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GAO Reports Bailout and Tech Firms Love Tax Havens
Posted by
kdawson
on Sat Jan 17, 2009 03:26 PM
from the how-to-spell-profit dept.
from the how-to-spell-profit dept.
theodp writes "Most of America's largest publicly traded corporations and Federal contractors — including those receiving billions of dollars from US taxpayers to finance their recovery — have set up offshore operations that could help them avoid paying US taxes, according to a GAO study released yesterday. Of the 100 largest public companies, 83 do business in tax-haven hot-spots like the Cayman Islands, Bermuda, and the British Virgin Islands. The report found that Citigroup, a recipient of $45B in bailout funds so far, has set up 427 subsidiaries in tax-haven countries, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Household names on the lists from the tech sector include Apple (1 tax haven subsidiary), Cisco (38), Dell (29), HP (14), Intel (6), IBM (10), Microsoft (8), Motorola (4), and Oracle (77)."
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Off with her head! (Score:4, Insightful)
Isn't the way this worded presuming guilt before innocence? Is doing business in a tax-haven country an automatic fail?
Yes. (Score:5, Insightful)
I really get frustrated when doublespeak is acceptable. It's like the question, "Are prisoners in Guantanamo being tortured?" If they weren't being tortured, they would be in New York state, sitting in the same jail cells we use for other suspected murderers. The fact that anyone is asking the question is mind-boggling.
Similarly, any company that sets up in a small country that they do no business in is obviously up to something. Otherwise they wouldn't be there.
American business is a game, where the winners are those who best exploit their workers, the tax code, government contracts, and the environment. The most important bit is not getting caught, and having a lot of lawyers if you do.
(I'd like to defuse any rebuttal by saying "Wal-Mart.")
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Re:Yes. (Score:4, Insightful)
Wal-mart is a funny example. They do a lot of things right(warehousing, distribution, workers safety) but they also screw their employees badly and are destructive to small town economies.
As for these companies that just got big bailouts, well, I really wish the feds would just take all the money back and we can all roll on the floor laughing at them for it.
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Re:Yes. (Score:5, Insightful)
I've on this subject frequently really.
http://slashdot.org/comments.pl?sid=1086449&cid=26406327 [slashdot.org]
1) Large sums of money have been given to a relatively small number of companies. Only a small percentage of the populace directly work for recipients of federal bailout money. Taking the money back wouldn't have a direct effect on most americans for quite some time(6 months or more).
2) Companies that need credit to cover payroll would have been in trouble before the credit crunch anyway, as this is usually a last ditch effort to save a company.
3) I'm a student. I don't foresee getting kicked out of school because of the financial market being in the shitter unless the feds cut off stafford loan subsidization, which is very unlikely to happen under a democratic or even republican administration.
4) Blowing over a trillion bucks to save companies who participated in a delusional pyramid scheme of realty market overvaluations isn't a good way to spend taxpayer money, especially considering the money IS BEING SAT ON. That money should have been given directly to homeowners under a grant program to keep people in their homes.
Right now, thousands of homeowners are evicted every day despite the $750B given to the banks that own the homes. It's a fucking tragedy.
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Re:Yes. (Score:4, Insightful)
Err, no. The main reason they are held in Guantanemo was for a jurisdictional dodge about holding them at all. One that didn't work out, as it turns out; the courts didn't buy the idea that they were beyond the reach of US courts just because they weren't within the boundaries of the United States.
Nothing in this report says the companies do no business in the "tax haven" countries. Apple originally set up in Ireland to make Powerbooks, as I recall. They don't do manufacturing there any more but it's still their European headquarters. Coke and Pepsi almost certainly sell sugar water in all those tax haven jurisdictions. Intel does manufacturing in Costa Rica.
Multinationals are, well, multinational. It's hardly a surprise when they do business in companies the IRS or GAO isn't fond of, whether that's why they do it (which it probably is, in many cases) or not.
Anyway, one of the definitions for the countries on this list was "...jurisdictions that have a high level of nonresident financial activity, and may have characteristics including low or no taxes, light and flexible regulation, and a high level of client confidentiality. " Horrors. Why would a country ever want to do that?
