economy.

___

Energy:

Homeowners looking to save energy, makers of solar panels and wind turbines and companies hoping to bring the electric grid into the computer age all stand to reap major benefits.

The package contains more than $42 billion in energy-related investments from tax credits to homeowners to loan guarantees for renewable energy projects and direct government grants for makers of wind turbines and next-generation batteries.

There’s a 30 percent tax credit of up to $1,500 for the purchase of a highly efficient residential air conditioners, heat pumps or furnaces. The credit also can be used by homeowners to replace leaky windows or put more insulation into the attic. About $300 million would go for rebates to get people to buy efficient appliances.

The package includes $20 billion aimed at “green” jobs to make wind turbines, solar panels and improve energy efficiency in schools and federal buildings. It includes $6 billion in loan guarantees for renewable energy projects as well as tax breaks or direct grants covering 30 percent of wind and solar energy investments. Another $5 billion is marked to help low-income homeowners make energy improvements.

About $11 billion goes to modernize and expand the nation’s electric power grid and $2 billion to spur research into batteries for future electric cars.

___

Schools:

A main goal of education spending in the stimulus bill is to help keep teachers on the job.

Nearly 600,000 jobs in elementary and secondary schools could be eliminated by state budget cuts over the next three years, according to a study released this past week by the University of Washington. Fewer teachers means higher class sizes, something that districts are scrambling to prevent.

The stimulus sets up a $54 billion fund to help prevent or restore state budget cuts, of which $39 billion must go toward kindergarten through 12th grade and higher education. In addition, about $8 billion of the fund could be used for other priorities, including modernization and renovation of schools and colleges, though how much is unclear, because Congress decided not to specify a dollar figure.

The Education Department will distribute the money as quickly as it can over the next couple of years.

And it adds $25 billion extra to No Child Left Behind and special education programs, which help pay teacher salaries, among other things.

This money may go out much more slowly; states have five years to spend the dollars, and they have a history of spending them slowly. In fact, states don’t spend all the money; they return nearly $100 million to the federal treasury every year.

The stimulus bill also includes more than $4 billion for the Head Start and Early Head Start early education programs and for child care programs.

___

National debt:

One thing about the president’s $790 billion stimulus package is certain: It will jack up the federal debt.

Whether or not it succeeds in producing jobs and taming the recession, tomorrow’s taxpayers will end up footing the bill.

Forecasters expect the 2009 deficit — for the budget year that began last Oct 1 — to hit $1.6 trillion including new stimulus and bank-bailout spending. That’s about three times last year’s shortfall.

The torrents of red ink are being fed by rising federal spending and falling tax revenues from hard-hit businesses and individuals.

The national debt — the sum of all annual budget deficits — stands at $10.7 trillion. Or about $36,000 for every man, woman and child in the U.S.

Interest payments alone on the national debt will near $500 billion this year. It’s already the fourth-largest federal expenditure, after Medicare-Medicaid, Social Security and defense.

This will affect us all directly for years, as well as our children and possibly grandchildren, in higher taxes and probably reduced government services. It will also force continued government borrowing, increasingly from China, Japan, Britain, Saudi Arabia and other foreign creditors.

___

Environment:

The package includes $9.2 billion for environmental projects at the Interior Department and the Environmental Protection Agency. The money would be used to shutter abandoned mines on public lands, to help local governments protect drinking water supplies, and to erect energy-efficient visitor centers at wildlife refuges and national parks.

The Interior Department estimates that its portion of the work would generate about 100,000 jobs over the next two years.

Yet the plan will only make a dent in the backlog of cleanups facing the EPA and the long list of chores at the country’s national parks, refuges and other public lands. It would be more like a down payment.

When it comes to national parks, the plan sets aside $735 million for road repairs and maintenance. But that’s a fraction of the $9 billion worth of work waiting for funding.

At EPA, the payout is $7.2 billion. The bulk of the money will help local communities and states repair and improve drinking water systems and fund projects that protect bays, rivers and other waterways used as sources of drinking water.

The rest of EPA’s cut — $800 million — will be used to clean up leaky gasoline storage tanks and the nation’s hazardous waste sites.

___

Police:

The stimulus bill includes plenty of green for those wearing blue.

The compromise bill doles out more than $3.7 billion for police programs, much of which is set aside for hiring new officers.

The law allocates $2 billion for the Byrne Justice Assistance Grant, a program that has funded drug task forces and things such as prisoner rehabilitation and after-school programs.

An additional $1 billion is set aside to hire local police under the Community Oriented Policing Services program. The program, known as COPS grants, paid the salaries of many local police officers and was a “modest contributor” to the decline in crime in the 1990s, according to a 2005 government oversight report.

Both programs had all been eliminated during the Bush administration.

The bill also includes $225 million for general criminal justice grants for things such as youth mentoring programs, $225 million for Indian tribe law enforcement, $125 million for police in rural areas, $100 million for victims of crimes, $50 million to fight Internet crimes against children and $40 million in grants for law enforcement along the Mexican border.

___

Higher Education:

The maximum Pell Grant, which helps the lowest-income students attend college, would increase from $4,731 currently to $5,350 starting July 1 and $5,550 in 2010-2011. That would cover three-quarters of the average cost of a four-year college. An extra 800,000 students, or about 7 million, would now get Pell funding.

