NYT Editorial: Why couldn’t the US financial system be more like it’s like Canadian brother’s?

Being that the World Economic Forum report from a few months back ranked Canada’s banking sector as the most stable in the world, the notion shouldn’t come as any surprise.  And since I’m working for a Canadian bank and am not either (a) jobless; (b) stealing taxpayer money to pad my annual bonus-but-don’t-call-it-a-bonus (… not to the same extent anyways); or (c) under investigation for the decades-long theft of billions, it seems that I should understand the appeal of emulating the Canadian system.

But in today’s New York Times editorial, Theresa Tedesco, a correspondent for the Canadian paper The National Post, comes to a mind-blowing conclusion:

“This would entail building a national banking system based on a small number of large, broadly held, centrally and rigorously regulated firms. Imitating the Canadian model would require sweeping consolidation of American banks. This would be a very good thing. Washington had difficulty figuring out the magnitude of the financial crisis because there are so many thousands of banks that it was impossible for regulators to get into all of them.”

Where the fuck did she get the idea that too many banks was the biggest problem with the US banking sector?  I believe toobigtofailitis was actually the biggest problem.  Last I checked, the FDIC wasn’t breaking too much of a sweat cleaning up two banks a week (including two yesterday) at a relatively-minor-but-adding-up loss, selling almost all of them to other small, regional banks.

Ms. Tedesco’s dream scenario is a nightmare to me:

“Washington is already on the path to achieving consolidation. Eventually, some of the larger banks into which the government is injecting taxpayer money will probably be deemed beyond help, and will either be allowed to die or be partnered with other banks. The market will take its cues from this stress-testing, and make its own bets on which banks will survive. It’s hard to predict how many will have survived when the dust settles, but the new landscape might consist of only 50 or 60 banking institutions”

We’re currently in the midst of a super-double-top-secret auditing of the top 19 banks’ books in the US (those with assets over $100 billion), largely to avoid another Lehman-like collapse (they had $600 billion in assets and their failure brought the global financial system to its knees).

In Ms. Tedesco’s fantasy solution, the US system would have 50-60 banks, all with hundreds of billions in assets (at $12 trillion in total US bank assets, according to this graph, that would leave roughly $200 billion in assets in each bank.  And that could be a massively underestimated value, as Google Finance indicated that just JP Morgan, Citigroup, and Bank of America combine for $6 trillion in assets).

So how are you Americans enjoying gambling your economy on the hope that your systemically-vital 19 largest financial institutions are healthy enough to survive on welfare without bringing down the whole US (and global) economy?  Ms. Tedesco recommends you triple-down.

… and the cow goes moo

NYT’s take on Iraq: It’s definitely sexist, but is it… true?

The New York Times daily e-mail highlighted a shocking quote from their article on the growing humanitarian crisis of Iraq’s war widows:

“If we give the money to the widows, they will spend it unwisely because they are uneducated and they don’t know about budgeting. But if we find her a husband, there will be a person in charge of her and her children for the rest of their lives.”

- Mazin al-Shihan, director of a city agency in Baghdad, on his plan to pay men to marry Iraqi war widows.

The article manages to provide a reminder of the crisis that will exist long after the war and insurgency end (wishful thinking, on my part?).  And also the broader issues that condemn Iraqi women to continued subjugation.

The desperation that accompanies the loss of the family’s patriarch, in addition to the damanged national economy, leave war widows especially in untenable — and downright disturbing — circumstances:

“Officials at social service agencies tell of widows coerced into “temporary marriages” — relationships sanctioned by Shiite tradition, often based on sex, which can last from an hour to years — to get financial help from government, religious or tribal leaders.”

The only way I can interpret that statement is that widows have been forced into a form of blessed prostitution for survival in the absence of their husbands.