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Re:Yes. (Score:5, Interesting)
I guess you haven't heard of many of the "offices" in the Cayman Islands consisting of one room, one phone, and one employee (never at his desk). Many exist purely to claim business in the country and filter money for tax purposes. They do no business there at all but save taxes.
Of course, this isn't every office or company. But many.
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Re:The collection of taxes is not theft! (Score:4, Insightful)
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Re:Yes. (Score:5, Informative)
So, in other words, you didn't actually read the report. Just skimmed through, and then immediately jumped on Slashdot to slap someone down. From said report:
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Re:Yes. (Score:5, Informative)
Nothing in this report says the companies do no business in the "tax haven" countries. Apple originally set up in Ireland to make Powerbooks, as I recall. They don't do manufacturing there any more but it's still their European headquarters.
LoL
Ireland has veeeeery friendly tax laws and is a prime example of a Country where individuals and corporations send money to dodge US taxes. Part of the reason so many individuals and businesses setup their tax shelters in Ireland is specifically because Ireland does not have the public perception of being a tax haven.
The only reason Ireland (as a member of the EU) can do this is because EU law only prevents countries that meet the 'EU economic norm' from playing such games with tax law. Once Ireland develops, those convenient tax laws will have to be changed.
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Ireland's popular if you do EU business (Score:3, Informative)
Ireland's taxes are lower than most of the rest of the EU, so it makes sense for any company doing pan-EU business to be based there. It also has had a number of years where it was a cheap place to get labor, and had workers that were educated and spoke English, though there's recently been a lot of business moving to Eastern Europe, especially Poland, where the labor's cheaper.
Re:Yes. (Score:5, Interesting)
Apple setup in Ireland to appease an EU mandate regarding labor content in their products. This sort of thing was also done by the US to Japanese TV manufacturers. It's a time-honored way to get manufacturers to spend a little money in the country they're selling into-- to avoid getting hit with taxes and duties.
However, very little manufacturing goes on in the Caymans, the BWI, and Luxembourg. They're tax havens, just like Cheney's Halliburton likes to use. Getting back that revenue would mean the end of corporate welfare, and that's unlikely to happen soon.
So call a shovel a spade and don't weasel word about the implications.
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Corporate, torture apologists (Score:5, Interesting)
Err, no. The main reason they are held in Guantanemo was for a jurisdictional dodge about holding them at all. One that didn't work out, as it turns out; the courts didn't buy the idea that they were beyond the reach of US courts just because they weren't within the boundaries of the United States.
Nope.
http://www.nytimes.com/2008/02/17/opinion/17davis.html?_r=1&ex=1360990800&en=a3b1d35d17a4d480&ei=5090&partner=rssuserland&emc=rss&pagewanted=all [nytimes.com]
My policy as the chief prosecutor for the military commissions at Guantanamo was that evidence derived through waterboarding was off limits. That should still be our policy. To do otherwise is not only an affront to American justice, it will potentially put prosecutors at risk for using illegally obtained evidence.
Emphasis mine.
Nothing in this report says the companies do no business in the "tax haven" countries.
Sure. If I posited the same argument that a person who fit the profile of a crack dealer was passing "something" to someone in a car after exchanging money, you'd be the first in line to throw him into prison. I'm not saying they don't deserve due process, but a judicial branch that wasn't a secretarial service for corporate America would at least investigate.
Horrors. Why would a country ever want to do that?
I'm not blaming the country, or claiming the corporations are automatically guilty. When they do business that removes tax money from the community that built it's wealth, I consider that a worse offense than someone who is falsely collecting welfare.
I'm upset with the habit of Americans getting upset over social welfare and not over corporate welfare. When corporations have more rights than an individual person, not even equal rights, I consider that to be reprehensible. I can't buy a palm tree in Costa Rica and reduce my tax liability as an individual, but I could if I formed an LLC. In my opinion, that's bullshit.