The stimulus also increases the tuition tax credit to $2,500 and makes it 40 percent refundable, so families who don’t earn enough to pay income tax could still get up to $1,000 in extra tuition help.

Computer expenses will now be an allowable expense for 529 college savings plans.

The final package cut $6 billion the House wanted to spend to kick-start building projects on college campuses. But parts of the $54 billion state stabilization fund — with $39 billion set aside for education — can be used for modernizing facilities.

There’s also an estimated $15 billion for scientific research, much of which will go to universities. Funding for the National Institutes of Health includes $1.5 billion set aside for university research facilities.

Altogether, the package spends an estimated $32 billion on higher education.

___

The Poor:

More than 37 million Americans live in poverty, and the vast majority of them are in line for extra help under the giant stimulus package. Millions more could be kept from slipping into poverty by the economic lifeline.

People who get food stamps — 30 million and growing — will get more. People drawing unemployment checks — nearly 5 million and growing — would get an extra $25, and keep those checks coming longer. People who get Supplemental Security Income — 7 million poor Americans who are elderly, blind or disabled — would get one-time extra payments of $250.

Many low-income Americans also are likely to benefit from a trifecta of tax credits: expansions to the existing Child Tax Credit and Earned Income Tax Credit, and a new refundable tax credit for workers. Taken together, the three credits are expected to keep more than 2 million Americans from falling into poverty, including more than 800,000 children, according to the private Center on Budget and Policy Priorities.

The package also includes a $3 billion emergency fund to provide temporary assistance to needy families. In addition, cash-strapped states will get an infusion of $87 billion for Medicaid, the government health program for poor people, and that should help them avoid cutting off benefits to the needy.

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A budget breakdown of the February 2009 stimulus plan

February 16, 2009 · Posted in Financial Crisis, Government, Political Issues, Politics · 2 Comments 

The Stimulus Plan: A Detailed List of Spending

by Michael Grabell and Christopher Weaver, ProPublica – February 13, 2009

Program Funding

Accountability

$323,500,000
Department of Agriculture – Office of Inspector General $22,500,000
Department of Commerce – Office of Inspector General $10,000,000
National Oceanic and Atmospheric Administration – Office of Inspector General $6,000,000
Department of Justice – Office of Inspector General $2,000,000
NASA – Office of Inspector General $2,000,000
Defense Department – Office of Inspector General $15,000,000
Department of Energy – Office of Inspector General $15,000,000
Department of the Treasury – Inspector General for Tax Administration $7,000,000
General Services Administration – Office of Inspector General $7,000,000
Recovery Act Accountability and Transparency Board $84,000,000
Small Business Administration – Office of Inspector General $10,000,000
Department of Homeland Security – Office of Inspector General $5,000,000
Bureau of Indian Affairs – Office of Inspector General $15,000,000
Environmental Protection Agency – Office of Inspector General $20,000,000
Department of Labor – Office of Inspector General $6,000,000
Department of Health and Human Services – Office of Inspector General related to the Office of the National Coordinator for Health Information Technology $17,000,000
Department of Education – Office of Inspector General $14,000,000
Corporation for National and Community Service – Office of Inspector General $1,000,000
Social Security Administration – Office of Inspector General $2,000,000
Government Accountability Office salaries and expenses $25,000,000
Veterans Affairs – Office of Inspector General $1,000,000
State Department – Office of Inspector General $2,000,000
Department of Transportation – Office of Inspector General $20,000,000
Department of Housing and Urban Development – Office of Inspector General $15,000,000

Aid to People Affected by Economic Downturn

$36,910,807,000
Rural Housing Service insurance fund program account – direct loans and unsubsidized guaranteed loans $11,672,000,000
Rural community facilities program account $130,000,000
Special supplemental nutrition program for women, infants and children (WIC) $500,000,000
School lunch programs for schools in which at least 50% of students are eligible for free or reduced price meals $100,000,000
Food bank commodity assistance program $150,000,000
Temporary increase in benefits under the Supplemental Nutrition Assistance Program (food stamps) $19,900,000,000
Food distribution program on Indian reservations $5,000,000
Agricultural disaster assistance transition – Federal Crop Insurance Act
Farm operating loans $173,367,000
Direct farm operating loans $20,440,000
IRS health insurance tax credit administration $80,000,000
Emergency food and shelter $100,000,000
Bureau of Indian Affairs job training and housing improvement programs $40,000,000
Indian guaranteed loan program $10,000,000
Community service employment for older Americans $120,000,000
Extra funding for state unemployment insurance $150,000,000
State re-employment services for the jobless $250,000,000
Child care assistance for low-income families $1,651,227,000
Child care assistance for low-income families through state programs $255,186,000
Child care assistance for low-income families to improve infant and toddler care $93,587,000
Community Service Block Grant Program $1,000,000,000
Social Security Act funding 50,000,000
Social Security Administration processing of disability and retirement workloads $460,000,000

