The Ostrich Head

Australia and Canada should support the Global Bank Tax

    Following the 2008 financial crisis, dozens of countries bailed out hundreds of banks, costing tax payers trillions of dollars.  Clearly, something has to be done to share the burden. 

    The IMF has come up with the fairest idea to share that burden: a global bank tax.  This obviously fair and simple way of ensuring that there's a big fund -- to bail out banks tax payers in the event of the next another financial crisis -- is now in danger of failing to become reality thanks largely to Australia and Canada.

    The arguments put forward by these two recalcitrant countries are as weak as they are irrelevant:

 

1. Neither country had to bail out any banks

2. Both countries have sound financial systems

3. Neither country plans to bail out Greece

 

    These arguments, while true, are clearly not very neighbourly. 

    I mean, Australian and Canadian tax payers are pretty fair minded people (I've never been one myself, but I've met some) and would be happy to step up to the plate by paying higher bank charges to cover this tax.  Australian bank charges are so extortionate already that a few more percent would hardly even be noticed.

    Compare the Australian/Canadian arguments with those of the main proponents and you'll see how unfair these two countries are being.

    America's argument is that banking and finance is global (Goldman Suchs sells junk bonds mortgage backed securities in dozens of countries, for example) and therefore the pain should be shared globally as well. 

    Sounds fair to me.

    After all, when American tax payers bailed out over 700 banks, it was for the global financial good -- and not because banks were the top contributors to Barack Obama's presidential campaign.

    And on the European end, Germany, France and the UK strongly support this tax.  Sure, these countries had to bail out a few banks of their own, but it's more the community mindedness that's behind this push.

    Specifically, they're worried about the European Community.  Even more specifically, they want a great big slush fund to bail out Greece (initially), Ireland, Portugal, Spain, Italy, and then Greece a second and third time.

    Fair enough.  I'm worried about these countries as well.  The idea of simply forcing them to live within their means is as repulsive to me as banks placing credit limits on VISA cars. 

    The two taxes being proposed are: a) a percentage of the on-balance sheet and "possibly" off-balance sheet items; and b) a percentage of bank profit plus total compensation. 

    This is awesome.  Obama's 0.15% balance sheet tax alone would bring in $120 billion from JP Morgan's $80 trillion balance sheet in the first year.  It may bankrupt JP Morgan and trigger another financial crisis, but at least we'll have the tools to deal with it!

    If you feel as strongly about this as I do, write letters to the treasurers of Australia and Canada, enclosing cheques to the value of how much you would like to contribute to bail out failed US banks and mismanaged European governments.

 

    I think JFK put it best when he said:

 

Ask not what your country can do for you. 
Ask what you can do for someone else's country.

 

 

    Cheers,

 

    Peter. 

The most corrupt company in history

    The Daily Bear (aka The Ostrich Head) has, through perusing thousands of audit reports, selected the most hideously corrupted company in the world.  Here are a few extracts of the 26 page report:

    Material weaknesses discussed later in our report continued to (1) hamper the [company]'s ability to reliably report a significant portion of its assets, liabilities, costs, and other related information; (2) affect the [company]'s ability to reliably measure the full cost as well as the financial and nonfinancial performance of certain programs and activities; (3) impair the [company]'s ability to adequately safeguard significant assets and properly record various transactions; and (4) hinder the [company] from having reliable financial information to operate in an efficient and effective manner.

 

  • Certain material weaknesses in internal control over financial reporting and other limitations on the scope of our work resulted in conditions that continued to prevent us from expressing an opinion on the accompanying consolidated financial statements for the fiscal years ended September 30, 2009 and 2008.

 

    Because of the [the company]'s inability to demonstrate the reliability of significant portions of the its accompanying consolidated financial statements for fiscal years 2009 and 2008… we are unable to, and we do not, express an opinion on such consolidated financial statements.

 

    As a result of these limitations, readers are cautioned that amounts reported in the consolidated financial statements and related notes may not be reliable. 

 

    The material weaknesses that contributed to our disclaimer of opinion on the consolidated financial statements were the [company]'s inability to

 

  • satisfactorily determine that property, plant, and equipment and inventories and related property were properly reported in the consolidated financial statements;

 

  • ensure that the [company]'s consolidated financial statements were (1) consistent with the underlying audited entities’ financial statements, (2) properly balanced, and (3) in conformity with GAAP; and

 

  • identify and either resolve or explain material differences between certain… changes in cash balance… and underlying financial information and records.