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Re:Yes. (Score:5, Insightful)
It is perfectly normal in a time of war to hold prisoners (or "unlawful combatants") outside of the regular prison system. Torture is a completely separate issue.
Um, no, it's not. It's perfectly normal to hold POWs outside the prison system.
It is not normal to make up a category called 'unlawful combatants' and hold them both outside the POW and prison system.
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Re:Oh please, torture? (Score:5, Informative)
You know, the torture going on isn't just waterboarding, humiliation, koran desecration, human pyramids, being threatened with dogs, or "not getting the right jail." It includes what acts that are unarguably torture, including being beaten and chained up until dead (http://en.wikipedia.org/wiki/Dilawar_(torture_victim)). Even when the sadistic bastards believed the detainee was innocent.
Some other examples of "not really torture" (http://en.wikipedia.org/wiki/Abu_Ghraib_torture_and_prisoner_abuse):
* Urinating on detainees
* Jumping on detainee's leg (a limb already wounded by gunfire) with such force that it could not thereafter heal properly
* Continuing by pounding detainee's wounded leg with collapsible metal baton
* Pouring phosphoric acid on detainees
* Sodomization of detainees with a baton
* Tying ropes to the detainees' legs or penises and dragging them across the floor.
And some other forms of torture, with real torture names that can really kill you, like strappado (http://en.wikipedia.org/wiki/Manadel_al-Jamadi). Although folks like you, Rush Limbaugh and all the other right wing nuts seem to prefer the doublespeak term "stress positions."
And I guess because some soldiers were just so stressed out and needed to blow off steam, some prisoners were just tied up, put in sleeping bags and beaten to death (http://www.washingtonpost.com/wp-dyn/content/article/2005/08/02/AR2005080201941.html).
But you're right, waterboarding isn't torture and it was only 4 guilty as hell terrorists anyway.
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Tax policy (Score:4, Insightful)
Maybe if the US tax policy wasn't insanely out of line with the rest of the world, we wouldn't have this problem. Can you blame these companies for getting away?
Other countries charge income tax based on income earned in that country. The US charges income tax for income earned in any country. Where would you set up your company?
The FairTax [fairtax.org] would instantly make the US the world's tax haven.
Re:Tax policy (Score:4, Interesting)
Don't kid yourself, large US based companies doesn't pay tax either. Tax heavens are just an easier way to avoid paying tax, it is saving the companies money on the payroll to accountants and number magicians, but no not on the tax bill. Only people and small companies pay tax.
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Re:Tax policy (Score:5, Insightful)
I love how crazy people talk about how much percentage of taxes a percentage of people should pay, like that has anything to do with anything. We are taxed on income here, not per person.
Those 1% earned 22% of all income. Hence at the very least they should have paid 22% of all income tax, in a crazy world where everyone pays exactly the same proportion of income tax.
But no, loons like you like to imply they're paying a huge huge huge burden by using '1%' and '40%', instead of twice as much proportionally.
Same with the top 5%, which earned 37% of all income, and hence should have paid at least 37% of all income taxes. So 60% is not some amazing step, that's only about 50% more than they should be paying in a completely 'fair' system.
But I'm sure if it was like that, people like you would be whining that the top 1% paid 22% of all income tax.
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Hell yes I can blame them. (Score:5, Insightful)
They are receiving US GOVERNMENT funds taken from US TAXPAYERS and they're stashing them in foreign tax havens.
This is solely for the benefit of their executives. It will not help rebuild the US economy.
There needs to be a new law passed TODAY (drag Congress back in) that makes that practice illegal.
If you want "bailout" funds, you cannot use a foreign tax haven.
If you use a foreign tax haven, you cannot receive "bailout" funds.
Why should the US taxpayers finance some CEO's retirement villa in Monte Carlo while the economy drags?
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Re:Hell yes I can blame them. (Score:4, Informative)
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Re:Hell yes I can blame them. (Score:4, Insightful)
While its true they sold the bailout as a "loan", they also specifically stated that there was no guarantee taxpayers would get their money back.