As horrible as Mr. al-Shihan’s comment may seem (and the NYT’s choice to include his laughing before the comment in the article makes it clear that the sexism and callousness of Mr. al-Shihan’s remarks was intentionally passed on), one wonders if the sexism that appears to permeate the culture (though I’ve heard that the sexism pre-war existed to a smaller degree in Iraq than many other mideastern nations) has left thousands of Iraqi women uanble to fend for themselves and their families in absence of their patriarch?

As easy as it would be to simply condemn Mr. al-Shihan’s remarks, I clearly cannot rival his knowledge of the situation and would be loath to make claims contending such.  But if he is in fact speaking truth — and not just being an asshole — then the humanitarian crisis taking shape in Iraq’s war widows will outlast the war by years if not decades.

[And this may seem minor but is frankly the most shocking information I found in this article:

"Efforts to increase the government stipend for widows — currently about $50 a month and an additional $12 per child — have stalled. By comparison, the price of a five-liter container of gasoline, used for cars as well as home generators, is about $4."

The paltry stipend is not a surprise at all.  But why is one of the most oil-rich countries in the world charging more for a liter of gasoline than Canadian gas stations (approximately $0.80/L CDN now, or roughly $0.64/L USD)?  How does that make any sense?]

… and the cow goes moo

Bill Moyers: Big Fucking Hypocrite

Or so it appears, according to this Slate exposé: “The Intolerable Smugness of Bill Moyers”

Very disappointing.  Bill Moyers has been a professional and capable figure of liberal journalism for years and my personal favorite interviewer (he’s not a grilling type, but explores subjects the manner I would want someone to and in a manner that is very affable but not obsequious).

The Slate report makes a number of accusations of Moyers that are difficult for someone my age (I was not alive to see Moyers working in LBJ’s administration) to comprehend.  In the years that I have watched Moyers conducting interviews, and giving interviews, he has been a champion of civil rights, responsible journalism, and a critic of the Bush Jr. administration’s attempts to coerce the press corps.

But the article brings grave doubt to all those claims of Moyers, and makes him out to be a big fucking hypocrite.  Not only had Moyers apparently been a point man involved in rooting out homosexuals within the Johnson administration, a participant in the surveillance of Martin Luther King’s private life, but he appears to have been a political operative of the first order, requesting help from FBI Director J. Edgar Hoover to dig up information about 1964 presidential nominee (and rival to Johnson) Barry Goldwater.

And Moyers’ past interactions with journalists in the White House Press corps were fraught with what I would have thought to be a uniquely Bush/Rove investion:

“Moyers pitched the idea of planting questions to Johnson, who embraced it, giving Moyers a couple of questions for [Lyndon B. Johnson's assistant press secretary Joe] Laitin to distribute, which he did.

Johnson so loved this innovation that he was determined to plant every question at his next news conference. About 15 minutes before the session started, Moyers brought Laitin about 10 questions from the president. When Laitin protested that this was too much—”Bill, this isn’t the way it’s done”—Moyers said, “Do it!”"

And these stories seem to be corroborated by multiple sources.  It seems Moyers should be much more reticent in criticizing Bush’s gelding of the press.

Yet, the following is a quote from Moyers in 2003, referring to a joke made by Bush that a press conference was scripted (also from the Slate’s article):

“I think these forces have unbalanced the relationship between this White House and the press. Frankly, even if we had tried it in LBJ’s time, we wouldn’t have gotten away with the kind of press conference President Bush conducted on the eve of the invasion of Iraq—the one that even the President admitted was wholly scripted, with reporters raising their hands and posing so as to appear spontaneous.”

Bill Moyers is a big fucking hypocrite.

