Where Are They Now? Seven Villains of the Financial Crisis

After the financial crisis, a lot of people were looking for someone to point the finger of blame at, but as this article from Daily Finance, there are multiple individuals that contributed to the bank collapse.

In 2008, as the economy seemed to be in free-fall, pundits, politicians and the public cast about in search of the ultimate villain, the Wall Street weasel who could assume the blame for massive foreclosures, skyrocketing unemployment, and plummeting stock values. While the disaster was too big to pin on any single schemer, a handful of likely candidates quickly emerged.

Some, like Ken Lewis and Jimmy Cayne, seemed merely inattentive and inept, while others like Angelo Mozilo and Fabrice Tourre appeared to be actively involved in cheating the public. Yet, whether their position was in Wall Street or Washington, the CEOs office or the analyst's desk, all seven of the people on our list carried some measure of the blame for the events of 2008.

Two years later, most members of the class of 2008 have moved on to new jobs, cushy retirements or fresh challenges -- often involving the Securities & Exchange Commission. Yet, regardless of where they go, all seven will continue to carry the marks of 2008, the end of a ride that gave them billions in salary, yet cost them their reputations.

Jimmy Cayne: Playing Bridge While Bear Burned

In the two and a half years since Bear Stearns went belly up, the company's chairman of the board James E. "Jimmy" Cayne has become famous -- indeed, notorious -- for two things: smoking weed and playing cards.

Winner of 13 national championships, Cayne is among the world's top masters at the game. In 1969, he was playing bridge professionally in New York when fellow player Alan "Ace" Greenberg hired him to be a stock broker at Bear Stearns. Over the next 32 years, Cayne rose to become president, CEO, and ultimately chairman of the company; along the way, he continued to play bridge, becoming famous both for his playing style and for the rumor that he smokes marijuana after tournaments.

The 10 Richest Presidents

Forbes put together a great story on the 10 wealthiest Presidents of the United States. To see what Presidential faces grace the list, check out a segment of the story below or watch this slideshow on Forbes.com.

Don't believe all that born-in-a-log-cabin hype. Only four United States presidents actually started out that way, Abraham Lincoln being the most famous. By the time the other three, Franklin Pierce, James Buchanan and James A. Garfield, entered the nation's highest office, they shared one trait with its other 40 occupants: All had achieved a certain measure of financial prosperity.

Despite two centuries of campaign rhetoric touting identification with the common man, the simple fact is that no truly poor individual ever has become president of the United States.

Can anyone grow up to be president? If history is a judge, one just cannot become President unless they first amass sufficient financial wherewithal to withstand often income-less political races. (If Sarah Palin runs for president she'll need that $10 million Forbes estimates she has earned in book advances and speaking fees over the past year.)

Like citizens themselves, some presidents have been richer than others as they exercised their weighty responsibilities. Who were the flushest?

For our money, George Washington wins hands down. In the largely tax-free environment that characterized colonial America, he was considered one of its richest residents, a product of his shrewd business sense, a marriage to a wealthy widow and several inheritances. He benefited from an older brother's marriage into a powerful family, while early work as a surveyor helped give him a keen understanding of land.

Geithner Favors Allowing Tax Cuts for the "Wealthy" to Expire

From Examiner.com:

In another move sure to up the ante in the perceived class warfare being waged by the Obama administration, Treasury Secretary, Timothy Geithner has said that he is favorably disposed to allowing the present tax cuts for the "wealthiest people" to expire.

He calls it the "responsible thing to do", although most Blue Dog Democrats and Republicans would disagree, as they see it as a failed economic policy (increasing taxes on the wealthiest people) that would only hurt economic growth, in the long run.

While speaking on ABC's "This Week" this morning, Geithner professed that allowing the tax cuts to expire would send a signal to the world that the United States was willing as a country, to take concrete steps, necessary to reducing long-term budget deficits.

What he however failed to propose was how exactly the government intended to make up for the still expected shortfall, as the so-called wealthiest people already pay close to two-thirds of the taxes.

The truth is that invariably, higher taxes on the wealthiest people, will end up hurting the economy in the long run as the latter will withdraw or significantly reduce their charitable donations, thus negatively impacting the non-profit sector of the economy.