Which is idiotic. Common practice is to use collateral to back a loan. The bailout operators refuse to take sufficient stock in companies to assure the collateral value. They also refuse to actually audit any of the companies they are bailing out to determine how much their stock is actually worth.
In other words, its either criminal mismanagement or a more likely, a giant scam. And tacking the the executive compensation terms on there is total PR stunt.
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Re:Tax policy (Score:5, Insightful)
Taxes are the price we pay for civilization.
The reason places like Luxembourg, Cayman Islands, etc. can get away with charging low (or no) corporate tax is that those places are small and relatively lightly populated. Therefore, the government there doesn't have a whole lot of needs, and can get away with a light budget. The solution to this inequality, as others have suggested, is to close loopholes and make sure that corporations are paying their fair share of taxes, not to reduce the size of our government to that of Luxembourg.
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Re:Tax policy (Score:5, Funny)
Wrong. The solution is mass genocide, so that the United States is just as sparsely populated as Luxembourg and our taxes go down to similar levels.
Vote Genocide in 2010!
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Re:Tax policy (Score:4, Informative)
Luxembourg population density: 186/km2
Unites States population density: 31/km2
So you'd need to increase the US population 6x to be "just as sparsely populated as Luxembourg", so unless that mass genocide is being done in Luxembourg it isn't going to help...
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Re:Tax policy (Score:5, Informative)
No. Really you don't. Tax brackets don't work like that. The fact that you don't even understand how taxes work, makes me believe that you've never paid taxes in your life. So why would we take tax advice from someone who doesn't understand the current system, and probably doesn't even pay taxes?
You only pay the tax rate in a bracket for the money that actually falls in that bracket. In your example you'd pay 15% of the amount up to $32,500, then 25% on the $520 between $32,500 and $33,020. So the person's take home would actually go up $7.50/week to $538.75.
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Re:Tax policy (Score:5, Insightful)
> Maybe if the US tax policy wasn't insanely out of line with the rest of the world, we wouldn't have this problem.
Rest of the world? The economical rest of the world is having the same problem. It isn't like they said, Tax Havens like Canada, France, UK, Germany or Japan.
Simple tragedy of the commons. Tax havens are small nations, which profit over-proportionally from shift of profit to their nations. A lower tax in small nations results in an increase in tax-income due to accounting of companies in larger economic nations. Hardly a sustainable approach for larger economies.
> Can you blame these companies for getting away?
Well, those companies make profits in nations, which provide them infrastructure, educated people as working force and affluent people as customers. Then they transfer the profits to a different nation due to lower taxes, thereby reducing their contribution to the same society, which provided for their profits.
I'd say that is hardly laudable.
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How does this make sense? (Score:3, Insightful)
We give them money, then they are supposed to give it back?
Is this so Hank Paulson and some IRS agent can siphon some off to keep their jobs?
US Corp. Tax Load VS Other Countries is... (Score:5, Insightful)
2nd highest in the industrialized world behind only Japan, as I recall the most recent article.
California has the highest or 2nd highest corp. (and other) taxes and has a net outflow of population compared to inflow.
You don't think taxes has something to do with economic decisions?
Think again.
Re: (Score:3, Interesting)
Re:US Corp. Tax Load VS Other Countries is... (Score:4, Interesting)
Yes we would. However such a policy would make sense, which is why it would never be implemented.
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Re:US Corp. Tax Load VS Other Countries is... (Score:4, Insightful)
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This isn't surprising... (Score:5, Insightful)
Theoretically, their duty is to maximize return on investment for their stockholders, which means doing everything they can legally to minimize their tax liability. So if a tax shelter is legal, expect them to use it. (If it's not legal, expect them to try to pretend it's legal.)
Now, though, because in some cases their partial owner is the U.S. government, there is a conflict of interest between the interests of the government shareholder and the private shareholders.
Re: (Score:3, Interesting)
Re:This isn't surprising... (Score:4, Insightful)
Which is, of course, why the waiting list for the Prius is currently at four months and growing, and yet there's no waiting list for a Chevy Silverado, etc?
