…credit card and car-loan interest payments were, like houses, tax-deductible?
On Oct. 22, 1986, President Ronald Reagan signed into law the Tax Reform Act of 1986. Reagan called the 829-page, 33-pound bill “the most sweeping overhaul of the tax code in our nation’s history.”
The new code gradually phased out all deductions for interest paid on car loans, charge-account purchases, vacations and anything else that fell under what the law termed “consumer loans.”
This is a pretty obvious yardstick for assessing President Obama and his (and his party’s) efforts to rescue and ram through the overclass’s pet Chicago-school/supply-side theory of how to fix a Depression.
Remember way back in 2008, when the federal government had to rescue the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, both of which had ruined themselves by making too many mortgage loans during the inflation phase of the housing bubble? Remember how, way back in 2008, there were campaign promises that the lax lending would be restricted, in order to prevent a recurrence of the implosion?
Guess what. That’s right:
Seeking to stabilize the foundering housing market, President Obama is offering a plan to help as many as nine million families refinance their mortgages or avoid foreclosure, according to a summary released by the White House on Wednesday morning.
Included in the package is a move to ease some restrictions on Fannie Mae and Freddie Mac — which guarantee millions of home loans. Generally Fannie and Freddie cannot guarantee refinancing on mortgages valued at more than 80 percent of the home’s worth.
But the president’s plan would remove that restriction on mortgages the lending giants already own or guarantee. [The New York Times, February 18, 2009]
Dmitry Orlov is right: The USA’s ultra-decrepit overclass is completely out of real answers. All it can do is throw new capitalist boondoggles on top of the craters left by the collapse of the old ones.
And, as they do this, they are displaying a truly Orwellian capacity for forgetting yesterday’s ancient history.
Meanwhile, the cravenness and market-totalitarian stupidity of the Obama Administration, which starts right where the buck supposedly stops, is yet more solid proof that, as the great Noam Chomsky says, we live in a one-party state. There is the Business Party, which has two wings, called “Republicans” and “Democrats.”
Batten down the hatches, folks. The worst is yet to come, and the flood will be very deep…
…is a journalist who actually performs the core task of journalism — whistleblowing — from inside the corporate media system, which generally selects and encourages ventriloquists rather than news-hawks, fearing (correctly) that too much actual journalism would cost it corporate advertising dollars.
Yesterday, Joe Nocera of The New York Times earned the first-ever Consumer Trap Shrieking Coelacanth Award. His brave and lonely act of journalism requires no extra explanation, other than to say that it has, despite its extreme relevance and currency, been quickly buried, rather than bannered, on the NYT website.
Here is what Mr. Nocera wrote:
“Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?”
It was Oct. 17, just four days after JPMorgan Chase’s chief executive, Jamie Dimon, agreed to take a $25 billion capital injection courtesy of the United States government, when a JPMorgan employee asked that question. It came toward the end of an employee-only conference call that had been largely devoted to meshing certain divisions of JPMorgan with its new acquisition, Washington Mutual.
Which, of course, it also got thanks to the federal government. Christmas came early at JPMorgan Chase.
The JPMorgan executive who was moderating the employee conference call didn’t hesitate to answer a question that was pretty politically sensitive given the events of the previous few weeks.
Given the way, that is, that Treasury Secretary Henry M. Paulson Jr. had decided to use the first installment of the $700 billion bailout money to recapitalize banks instead of buying up their toxic securities, which he had then sold to Congress and the American people as the best and fastest way to get the banks to start making loans again, and help prevent this recession from getting much, much worse.
In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who’s been indiscreet enough to say it within earshotof a journalist.
(He didn’t mean to, of course, but I obtained the call-in number and listened to a recording.)
“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”
Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: at another point in the conference call, the same executive (who I’m not naming because he didn’t know I would be listening in) explained that “loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot.
It is starting to appear as if one of Treasury’s key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury’s version of the weapons of mass destruction.
In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, “the government wants not only to stabilize the industry, but also to reshape it.” Now they tell us.