World's Rich Got Richer Amid '09 Recession

From MSNMoney.com:

The United States was home to the most millionaires in 2009 -- 2.87 million -- followed by Japan with 1.65 million, Germany with 861,000, and China with 477,000.

Switzerland had the highest concentration of millionaires: nearly 35 for every 1,000 adults.

Yet as portfolios bounced back, investors remained wary after a collapse that erased a decade of stock gains, fueled a contraction in the global economy and sent unemployment soaring.

The report, based on surveys with more than 1,100 wealthy investors with 23 firms, found that the rich were well served by holding a broad range of investments, including commodities and real estate.

"The wealthy allocated, as opposed to concentrated, their investments," Merrill Lynch head of U.S. wealth management Lyle LaMothe said in an interview.

Millionaires poured more of their money into fixed-income investments seeking predictable returns and cash flow. The challenge ahead for brokers is convincing clients to move off the sidelines and pursue riskier, more fruitful investments.

Texas Billionaire’s Legacy

On January 1, 2010 the federal estate tax disappeared. While every tax-minded person out there, myself included, assumed Congress would step in and reinstate it, that just didn’t happen. So, when Texas billionaire, Dan Duncan, died in late March, his entire $9 billion estate passed on to his family, tax-free.

Had he passed three months earlier, his estate would have been subject to 45% federal estate tax. Had he lasted until 2011, that estate tax would have gone up to 55%. But, since Congress allowed the estate tax to lapse for one year, his heirs will receive the whole kit and caboodle without Uncle Sam getting a cut.

Rumors that Congress will instate a retroactive estate tax continue to circulate. With enormous deficits and historically low tax revenues, the government loathes missing out on the billions of dollars Mr. Duncan’s estate would have produced. However, Mr. Duncan’s heirs certainly have the financial means to battle any such law’s constitutionality in court.

No one knows what Congress will do at this point. To read more about Mr. Duncan and the estate tax, read the full article here.

Rating Cut by Fitch on Wealthiest U.S. State

According to EconomicPolicyJournal.com, the state of Connecticut is expected to borrow nearly a billion dollars to close a budget gap in the fiscal year beginning July 1^st. This move comes after boring money last fiscal year to cover their $947.6 million deficit. As a result, Fitch – a well-regarded international credit rating agency – has downgraded the states credit rating AA+ to AA.

“The downgrade reflects the state’s reduced financial flexibility, illustrated by its reliance on sizable debt issuances during the current biennium to close operating gaps in the context of already high liabilities,” Fitch said.

Connecticut is the wealthiest state on a per capita basis with personal income of $54,397 in 2009, according to Department of Commerce.

World’s Wealthy Tapped for Cash as Governments Tax High Incomes

From Bloomberg.com:

From Athens to Olympia, Washington, governments made poorer by the recession are looking to higher taxes on the rich for cash.

Spain’s wealthiest should be tapped to help close the euro region’s third-largest budget deficit, Prime Minister Jose Luis Rodriguez Zapatero said yesterday. The U.K. has boosted taxes on high earners and French and Swedish politicians are calling for the same. The top U.S. tax rate is set to rise in 2011, while at least 14 states have lifted rates or are considering increases.

“There’s a real move to get at whatever revenue you can get at without being so broad as to get the populace all up in arms,” said Scott Pattison, executive director of the National Association of State Budget Officers in Washington. “You go where the money is.”

The longest recession since the Great Depression has deprived governments of revenue, opening gaps between what they take in and what they must spend to sustain their economies. Budget deficits in advanced economies have swollen more than eight-fold since 2007 to about 9 percent of gross domestic product, the International Monetary Fund said.

U.S. states are projected to confront $124 billion in cumulative budget gaps in the next two fiscal years, according to the Pew Center on the States, confronting politicians with the need to raise revenue and cut spending to balance budgets.

Medicare Tax Hikes: What The Rich Will Pay

There are plenty of tax changes in the new health care reform bill, but the group of taxpayers that will be hit hardest are families making $250,000 or more per year. As this CNN Money.com article explains, they will get hit with pretty significant Medicare tax increases.

