Enforcing Anti-Trust Laws, What a Novel Idea

The new head of the U.S Justice Department announced that it will break with efforts to end the devitalizing of U.S anti-trust laws, where large defendants who are accused of unfair and unethical business practices and pose a hazard to the legitimate free market; are insulated from the complaints registered by plaintiffs who are often smaller in size and strength.

NY TIMES:

WASHINGTON — President Obama’s top antitrust official announced on Monday that the administration would restore an aggressive enforcement policy against corporations that use their market dominance to elbow out competitors or to keep them from gaining market share.

The new enforcement policy reverses the Bush administration’s approach, which strongly favored defendants against antitrust claims. It returns to a policy that led to the landmark antitrust lawsuits against Microsoft and Intel in the 1990s.

The head of the Justice Department’s antitrust division, Christine A. Varney, announced the policy reversal in a speech on Monday before the Center for American Progress, a liberal policy research organization. She will deliver the same speech on Tuesday to the United States Chamber of Commerce.

Ms. Varney said that the Bush administration policy “lost sight of an ultimate goal of antitrust laws — the protection of consumer welfare.”

“The failing of this approach is that it effectively straitjackets antitrust enforcers and courts from redressing monopolistic abuses, thereby allowing all but the most bold and predatory conduct to go unpunished and undeterred,” she said. “We must change course and take a new tack,”

Though it is great news for those who believe in small businesses, legitimate competition that is not used to enrich economically or industrially a given company within a sector of the economy who uses intimidation and wield their power to clear the field; this problem is likely much broader then the last administration.

Now I confess (and I am fairly certain that the handful of regular readers are aware ) that I am not fluent in economics, business, or anti-trust law; however it is evident even to an eye as untrained as mine that large business has gained a stranglehold in various arenas of the economy. And its not a partisan issue. A few given companies are acquiring entities in more and more areas. It was in the 1990s with the approval of then President Clinton, that the trend of media deregulation began with the Telecommunications Act of 1996, where radio and television stations can own multiple stations in the same community. News papers have also followed suite . And then there is the credit card companies, banks, oil companies, energy companies, and agribusiness just to name a few who have used their mammoth stature to ensure that small operations don’t get a chance to become viable competitors.

But its not just monopolies that are the problem. Oligopolies, which are when not merely one entity has dominion over a market but say two, three., or four do and use their muscle to keep out smaller and often more local competition. There needs to be laws, if there aren’t already that curb that. Something of a modern day “trust busting” of these oligopolies may not be a bad idea.

To me it sounds like at least the potential of a good start.

Too Big to Fail? How about too stupid to be Rescued?

Despite their sorry financial state, AIG will go ahead and give its top executives bonuses. How tone deaf can they possibly be? The Obama administration keeps trying to make the case that we need to infuse capital into these giant casinos to keep our economy afloat. Its disgraceful practices like this that make the job of President Obama and anyone else all the more harder.

New York Times:

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

The payments to A.I.G.’s troubled financial products division are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the second half of their bonuses to their performance in restructuring the company.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.

Personally I don’t see why the government doesn’t exercise more leverage here. After all since the U.S government and by proxy the U,S taxpayer now owns 80% of the operation.

UPDATE (3/16/09): Rep. Barney Frank (D-MA) said the same thing that maybe its time to get rid of some of those who got us into this crisis rather then enrich them. Of Course that would go for some of the politicians who got us into this disaster by removing some of the regulatory frame work that helped make this so catastrophic. Proof that deregulation and a no rules economy doesn’t work.

Good News: Madoff Heads to Jail

Today Bernie Madoff began the first day of the rest of his life, in prison. The 70 year old is accused of orchestrating one of the largest ponzi schemes in U.S History. Madoff pleaded guilty to eleven counts and despite the attempts of his defense, Bernie will not be returning to his New York Penthouse between now and his sentencing, but will head right to prison.

Daily Camera/ AP News:

NEW YORK (AP) — Bernard Madoff’s new Manhattan home is the size of a walk-in closet, with cinderblock walls, linoleum floors and a bunk bed. Breakfast will be served before sunrise, and the disgraced financier can stretch his legs outside, but only every other day – in a cage.

The Metropolitan Correctional Center, which has housed accused terrorists and reputed mobsters, welcomed the 70-year-old Madoff on Thursday after he pleaded guilty in one of Wall Street’s biggest investment swindles and a judge revoked his bail.

The federal jail in lower Manhattan stands between a courthouse and a church and holds inmates awaiting trial or serving short sentences. Currently, about 750 men and women are behind bars there.

Since his arrest in December, Madoff has been confined to his $7 million penthouse apartment.

When inmates first arrive at the jail, they are given physical and psychological exams and instructed on the rules. If cleared to enter the general population, they are issued a baggy brown uniform and assigned to cells measuring 7 1/2-by-8 feet, each fitted with a sink and toilet.

Many inmates must share their cells with another prisoner, but it was not immediately clear Thursday whether Madoff would have a cellmate.

One word: Justice!

AIG Could Ask for More Bailout Money

The behemoth Investment bank American International Group (AIG) may ask the government for additional money from the government after it is expected to post a steep loss in the 4th quarter.

American International Group, or AIG is expected to ask the Federal Government for more money.

NBC News is reporting that the company is set to post a nearly $60 Billion loss; the biggest in US corporate history. If that happens, the company may not be able to stay afloat without more cash from the government.

AIG has already received more than $150 Billion in bailout money, and it might not be able to get any more under the current laws.

The government already owns about 80% of the bank. With the extravagant and frivolous spending these captains have been engaging in since their ship has slowly sunk into the waters of financial oblivion, we might not want to be so eager to give them more.

Force Feed the Rich, Screw Everyone Else?

