Feb 21, 2014 - 12:29 PM GMT
By: Money_Morning
Shah Gilani writes:When it comes to big banks’ bad behavior and the fines they pay to settle “allegations” — which are actually civil charges and which would be criminal charges if applied to any other business or in any parallel universe — things aren’t even close to what they seem.
Sure the headlines scream victory, at least monetary victory, for some ripped-off consumers, some hard-charging regulators, and our vaunted (NOT) Justice Department.
We think we hear the ching-ching of the Treasury Department’s cash registers ringing as they collect billions of dollars from miscreant, monster banks.
We think we can hear victorious regulators popping champagne corks as they celebrate settlement money coming in to prop up their budgets so they can keep going after these lawbreakers.
We think we can hear the cling-clank of consumers — who’ve been set up like bowling pins to be knocked down until the change falls out of their pockets at the feet of slobbering banksters — getting some of their stolen money back.
Here’s what’s really going on…
The headlines, like the ones that screamed JPMorgan Chase & Co. (NYSE:JPM) was paying a record $13 billion to settle misdeeds that may have accidentally contributed to the credit crisis and the Great Recession that maybe forever imposed on America’s middleclass and perennial underclass a new set of dream shackles, are BS. And I don’t mean back-stabbing.
Ripped-off consumers don’t get made whole. Regulators don’t keep a dime of what they extract. Only the U.S. Treasury rings its register on any regular basis… and you thought the deficit was declining on its own!
And the big banks? Not only aren’t they paying what the headlines trumpet, most of what they do pay, and far more disgustingly, a lot of what they say they are going to pay in restitution to consumers, they write off on their taxes!
That’s right, after they neither admit nor deny doing what they did, and settle on paying fines and other forms of remunerative compensation to prove they didn’t do anything wrong, they write most of those “expenses” off.
Of course those write-offs reduce their taxable income. So the public’s screwed again.
You didn’t know that? If not, don’t beat yourself up. Not a lot of people do.
But Congress does.
Some people in Congress actually want to do something about the games banks play with the settlements they negotiate with regulators, attorneys general, and the Justice Department.
But, of course, Congress being Congress, none of these “bills” have moved an inch.
Back on October 30, 2013, after JPM’s $13 billion settlement made headlines, House Democrats Peter Welch (VT) and Luis Gutierrez (IL) introduced the “Stop Deducting Damages Act of 2013.”
The bill as intended:
- …amends the Internal Revenue Code to: (1) deny a tax deduction for any amount paid or incurred for compensatory or punitive damages in connection with any judgment in, or settlement of, any action against a government; and (2) include in gross income any amount paid as insurance or otherwise due to liability for punitive damages.
Then on November 5, 2013, Senators Jack Reed (D-RI) and Charles E. Grassley (R-Iowa) put forward their “Government Settlement Transparency and Reform Act.”
The bill as intended:
- …amends the Internal Revenue Code to expand provisions relating to the non-deductibility of fines and penalties, to prohibit a tax deduction for any amount paid or incurred to any governmental entity relating to the violation of any law or the investigation or inquiry into a potential violation of law. Exempts from such prohibition: (1) restitution or amounts paid to come into compliance with any law that was violated or otherwise involved in the investigation or inquiry, (2) amounts paid pursuant to a court order in a suit in which the governmental entity was not a party, and (3) amounts paid or incurred as taxes due. Imposes new reporting requirements on governmental entities relating to amounts paid as fines or for restitution.
But neither of those “bills” came due.
Then on January 8, 2014, Senators Elizabeth Warren (D-MA) and Tom Coburn (R-OK) introduced to the Senate their “Truth in Settlements Act of 2014.”
Senator Warren explained the bill:
- When government agencies reach settlements with companies that break the law, they should disclose the terms of those deals to the public. Anytime an agency decides that an enforcement action is needed, but it is not willing to go to court, that agency should be willing to disclose the key terms and conditions of the agreement. Increased transparency will shut down backroom deal-making and ensure that Congress, citizens and watchdog groups can hold regulatory agencies accountable for strong and effective enforcement that benefits the public interest.
Meanwhile, Senator Warren’s website tells us:
- Under the Truth in Settlements Act, all written public statements that reference the dollar amounts of settlements will be required to include explanations of how those settlements are categorized for tax purposes and whether payments may be offset by “credits” for particular conduct. Companies that settle with enforcement agencies will be required to disclose in their Securities and Exchange Commission (SEC) filings whether they have deducted any or all of the dollar amounts of their settlements from their taxes; and federal agencies will be required to post basic information about settlements and provide copies of those agreements on their websites. To address concerns about confidentiality, the Truth in Settlements Act also requires agencies to explain publicly why confidentiality is justified in any particular instance. The Act also directs agencies to disclose basic information about the number of settlements they deem confidential each year and directs the Government Accountability Office (GAO) to conduct a study of confidentiality procedures and to provide additional recommendations for increasing transparency. These and other provisions of the Truth in Settlements Act will increase the transparency of government settlements and permit greater public scrutiny.
Where are these bills?
They were all DOA, as in dead on arrival.
Don’t bother looking to see if they’ve made any progress. I’ll tell you now, if any of them ever happen it will probably be in February, because it will be a cold day in hell before any of the big banks’ profits are meaningfully haircut by any “law.”
You want to know more about how settlements work, how banks negotiate them, how headlines about big fines are misleading? Read Part III of my series on settlements in today’s MoneyMorning.
But read it on an empty stomach, otherwise you might get sick.
By the way, did you see what I put together especially for you?
Click here. As you’ll see, I’m finally blowing the lid on the most lucrative trade on the planet.
This is very unique trade… one that has created some of the biggest gains in history. Guys like Paulson, Paul Tudor Jones, Templeton… they’ve made unbelievable amounts of money using this trade. George Soros used it to make a billion dollars – in a single day!
This strategy has been hidden from you because the folks on Wall Street don’t want you to know how to land huge gains trading some of world’s biggest Blue Chips – without have to actually buy the stock.
But today I’m changing all of that. Just go here and I’ll show you exactly how to trade this trade for exceptionally large returns. Anyone can do it.
Shah
©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:customerservice@moneymorning.com
Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.
Money Morning Archive
|
© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
No comments:
Post a Comment