[His show is still great though.  Washington Post reporter Robert G. Kaiser's interview in Moyers' most recent episode wasn't shocking in its content, but anothe rexample of Moyers' fairly balanced reporting (for a former Democratic staffer anyways).  They discuss the infection of D.C. with lobbyists, their ability to shape legislation, and their permeating influence on Republicans and Democrats alike.  Tom Daschle, a notably corrupted high-profile Democrat, receives as much attention as the similarly corrupted and high-profile Republican Tom Delay.  And the brightest figure in the Democratic Party's near past, Bill Clinton, is not saved from mention.  Nor the bright figure in the party's future, Hillary Clinton.  I love when Moyers speaks on the subject of compromised principals in politics.  Seems he had first hand knowledge.]

… and the cow goes moo

NYT: IRS Grows a Pair

In today’s New York Times:

“In the criminal investigation that led to this week’s settlement, the Justice Department had zeroed in on about 19,000 wealthy Americans. Those UBS customers had a combined $20 billion in assets at the bank, and may have evaded $300 million a year in federal taxes through UBS’s undeclared offshore private banking services. But the I.R.S. has been conducting a parallel investigation, and on Thursday the Justice Department asked a federal judge to require UBS to disclose to the I.R.S. the identities and records of the 52,000 clients. In the past, UBS has suggested that the 19,000 accounts under investigation, which it is now closing, were the extent of its undeclared offshore banking services. UBS, the world’s largest private bank, said it would vigorously challenge the efforts.”

Ooooooowee! They’re taking this shit seriously!  Note to IRS auditors: I’ve heard the Cayman Islands and Bahamas are lovely this time of year.  Perhaps there are some institutions there worthy of investigation?

Time for those that made so much during the boom years to pay up.  Up until now, they have shirked their responsibilities to bear the costs of their government’s ‘functioning’, but now that the government’s sole purpose is to clean up their mess they made while partying, I think it’s time they open their wallets a bit.

I am so happy.

… and the cow goes moo

One Good Thing to Come Out of the Crisis: The End of Offshore Tax Shelters?

The New York Times has a, quite frankly, SHOCKING story about UBS’s offshore account business for Americans.  That the Swiss bank offers solutions that offer little purpose other than tax evasion is not the shocking part, of course.  I am blown away that not only is this tax sheltering tool used exclusively by the ultra-rich actually being attacked, but UBS is actually cooperating AND admitting guilt!

Holy cow!

Now initially, it all sounded well and good… but upon a closer reading of the article, I have a number of issues:

1. “Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers.” – So USB has a choice? Or are prosecutors just investigating a hundred times more accounts than they need to?
2. “The Swiss are saying that this is the end of Swiss banking as they knew it,” said Jack Blum, an offshore tax specialist. “Nobody will trust the security of the Swiss bank account.”” – I hear a banker making cash register noises in the Cayman Islands right now.
3. “Under the terms of a so-called deferred prosecution agreement, the bank and its executives could be indicted if UBS didn’t identify the customers.” – See issue (1).  Threatening indictment still only gets you a few hundred of 19,000 accounts of interest?
4. “Prosecutors suspect that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes.” – Over that six-year span, we would be looking at $1.8 billion in taxes evades.  Kinda feels like chump change by today’s standards, but I question the accuracy of the reporting.  The article indicates that UBS earns $200 million per year from the business.  Assuming that revenue comes from the clients (though perhaps it comes from gains on the deposits), the clients are then looking at a net-gain of $100 million per year collectively over just paying their taxes like the average sucker.  So for that six-year period, and $20 billion hidden, the clients manages a net-gain of $600 million.  So are UBS’s tax-evading clients parking their money in Switzerland to come ahead 3% points on their capital?  Or do Swiss accounts earn more money than plebian accounts as well?

Granted, I know nothing about Swiss banking (I’m not in their demographic) beyond what I picked up from David Cay Johnston’s ‘Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich–and Cheat Everybody Else’, but this sounds like a mere surface-level story.  Not only does this apparently successful investigation likely only scratch at the surface of UBS’s admitted misconduct, UBS is merely one of many businesses earning money by helping wealthy individuals avoid paying taxes (the Tax Justice Network indicates that “the world’s High Net Worth Individuals (HNWIs) held around $11.5 trillion of assets offshore, which would generate a return of about $860 billion a year at a 7.5% rate of return, and a consequent tax loss of $255 billion”).  Is this prosecution meant to placate those of us who have been disgusted by the ease with which the wealthy evade taxes in America?  Or is this the start of real change in the way the US government treats white collar crime?