Aid to State and Local Governments

$58,355,000,000
State administrative expenses to carry out increase in food stamp program $295,000,000
Economic development assistance programs $150,000,000
Violence against women prevention and prosecution programs $225,000,000
Office of Justice Programs state and local law enforcement assistance (Edward Byrne Memorial Justice Assistance Grants) $2,000,000,000
State and local law enforcement assistance grants to improve criminal justice systems, assist crime victims and mentor youth $225,000,000
Southern border and high-intensity drug trafficking areas $30,000,000
ATF Project Gunrunner $10,000,000
State and local law enforcement assistance to Indian tribes $225,000,000
Crime victim assistance $100,000,000
Rural drug crime program $125,000,000
Internet crimes against children initiatives $50,000,000
Community Oriented Policing Services (COPS) grants $1,000,000,000
Justice Department salaries and expenses for administration of police grant programs $10,000,000
Community Development Financial Institutions Fund for financial assistance, training and outreach to Native American, Hawaiian and Alaskan native communities $100,000,000
Local and state fire station upgrades and construction $210,000,000
Disaster assistance direct loans may exceed $5,000,000 and may be equal to not more than 50% of local government annual budget if the government lost 25% or more in tax revenues
State Fiscal Stabilization Fund to avoid cutbacks and layoffs (82% must be used for education while 18% may be used for public safety and other government services. The latter part may be used for repairs and modernization of K-12 schools and college and university buildings.) $53,600,000,000

Business

$870,000,000
Rural Business – Cooperative Service: rural business program account $150,000,000
Small Business Administration salaries and expenses, microloan program and improvements to technology systems $69,000,000
Surety bond guarantees revolving fund $15,000,000
Small business loans $636,000,000

Education

$48,420,000,000
State grants for adult job training $500,000,000
State grants for youth job training and summer employment opportunities $1,200,000,000
Dislocated worker job training $1,250,000,000
YouthBuild program for high school dropouts who re-enroll in other schools $50,000,000
Job training in emerging industries $250,000,000
Job training in the renewable energy field $500,000,000
Head Start programs $1,000,000,000
Early Head Start program expansion $1,100,000,000
Education for the disadvantaged – elementary and secondary education 10,000,000,000
Education for the disadvantaged – school improvement grants $3,000,000,000
Education impact aid $100,000,000
School improvement programs $650,000,000
Innovation and improvement of elementary and secondary schools $200,000,000
Special education funding under the Individuals with Disabilities Education Act $12,200,000,000
Pell grants for higher education $15,840,000,000
Institute of Education data systems $245,000,000
Institute of Education state data coordinators $5,000,000
Dislocated worker assistance national reserve $200,000,000
School improvement grants awarded based on the number of homeless students identified in a state $70,000,000
Student aid administrative costs $60,000,000

Energy

$41,400,000,000
Energy efficiency and conservation block grants $3,200,000,000
Weatherization Assistance Program (increases maximum income level and maximum assistance) $5,000,000,000
State energy program $3,100,000,000
Advanced batteries manufacturing, including lithium ion batteries, hybrid electrical systems, component manufacturers and software designers $2,000,000,000
Modernize electricity grid $4,400,000,000
Electricity grid worker training $100,000,000
Fossil energy research and development $3,400,000,000
Uranium Enrichment Decontamination and Decommissioning Fund $390,000,000
Department of Energy science programs $1,600,000,000
Advanced Research Projects Agency $400,000,000
Innovative technology loan guarantee program $6,000,000,000
Western Area Power Administration construction and maintenance $10,000,000
Bonneville Power Administration borrowing authority $3,250,000,000
Western Area Power Administration borrowing authority $3,250,000,000
Leading edge biofuel projects $500,000,000
Federal building conversion to “high-performance green buildings” $4,500,000,000
Energy efficiency federal vehicle fleet procurement $300,000,000

Health Care

$18,830,000,000
Indian Health Service information technology and telehealth services $85,000,000
Indian health facilities $415,000,000
Grants for public health centers $500,000,000
Construction, renovation, equipment and information technology for health centers $1,500,000,000
National Health Service Corps funding $75,000,000
Addressing health professions workforce shortage $425,000,000
National Institutes of Health grants and contracts to renovate non-federal research facilities $1,000,000,000
National Institute of Health grants and contracts for shared resources and equipment for grantees $300,000,000
National Institutes of Health fund to support scientific research $7,400,000,000
National Institutes of Health Common Fund $800,000,000
National Institutes of Health renovations of high-priority buildings at the Bethesda, Md., campus, and at other locations $500,000,000
Comparative effectiveness research $300,000,000
Comparative effectiveness research by the National Institutes of Health 400,000,000
Comparative effectiveness research by the Department of Health and Human Services $400,000,000
Office of the National Coordinator for Health Information Technology $1,680,000,000
National Coordinator for Health Information Technology’s regional or subnational efforts $300,000,000
Department of Commerce health care information enterprise integration activities related to the Office of the National Coordinator for Health Information Technology $20,000,000
Department of Health and Human Services computer and information technology security $50,000,000
Department of Health and Human Services Prevention and Wellness Fund $1,000,000,000
Prevention and Wellness Fund immunization program $300,000,000
Prevention and Wellness Fund evidence-based clinical and community-based prevention strategies $650,000,000
Prevention and Wellness Fund reduction in incidence of health-care-associated infections $50,000,000
Rehabilitation services and disability research 540,000,000
State grants for rehabilitation services and disability research $18,200,000
Rehabilitation services in independent living centers $87,500,000
Rehabilitation services for older blind individuals $34,300,000

