The government bailouts have started as the markets freeze up

[Canuckguy]

<p>

“Robert Hare used to say that if for some reason he did not have the prison population to study psychopathy, he would have headed for the stock exchange to look for them. He was not kidding.”</p>

<p>

</p>

<p>He said it on numerous occasions. Here is an example:</p>

<p><a href=“http://www.fastcompany.com/magazine/96/open_boss.html[/url]”>http://www.fastcompany.com/magazine/96/open_boss.html&lt;/a&gt;&lt;/p&gt;

<p>

And this summer, together with New York industrial psychologist Paul Babiak, Hare begins marketing the B-Scan, a personality test that companies can use to spot job candidates who may have an MBA but lack a conscience. “I always said that if I wasn’t studying psychopaths in prison, I’d do it at the stock exchange,” Hare told Fast Company. “There are certainly more people in the business world who would score high in the psychopathic dimension than in the general population. You’ll find them in any organization where, by the nature of one’s position, you have power and control over other people and the opportunity to get something.”

</p>

<p>Since the conversation is moving on to politics, guess what politicians, stockbrokers, and prisoners have in common?</p>

<p><a href=“http://archive.theboltonnews.co.uk/1996/9/5/845604.html[/url]”>Archive news from the The Bolton News;

<p>

Researchers at Glasgow University yesterday announced the results of a three year study which suggested the personality profiles of politicians is similar to criminal psychopaths.</p>

<p>They told the British Psychological Society’s criminological and legal division that some stockbrokers and politicians could be described as “successful psychopaths”.</p>

<p>According to the study, similar traits between MPs and criminal psychologists include a high sense of self worth, failing to accept responsibility for actions, having a socially deviant lifestyle, needing constant stimulation, remorselessly using others and being glib.</p>

<p>

</p>

<p>Great news, no?</p>

[tom1944]

<p>If you walk away from a mortgage and the home is sold by the lender any amount due (mortgage balance vs sale price) that does not get paid is reported by the lender on a 1099 as income to the borrower. The borrower ends up with a huge tax bill. The IRS and State tax departments are not as forgiving. Imagine an extra 1099 for 100K or more at the end of the year. The tax bill is unbelieveable.
The law of unintended consequences.</p>

[dstark]

<p>Well, the taxes on the $100,000 loss are quite a bit less than the $100,000 loss.</p>

<p>Having said that, the tax law should probably be tweaked. I have to think about it but my gut says there is a difference between somebody who overpays for a house or buys a house he/she can’t afford and loses the house and somebody who refinances a place and takes money out for vacations, parties, cars or college educatin costs. In the latter cases, I think the taxes should be owed. </p>

<p>If you take money out, there should be a tax if you renege on the loan.
If you don’t take money out, I don’t see why there should be a tax.</p>

[hazmat]

<p>does this same tax consequence apply to Deed in Lieu of Foreclosure arrangements. I hear about default and such but hardly any mention of this other option. Anybody?</p>

[tom1944]

<p>Between the Feds and most States it is about 40k on 100,000. Add in the peanlties and interest charges and you are almost up to the 100k. My experience is that most people do not realize the tax situation so they do not prepare for it.
The tax law will not be changed because the lenders want the added stick that the unforgiven debt gets added as income.</p>

[tom1944]

<p>hazmat- I believe that unforgiven debt gets added as income in all situations.</p>

[hazmat]

<p>Ahhh so the Deed in Lieu of is still an unpaid debt. So quid pro quo doesn’t enter into it here? Interesting. Call in the JDs and pay them well is what it is sounding like. Thanks for the response.</p>

[barrons]

<p>I forgot about that one. Lots of Dotbombers got bitten on that one when they borrowed on their soon to be worthless stock and then the loans were called and written off. They still got huge tax bills for the written off loan amount. I enjoyed that greatly.</p>

[Canuckguy]

<p>Back to the topic of this thread, there is no way government can bailout this type of silliness. So much lending against collaterals that are worth a lot less than people claimed they are worth. </p>

<p>These are real losses that have to be accounted for. The government can smooth out the pain by weaken the currency, but they can not make them go away.</p>

<p>I have been out of US equity since the end of 2004. If not, I would have taken losses in Canadian dollars even though the market has been going up. I expect debt holders to see that they are taking on a lot more risk without the return in compensation, and will be heading back to equity again.</p>

<p>The big question is when.</p>

[higherlead]

<p>The problem is this bad debt is in equities. That is how they packaged up all this bad paper now when people try to flee it they are going to take the equities market down too.</p>

<p>I’d suggest commodities. The basics like guns and ammo. Oh I forgot you are Canadian ad cannot own that stuff.</p>

<p>Seriously the credit dries up and the equities market tanks too.</p>

[dstark]

<p>Credit dries up and commodity prices plunge.</p>

<p>I thought they packaged this debt as different debt.</p>

<p><a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg;

[barrons]

<p>Ahhh, those Wall Streeters–all putting that expensive education to good use–panicking like a bunch of 7 year olds when the counselor starts telling scary stories. What a bunch of overpaid self-important worthless clowns.</p>

[dstark]

<p>I can’t stand Alan Greenspan. He gave us 3 major bubbles, the stock market bubble, the real estate bubble and the credit bubble. I’m just talking about this country.</p>