Currently, the Medicare payroll tax is 2.9% on all wages -- with the worker and his employer each paying 1.45%.

Under the new law, starting in 2013, high-income individuals will pay another 0.9 percentage points -- so their share will total 2.35% of their wages.

A single person making $250,000 would pay an additional $450 a year into Medicare relative to what he pays today, according to calculations by Deloitte.

If he made $1 million, he would pay an additional $7,200.

Couples making $500,000 in wages would pay an additional $2,250. If they made $1 million, they would pay an additional $6,750.

U.S. Minted More Millionaires In 2009

It should come as no surprise that the number of millionaires in the country decreased in 2008 due to the market meltdown, and poor economy. However, I was surprised when I read that the number of millionaires actually increased by around 16% in 2009, according to this article on CNN Money. As it explains, the number of households in the U.S. worth $1 million or more grew to 7.8 million in 2009.

The firm's report, "Affluent Market Insights 2010," also found that the number of ultra high-net-worth households, worth $5 million or more jumped 17% to 980,000 in 2009.

"This is largely attributed to the stock market rebound, since other assets including real estate and private businesses have not rebounded as dramatically," said George H. Walper, Jr., president of Spectrem Group.

The report comes one year to the day after the Dow and the S&P 500 closed at 12 year lows in the thick of the financial crisis.

Continue reading at CNN Money.com…

Oregon Approves Tax Increase on Top-Earners, Business

The State of Oregon approved a $727 million tax increase on businesses and high-earners this week, hoping to bridge some of the gap in the States budget. Well known for being a State with out a sales tax, it is not uncommon for Oregonians to approve taxes increases elsewhere. Checkout the following article on the development courtesy of Bloomberg.com.

Oregonians voted to keep taxes enacted by Democratic Governor Ted Kulongoski in July, according to a count of ballots cast by more than half of the state’s registered voters. Measure 66, which raises taxes on households earning $250,000 or more, passed by 54 percent. Measure 67, which increases corporate levies, garnered favor of 53 percent.

Legislators enacted the tax boost last year to help close a $4 billion hole that the U.S. recession opened in the state’s budget. The levies spurred a challenge from foes who gathered enough signatures to force the referendum. By targeting businesses and the wealthy, proponents parried resistance from voters who twice defeated tax increases in the wake of the 2001 recession.

“It’s a go-after-the-rich strategy,” said John Matsusaka, president of the Initiative and Referendum Institute at the University of Southern California in Los Angeles. “It shows that some voters have switched their minds and they’re more likely to go after the rich.”

The results are from an unofficial count of 1.12 million ballots released by the Secretary of State’s office by 11:15 p.m. local time yesterday. That accounts for 55 percent of the state’s registered voters, who cast ballots in a mail-in election that concluded yesterday.

Continue reading at Bloomberg.com…

Bill Gates suggests Tax Increase in the U.S

Well known for being the richest man in the world, Microsoft’s Bill Gates spoke with ABC News yesterday to talk about the economy. He also proposed raising taxes a solution to help bridge the budget gap. Although his opinions are different from President Obama’s, Gates is convinced his solution is in the best interest of the country.

According to LuckyRoom, Gates has also come out against excessive state intervention, while U.S. president Barack Obama stressed that focus should be put upon longer term policy issues, such as education, to remove the effects of the worst recession experienced by the U.S. since the late the 1930s. “When you face a financial crisis like this, it will take years to disappear completely.

The budget currently shows a large deficit, and although the economy seems to be recovering, barring any changes in tax policy and the tax enforcement mechanism will not return the budget to a balanced position, said president Obama. It is worth mentioning that Gates speech takes place just two days before the annual speech by Obama in Congress, which is expected to focus extensively on economic issues, including the need to create new jobs.

The statements made by Gates that the U.S. economy will take years to recover reflect on the sales figures of old homes in the U.S. which showed a greater decline after three consecutive increases in by big tax reduction. Sales of old homes fell 16.7% in December, while analysts were expecting a fall below 11.6%.