Other

$2,147,000,000
Census Bureau programs $1,000,000,000
Digital-to-analog television converter box program $650,000,000
President shall establish arbitration panel under FEMA public assistance program to expedite recovery efforts from Hurricanes Katrina and Rita
Requirement that Department of Homeland Security uniforms be manufactured and sewn together by U.S. fabric and apparel companies
National Endowment for the Arts grants $50,000,000
Department of Labor salaries and expenses $80,000,000
Additional awards to existing AmeriCorps grantees $83,000,000
AmeriCorps program salaries and expenses $5,200,000
AmeriCorps program administrative costs of expansion $800,000
National security trust appropriation $40,000,000
Social Security Administration health information technology research $40,000,000
Filipino World War II veterans compensation $198,000,000

Science and Technology

$13,142,000,000
Farm Service Agency salaries and expenses to maintain and modernize the information technology system $50,000,000
Distance learning, telemedicine and broadband program $2,500,000,000
National Telecommunications and Information Administration – broadband technology opportunities program $4,690,000,000
National Institute of Standards and Technology scientific and technical research and services $220,000,000
National Institute of Standards and Technology construction of research facilities $360,000,000
National Oceanic and Atmospheric Administration operations, research and facilities $230,000,000
National Oceanic and Atmospheric Administration procurement, acquisition and construction $600,000,000
NASA science $400,000,000
NASA aeronautics $150,000,000
NASA exploration $400,000,000
NASA cross agency support $50,000,000
National Science Foundation research and related activities $2,500,000,000
National Science Foundation education and human resources $100,000,000
National Science Foundation major research equipment and facilities construction $400,000,000
National Science Foundation – Office of Inspector General $2,000,000
Veterans Affairs for hiring and training of claims processors $150,000,000
Veterans Affairs information technology systems $50,000,000
State Department technology security upgrades $252,000,000
U.S. Agency for International Development (USAID) technology $38,000,000

