Category Archives: Capitalism
The point is, ladies and gentleman, that greed — for lack of a better word — is good.
Greed is right.
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.
Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind.
And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the USA
That has become a mantra of sorts on Wall Street, thanks to Oliver Stone and Stanley Weiser. Twenty-one years ago, the two paired up to make the film Wall Street, starring Michael Douglas and Charlie Sheen.
Now , 20th Century Fox is moving forward with a sequel (called Money Never Sleeps) to 1987’s Wall Street. The modern-day story will again center on Gordon Gekko, who has recently been sprung from prison and re-emerges into a much more tumultuous financial world than the one he once lorded over. The Bud Fox character, played by Charlie Sheen in the original, will not appear in the latest incarnation.
Seems like it is the perfect time for sequel to movie Wall Street when the economy is in crisis and the markets are in freefall.
`Joe the plumber,” the Toledo, Ohio, man whose complaints about Barack Obama’s tax plan were highlighted by John McCain in the final presidential debate, owes the state of Ohio almost $1,200 in back income taxes.
According to records on file with the Lucas County Court of Common Pleas, the state filed a tax lien against Samuel J. Wurzelbacher for $1,182.98 on Jan. 26, 2007, that is still active.
Wurzelbacher was thrust into the national spotlight this week when he told Obama he worried that the Illinois senator’s proposals to roll back Bush administration tax breaks for Americans earning more than $250,000 would prevent him from buying a plumbing business that would earn between $250,000 and $280,000 a year.
McCain, an Arizona Republican senator, pointed to the exchange during the debate last night when he turned to the camera and said, “I will not stand for a tax increase on small-business income.” Directly criticizing Obama, he added, “what you want to do to `Joe the plumber’ and millions more like him is have their taxes increased and not be able to realize the American dream of owning their own business.”
Today, at a rally in Downingtown, Pennsylvania, McCain said “the real winner last night was `Joe the plumber.”’
On Oct. 12, as Obama was campaigning door-to-door in suburban Toledo, Wurzelbacher confronted the Democratic presidential nominee about his tax plan.
“Do you believe in the American dream?” Wurzelbacher asked before asking about the tax increase. “I’m being taxed more and more for fulfilling the American dream.”
Wurzelbacher’s home telephone number is unlisted, and efforts to reach him by calling his neighbors and family were unsuccessful. Attempts to reach Wurzelbacher at the plumbing company where he works were also unsuccessful. The address on the lien and other records for him matched the address published by the Toledo Blade, which also noted the lien.
The state of Ohio places a lien on real property after several steps to try to collect a tax debt, according to John Kohlstrand, a spokesman for the Ohio Department of Taxation who said he couldn’t discuss any specific case.
If a delinquency notice goes unheeded, the Department of Taxation issues a billing notice, Kohlstrand said. If that is ignored, a more formal assessment notice is sent. Failing to appeal an assessment or losing an appeal puts the debt into the hands of the state attorney general for collection. The attorney general typically sends a collection notice and simultaneously files a lien.
“The taxpayers may not necessarily know about the lien,” Kohlstrand said, although they would receive other notices.
In Wurzelbacher’s case, the lien indicated that the notice was sent to a previous address in Toledo.
Ray Ann Estep, section chief for revenue-recovery services for the Ohio attorney general, said Wurzelbacher’s lien was filed six months after the Department of Taxation certified the debt for collection.
“Unfortunately, sometimes people don’t resolve their debts as quickly as we would like them to,” she said.
In addition to tax credits and a proposal that would allow Wurzelbacher to avoid paying capital-gains taxes if he ever sold the business he wants to acquire for a profit, Obama has proposed allowing the top two tax rates of 33 percent and 35 percent to revert to what they were during the Clinton administration, or 36 percent and 39.6 percent, respectively.
In 2007, the 33 percent bracket kicked in for taxable income exceeding $195,851.
Under Obama’s proposal, Wurzelbacher would face about $900 more in taxes if he netted $280,000 of income from his new business and had to pay an extra 3 percentage points on the amount over $195,851, said Gerald Prante, a senior economist at the Tax Foundation, a Washington research group that is examining both candidates’ plans.
“His average tax burden, the final bill he pays to the IRS isn’t going to go up much if he’s just making $280,000 a year,” Prante said. He would face higher marginal tax costs to expand the business beyond that, he said.
Not Taxable Income
It’s far more likely that the $280,000 Wurzelbacher told Obama he’d earn would be in the form of gross receipts and not taxable income, said Steven Bankler, a certified public accountant in San Antonio, who counts plumbers and other trade professionals as his clients.
By the time Wurzelbacher took proper business deductions, Bankler said, he’d be left with between $150,000 and $200,000 in taxable income and wouldn’t be affected by Obama’s proposed increase in the top rates.
