Congress, Finance Law and Your Personal Economic Future


In the past week, three occurrences brought signals of what you can do to protect your personal economic future. But you’ll have to remember that your president, U.S. senators and Congress members are not leaders. They’re followers. And you’re going to have to tell them what you want…and hold their feet to the political furnace. Which, of course, means you’ll need to get organized, get educated, and get active.

The three occurrences:

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1. Sandford Weill, creator of the banking giant Citibank, basically said last week he was wrong. The nation needs to break up the big banks he helped foster and return to the two separate systems: commercial banks and investment banks. In other words, Congress needs to bring back legislation comparable to the Glass-Steagall Act which regulated the financial industry, foiled greedy speculation, and for decades avoided another Great Depression.

Following the historic stock market crash of 1929, research showed that much investment in the bubbling market came from borrowed money. It also involved banks providing “trash mortgages,” according to investment banker/commentator James G. Rickards, i.e. mortgages which banks knew couldn’t be paid back. Banks then bundled those mortgages into securities and sold them. Does that banking method sound familiar? As in the economic meltdown of 2008.

To insure that the crash of ’29 wouldn’t recur, Congress created Glass-Steagall in 1933. It mandated separating commercial banks-which operate through taking customer deposits and providing loans-from investment banks that deal in stocks, bonds and securities.

That act stood, and so did the U.S. economic system, until 1999, when Congress and President Bill Clinton-at the behest of the big banks–scrapped it for the Gramm-Leach-Bliley Act. That law repealed Glass-Steagall’s separation of commercial and investment banks. After signing the Gramm legislation, Clinton said, “The Glass-Steagall Act is no longer relevant.”

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But it was still relevant. In less than a decade, banks had repeated their trash-mortgage bundling of securities, leading to the meltdown of the world economy that we’re still dealing with today.

The Bush Administration, under Treasury Secretary Henry Paulson, hurriedly designed a multi-billion-dollar TARP bailout for the banks which Paulson deemed “too big to fail.” Congress approved it. Neil Barofsky, former special inspector general for TARP (SIGTARP), just came out with a book in which he blames both Paulson and current Treasury Secretary Timothy Geithner for a “bias toward the banks” which basically gave the banks money, and has helped only 20 per cent of the homeowners it was supposed to help. Burofsky said Geithner told him the bailout was designed to “foam the runway for the banks” rather than help the public.

TARP is expected to lose $32 billion to $70 billion in public monies, according to Burofsky.

Will Congress create a new form of Glass-Steagall and the president sign it? You’ll have to make them.

2. Congressman Ron Paul’s “Audit the Fed” legislation passed the House by a vote of 327-98 this past week. The bill calls for the Government Accountability Office to audit the Federal Reserve’s monetary policy and deliberations.

It’s basically an effort to give taxpayers some control over the independent agency that prints and distributes money to banks. Paul and other Fed critics have complained that the agency has printed trillions of new dollars and made them available to the banks, but that the banks either hoard or spend the money, but don’t make it available to citizens who need it for everything from home mortgages to small businesses.

The Fed, of course, has defied any effort to force transparency on it. Late last year, it came out that the Fed in 2008 had secretly loaned banks $7.7 trillion more than reported.

Investment banker Rickards also pointed out last week that the Fed’s manipulation (lowering) of interest rates is costing savers $500 billion a year. It actually displaces the money from investors, who lose it through lowering of rates, to the banks which use the monies for their own benefit.

Democratic opponents of the Paul bill warn it will place the free-dealing Fed at the mercy of politicians. The bill now goes to the Senate, and Sen. Harry Reid, the Democrats’ leader, has said he won’t let the legislation come up for a vote. So it seems dead for this session.

But this is an election year, and if you want to protect yourself and your children from our money-printing and distributing institution that seems to favor the banks over citizens, you need to get your Congressional candidates to commit to it.

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Will Congress eventually create and pass Federal Reserve-monitoring legislation and the president sign it? You’ll have to make them.

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3. The Tax Justice Network issued a report showing that 92,000 people (0.001 per cent of the world’s population) have stashed at least $21 trillion in hidden assets in offshore tax havens. The independent research network equaled the sum to both the U.S. and Japanese economies combined.

The July 45-page report said the hidden amount of untaxed funds could be as high as $32 trillion. Much of the data analyzed in the report comes from the World Bank, International Monetary Fund (IMF), Bank for International Settlements (BIS), and the United Nations.

James N. Henry, the study’s author, states:

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The very existence of the global offshore industry, and the tax-free status of the enormous sums invested by their wealthy clients, is predicated on secrecy: that is what this industry really “supplies” as it competes for, conceals, and manages private capital from all over the planet, from any and all sources, no questions asked.

We are up against one of society’s most well-entrenched interest groups. After all, there’s no interest group more rich and powerful than the rich and powerful, who are the ultimate subjects of our research.

If Congress would decide to pursue and tax this vast wealth, it would keep our lawmakers from looking to tax you more. And it could protect you from their efforts to abuse your Social Security trust fund, cut America’s Medicare program, and penalize the poor, elderly and homeless. They might even look for ways to help our college students out of their $1 trillion debt, and Americans’ $1 trillion credit-card debt, both of which provide wealth for America’s bankers.

So far, regulators have shown slight results at finding and bringing in some of this money. The New York Times‘ Mark Scott reported in April that, worldwide, “countries have collected about $18.7 billion in additional taxes from more than 100,000 wealthy individuals… The situation has left private banks scrambling to bolster their risk management practices and educate wealthy clients on the new regulatory environment.”

As you can see, that’s far short of taxing all the $21-32 trillion, so there’s room for more heavy enforcement.

Scott also noted:

Several European allies reached an agreement with the United States in February to help enforce the Foreign Account Tax Compliance Act, which requires that virtually every financial institution in the world report any accounts held by Americans. Many wealthy clients who previously had not worried about revealing all their international assets to home authorities are taking advantage of tax amnesty programs in countries like the United States and Britain.

U.S. federal regulators will only make a determined push to find and collect taxes on the trillions in offshore funds, or before the money makes it there, if Congress and the president demand it. One problem: nearly half of the Congress are millionaires. So is President Obama. So is Mitt Romney. So is Ron Paul.

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Will Congress create shark-teeth legislation to really bite into these offshore tax havens, and will the president sign it? Will they push for strict enforcement of the Foreign Account Tax Compliance Act? You’ll have to make them.