Transportation and Infrastructure

$98,325,000,000
Agriculture buildings and facilities and rental payments $24,000,000
Agricultural Research Service buildings and facilities $176,000,000
Natural Resources Conservation Service watershed and flood prevention programs $290,000,000
Watershed rehabilitation program $50,000,000
Rural Utilities Service water and waste disposal program account $1,380,000,000
Defense Department facilities operation and maintenance, Army $1,474,525,000
Defense Department facilities operation and maintenance, Navy $657,051,000
Defense Department facilities operation and maintenance, Marine Corps $113,865,000
Defense Department facilities operation and maintenance, Air Force $1,095,959,000
Defense Department facilities operation and maintenance, Army Reserve $98,269,000
Defense Department facilities operation and maintenance, Navy $55,083,000
Defense Department facilities operation and maintenance, Marine Corps Reserve $39,909,000
Defense Department facilities operation and maintenance, Air Force Reserve $13,187,000
Defense Department facilities operation and maintenance, Army National Guard $266,304,000
Defense Department facilities operation and maintenance, Air National Guard $25,848,000
Army research development, test and evaluation $75,000,000
Navy research development, test and evaluation $75,000,000
Air Force research development, test and evaluation $75,000,000
Defense-wide research development, test and evaluation $75,000,000
Defense Department medical facilities repair and modernization including energy efficiency $400,000,000
Corps of Engineers investigations $25,000,000
Corps of Engineers construction $2,000,000,000
Corps of Engineers – Mississippi River and tributaries $375,000,000
Corps of Engineers operations and maintenance $2,075,000,000
Corps of Engineers regulatory program $25,000,000
Corps of Engineers formerly utilized sites remedial action program $100,000,000
Bureau of Reclamation water and related resources, including inspection of canals in urbanized areas $900,000,000
Central Utah Project water programs $50,000,000
California Bay-Delta restoration $50,000,000
Non-Defense environmental cleanup $483,000,000
Defense environmental cleanup $5,127,000,000
Federal buildings and courthouses $750,000,000
Border stations and land ports of entry $300,000,000
Department of Homeland Security headquarters consolidation $200,000,000
Customs and Border Protection non-intrusive inspection systems $100,000,000
Customs and Border Protection tactical communications equipment and radios $60,000,000
Border security fencing, infrastructure and technology $100,000,000
Land border ports of entry construction $420,000,000
Immigration and Customs Enforcement tactical communications equipment and radios $20,000,000
Transportation Security Administration checked baggage and checkpoint explosives detection machines $1,000,000,000
Coast Guard shore facilities and aids to navigation facilities $98,000,000
Coast Guard alteration of bridges $142,000,000
FEMA public transportation and railroad security $150,000,000
FEMA port security grants $150,000,000
Bureau of Land Management maintenance and restoration of facilities, trails, lands, abandoned mines and wells $125,000,000
Bureau of Land Management construction of roads, bridges, trails and facilities, including energy efficient retrofits $180,000,000
Wildland fire management and hazardous fuels reduction $15,000,000
U.S. Fish and Wildlife Service maintenance and construction on wildlife refuges and fish hatcheries and for habitat restoration $165,000,000
U.S. Fish and Wildlife Service roads, bridges and facilities, including energy efficient retrofits $115,000,000
National Park Service facilities and trails $146,000,000
Historically black colleges and universities preservation $15,000,000
National Park Service road construction, cleanup of abandoned mines on parkland and other infrastructure $589,000,000
U.S. Geological Survey facilities and equipment, including stream gages, seismic and volcano monitoring systems and national map activities $140,000,000
Bureau of Indian Affairs construction of roads, schools and detention centers $450,000,000
Superfund site cleanup $600,000,000
Leaking underground storage tank cleanup $200,000,000
Clean water state revolving fund grants $4,000,000,000
Safe drinking water capitalization grants $2,000,000,000
Brownfields projects $100,000,000
Diesel emission reduction grants and loans $300,000,000
Forest Service road, bridge and trail maintenance; watershed restoration; facilities improvement; remediation of abandoned mines; and support costs $650,000,000
Wildfire mitigation $500,000,000
Smithsonian Institution repairs $25,000,000
Construction, renovation and acquisition of Job Corps Centers $250,000,000
Social Security Administration’s National Computer Center replacement $500,000,000
Military construction, Army – child development centers and warrior transition complexes $180,000,000
Military construction, Navy and Marine Corps – child development centers and warrior transition complexes $280,000,000
Military construction, Air Force – child development centers and warrior transition complexes $180,000,000
Military hospital construction and energy conservation investments $1,450,000,000
Military construction, Army National Guard $50,000,000
Military construction, Air National Guard $50,000,000
Family housing construction, Army $34,507,000
Family housing operation and maintenance, Army $3,932,000
Family housing construction, Air Force $80,100,000
Family housing operation and maintenance, Air Force $16,461,000
Temporary expansion of military homeowner assistance program to respond to mortgage foreclosure and credit crisis, including acquisition of property at or near military bases that have been ordered closed. $555,000,000
Veterans Affairs hospital maintenance $1,000,000,000
National Cemetery Administration for monument and memorial repairs $50,000,000
State extended care facilities, such as nursing homes $150,000,000
State Department diplomatic and consular programs for domestic passport and training facilities $90,000,000
International Boundary and Water Commission – Rio Grande levee repairs $220,000,000
Additional capital investments in surface transportation including highways, bridges, and road repairs $1,298,500,000
Administrative costs for additional capital investments in surface transportation $200,000,000
Capital investments in surface transportation grants to be awarded by other administration $1,500,000
Federal Aviation Administration infrastructure $200,000,000
Grants-in-aid for airports $1,100,000,000
Highway infrastructure investment $26,725,000,000
Highway infrastructure investment in Puerto Rico $105,000,000
Highway infrastructure funds distributed by states $60,000,000
Highway infrastructure funds for the Indian Reservation Roads program $550,000,000
Highway infrastructure funds for surface transportation technology training $20,000,000
Highway infrastructure to fund oversight and management of projects $40,000,000
High speed rail capital assistance $8,000,000,000
National Railroad passenger corporation capital grants $850,000,000
National Railroad passenger corporation capital grants for security $450,000,000
Federal Transit Administration capital assistance $6,800,000,000
Public transportation discretionary grants $100,000,000
Fixed guideway infrastructure investment $750,000,000
Capital investment grants $750,000,000
Shipyard grants $100,000,000
Public housing capital improvements $3,000,000,000
Public housing renovations and energy conservation investments $1,000,000,000
Native American housing block grants $510,000,000
Community development funding $1,000,000,000
Emergency assistance for the redevelopment of abandoned and foreclosed homes $2,000,000,000
Additional capital investments in low-income housing tax credit projects $2,250,000,000
Homelessness prevention and re-housing $1,500,000,000
Assistance to owners of properties receiving section 8 assistance $2,000,000,000
Grants and loans for green investment in section 8 properties $250,000,000
Lead hazard reduction $100,000,000

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Debunking a “theoretical” criticism of the Obama Stimulus

January 26, 2009 · Posted in Big Business Ripoffs, Finance, Financial Crisis, Government, Political Figures, Political Issues, Politics, Thoughts on the economy · Comment 
January 20, 2009 - President Barack Obama Oath of Office

January 20, 2009 - President Barack Obama Oath of Office

OK, I am probably diving in over my head on this one.  So here goes.  The Wall Street Journal online ran an opinion piece (http://online.wsj.com/article/SB123292987008414041.html?mod=googlenews_wsj) which cites a study that claims to de-bunk the theory behind a Keynesian-style stimulus plan as a cure (partial or otherwise) for an ailing economy.

The basis of the argument is that when a government spends a dollar, it takes a dollar from some other pocket which washes the impact of the spending.

The claim is that because the government would have to (in this case) sell a bond, the investor that buys the bond would otherwise have invested the money somewhere that would have had much the same effect as the stimulus package would have on the greater economy.

I accept that this may be true in an otherwise healthy economy.  But in the current economy it must be kept in mind that the propensity of savers to invest in riskier assets – let alone in job creating businesses is sharply lower than what it would be in an otherwise healthy economy.  Thus it is likely that those funds, if not used to purchase the government bond used to finance the stimulus, would have stayed in some ultra secure savings vehicle, a bank account (and we know how eager banks are to lend these days) or some other asset which is ultra secure and would not in fact be deployed somewhere that would get the economy moving.

It is exactly in situations like the one we are in where a Keynesian stimulus package will work.  No, it will not cure all the economy’s problems.  Will it make them less severe than they otherwise might be.  I truly believe it will.