While taxpaying Americans are being expected to pay a high price for the current crisis (through diminishing employment opportunities, decades of stagnating wages, the destruction of capital wealth, and lately the withholding of income tax returns), and doing so largely against their will, a real uproar could be created should the average American taxpayer be made aware of the amount of taxes rich individuals and corporations succeed in evading.  And certainly, the federal and state governments could use this income now more than any time in the recent past.

Let’s hope investigators continue to pursue the billions of taxes owed to our now-bankrupt governments on wealth generated during the good years.  And if not, well, maybe we’ll address them next economic-collapse.

… and the cow goes moo

Is anyone thinking about what happens after the recession?

With all this effort, newsprint, and bytes expended on the crafting of a stimulus plan to dampen the effects of the financial crisis, does it seem odd to anyone else that little thought is being applied to what will come after?

Granted there are good reasons to focus on the task at hand considering the enormity of it.  But there should be one very prominent factor in deciding which projects should survive the Congressional ‘negotiating’:  How much of what is spent now can help us save later.

Regardless of whether this stimulus package achieves its purported goals, or even if you believe that a government can spend a country (a world, in this case) out of a recession, it should be agreed that spending must reach a nadir afterwards to make up for the profligate spending of our recent past and likely future.

‘Shovel-ready’ has been a key criterion used by those who support a stimulus bill.

How about ‘return on investment’?  If spending now can help bring the country out of recession, then that sounds like a great idea to me.  And since the nation’s nominal debt grew by 50% during the Bush presidency (and he wasn’t even trying!), we can probably expect to sink even greater into debt.

If we can spend a billion here to save a billion in the future, that seems like a great deal to me.

If we can spend $10 billion modernizing our infrastructure to reduce energy loss in transmissions for the next decade, great!

If we can spend another $10 billion creating an alternative-energy infrastructure for transportation, to save billions in oil imports as well as mitigate environmental damage, even better!

This is not to say that the recently passed stimulus bill does not include projects that meets this criterion, but the debate could have been much easier (and more relevant) if current spending was tied with greater future savings.

This recession has to end eventually, right?  And the US national debt has to be reduced eventually, right?

… right?

… and the cow goes moo

Ted Stevens Trial Re-Do?

Holy crap.  This guy cannot be stopped.

In the continuing saga of our mess of a justice system, and joke of a political system, the Ted Stevens conviction is starting to look like it was written in pencil.

Not only was the trial fraught with oddities (a juror taking off, claiming her father just died, but actually just to watch the Breeder’s Cup), prosecutor Brenda Morris’ serial incompetence (leading her to be berated by the judge, being caught withholding information that they were obligated to share with the defense, and sending home a witness that may have helped the defense), and now, in a continuation of the sexy undertones permeating this trial:

From the New York Times:  FBI agents involved in the investigators may have had inappropriate relations with the star witness for the prosecution!

“Among the startling accusations in the statement by the agent, Chad Joy, is that another agent maintained an inappropriate relationship with the prosecution’s star witness. Mr. Joy said his colleague, Mary Beth Kepner, almost always wore pants but on the day the witness, Bill Allen, took the stand, Ms. Kepner donned a skirt, which Mr. Joy said she described as “a present” to Mr. Allen.

…

In its court filing, Mr. Stevens’s defense team has magnified Mr. Joy’s complaint about an improper relationship between Ms. Kepner and Mr. Allen, asserting that they appeared to have had a sexual relationship. Mr. Joy did not raise that possibility in the redacted version of his statement,but did say Ms. Kepner had improperly gone alone to Mr. Allen’s hotel room.