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Re:This isn't surprising... (Score:4, Insightful)
Theoretically, their duty is to maximize return on investment for their stockholders, which means doing everything they can legally to minimize their tax liability.
I've heard that line ever since the Regan administration. It's a line corporate execs use to excuse excess and over-stepping. Fiduciary duty to investors does not require anyone to cheat the government and broader base of taxpayers by setting up operations in tax shelter countries and burying revenue to avoid paying US taxes.
It's time we crushed that truism and stop accepting it as some sort of financial gospel that will excuse corporate misbehavior. The "free market" we have in place now rewards a few people at the top and screws everyone else down the line. Time for accountability and responsibility to come back in style and that starts with the people at the top of the artificial person we call a corporation.
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Re:This isn't surprising... (Score:4, Insightful)
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Respond Appropriately (Score:3, Insightful)
Judge Learned Hand said it best (Score:5, Insightful)
"there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible".
People and companies respond to incentives -- it is really surprising that the bizarre tax structure in the US pushes companies to form subsidiaries? Apparently it is, to either clueless or grandstanding politicians.
Legal and understandable - (Score:4, Insightful)
Re:Legal and understandable - (Score:4, Informative)
For some of those other countries, the "local office" requirement was made at the behest of their banks, because they were scared that they'd lose the business of some of these companies when other countries introduced restrictions on the use of tax havens.
You'll notice that for many of these companies that supposedly do do business in those countries, the only address you'll find for them in the country will be, curiously enough, also the address for their lawyers in that country, or their accountants, and they'll only have one employee, who is actually "on part time secondment", curiously enough, from said lawyer or accountancy.
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republicans tag (Score:3, Informative)
I see the "republicans" tag on this story and am having a hard time making the connection. If I remember right, a large number of republican members of congress didn't like the idea of the bailout and continue to speak against the release of the second half of the money. We need a tag called "bipartisans." I think part of Obama's appeal to monied interests is "All this partisan bickering is getting in the way of what we can really do for this country: get paid."
The Republicans cared so much (Score:3, Insightful)
Time to End White-Collar Theft (Score:4, Insightful)
Corporations and the power-elite have ripped the US taxpayers off to the tune of trillions of dollars over the past eight years alone. They always have, of course, but it has grown so rampant and egregious that we must put a stop to it once and for all. That means cracking down on offshoring and outsourcing by companies that come to the US taxpayer begging for hand-outs. It means life-sentences or worse for the white-collar criminals like Bernie Madoff who are responsible. It means revocation of corporate charters for companies that do wrong, to curb the complicity of Boards of Directors and middle-management in white-collar crime; there must be more cases like Arthur Andersen being put out of business by the government.
And to those who contend that if we hold companies and white-collar criminals responsible for their actions that capital will simply flee the country, I ask, where are they gonna go? Where can they go that the long arm of the American people cannot reach? Mars? Because the US can make life on earth very uncomfortable for any place else that arouses its ire by sheltering them.
They have a duty to the shareholders (Score:4, Insightful)
Not to worry (Score:3, Funny)
It's all part of the NewParadigm (TM). The NewParadigm ends with the old-fashioned way of taking money in form of taxes and using it to provide services to the people. The NewParadigm reduces the input of taxes, and makes up the difference by issuing debt, that is in turn bought by the Chinese, that for some cultural superstition of them, like to work hard, sell merchandise, and lend back all the received money to the buyers, to allow them to buy still more stuff.
In the NewParadigm is not wrong for corporations to use tax law loopholes to evade taxes, and even receive bailout money afterwards, because the bailout money is just more debt, and debt is good. The NewParadigm states that the bigger the debt of a country, so much the better, because the debtors will be scared of forcing a default, and will keep on buying debt forever. So now, besides having companies too big to fail, we have countries too big to fail. In the NewParadigm, once you have a company deemed too big to fail, you can stop working, because the government will pay all your costs, as by definition they cannot allow you to fail. If you manage to have a country too big to fail, you also can stop working, and finance yourself just by selling bonds.