Continue reading at LuckyRoom…

Estate-Tax Repeal Means Some Spouses Are Left Out

From the WallStreetJournal.com:

Spouses of those wealthy who die this year might find themselves with nothing if the family will isn't revised—a major wrinkle that could follow Friday's repeal of the federal estate tax.

As started on Jan. 1, estate taxes will be repealed for 2010 only. That means unless Congress acts otherwise, there is no limit to the wealth that can be passed on to heirs without incurring federal estate taxes through the end of the year.

But wills have often been written on the expectation that estate taxes were a fact of life for years to come, estate planners say. As a result, wills typically direct assets not subject to the tax be passed on to children—for 2009, up to $3.5 million—with the rest directed to the spouse.

"You could be in a situation now where everything would go into a trust downstream to the kids and nothing is left to the spouse," said Greg Rosica, a tax partner at Ernst & Young. "There is a need to revisit the basic estate-planning documents to make sure that what you intend to have happen really does happen."

Most states allow a surviving spouse to claim a portion of the estate, even if the spouse is disinherited under the will. But doing so can be time-consuming and expensive.

In 2011, the estate tax is scheduled to snap back to higher rates similar to those prior to President George W. Bush's tax cuts. The roundabout series of changes—the result of a compromise to pass the tax-cut legislation—has been on the books for years, but estate planners anticipated congressional Democrats would prevent the 2010 repeal from taking effect.

Lack of Estate Tax in 2010: Now Cheaper to Die?

From ABC News.com:

Well, 2010 has arrived – and because Congress devoted so much effort toward health care reform, we may have ourselves some death panels after all.

While critics have dismissed Sarah Palin's "death panels" to dole out medical care as fiction, a tax loophole may in fact give the heirs of some wealthy people a financial incentive to make this new year their loved one's last.

In 2001, then-President George W. Bush signed a law designed to phase out the estate tax -- a tax on the assets a deceased individual leaves behind. The law reduced the amount wealthy families were taxed after death starting in 2001 -- leading to complete abolition of the tax in 2010, but at the same time it concerned some because of the financial implications of the date when someone died.

For example, a wealthy person who dies on January 1, 2011, and left her heirs $10 million would really be leaving them $5.05 million because of taxes. If they died a day earlier (assuming no changes were made in tax laws), the heirs could receive the full $10 million.

Nobel prize-winning economist Paul Krugman appears to be the first to explain the potential pitfall for some elderly individuals, writing in May 2001 in the New York Times that it should have been called the "Throw Momma From the Train Act of 2001."

Rich Cling to Life to Beat Tax Man

The temporary repeal of estate taxes for 2010 has some wealthy taxpayers going to great lengths to take advantage of this change. According to this article on the Wall Street Journal, some families are even debating between keeping loved ones on life support for a few days in order to avoid paying estate taxes.

"I have two clients on life support, and the families are struggling with whether to continue heroic measures for a few more days," says Joshua Rubenstein, a lawyer with Katten Muchin Rosenman LLP in New York. "Do they want to live for the rest of their lives having made serious medical decisions based on estate-tax law?"

Currently, the tax applies to about 5,500 taxpayers a year. So, on average, at least 15 people die every day whose estates would benefit from the tax's lapse.

The macabre situation stems from 2001, when Congress raised estate-tax exemptions, culminating with the tax's disappearance next year. However, due to budget constraints, lawmakers didn't make the change permanent. So the estate tax is due to come back to life in 2011 -- at a higher rate and lower exemption.

Exclusive: IRS Hires "Hundreds" for New Wealth Unit

Following the IRS’s recent announcement regarding the creation of a new wealthy tax cheats unit, they have reportedly already hired hundreds of employees to join the new division. The group is expected to use their skills to identify rich and famous tax cheats who have the ability to hide their money in complex tax shelters. You can find a section of a Reuters.com article discussing the new IRS unit below.

The IRS high wealth unit, part of a broader effort to combat international tax evasion, is focusing on "the entire web of business entities controlled by a high wealth individual," IRS Commissioner Doug Shulman told a tax conference this week.

Another IRS official told Reuters "hundreds" of people have already been hired to staff the new unit, including some from within the agency.