His statement also said agents received gifts from Mr. Allen, including help in getting a family member a job.”

Holy Jesus!

The system is not necessarily corrupt, but apparently every other human component within the system is entirely compromised!

How do you get in the FBI if you can’t keep it in your pants?  And if you CAN’T keep it in your pants and you’re in the FBI, how do you now figure out a way do slut it up more subtly than dolling yourself up for the witness on the stand?

And arranging private meetings at hotels with the witness that is paramount to the prosecution’s case?

Perhaps she just wanted to see Ted Stevens humiliated as much as I did.  If so, isn’t it sad that the only way an FBI agent knows how to bring about ‘justice’ is by sexual means as opposed to… you know… police work?

Perhaps this isn’t fortuitous (for Ted Stevens)  incompetence.  Perhaps this is part of the way Washington can subtly influence the outcome of a trial by attacking the weakest links in the system: the people.

Or perhaps it’s just animal instinct.  I mean, who could resist?

I'm wearing shorts at my computer just for you, Mr. Allen. Did you notice?

… and the cow goes moo

Paul Krugman: Obama is not a savvy negotiator

Paul Krugman’s latest stimulus-isn’t-big-enough op-ed rant may feel very ho-hum to those who read his articles and his blog posts regularly, but he does take one broadside against Obama that I found apt and worth plagiarizing:

“So Mr. Obama was reduced to bargaining for the votes of those centrists. And the centrists, predictably, extracted a pound of flesh — not, as far as anyone can tell, based on any coherent economic argument, but simply to demonstrate their centrist mojo. They probably would have demanded that $100 billion or so be cut from anything Mr. Obama proposed; by coming in with such a low initial bid, the president guaranteed that the final deal would be much too small.”

Here Krugman makes a point that I have agreed with him upon all the way, since Obama’s Presidential bid became a palpable reality:  His declared and committed centrism may win votes with the electorate, as it may have with George W. Bush, but the believability (unlike Bush) with which he made his declaration will cost him votes and more in Congress.

By centering his campaign beyond all else as being one above the recent partisan fray, he gives himself no room to maneuver.  Krugman succinctly this argues is exemplified with his disastrous attempt at spearheading a stimulus package, every other participant in the debate knows that Obama will yield readily, or risk making himself appear a hypocrite.

I had hoped that the almost rabid popularity he has gained would effuse his presidency with some additional legislative heft, however the Republicans have ably neutralized his popularity by opposing the highly unpopular house and senate Democrats (almost as unpopular as house and senate Republicans) in support of the stimulus bill and the points within the bill rather than opposing President Obama directly.  Brilliant. And I’m sure the speed and alacrity with which Obama has caved will encourage Republican lawmakers to continue and increase their efforts to marginalize Democratic legislation and continue Bush-like policy initiatives.

His post-partisan stance earned Obama major points in the election, and effused his presidency with the possibility of something new, but it may have cost him the chance to be anything but.

… and the cow goes moo

Head of Nuclear Proliferation Ring, Abdul Qadeer Khan, Freed in Pakistan

If you believe all politics is local, this should come as no surprise.

The opening paragraph from the New York Times:

“A Pakistani court freed one of the most successful nuclear proliferators in history, Abdul Qadeer Khan, from house arrest on Friday, lifting the restrictions imposed on him since 2004 when he publicly confessed to running an illicit nuclear network.”

A.Q. Khan, who sold nuclear technology to Libya, North Korea, and Iran had been confined to a loose house arrest for the past four years for his acts, albeit non-criminal, that were deeply unpopular outside of the Islamic world.  There has long been public pressure within Pakistan for its leaders to recognize A.Q. Khan as a hero as much of the Pakistani and Muslim public already does.  To the best of my knowledge, Pakistani leadership has consistently expressed sentiment along those lines but kept Mr. Khan under house arrest at the behest of Western powers.