 

    Due to the material weaknesses and other limitations on the scope of our work discussed above, there may also be additional issues that could affect the consolidated financial statements that were not identified.

 

    To make the fiscal years 2009 and 2008 consolidated financial statements balance, [the company] recorded net increases of $17.4 billion and $29.8 billion, respectively, to net operating costs, which it labeled “Unmatched transactions and balances.”  An additional net $8 billion and $11 billion of unmatched transactions were recorded in costs for fiscal years 2009 and 2008, respectively.  [The company] is unable to fully identify and quantify all components of these unreconciled activities.

    It goes on and on and on.  I mean, this is worse than Enron right?  What company, seriously, could possibly get away with this and pull the wool over both government and shareholders' eyes? 

    And don’t tell me you actually guessed this is the US government.  I mean, this is the fair and transparent administration of Barrack Obama we're talking about. 

    But yes, sadly, this is from the official audit of the US government by the Government Accountability Office.

    And you wonder why the SEC can't find guys like Madoff?  Here's what the GAO had to say about the SEC:

 

    As of September 30, 2009, SEC did not have effective internal control over financial reporting.  We identified six significant deficiencies that collectively represented a material weakness in SEC’s internal control over financial reporting.

    In other words, the regulator that's supposed to weed out poor reporting and governance can't even get its own house into order!

    To clarify the accounting text in the Government Accountability Office Auditor's Report (or, rather, the non-report), the Whitehouse issued A Citizen’s Guide to the Financial Report of the United States Government.

     For easy consumption, the Whitehouse managed to reduce a 26 page report into 14 pages.  At least it does discuss transparency (once):

The website, Recovery.gov, is the centerpiece of the President’s commitment to transparency and accountability. Recovery.gov features information on how the Act is working, tools to help hold the government accountable, and up-to-date data on the expenditure of funds.

    Oops.  That's somewhere between an untruth and a straight out lie!

    The Citizen's guide also had a look at the problem of the horrendous lack of controls and balances -- in the securities market!  In fact, the citizen's copy totally missed out the bulk of the GAO report.

    Specifically, it missed the 27 pages (of a total of 28) that stated why the GAAP reported budget deficit of just $1.4 trillion was a complete sham.

    Fair enough I guess.  You don't want concerned citizens finding out about this sort of thing.

    Fortunately, you can't fool everyone all the time, and the guys at Shadow Stats who take government figures and compare them to reality found that the actual GAAP loss was $4.3 trillion.

    The reason I bring this up is the number of tea parties held recently.  For those of you who don't know the history of the Boston Tea Party, it basically marked the end of low-tax British Government Regime and the institution of the high-tax US Government Regime.

    Thanks to the GAAP loss, which is in essence a deferred tax, and to the corrupt and absurd policies that created it, Americans really should be holding their tea parties the day after Christmas!!

Cheers,

Peter.

The Tea Parties should be held the day after Christmas

    A number of tea parties were held recently in celebration of the Boston Tea Party.  For those of you who don't know the history of the Boston Tea Party, it basically marked the end of low-tax British Government Regime and the institution of the high-tax US Government Regime.

    Not much to celebrate for sure.  Now Tea Partiers celebrate the time of year when they've finished paying money to the government (about 35% of their year) and are now earning for themselves. 

    This is clearly misdirected and wrong.  These guys really need to take a long hard look at the numbers.

    The GAAP budget shortfall of $4.3 trillion is what Americans will have to pay in future taxes.  So it's nothing more than a deferred tax.

    If we add on the $1.75 trillion that individual American's already paid in tax, that brings the total tax bill to $6.05 trillion. 

    With the 155 million Americans over 15 that are working and earning an average of $39,500 a year, total personal income in the US is $6.12 trillion.

    That means total paid and deferred taxes account for 98.9% of the average income.  This puts the proper celebration for the Tea Party on the day after Christmas.  This still gives Americans four days to earn money for themselves (and five in a leap year)!

 

    Cheers,

    Peter.