A number of Republicans are coming out against the pay cap provisions for banks and companies borrowing tax payer money to stay afloat. After all have you ever tried living on $500,000 a year? Wish I could say I have.

Sen. James Inhofe (R-OK) said that he is “one of the chief defenders of Obama on the Republican side” for the president’s efforts to reach across the aisle. But, said Inhofe, “as I was listening to him make those statements I thought, is this still America? Do we really tell people how to run [a business], and who to pay and how much to pay?

Yeah if those companies are using our tax payer money to be bailed out. James Inhofe slowly building that rickety bridge back to the ‘gilded age’.

Its Certainly a positive step, but

The American International Group (AIG) has received reams of government money and unlike the auto industry they don’t have to provide a plan. They have used government money time and again on junkets, vacations at luxury resorts, and sports jerseys in stead of keeping their company afloat.

But due to some pressure by New York Attorney General Andrew Cummo, the abysmal failure who is the CEO of AIG will be paid a salary of $1 a year, and other executives won’t receive bonuses or increases at least through 2009. Its a battle won in the larger scheme of things and certainly a victory for common sense. After all if your house is burning down it is kind of foolish to start installing a new in ground pool.

New York Times:

Under pressure from Attorney General Andrew M. Cuomo of New York, the American International Group said Tuesday that it would pay its chief executive, Edward M. Liddy, only a $1 a year and that it was freezing the salaries and eliminating bonuses for its seven other top executives.

In addition, the troubled insurance company said its next 50 highest-ranked executives would not receive salary increases through 2009.

A.I.G.’s cutbacks on executive pay came after Mr. Cuomo questioned last week whether the company actually planned to give out raises and bonuses to top executives, especially in light of the federal government’s $150 billion bailout of the company.

But excuse me if I am a bit cynical when a company that is supposedly struggling to stay alive uses money intended to save it on sports jerseys. If the government is to grant these companies any money at all, they should be required to have a plan to restructure as well as a plan to at least pay half of it back. But then again I might be a little insensitive after all what good is an investment bank if it doesn’t have sports jerseys?!

Silver Bullet to Save the Economy

Here is the solution I guess. Go after Dallas mavericks owner and Internet billionaire, Mark Cuban. Great, I guess the stock market should be going up any day now as a result.

Washington Post:

Mark Cuban, the eccentric Dallas Mavericks owner and self-made Internet billionaire, was charged today with insider trading by the Securities and Exchange Commission.

Cuban, 50, is accused of illegally selling 600,000 shares of stock in Mamma.com, a company he himself had described as an “up and coming search engine” in a blog posting from 2005.

Problem is Mamma.com, a Montreal-based start-up now known as Copernic, began raising capital in June 2004 through a process known as a PIPE (“private investment in public equity”) offering. Cuban knew of the offering beforehand and sold his shares hours before it became official, prosecutors allege.

I wonder if this is going to be like the Martha Stewart obstruction of Justice show, that unfolded at the same time as Enron’s demise. Now I am not condoning what Cuban or in her case Martha Stewart have done. If Cuban is found guilty he should face the law and whatever punishment is deemed just. However, when corrupt CEOs in businesses such as AIG are able to bilk money out of the government, while simultaneously taking junkets and paying CEO’s exorbinant bonuses, an insider trading charge is the least of America’s economic worries. I’m just saying.

Ethanol

Fellow blogger Adam comments on ethanol and offers some praise for boxothoughts (on my wordpress site). Adam writes:

Good article. Thanks for posting it. It’s interesting isnt it, how little people know about the issue. I am glad to see though, that more information is coming out about it. I wont link without permission, but I did a post called “Jimmy Cracked Corn Ethanol and I Don’t Care.” on my Blog.

I’m going to take a look around you’re blog. By your Categories list, it looks like you may have some interesting reading.

Keep up the good fight,
Adam

The Absurdity of corn based Ethanol

More on the subsidy and fuel independence myth that is corn-based ethanol. (H/T: Andrew Sullivan).

Robbery by way of Ink Instead of Lead

Here’s something to make almost every one’s blood boil like a pot of water atop a stove. It turns out that nearly three in four foreign corporations conducting business on the shores of the United States as well as 57 percent of American corporations have dodged payment of federal corporate income taxes over the course of the past ten years.

The study was made public Monday and conducted by the Government Accountability offices (GAO), although unfortunately they don’t name those who have violated the policy here. Its repellent that these high profile wealthy corporate tycoons would get away with something like this , but they have and I wouldn’t count on this administration run by an ex-CEO and a failed oilman to enforce the law and punish these violators anytime soon. After all, this government’s view and that of the corporate tax cheats are probably best summed up by the so-called Attorney general who said this week that just because you have broken the law doesn’t mean you have committed a crime.

I don’t know much about economics and even less about the tax code, (I couldn’t even read the litany of charts, information, and bureaucratic jargon contained in the GAO’s 37 page report. But the finding that these corporations game the system and leave honest smaller businesses as well as households and individuals are forced to clean up for the is simply abhorrent.

Reuters:

WASHINGTON (Reuters) – Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.

The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.

The outrageous part is that alot of that is probably legal. Sure there are many tax credits that help create jobs and all, but there are just as many elements of the tax code and things like tax shelters, allow some of the largest corporations to evade payment of the taxes they legally have to pay. Here is more:

The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.

Just the latest example of what is wrong with certain elements and loopholes in our economic system. Between Exxon Mobil’s record profits of $.7 billion dollars in its second quarter, colossal contractors like Blackwater USA receiving small business loans and Exxon Mobil making record profits at a time when the public at large is paying obscenely high gas prices, this is just another indicator of how indifferent both government and corporate America are to the plight of the average American.

Related Articles:
U.S loses $100 billion annually from offshore tax evasion.

Summary of GAO report.