You can find a PhD or study to say just about anything you want.  The key is to understand the assumptions underlying the theory or study.  I have not reviewed the study referenced in the opinion piece.  But you do not need a PhD to know that Keynesian stimulus proposals – whose impact may very well be muted by less private spending in a healthy economy – are made to order for an environment where the propensity of consumers and investors is to be risk averse to an extreme degree.

Further, the psychological shift in confidence that may result in increasing private economy risk appetites (and is probably impossible to quantify in an economic study) over time from the knowledge that the government is stepping up to the plate is a key component in the effectiveness of any stimulus plan.

The article makes some good points about the first version of the stimulus package and its apparent lack of timeliness (when the money will be spent).  But this Congress and Administration have been in place less than a week (together).  Let’s give them a few weeks.

In ordinary times I am very much opposed to Keynesian policy for reasons consistent with the position laid out in the article.  But, like the great man himself once said, “when the facts change, I change my mind….what do you do sir?”

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The REAL problem with the TARP

January 12, 2009 · Posted in Big Business Ripoffs, Finance, Financial Crisis, Government, Thoughts on the economy · 1 Comment 

federal_reserveThe real problem with the TARP is not that the banks took money and can not track where it has gone.  As I outlined in a comment to a recent post on this site, this is impossible and irrelevant.

The real problem with the TARP is that the money was sent to the wrong place initially.

If your house was on fire from a gas leak, would you just randomly spray water or would you first try to get the gas leak cut off?

If you randomly spray water the fire is likely to reignite.  If you cut off the gas leak you can then put out the fire without fear that the gas leak will reignite.

The banks were (are to some degree still) collapsing because the value of their assets was deteriorating.  Those assets that were the initial problem were, for the most part, home mortgages.

The Treasury should have – as originally intended by Congress – used the money to stem foreclosures.  By doing that we would have stabilized the value of the underlying assets of the banks and been able to avoid injecting “untrackable” tax payer dollars into the banks.  And we would have helped – directly – a lot of struggling tax payers in the process.

If you want to complain about the TARP, don’t bitch about the subsequent behavior of the banks…..bitch about the initial use of funds by your government.

Imagine, if instead of putting the money into the banks, the U.S. Treasury had taken the $700bn and used it as 20% equity in a giant Federal Reserve backed facility (the Federal Reserve is not allowed, by law, to buy assets if it believes it will incur lossses – this is why the $700bn would have served as a “backstop” to a Federal Reserve facility) to allow Fannie Mae, Freddie Mac, the FDIC and other institutions to buy mortgages and mortgage backed securities and then to restructure loans for struggling borrowers.  We would have been able to acquire $3.5 Trillion (with a “T”) of mortgages and adjust terms to allow people to stay in their homes.

By doing this the government would have supported the value of the mortgage backed securities market and thus the write-downs that ultimately have required additional equity for the banks would have – to a great degree – been avoided.

Think about it.

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Clark Griswold has a message for the United States government and the powers that be

January 12, 2009 · Posted in Big Business Ripoffs, Financial Crisis, Government, Thoughts on the economy · 2 Comments 
Merry F'ing Christmas and Happy Holidays - Government A'holes

Merry F'ing Christmas and Happy Holidays - Government A'holes

Clark Griswold had it right on the money, he was not talking about the financial bailout money Congress gave to virtually every bank in the land, but he might as well have been.  I think if Clark was talking about the bailout this is all he would have had to change.

Hey! If any of you are looking for any last-minute gift ideas for me. I have one……..Congress, the President, the Federal Reserve, my leaders, right here tonight.
I want them brought from their happy holiday slumber over there on Pennsylvania Avenue with all the other rich people and I want them brought right here, with a big ribbon on their head, and I want to look them straight in the eyes and I want to tell them what a……..

  • cheap
  • lying
  • no-good
  • rotten
  • four-flushing
  • low-life
  • snake-licking
  • dirt-eating
  • inbred
  • overstuffed
  • ignorant
  • blood-sucking
  • dog-kissing
  • brainless
  • dickless
  • hopeless
  • heartless
  • fat-ass
  • bug-eyed
  • stiff-legged
  • spotty-lipped
  • worm-headed
  • sack of monkey shit…….

……They ARE!  Hallelujah!  Holy shit!  Where’s the Tylenol?

Why you ask would Clark Griswold be so pissed at Congress, the President and the Federal Reserve? Well the answer my friend is blowing in the wind. Yep that really unkind and nasty wind that blows from the backside of the financial world. Here is the story about how your money is being spent, and how grateful everyone is for you spending your hard earned money to keep them in business.

WASHINGTON – It’s something any bank would demand to know before handing out a loan: Where’s the money going?

But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.

“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,’” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”

The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest?

None of the banks provided specific answers.

“We’re not providing dollar-in, dollar-out tracking,” said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.

Some banks said they simply didn’t know where the money was going.

“We manage our capital in its aggregate,” said Regions Financial Corp. spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout.

The answers highlight the secrecy surrounding the Troubled Assets Relief Program, which earmarked $700 billion — about the size of the Netherlands’ economy — to help rescue the financial industry. The Treasury Department has been using the money to buy stock in U.S. banks, hoping that the sudden inflow of cash will get banks to start lending money.