<p>He was in favor of free markets, except for Wall Street, major corporations and his friends. He favored low taxes for the rich, which led to enormous budget deficits. He was in favor of privatising social security which would have benefitted the most well off in this country and put the lesser well offs at risk. </p>

<p>And those three bubbles… he had to bail out his friends every single time. So much for real capitalism. </p>

<p>Anyway, I saw this today. I agree with the author. I hope Bernanke doesn’t turn into another Greenspan.</p>

<p><a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg;

[Canuckguy]

<p>It is also my understanding that these debts are packaged and sold as new debt instruments. Where is my sister when I needed her the most? She was working in asset liability management and was using debt derivatives in a way that makes my head spin.</p>

<p>Fear has crept into the debt market and is now moving into the equity market, where investor psychology has clearly turned negative this last few weeks. While some folks are doing some selective buying after the rate drop, to me this is like trying to catch a falling knife.</p>

<p>We must remember that Greenspan is a disciple of Ayn Rand who advocated “enlightened self-interest”. It is certainly in his self-interest to look after the wealthy who can in turn look after him. We all know there is no payback looking after the poor.</p>

<p>What really bugs me is that those who created the mess are walking away with huge bonuses and commission while the innocent bystanders have to pay for the cleanup.</p>

[Allmusic]

<p>The rich just get richer.</p>

<p>

The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.</p>

<p>These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.</p>

<p>People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich.

</p>

<p><a href=“http://www.nytimes.com/2007/08/21/business/21tax.html?em&ex=1187928000&en=b1b60a430fb66ebd&ei=5087 [/url]”>http://www.nytimes.com/2007/08/21/business/21tax.html?em&ex=1187928000&en=b1b60a430fb66ebd&ei=5087 &lt;/a&gt;&lt;/p&gt;

[dstark]

<p><a href=“HuffPost - Breaking News, U.S. and World News | HuffPost”>HuffPost - Breaking News, U.S. and World News | HuffPost;

<p>Greenspan has also been hired by Bill Gross and Pimco the largest bond manager in the US. </p>

<p>Allmusic, great link. From the link…
2005 Incomes, on Average, Still Below 2000 Peak </p>

<p>The group’s calculations showed that 28 percent of the investment tax cut savings went to just 11,433 of the 134 million taxpayers, those who made $10 million or more, saving them almost $1.9 million each. Over all, this small number of wealthy Americans saved $21.7 billion in taxes on their investment income as a result of the tax-cut law. </p>

<p>The nearly 90 percent of Americans who make less than $100,000 a year saved on average $318 each on their investments. They collected 5.3 percent of the total savings from reduced tax rates on investment income.</p>

<p>Robert S. McIntyre, the director of Citizens for Tax Justice, said that even though he expected a few very wealthy people to reap most of the tax savings generated by lower tax rates on dividends and capital gains, the size of the savings “still takes your breath away.”</p>

<p>He said the tax savings at the top, combined with lower average incomes after five years, “shows that trickle down doesn’t work.”</p>

[higherlead]

<p>What percentage of total taxes payed did the top 10% of taxpyers shell out? There are actually a huge percentage of taxpayers who pay no net income tax. It is pretty hard to give them a tax cut.</p>

<p>Is wealth too concentrated? Maybe maybe not. It is hard to extract it from the wealthy taxpayer past a past a certain point. If you are Bill Gates or Warren Buffet or George Soros or John Lerry’s wife you can bury the wealth in a tax sheltered charitable trust that does your bidding for you. You are still effectively just as rich but technically the money is not yours. There are dozens and hundreds of ways to avoid the tax man and the higher the marginal tax rate the more of them make economic sense.</p>

<p>The bottom is is if you raise marginal tax rates past a certain point you actually lose net revenue plus you encourage the wealthy to “spend” their money in ways that are probably not optimal for society.</p>

[dstark]

<p>higherlead, I would take my chances and change the system. We already know the way we have been doing things doesn’t trickle down and most of the tax benefits got to the absolute top of income.</p>

[higherlead]

<p>And would your reason for that be punitive or because you think the government could spend that money better?</p>

<p>There are many things that government does well or at least ought to have a more or less monopoly on doing but each additional dollar is not necessarily spent equally well. Once they get through building bridges, putting out fires, keeping the streets safe, and maybe inspecting the meat government start dabbling in a lot of things it does not do especially well - like financing electoral campaigns, wiretaping our phones, and apparently building levees in New Orleans and tunnels in Boston.</p>

<p>I of course am a conservative of course and so allegedly was Mr Bush but as you might have notice even conservatives have a remarkable penchant to grow the government into every nook and cranny of society with little good to show for it. The only want to keep it in check is to keep it on a lean diet.</p>

[ucsd_ucla_dad]

<p>

most of the tax benefits got to the absolute top of income

Why do you say this? The top income brackets pay more dollars by far than those in mid to lower brackets and likely use the least government services.</p>

<p>Rather than having the attitude that anyone who makes a dollar more than me isn’t paying enough taxes or their “fair share”, I’m very glad for those who do happen to pay more because it means I pay less although I still pay plenty of taxes. IMO those in the top brackets are generally paying far more than their ‘fair share’ of taxes.</p>