Wurzelbacher might eventually have to pay more employment taxes under Obama’s plan to impose a rate of between 2 percent and 4 percent on wages over $250,000, Bankler said, but Obama has said that change wouldn’t take effect for a decade
Joe the plumber makes $250,000 a year whereas according to the Bureau of Labor Statistics, the mean annual wage for plumbers in the United States in 2007 was $47,350.
Why are these politicians calling him a plumber when in reality he is a businessman. I bet next they will next call Bill Gates an electrician.
General Motors Corp. said Friday that bankruptcy is not an option being considered despite the “unprecedented challenges” posed by a weakening economy.“Bankruptcy would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and nonconstructive,” a GM spokesman said.
Instead GM is in talks with Chrysler for a possible merger. General Motors Corp., Chrysler LLC and Cerberus Capital Management LP have held preliminary talks about a merger or an acquisition of Chrysler by GM.
Ford sold Jaguar and Land Rover earlier this year to Tata Motors for 1.15 billion , and according to sources Tata Motors might also be buying a stake in Mazda Motor Corp.
The auto industry has been hit hard in recent weeks by the effects of the credit crisis, prompting GM and Ford to issue statements Friday to dispel the notion that they might be headed for bankruptcy. GM and Ford shares were battered with the rest of the stock market this week, falling to lows not seen in decades.
Ford shares have plunged to a 26-year low at $1.99 and its U.S. rival General Motors Corp to a nearly 60-year low to $4.89
After the bailout of AIG last month, the United States government effectively bought an 80% share in the company. That should have caused a fundamental change, you would think, in how the company was spending funds on compensation, bonuses and benefits.
But it doesn’t look like that’s what happened. The committee learned that shortly after the bailout went through, executives from AIG’s major U.S. life insurance subsidiary, AIG American General, held a week-long conference at an exclusive resort in California.
The resort is called the St. Regis Monarch Beach. … It’s very impressive. This is an exclusive resort. The rooms start, gentlemen, at $425 a night. Some are more than $1,200 a night. AIG spent nearly $500,000 in a single week at the at this hotel. Now, this was right after the bailout.Some of the charges shareholders who are now U.S. taxpayers had to pay. Check this out.
AIG spent $200,000 for hotel rooms, and almost $150,000 for catered banquets. AIG spent $23,000 at the hotel spa and another $1,400 at the salon. They were getting their manicures, their facials, their pedicures and their massages while the American people were were footing the bill. And they spent another $10,000 for leisure dining.
Obama campaign launched a new iphone application called Obama 08 over the weekend. This is a real smart move considering there are around 4 million iphone users.
The free application is compatible with the iPhone and iPod touch. It will organize your contacts by key battleground states, and measures statistics to see how you are doing compared to other leading callers. It also provides you with information about the campaign via text messages and e-mail, offers coverage of national and local campaign news, helps you find local events, share the information by e-mail, and get maps and directions. You can also use the application to browse videos and photos from the campaign.
The Internet and technology is positioned to play a huge role in elections. Probably Mccain campaign does not get it.
Traders stunned as Russian stocks go into tailspin, lose nearly 20 percent
MOSCOW (AP) — Russia’s leading stock markets suffered their biggest-ever one-day losses as shares went into free fall on the back of falling oil prices and deepening fears about the global economy despite the passage of a $700 billion U.S. bank bailout.
Trading on MICEX — the country’s largest index– was shut down three times, closing down 18.6 percent to 752 points. The benchmark RTS — where trading was halted twice — crashed to its lowest point since August 2005, falling by 19.1 percent to 866.4 points.
“The mood is kind of disbelief. You’d think we would have gotten used to it by now,” said Ron Smith, strategist at Moscow-based Alfa Bank. “Traders are just sitting there staring at the screens and going, ‘Wow.'”
“In this environment, nobody wants to step up to the table and buy a stock,” he added.
In September, growing financial turmoil in the United States and a wave of margin calls sent the Russian stock markets into their biggest downward spiral since 1998. The MICEX lost 25 percent in just three days, and prompted regulators to shut down the markets to stem the decline. They have since used that tool on several occasions when falls have become severe — to lesser effect.
Russia’s stock market has boomed in recent years amid high prices for oil and natural gas. But the market began falling sharply in midsummer amid concerns about government interference with businesses, and the drop accelerated as the global economic crisis intensified. Oil prices, the backbone of Russia’s economy, have been sharply down in recent days — dropping to under $90 a barrel — and investors have also been spooked by August’s five-day war between Russia and Georgia. The RTS is now down by 64 percent from its May peak.
Banking stocks were among the worst hit on Monday in Russia. State-controlled Sberbank, the country’s largest lender, shed 16.6 percent on MICEX, while the state-backed VTB banking concern shed 24.5 percent. Mining firm Norilsk Nickel plunged by 30.1 percent on the RTS on weak financials and plummeting nickel prices. State-controlled oil major Rosneft was 24 percent lower.
Russia’s shares tanked against a worsening global backdrop.