There has been no accounting of how banks spend that money. Lawmakers summoned bank executives to Capitol Hill last month and implored them to lend the money — not to hoard it or spend it on corporate bonuses, junkets or to buy other banks. But there is no process in place to make sure that’s happening and there are no consequences for banks who don’t comply.

“It is entirely appropriate for the American people to know how their taxpayer dollars are being spent in private industry,” said Elizabeth Warren, the top congressional watchdog overseeing the financial bailout.

But, at least for now, there’s no way for taxpayers to find that out.

Pressured by the Bush administration to approve the money quickly, Congress attached nearly no strings on the $700 billion bailout in October. And the Treasury Department, which doles out the money, never asked banks how it would be spent.

“Those are legitimate questions that should have been asked on Day One,” said Rep. Scott Garrett, R-N.J., a House Financial Services Committee member who opposed the bailout as it was rushed through Congress. “Where is the money going to go to? How is it going to be spent? When are we going to get a record on it?”

Nearly every bank AP questioned — including Citibank and Bank of America, two of the largest recipients of bailout money — responded with generic public relations statements explaining that the money was being used to strengthen balance sheets and continue making loans to ease the credit crisis.

A few banks described company-specific programs, such as JPMorgan Chase’s plan to lend $5 billion to nonprofit and health care companies next year. Richard Becker, senior vice president of Wisconsin-based Marshall & Ilsley Corp., said the $1.75 billion in bailout money allowed the bank to temporarily stop foreclosing on homes.

But no bank provided even the most basic accounting for the federal money.

“We’re choosing not to disclose that,” said Kevin Heine, spokesman for Bank of New York Mellon, which received about $3 billion.

Others said the money couldn’t be tracked. Bob Denham, a spokesman for North Carolina-based BB&T Corp., said the bailout money “doesn’t have its own bucket.” But he said taxpayer money wasn’t used in the bank’s recent purchase of a Florida insurance company. Asked how he could be sure, since the money wasn’t being tracked, Denham said the bank would have made that deal regardless.

Others, such as Morgan Stanley spokeswoman Carissa Ramirez, offered to discuss the matter with reporters on condition of anonymity. When AP refused, Ramirez sent an e-mail saying: “We are going to decline to comment on your story.”

Most banks wouldn’t say why they were keeping the details secret.

“We’re not sharing any other details. We’re just not at this time,” said Wendy Walker, a spokeswoman for Dallas-based Comerica Inc., which received $2.25 billion from the government.

Heine, the New York Mellon Corp. spokesman who said he wouldn’t share spending specifics, added: “I just would prefer if you wouldn’t say that we’re not going to discuss those details.”

The banks which came closest to answering the questions were those, such as U.S. Bancorp and Huntington Bancshares Inc., that only recently received the money and have yet to spend it. But neither provided anything more than a generic summary of how the money would be spent.

Lawmakers say they want to tighten restrictions on the remaining, yet-to-be-released $350 billion block of bailout money before more cash is handed out. Treasury Secretary Henry Paulson said the department is trying to step up its monitoring of bank spending.

“What we’ve been doing here is moving, I think, with lightning speed to put necessary programs in place, to develop them, implement them, and then we need to monitor them while we’re doing this,” Paulson said at a recent forum in New York. “So we’re building this organization as we’re going.”

Warren, the congressional watchdog appointed by Democrats, said her oversight panel will try to force the banks to say where they’ve spent the money.

“It would take a lot of nerve not to give answers,” she said.

But Warren said she’s surprised she even has to ask.

“If the appropriate restrictions were put on the money to begin with, if the appropriate transparency was in place, then we wouldn’t be in a position where you’re trying to call every recipient and get the basic information that should already be in public documents,” she said.

Garrett, the New Jersey congressman, said the nation might never get a clear answer on where hundreds of billions of dollars went.

“A year or two ago, when we talked about spending $100 million for a bridge to nowhere, that was considered a scandal,” he said.

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An Open Letter to Hank Paulson: Uncertainty & the Banks, What to do now

November 20, 2008 · Posted in Entertainment, Featured, Finance, Financial Crisis, People in the news, Political Issues, Politics, Social Issues, Society, Things to think about, Thoughts on the economy · 4 Comments 

Mr. Paulson:

The capital injections by the Treasury have not done anything to inspire confidence in the banking system by investors or to incentivize banks to start making new loans.

I recognize that it is too much to expect banks to run out and start expanding their balance sheets by writing new loans with so much uncertainty with respect to losses and impact on their capital.

Now that fears are spreading with respect to the commercial real estate market and the consumer loan market, the ability of banks to look at new business is further hampered.

We need to do something decisive and since so many are putting forth ideas, I want to put one out for your consideration.

The problem with the banking system is the continued uncertainty over asset values.  Due to the huge leverage of the banks a small decrease in asset values can blow through ALL of the capital in the banking system including the $125 billion given to the 7 largest banks and billions more given to the smaller banks.

As long as these assets are on their balance sheets, this situation remains unresolved and there is no place to go with these assets.  This is a cancer in the system and must be removed.

The U.S. Treasury is not moving forward with the TARP.  I think this is due to the complexity of the problem as well as the current environment in Congress and I understand your position.

But, with all due respect to you, I do not believe that you can wait and throw this off to the new Administration.

