The corrupt Shorebank bailout has pitted one faction of the left against another. On the one side are those like Geithner, who are starting to wake up to the grim economic reality that bailouts and corruption have imposed on our nation. On the other side are those like Schakowsky, who are determined to borrow, spend, and tax our nation into penury in order to chase their radical ideals and reward their political cronies.
The dividing line between the two factions is not based on ideology, but circumstance: those with actual responsibilities are the ones getting cold feet. Even Rep. Barney Frank (D-MA) was prepared to allow an investigation of ShoreBank and other bailouts into the financial regulation bill, until that amendment was killed in Senate negotiations at the last moment by those determined to cover up the role of the White House in the affair.
Schakowsky and other Chicago politicians who have lobbied for the ShoreBank bailout claim they are acting on behalf of a bank that serves needy communities. What they refuse to explain is why ShoreBank is the only community development bank they have campaigned and lobbied for, out of all the community development financial institutions in America that would be eligible for the $1 billion set aside within TARP for their benefit.
Schakowsky did not try to bail out Park National Bank, for example, which failed last year and had a distinguished record of addressing the needs of low-income customers. Nor has she tried to help banks in her own community, such as Bank of Lincolnwood, which was an iconic symbol in the 9th congressional district. This year alone, 11 banks have failed in Illinois, and 86 nationwide. None received the help ShoreBank is getting.
The Treasury is backing away from ShoreBank because of the mounting political and financial cost of supporting it. Schakowsky and other Illinois politicians are determined to save ShoreBank because of what might be revealed in an audit if it were allowed to fail. This is the classic pattern of failed hegemonic political movements, left or right: they fall apart not over differences of principle, but over the rapidly dwindling spoils of power.
Showing posts with label bailout. Show all posts
Showing posts with label bailout. Show all posts
Saturday, July 10, 2010
Tuesday, May 11, 2010
Bailing out a basket case: Even with austerity, Greek debt will grow to 150% of GDP in four years
The Obama Administration on Sunday approved U.S. participation in an international bailout of Greece that will cost American taxpayers billions of dollars. Despite the objection of many members of Congress, the President went ahead with the bailout, thinking that $145 billion would be enough to bring Greece out of its economic malaise and restore stability to the global economy.
On the contrary, the President’s willingness to pump billions into a small European country such as Greece makes it more likely that other European countries with similar problems – namely, Spain, Portugal, and Italy – will be coming to the United States soon looking for even bigger bailouts.
First, some background: Greece’s economic crisis was caused by too much government spending and borrowing which weakened its already over-taxed, over-regulated economy. Although Greece’s population is just 11 million, it has more than one million public-sector employees. Greek civil servants enjoy 14 months of pay for 12 months worked, and their average retirement age is 53. Once retired, they enjoy generous pension benefits worth 80% of their salary. Greece will run a budget deficit this year worth 14% of its GDP, and its entire national debt will equal 113% of GDP. These policies proved unsustainable, and so the European Union and the IMF were called in to rescue Greece before international investors stopped lending them any more money.
The $145 billion bailout comes to $13,000 per person in Greece. An equivalent bailout of America — which has a population of over 300 million — would cost over $4 trillion. With such a large amount of cash being thrown at Greece, the bailout has to work, right? Well, according to the IMF’s own optimistic forecasts, even if Greece implements the austerity measures required by the deal, it will still run huge budget deficits indefinitely. So huge, in fact, that Greece’s debt-to-GDP ratio will soar to 150% in just four years.
On the contrary, the President’s willingness to pump billions into a small European country such as Greece makes it more likely that other European countries with similar problems – namely, Spain, Portugal, and Italy – will be coming to the United States soon looking for even bigger bailouts.
First, some background: Greece’s economic crisis was caused by too much government spending and borrowing which weakened its already over-taxed, over-regulated economy. Although Greece’s population is just 11 million, it has more than one million public-sector employees. Greek civil servants enjoy 14 months of pay for 12 months worked, and their average retirement age is 53. Once retired, they enjoy generous pension benefits worth 80% of their salary. Greece will run a budget deficit this year worth 14% of its GDP, and its entire national debt will equal 113% of GDP. These policies proved unsustainable, and so the European Union and the IMF were called in to rescue Greece before international investors stopped lending them any more money.
The $145 billion bailout comes to $13,000 per person in Greece. An equivalent bailout of America — which has a population of over 300 million — would cost over $4 trillion. With such a large amount of cash being thrown at Greece, the bailout has to work, right? Well, according to the IMF’s own optimistic forecasts, even if Greece implements the austerity measures required by the deal, it will still run huge budget deficits indefinitely. So huge, in fact, that Greece’s debt-to-GDP ratio will soar to 150% in just four years.
Monday, November 23, 2009
Generous uncle: Goldman Sachs got $10 billion from taxpayers, paid $10.9 billion to employees
Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.
The company’s effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits.
Goldman Sachs, which today reported its first quarterly loss since going public in 1999, lowered its rate with more tax credits as a percentage of earnings and because of “changes in geographic earnings mix,” the company said.
The rate decline looks “a little extreme,” said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC.
“I was definitely taken aback,” Willens said. “Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.”
The company’s effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits.
Goldman Sachs, which today reported its first quarterly loss since going public in 1999, lowered its rate with more tax credits as a percentage of earnings and because of “changes in geographic earnings mix,” the company said.
The rate decline looks “a little extreme,” said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC.
“I was definitely taken aback,” Willens said. “Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.”
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