After trading closed for the weekend in Russia, the U.S. House of Representatives passed a $700 billion bailout plan at the second attempt. But it provided little relief to investors, who are focused on deepening financial woes in Europe that threaten to derail global growth.
Concerns have mounted in Europe amid a wave of state-backed bank bailouts, and a growing sense of dislocation of European-wide efforts to tackle the financial crisis — despite pledges from EU leaders to secure the stability of the financial system in a coordinated manner.
All major indexes in Europe suffered heavy falls in afternoon trading: The FTSE 100 closed the day down 7.9 percent, Germany’s DAX was down 7.1 percent and France’s CAC-40 closed 9 percent lower.
“When it’s cracking up that badly there, you are going to see extremely high data come in for a market like Russia,” said Smith. “The valuations (in Russia) haven’t mattered for two months now, and they certainly don’t at this point.”
Auto Industry is feeling the heat from the credit crunch in the US market and is heading south
General Motors reported that sales of cars and light trucks dropped 16% compared to September a year ago. Sales at Ford tumbled 35% from last year and Toyota says September sales down 32.3%. Chrysler LLC sales are forecast to drop by 37%.
Auto industry is starting to look like the Real Estate market (though there have been no bubble , like we saw for housing ) , but analyst predict that as many as 3,800 U.S. car dealerships could fail this fall and into 2009 — nearly one in five — because of weak sales, increased operational costs and the credit crunch.
If on an average a car dealer employs around 50-60 employees , we are looking at a minimum 200,000 job losses. And if these auto giants start to go bankrupt the amount of job loss is unimaginable.
Seeds were sown way back in 1977. Known as Community Reinvestment Act , is a United States federal law that requires banks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services. The bill encouraged the Federal National Mortgage Association, commonly known as Fannie Mae, to enable mortgage companies, savings and loans, commercial banks, credit unions, and state and local housing finance agencies to lend to home buyers.
National grassroots pressure for affordable housing. Though there was considerable opposition from the mainstream banking community. Only one banker from ShoreBank in Chicago, testified in favor of the act.
Mr A seeks a housing loan to give shape to his dream home. But he doesn’t have good credit rating. This means that he is unable to clear all the stringent conditions that a bank imposes on an individual before it sanctions a loan. Since his credit is not good enough, no bank will give him a home loan as there is a fear that the chances of a default by him are high. Here enters , Mr B (a robust financial institution)who has good credit rating and is willing to take on some amount of risk and make profit.
Given his good credit rating, the bank is willing to give Mr B a loan. The bank gives the loan at a certain rate of interest.Mr B then divides this loan into a lot of small portions and gives them out as home loans to lots of others like Mr A who do not have a great credit rating and to whom the bank would not have given a home loan in the first place.
Mr B gives out these loans at a rate of interest that is much higher rate than the rate at which he borrowed money from the bank. This higher rate is referred to as the sub-prime rate and this home loan market is referred to as the sub-prime home loan market.
By giving loan to many Mr A’s , Mr B is expecting to make lot of profit. Mr B does not wait for the principal and the interest on the sub-prime home loans to be repaid, so that it can repay its loan to the bank (the prime lender), which has given it the loan.
So what does Mr B do? He goes ahead and securitises’ these loans. Securitisation means converting these home loans into financial securities, which promise to pay a certain rate of interest. These financial securities are then sold to Mr C (Institutional Investors)
And how is Mr C repaid? The interest and the principal that is repaid by Mr A through equated monthly installments (EMIs) is passed onto Mr C.
This looks so simple so what went wrong
The sub-prime home loans were given out as floating rate home loans. A floating rate home loan as the name suggests is not fixed. As interest rates go up, the interest rate on floating rate home loans also go up. As interest rates to be paid on floating rate home loans go up, the EMIs that need to be paid to service these loans go up as well.
What happened next is that people started defaulting on their obligations. Once more and more sub-prime borrowers started defaulting, payments to the institutional investors who had bought the financial securities stopped, leading to huge losses. The housing bubble collapsed and mortgage-backed securities (bought by Mr C) were almost worthless . As defaults kept rising, Mr B could not service their loans that they had taken from banks. So they turned to other financial firms to help them out, but after a while these firms too stopped extending credit realizing that the collateral backing this credit would soon lose value in the falling real estate market.
Now burdened with tons of debt and no money to pay it back, the back of these financial entities broke, leading to the current meltdown.
Ok this is an American problem , so why are markets around the world crashing
Mr C who had invested in securitised paper from the sub-prime home loan market in the US, saw his investments turning into losses. Most big investors have a certain fixed proportion of their total investments invested in various parts of the world. Once investments in the US turned bad, more money had to be invested in the US, to maintain that fixed proportion. In order to invest more money in the US, money had to come in from somewhere. To make up their losses in the sub-prime market in the United States, they went out to sell their investments in emerging markets like India where their investments have been doing well. So these big institutional investors, to make good of their losses in the sub-prime market, began to sell their investments in India and other markets around the world.