"We have drawn top talent within the IRS that have expertise involving wealthy individuals as well as examination of their related entities," said Mae Lew, an IRS special counsel.

The high-wealth unit is focusing on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals.

While use of sophisticated legal structures can be legal, in other instances they "mask aggressive tax strategies," Shulman said.

Tax authorities in Japan, Germany and the UK have also created similar units.

The U.S. House of Representatives on Thursday approved a $387 million boost for the IRS for the fiscal year that started October 1, in part to fund the high-wealth unit. The Senate is expected to vote on the measure on Sunday.

Rise of the Super-Rich Hits a Sobering Wall

From the New York Times:

The rich have been getting richer for so long that the trend has come to seem almost permanent.

They began to pull away from everyone else in the 1970s. By 2006, income was more concentrated at the top than it had been since the late 1920s. The recent news about resurgent Wall Street pay has seemed to suggest that not even the Great Recession could reverse the rise in income inequality.

But economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon.

For every investment banker whose pay has recovered to its prerecession levels, there are several who have lost their jobs — as well as many wealthy investors who have lost millions. As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerous may now be ending.

The relative struggles of the rich may elicit little sympathy from less well-off families who are dealing with the effects of the worst recession in a generation. But the change does raise several broader economic questions. Among them is whether harder times for the rich will ultimately benefit the middle class and the poor, given that the huge recent increase in top incomes coincided with slow income growth for almost every other group. In blunter terms, the question is whether the better metaphor for the economy is a rising tide that can lift all boats — or a zero-sum game.

Is The Ball In Obama’s Court? Health Care Bill May Affect 2010 NBA Drafts

Rising taxes for the wealthy combined with the expiration of the Bush tax cuts may affect the 2010 NBA more than some States would like to admit. For example, some teams like the Chicago Bulls may have more trouble drafting popular free agents like Dwayne Wade, due to much higher state income taxes. Checkout the story from NBA.com below.

Could, in the end, the biggest barrier to the Bulls attracting a major free agent next summer like Dwyane Wade be the health care legislation now being debated in Washington?

Let’s face it. The prize next summer is Wade. LeBron James seems almost certain to remain in Cleveland given the weak state of the New York Knicks’ roster and uncertainty regarding the moving plans of the New Jersey Nets, supposedly James’ two speculated destinations. And do you really want to give a maximum contract to Chris Bosh, who doesn’t seem to impact winning very much? It seemed to me Bosh's Toronto had a much better roster last season than Wade’s in Miami and yet the Heat was far better than the Raptors. And the reason why Wade could well move is that roster. There’s no way, given how much Wade had to do last season that he could hold up carrying a team like that. It’s why you figure Miami is so desperate to make a major move now and why Wade, seemingly, has challenged them to do so.

Michael Beasley was at the USA Basketball mini-camp in Las Vegas Saturday hanging out in the media and family area after the scrimmage. He was the most obvious omission among the young players invited to try out for the Olympic team. Beasley couldn’t have been more gracious after the game staying around and signing autographs for everyone who asked. But he also was wearing his shorts so low you got way too much of a view of his underwear as he walked away. I know it was Vegas, but leave something to imagination. That streak of insouciance coupled with extreme immaturity suggests Miami has work to do with its roster to appease Wade.

And now comes the health care legislation, and you wonder what that has to do with anything?

The answer is taxes. The closest anyone seems to a plan now to pay for the changes is to tax the so-called rich. That would include just about every player in the NBA. I know we’re not supposed to feel sorry for rich people and assume they have so much that giving up more doesn’t matter. It does, just as comfortable people in the middle class with two cars and a nice health club membership don’t want to pay more taxes, either, even though they can afford to.

So I contacted a tax expert in Chicago, Noel Wilner, president of CBIZ MHM, an accounting and tax advisory company, and asked him to do some calculations. The assumption was single tax payer, the 2011 tax rates when the presumed five percent health care surtax would go into effect with the higher rates that year, salaries of $5.5 million, which is about the NBA average, and $17 million, which would be a high earner like Wade and no deductions.