The reason because the NewParadigm works is because the world increase of productivity has generated a net production surplus. With the old paradigm, there was no way to use that surplus. If you stopped working to reduce the surplus, you stopped having money, and so you died, or got sick or something, and usually returned to work, very likely coughing. If you kept on working, the surplus just got bigger, and was from time to time wiped out by crisis and wars. However, the increase in production lately has made those two methods rather inadequate anymore. The NewParadigm, however, offers a way out of the dilemma. You can now stop working (or pretending to work in non-productive jobs like marketing or politics or the military) and keep on living well just by adding to your VISA debt balance. A whole country can do that by adding the VISA debt balances of the population and putting them into bonds, and selling the to the Chinese. In that way the surplus is eliminated and global prosperity ensues.
Those that will like to point out the current crisis as a negation of the principles of the NewParadigm should be ashamed of themselves, as the current crisis is obviously produced by _failure_ to fully apply the NewParadigm principles. Some old fashioned thinkers, worried by old fashioned guilt thoughts about getting something from nothing, got cold feet and stopped issuing more debt. But now the good work has been taken up by the governments, and all the VISA debt will be backed up by bonds, that the Chinese will promptly buy. So please don't criticize these companies, they are the backbone of the next step in economical evolution, and you are old fashioned thinkers, probably full of shit too.
Re:It's a TARP! (Score:5, Informative)
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It would STILL be better. (Score:5, Interesting)
To drive the economy, you want the people with the LEAST money to spend MORE money.
The VELOCITY of the money is what drives our tax system. The government gets more taxes if a dollar is used 100 times than if it is used 10 times.
Buying a pizza - taxed. ... etc
Pizza shop owner pays delivery guy - taxed.
Delivery guy goes to dinner with his girlfriend - taxed.
Restaurant owner pays cook - taxed.
Cook buys muffler for car - taxed.
Pump enough money into the lower economic rungs and more pizza delivery guys will have to be hired to meet the demand for more pizzas.
Give the money to some company that's going to stash it in an off-shore tax haven ... the US jobs stagnate.
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Re:It would STILL be better. (Score:5, Insightful)
Additionally, feeding money into the top is a flawed strategy for the same reason that pushing a rope is a flawed strategy.
Banks issuing loans have updated their decision-making to account for the people who cannot repay their loans. By loaning $X to people with credit rating A and $Y to people with credit rating B, etc., they can maximize their profit. If you give the bank $10MM dollars, they now have more capital, but that does not change the fact that the maximum profit they believe they can achieve is to loan money according to their studies.
The additional money comes into play only when there are more people seeking loans than the bank has money. This is the definition of the credit crunch and why the companies want a "bailout". However, the Fed has lowered the federal funds rate (the rate at which it lends to banks) to a figure so low that the banks can borrow all the money they want with very little penalty. Giving money to banks does not encourage them to lend.
The root of the problem is that very nearly everything is overvalued, especially at the high end of the scale. Without a bailout, the monetary values of things would return to a sane level. This would allow more lower-middle and upper-middle-class people to afford ownership of companies (rescuing stock prices) and luxuries (improving consumer demand.) Or, in layman's terms: Nobody's buying things now because they're too expensive. The common-sense solution is to price them lower, while the current solution is to give people with money more money and hope they start buying things even though they're too expensive.
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Re: (Score:3, Interesting)
I agree with you, but for different reasons.
The federal government of your United States is pumping money into failed business models. Consumers are far more likely to efficiently channel that money into the growth industries of the future than the government is.
Having said that, I don't actually believe the claimed economics of the bail-out. You can't spend your way out of a recession. Also, it is not desirable to tax that dollar as much as possible, as the whole point of the bail-out is to inject money in
Re:fp (Score:5, Funny)
dude, when you do... the coincidence is gonna blow your mind!
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Re:fp (Score:5, Funny)
Well if you had both read the fine article before it was overloaded and had to be changed, you would have find that it had a perfect system for getting rich whilst meeting beautiful girls (or boys or non-determined goth types, depending on your taste) which unfortunately I can follow but can't explain. So don't make this mistake next time.
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