This apparent deference to Western hegemony over Pakistani sovereignty has added to the controversy within Pakistan, especially with Pakistan’s half-hearted involved in the Global War on Terror.  Many within Pakistan and other Islamic nations view Pakistan’s involvement in the GWOT as contrary to Pakistan’s own wishes and a shameful act of obsequiousness towards its Western allies.

A.Q. Khan’s release, I feel, was a longtime coming.  It seems, with Musharraf’s pardon of Khan and the revelation that Mr. Khan was in no way under house arrest (new Prime Minister Asif Ali Zardari had already released some restrictions upon Khan, allowing him to visit restaurants and write for newspapers according to the NYT piece) that restrictions would be subtly reduced to placate the Pakistani public without bringing it to the attention of the obviously less-attendant Western public.  That A.Q. Khan’s release was done in such a manner makes me wonder if this was an intended affront to the West.  I would imagine allowing the open violation of his house arrest would be enough to make the local news in Pakistan, while still receiving a low-profile in the West.  To have Khan, a merchant of nuclear weapons to the nations and dictators that pose the greatest threat to America, meeting throngs of adoring press and public outside of his home approaches provocation.

This may be an offensive comment to some, but it is difficult for me to judge the legality or the moral issues involved.  Pakistan was never a signatory to the Nuclear Non-Proliferation Treaty.  I would interpret that to mean that Pakistan has every right to spread their nuclear technologies among other non-signatories, such as North Korea, and the signatories of the NNPT would have every right to ‘punish’ Pakistan’s actions with sanctions (which would likely further drive the leader and populace of the nation against the West and perhaps make them more reliant upon thier nuclear exports).  Not exactly a wide range of options.

The moral issue is even stickier to me, and even less palatable.  A nation should have every right to develop armaments to defend its people, and even trade such materiel to other nations for the same purpose.  America’s role as  the world’s largest military exporter suggest to me that most Americans would concur.  Were A.Q. Khan a head of Pakistan’s Smith & Wesson, his name would be unknown to Americans.

It goes without saying that the reason why A.Q. Khan was under house arrest, not as a criminal, but as a prisoner of international politics, was of course that his occupation was the trade of devices capable of killing thousands, if not millions, at a time and shift political power in the process.  As the creator of the Islamic Bomb (referring to the actual bomb, though more appropriately describing the birthrate), he brought the smaller nation of Pakistan to near-parity with India on the international stage.  And more importantly, he brought Pakistan (and North Korea) to the point of true sovereignty.  As America (and her partners’) actions in Iraq, Afghanistan, Vietnam, more recently and going as far back as Chile and Cuba (or perhaps earlier), and her inaction with North Korea and Pakistan, would attest, soverignty is only a theoretical concept if you cannot defend it.

America’s bloody history of intevention in the rule of other nations is certainly of (to the say the least) ‘arguable’ malevolence or benevolence.  As is Pakistan and Abdual Qadeer Khan’s efforts to arm other nations with nukes.  Of course, two wrong don’t make a right.  And neither do ninety-nine.  But the arithmetic is clear: If what you have can be taken away by the USA, then you don’t really have anything at all.  If you have nukes, however, than you can public exonerate and celebrate a man perceived abroad to be among history’s greatest criminals, with little fear of retaliation.

Even if you hate him, or think him as a criminal and a mass-murderer-in-waiting, you cannot question his popularity among Pakistanis.  He freed his nation, among others, from Western rule.  His fathering of 100+ Pakistani nukes provided his nation with the means to confront aggressor nations, and to liberate the potential father of a million deaths in the face of worldwide outrage.

… and the cow goes moo

Citibank Corporate Jet Hullabaloo

I guess I’m a bit late getting to this (it’s hard enough keeping up with the news lately.  Typing a few words about it is sometimes put aside) but it certainly is the type of story I love.  And it’s especially salient since the GM/Ford/Chrysler Beggars Flyin’ in Style fiasco.

