May 2010

Conference Committee - Where Lobbyists Attack Bills after they have passed Congress

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As noted many times, lobbyists are swarming capital hill trying to stop financial reform.

Many of you probably don't know of a major kill legislation lobbyist trick in their arsenal tool basket. That trick is to kill amendments, rewrite the bill in conference committee. After a bill has passed both houses, even with some amendments passing in overwhelming majorities, lobbyists can get their chosen representatives as conferees when the House and Senate bill versions are negotiated to rectify the differences between the two versions.

Conferees are House and Senate members, but only about 3 from each congressional body. So, a select group of 6 or 8 can literally change a piece of legislation after it has passed both houses via conference committee. Lobbyists can get their representatives hand picked by Congressional and or Committee leadership and then override the vote of the Congressional majority.

This is where amendments are literally ripped out, per the conferees and one gets a completely different bill than what passed either the House or the Senate body.

Ridiculous huh?

Global Financial Meltdown Redux

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If you are wondering what's going on, think no more. The end of the world is upon us. All conspiracy theory aside, we are hitting phase 2 of the global financial crisis. Instead of the banks being insolvent, now nations are. No surprise since governments took on the follies of the Banksters and are now drowning in debt.

The long shadow on deficits hovers over the lack of real economic growth projected for the future.

How To Avoid Paying Taxes, if you are a Multinational Corporation that is - Transfer Pricing

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Bloomberg has an amazing overview on transfer pricing, via an upcoming paper by Economist Kimberly Clausing. It is estimated $60 billion dollars in corporate taxes are avoided through this technique and $1 trillion dollars in profits are parked offshore, much of which is to avoid paying taxes.

The nutshell of the technique is to attribute sales in one country to profits in another.

The system allows for creating paper transactions between subsidiaries of the same company to allocate expenses and profits to selected countries. For instance, when technology firms license their patents to offshore subsidiaries in low-tax countries, profits from sales overseas are booked to the foreign units, not the U.S. parents. The tax savings add to profits.

U.S. tax laws have sought to regulate transfer pricing in various forms since 1921. Treasury Department regulations in 1968 created standards for pricing inter-company transactions. Thousands of pages of rules have followed, and the tax code was amended in 1986 because of concerns that companies were shifting profits from the U.S.

Derivatives, derivatives, derivatives!

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Over and over again, we discover, upon some obscure audit or forensic accounting report being published, derivatives were the real culprit behind some bank/credit union/country failing.

Now we have Greece considering suing U.S. banks over credit default swaps on their sovereign debt and other derivatives.

Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou said.

“I wouldn’t rule out that this may be a recourse,” Papandreou said.

While this interview is making headlines buzz, to read the details of why Greece would consider suing U.S. banks click here and here

What a surprise, having a vehicle that pays out hansomely if a nation defaults on their debt might create some shady dealings. Bloomberg:

European Central Bank President Jean-Claude Trichet said May 6 that he was concerned about speculation in bond markets using credit default swaps. “By first buying the CDS and then trying to affect market sentiment by going short on the underlying bond, investors can make large profits,” he said.

Rethinking the Political Economy

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One of the most misused and abused terms in language today is "free market".
The definition of a free market is business governed by supply and demand, and not restrained by government regulation or subsidy.
This definition is often used in conjunction with environmental regulation and minimum wage laws, but almost never with trade between firms and corporations. Which is the problem, because without government protections this "free market" wouldn't exist.

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