So, where do we go from here? 

I think the U.S. Treasury should convene the largest banks in the country, lock them in a room, with the following mandate:

1) The U.S. Treasury (UST) is going to capitalize a special purpose vehicle (SPV) – a new company – with $100 billion in cash.  UST will own the common stock of the SPV.

2) The banks (I use banks for ease, this could include insurance companies) – are going to contribute $1 trillion of assets to this vehicle with limits for each bank based on size.  The banks and UST will agree on what assets can be contributed and as a group the banks and UST will agree on the value of the assets to be contributed.

The assets that are allowed to be contributed will be broad asset classes, not one-off derivative deals and such.  Commercial mortgages, residential mortgages, consumer loans, large corporate and commercial loans (Shared National Credits, loans broadly held by banks) etc.

The $1 trillion of assets will not be contributed at “market value” nor will it be contributed at “par” value (the original value of the asset).  It will be contributed at a value that reflects the expected recovery of those assets over the life of the assets discounted back to the present (the “Intrinsic Value”).  

3) In addition to the $100 billion of capital injected into the vehicle by the U.S. Treasury the banks will make the following contributions:

a) For each $10 dollars of assets they contribute to the SPV they will contribute $1.00 of common stock.

Combining the $100 billion of cash and the $100 billion of common stock contributed by the participating banks the SPV will end up with $200 billion of capital, which should increase with the stock price of the banks.

b) In addition, the banks will place in escrow $1.00 of common stock for each $10.00 of assets contributed to the SPV.

The stock placed in escrow will be issued to the U.S. Treasury or liquidated at some future date to compensate the U.S. Treasury for any losses from its investment in the SPV and a minimum preferred return.  To the extent recoveries on the SPV exceed the intrinsic value estimate, this is the UST profit on the enterprise and the banks recover the shares placed in escrow.  The shares placed in the SPV are, again, part of the value to the UST from this endeavor.

3) The banks will receive a senior note equal to the value of the assets contributed to the SPC, paying interest at a rate which is equal to the yield on the collective assets of the SPV less operating costs.  The banks will also bear responsibility for providing knowledgeable employees – at their cost – to the SPV to manage these assets.  The SPV will have a Board comprised of respected individuals on a bipartisan basis.

The value in this idea is two fold:

First, by the banks getting a lot of these assets off their balance sheets they reduce the uncertainty in the system which should allow the stock market to re-value the equity based on the core business and not the “unknowns” associated with these assets.

Second, the security which the banks take back from the SPV will be worth more than the value of the loans on their balance sheet.  Consider this hypothetical example:

1) The banks contribute assets, collectively priced by the market at 50% of the par value of the security;

2) A conservative analysis (5% drop in GDP next year and 1.5% growth thereafter, or something like this) suggests that the intrinsic value of the assets is actually 70% of par;

3) The banks contribute these class of securities to the SPV for $1 trillion at the determined 70% “intrinsic value” (the face value contributed will exceed $1 trillion, but the value is greater than the mark to market value);

4) Now let’s say the actual recovery on these securities is $800 billion, the banks hold a senior security on this asset and thus would have first recourse to the $800 billion;

5) The SPV would however have the $100 billion of UST capital and $100 billion (at current market prices) of a portfolio of bank stocks to satisfy the SPV obligations to the banks.

As a result of this structure, the SPV senior securities taken back by the banks would have a tremendous cushion to absorb losses and still be worth par value to the banks which participate.  The break-even recovery in this example is 56% on the original par or face values of the securities contributed.  This should provide considerable ability for the new SPV senior securities on the bank balance sheets to be valued at Par.  This will enhance the asset quality of the banks and likely allow them to mark up asset values on their balance sheets.  

This is how the UST gets the “bang for the buck” that you referenced when you said the TARP could not serve its purpose.

The banks would be healthier as a result of this structure and thus the stock they contribute as capital and to the escrow should be a good store of value.

THE KEY MERIT OF THIS IDEA IS THAT IT REPLACES ILLIQUID ASSETS WHICH NO ONE CAN VALUE WITH A SINGLE ASSET THAT HAS ADDITIONAL SUPPORT AND SHOULD THUS BE WORTH PAR.

The taxpayer is protected by the escrowed stock that the banks contributed to participate.  The escrowed securities first go to compensate the UST dollar for dollar on losses and then up to a preferred rate of return.  Any appreciation in the stocks is split with 50% staying with the UST and the rest returned to the banks.

Since no one will buy bank stocks right now – everyone, I mean everyone who has bought bank stocks in the last two years has been killed – this allows the banks to effectively RECAPITALIZE themselves with some assistance from the UST.

By getting a large part of the troubled assets off the balance sheets of the banks, placing it into a vehicle that is NOT PUBLIC (thus it can sit and hold these securities without concern for the “mark to market” accounting) and replacing those assets with a single security whose credit has been enhanced partly by the UST and partly by the banks themselves, you will dramatically reduce the uncertainty in the banking system.

The banks will still have some troubled assets which due to the unique characteristics of those assets are not appropriate for the SPV.  But the idea here is that by reducing the MAGNITUDE of the problems the banks are facing and enhancing the asset quality of the banks through this program you leave them in a better position to take the write-off on those assets or to work them out themselves.

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