Quick recap:

Citigroup, after receiving billions of dollars in bailout money and guarantees against taxpayer wishes not only doesn’t appear to be increasing its lending signficantly (at least, not significant enough to placate the taxpayers that whose future incomes are being used as security for the federal governments recent loan dispersals), but they decided to spend $50 million of it to buy a sick new corporate jet.

On top of that, they defend their purchase with the unbelievably unbelievable canard that their upgrading of their corporate jet fleet is actually a good thing, since the new plane will be more fuel efficient!

What balls!

Of course, Citigroup does not have any goodwill with the nation to risk losing, so I can understand their defiance.  Especially since the bailouts provided to them have been massively unpopular, but advancedj ust the same based on the fear of Citi’s failure.  The executives of the banks being arrogant pricks has nothing to do with whether or not they receive another few hundred billion in capital and guarantees.  Citi replaces their jets not because of eco-sensitivity, but because they love travelling in awesome new jets.  And the federal government doesn’t give money to the banks because they feel bad for small businesses who are having their credit lines cut, but because they don’t want to be blamed for another Lehman-sized catastrophe.

Although Citi’s management does not respond to poll data, those in government are thankfully a bit more self-conscious.  The Treasury department did take their keys away.

Thankfully, the story does not end there.  As ballsy as Citi’s move to spend $50 million on a new toy for the execs after getting a government bailout (welfare queens driving Cadillacs, anyone?), and on a French jet no less, we have an editorial in the New York Times by the not-self-interested-at-all editor-in-chief of the magazine Business and Commercial Aviation, William Garvey. espousing the virtues of buying jets.  Because, you see, when you have a bankrupt company spending millions of taxpayer money on a jet for their economy-wrecking executives to fly in, blue collar stiffs get some work!

And after all this controversy over the appropriateness (or the massively inappropriateness) of the attempted corporate jet purchase, we manage to overlook the fact revealed to my by Pulitzer Prize-winning journalist, David Cay Johnston, in his book ‘Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rick–and Cheat Everybody Else’, that corporate jet purchases have ALWAYS been subsidized by taxpayers!

See, since Citigroup is not a commercial airliner, it cannot charge it’s executives for using its corporate jets (even for entirely non-business purposes, like a family trip).  Instead, it counts the cost of the trip as income for the executive.  Which sounds fair, except that IRS rules for calculating the value of the use of a corporate jet are so low that an executive riding in a luxury jet for personal reasons would actually only be counted as having been ‘charged’ about half of a comparable first class ticket on a commercial airliner.  AND, if the company simply writes a memo deeming that the executive must travel in a private pleasure palace, away from the plebs, for his or her own security, then even the already ridiculously underbilled ‘income’ counted to the executive for the corporate jet flight is taxed at half the rate!

(Once again, recall the GM/Ford/Chrysler private jet fiasco?  Guess who had to travel on a private plane for ’security reasons’?  “Like many other major corporations, all three have policies requiring their CEOs to travel in private jets for safety reasons.”)

In effect, having a corporate plane isn’t just a symbol of excess, status, and a toy for a company’s spoiled executive class, but it is a form of hidden income, where a company can spend millions providing pleasure flights worth several thousand dollars to an executive and their family, ‘bill’ them a few hundred dollars, and charge the rest to taxpayers, who foot the bill for the income taxes that go unpaid for the underpriced benefit, and the company’s shareholders (an archaic term.  Now better known as ‘taxpayers’).

Even though Citi has bailed on its plan to get a new whip on it’s sugar daddy’s tab, and President Obama has allegedly laid the usual verbal smackdown on the wasteful executives, we should not be any less outraged.  Corporate jets have always existed as a way of sneaking income to executives and sticking shareholders and taxpayers with the bill and will continue to exist as such post-TARP.

… and the cow goes moo