No Vault Banking

The financial world often gets away with murder simply because it is so damned complex. We understand that Wall Streeters have gamed the system, drained more than a few taxpayers, misled both the public and a bumbling Congress and have managed to create a world where a couple of hundred families in this country own and control half the wealth. The dynamic need for cash of House representatives, running every two years, combined with the jacking-up of media costs because of new competition from bottomless-pit-SuperPacs, no longer restrained by spending limits, have turned elections into political prostitution.

If you ever want to see exactly how absurd it all is, trundle down to a local law library (law schools and many courts have them) and open up any provision of the Internal Revenue Code or any bank regulations. Yes, technically, it is English, but just barely. I can read the provisions, but it’s hardly linear reading. Every time there is a reference to another code section, you literally have to read the other section (which may have its own additional references), and the come back to your text. A careful lawyer will then have to research court and administrative interpretations of those provisions. Boy, does it take time just to cover a single paragraph.

But to enable more loopholes – usually drafted by the beneficiaries and their lobbyists – there occasionally needs to be a sacrificial lamb that makes it look as if the Congress is acting in a way to save taxpayers money and not cater to corporate interests. They cut direct farm subsidies, but if you look carefully at federally-funded crop insurance, you can see that for a small payment and a fake “planting of seeds even in land too arid to grow crops,” the resulting payouts remain huge.

And they often drill down on federal programs that look bad but really don’t generate that much in costs. Like the Export Import Bank. According to their website, “The Export-Import Bank of the United States is the official export credit agency of the United States. Our mission is to ensure that U.S. companies — large and small — have access to the financing they need to turn export opportunities into sales. Ex-Im Bank does not compete with private institutions. We fill gaps in the trade finance market by working with lenders and brokers to ensure that U.S. businesses get what they need to sell abroad and be competitive in international markets.” Effectively, it insures qualified U.S. exporters who are selling overseas can count on their buyer’s actually paying them. Credit insurance if you will.

Well, the Ex-Im Bank appears to be a sacrificial lamb that corporate America has told those in power in Congress, wink-wink, that they can live without. It accounts for such a small share of our exports and isn’t used much by the biggest of the big companies. So… “The Department of Homeland Security is not alone when it comes to being on shaky federal ground. The Export-Import Bank could go out of business at the end of June if Congress doesn’t act.

“The conservative advocacy group Heritage Action hopes that is exactly what happens… To that end, it is starting a campaign of automated phone calls to voters in the districts of 31 Republicans who have signed on to a measure renewing the bank’s charter.

“The calls label the bank, which is intended to spur American exports by providing aid to potential buyers, a ‘slush fund for corporate welfare.’ Voters are encouraged to ‘tell your congressman to stop giving taxpayer-backed loans to multinational corporations and hostile foreign governments.’” New York Times, February 18^th.

But the real reform is not on the table. Taxing U.S. companies who use off-short financing that I have blogged about in the past to shelter hundreds of billions of dollars from U.S. taxes… even when the money was generated inside the United States. Or allowing fund managers to get taxed on much of their income as if they were long-term capital investors (who get really favorable tax rates) when they haven’t invested a dime. The list of mega-loopholes is long, and those running Congress pretend that to impose a fair and uniform tax system is just “class warfare.” Indeed, even assuming it is class warfare, trust me it wasn’t those in the middle and the bottom of the income ladder who declared war. Fairness in our tax code has left the building… a long, long time ago.

I’m Peter Dekom, and it’s time to stop playing distraction games and deal with the fundamental inequalities in our financial and tax codes that so completely and totally favor the mega-wealthy at the expense of everyone else.