Continue reading here…

Examples of How Tax Increases could Hit the Rich

Over the weekend, I came across this informative article from the Associated Press explaining how families would be impacted if the House’s new tax increate were to become law. As you can see from the examples below, some taxpayers could face a huge tax bill next April.

• A family of four making $450,000 a year would pay $103,600 in federal income taxes, an increase of $1,000.
• A single filer making $450,000 a year would pay $112,200 in federal income taxes, an increase of $7,100.
  
• A family of four making $800,000 a year would pay $220,800 in federal income taxes, an increase of $30,000.
  
• A single filer making $800,000 a year would pay $231,300 in federal income taxes, an increase of $30,700.
  
• A family of four making $5 million a year would pay $1.81 million in federal income taxes, an increase of $443,500.
  
• A single filer making $5 million a year would pay $1.83 million in federal income taxes, an increase of $452,000.

Democrats Agree on Tax Hike to Fund Health Care

From the Washington Post.com:

House Democrats agreed yesterday to raise taxes on the wealthy to pay for a sweeping expansion of the nation's health-care system, proposing a surtax on the highest earners that could send the top federal tax rate toward 45 percent.

Beginning in 2011, the plan would target all income over $350,000 a year for families and $280,000 a year for individuals, Democratic sources said. The surtax would start at 1 percent, rise to around 1.5 percent for families earning more than $500,000, then step up again, to around 3 percent, for families earning more than $1 million, Democrats said.

That would raise about $550 billion over the next decade, Democrats said -- about half the cost of reforms that are expected to cost about $1 trillion. The surtax percentages could rise two years later, they added, if lawmakers think additional cash is needed to cover the cost of health-care reform.

The top federal tax rate currently stands at 35 percent, but Democrats have vowed to raise it to 39.6 percent next year, when cuts enacted during the Bush administration expire. Combined with other federal tax adjustments, the surtax could leave most taxpayers with annual incomes more than $350,000 facing top federal rates of at least 45 percent, said Robert Carroll, a senior fellow at the nonprofit Tax Foundation.

Democrats Weigh Health Mandate as Obama Urges Taxing Wealthy

According to Bloomberg.com the Obama Administration and Democratic leaders in Congress are looking to increase taxes on the wealthy in this country in order to pay for a health care overhaul. Check out the text of their article below.

The Obama administration stepped up efforts to influence health-care legislation today as advisers David Axelrod and Austan Goolsbee appeared on television talk shows to discuss the issue.

The president is trying to avoid broad-based levies such as a Senate proposal to tax some employer-provided health benefits Axelrod said. Instead he is urging lawmakers to reconsider limiting all tax deductions for Americans in the highest tax brackets.

“He made a very strong case for the proposal that he put on the table, which was to cap deductions for high-income Americans, and he urged them to go back and look at that,” Axelrod said on the CNN’s “State of the Union.” Goolsbee, appearing on “Fox News Sunday,” said Obama is “mindful” about how “ordinary Americans are able to foot the bills” and never proposed taxing employee benefits.

House Democrats are weighing a new proposal in response to Obama’s call for legislation to be enacted by August. An outline of the plan obtained by Bloomberg News would require Americans to have insurance with some exceptions.

It would probably exempt those who can prove they can’t find an affordable policy. There could be a tax penalty for those with adequate financial resources who don’t elect to get insurance, according to the outline.

The outline suggests consumers who have individual health insurance policies that they like could keep them. Still, it says that “by and large” the nation’s market for individually purchased health insurance policies would move to a new federally operated exchange. It would permit both individuals and employees of small firms to buy policies at less expensive group rates.

“States will have the option to run a state exchange but the default will be a national exchange,” according to the outline.

Karen Lightfoot, a spokeswoman for House Energy and Commerce Committee Chairman Henry Waxman, a California Democrat whose panel is working on a proposal, said the document that is circulating is not the official work of the committee.

All House Democrats will be briefed June 9 on the details of a single piece of legislation that three House committees will work on, with the House slated to act by the end of July. The proposal is part of a broader push by Democrats in Congress to complete a revamp of the U.S. health-care system by an early fall timetable set by Obama.