The
Largest Tax in the
History of the World
2008’s $700 Billion
Emergency Proposal
By
Michael Minns
Houston, Texas Lawyer
Tax (verb)… To make difficult or excessive demands upon.
Our government is in the process of voting to tax American citizens, in one day, more than it has ever taxed them in any year, perhaps any decade … and we will not be able to pay-off this tax encumbrance in our lifetime.
A tax, generally defined, is a pecuniary (monetary) burden placed upon individuals or property to support the government. Sometimes taxes are direct, sometimes indirect; sometimes levied in money, and sometimes in kind.
The Tax we are about to receive is both “in kind”, and unkind, and, if allowed, it could lead to the end of our Republic.
The day it is passed we will be converted to either a fascist or socialist State, depending on your point of view; but on that day we will cease to be a free market Republic. If Pompey had asked the Romans to pay such a tax, the city that bore his name would, quite possibly, never have been built. The Coliseums would not have been dreamed of, and the Romans might have invited Spartacus into Rome as a liberator.
President Bush - through his Treasury Secretary Henry Paulson, former CEO of Goldman Sachs, who is reputed by Newsweek to be, “a man of tremendous intelligence, drive, and pragmatism” and who is spoken of by politicians of both parties as if he were a messiah - has asked Congress to give him Seven Hundred Billion Dollars cash (that’s $700,000,000,000.00) to buy more trash than anyone has ever bought in one single purchase … or, for that matter, in one hundred thousand purchases. The trash is a lot of paper promising to make payments by people we know in advance are not going to be able to make their payments.
The trash paper is called “promissory notes” which means a promise to pay. When you buy a house, and borrow the money, you sign this piece of paper called a “promissory note” and then you sign something that constitutes “collateral” (what you lose if you break your promise), usually the house, perhaps something else. When you buy a car for example, the collateral is the car, until you pay it off. So you give two things for the money: 1) Collateral, and 2) Your word. If the collateral is no good, and if your word is no good, either because of circumstances beyond your control, or because your word is just not any good, then the promise isn’t worth the paper it is written on.
Promissory note papers have been signed by various borrowers, who could never hope to keep the promises, coupled with some who could, and the money was given to promoters, con-artists, and members of the giant investment firms, Merrill Lynch, Bear Stearns, Lehman Brothers, Goldman Sachs, and Morgan Stanley.
The con men are long gone from their home “sting” base, (Lehman Brothers doesn’t even exist any more, Merrill Lynch is buried in Bank of America paper work); but like the leader of Goldman Sachs, some have hidden within the ranks of government. Few left with half a billion in stock like Paulson…but perhaps the time has come for them. The path from government to the free market and back hasn’t been this good since Dick Cheney, the public servant, marched from Bush to Halliburton and back to Bush again as a newly created gazillionaire. No one has yet examined the paper trash to decide what it’s really worth. Although Warren Buffett has cherry picked $5 Billion from Goldman Sach’s trash can, it doesn’t mean the rest of us have the skills to find the treasure amidst the trash, and more likely, if he has stopped looking in their trash can anything that could or should be “recycled” has been taken out. Buffet is a genuine American entrepreneur and it is clear that no one in government has his skills for finding good value. Is it already uncollectible? Will we buy only trash and leave the good stuff behind; the paper that will turn into cash by the relatively few promisors who have never gotten behind and likely will remain “good” paper, instead of trash?
At the end of the great depression, when men had finished jumping out of buildings because they had gone broke in the stock market, and when the last food line, which fed hundreds of thousands of formerly proud American workers who had lost their jobs, - often when their companies lost their corporate shirts - closed down, the smoke cleared and there were a few American powerhouses still standing. Among those remaining were Ford Motor Company and Sears & Roebuck, as well as Merrill Lynch and Lehman Brothers.
We are now seeing the tip of the Iceberg, of this recession and Merrill Lynch and Lehman Brothers are already gone. Goldman Sachs, the former home of the new King Paulson, made a deal with the federal government and they get to survive…not by the grace of good business practices or God…but by the graces of King Paulson and King Bush. And, Morgan Stanley, who operates in the smoke-filled good-old-boys’ room, gets the same tax payer deal… while their competitors Lehman and Lynch get lynched and divided up. Lehman will have much of its wealth taken over by the British company Barclays - which is now owned, in no small part, by oil-rich Arabs. The same Arabs we have bought overpriced oil from by borrowing overpriced dollars from the farsighted Chinese who, out of gratitude for our business (sneer), have put half of our domestic manufacturing industries out of business.
To understand the ultimate answer – which for King Bush is money, more specifically your money; you have to know the questions that lead to the answer.
The first question for Lehman Brothers, Goldman Sachs and Bank of America was: “How can we sell more product than we have so that we can make more money?”
One of the reasons that Sears survived the great depression is that they earned our trust. My family shopped at Sears because they stood behind their products. You could bring them back if you didn’t like them. They had a warranty on everything and that meant they would come to your house and fix your washer and dryer or fridge. Sears hit the skids, along with Montgomery Wards, which went under when they stopped showing quality service and honorable dealing. We don’t shop there anymore but it took years to figure out they had stopped selling service. Now we buy cheap products from Wal-Mart made in China - and they don’t sell service either, but they don’t pretend to - so when the cheap products break we replace them.
Let’s
go to the banks
and the investment brokers
In the old days a banker would examine four typical customers. Fred is rich. He wants a big house. Sam is middle class. He wants a middle class house. Joe six pack wants an apartment and a charge card. And Carl. Carl wants it all - the Cadillac, the blond beer heiress, the mansion, and some gold chains. Carl just doesn’t like to work, so he doesn’t ever pay bills.
In the old days the banker would loan Rich Fred $200,000 and charge one percent, a point, or $2000 and much of that would go in his pocket. Sam would borrow $50,000 and pay two points (he doesn’t get the service or deals Fred gets) or $1000. Joe Six pack would get $5000 on his credit card at 10% interest and there would be a little profit for the banker and the bank’s shareholders. Carl would be trying to raise bail to get out of jail… and his wife, or his Mom would put up some money with the bail bondsman… but Carl wouldn’t even get an appointment with the banker. Carl doesn’t like to work so he doesn’t have a job…and jobs in the old days were very important conditions for borrowing money. The banker would make a nice profit and take home a handsome salary of $50,000.
So the banker wondered about it all. First he got King Bush to lower the cost of the money to almost nothing. Then he wondered what would happen if he talked Rich Fred into buying a $2,000,000 dollar home (with perhaps a five million dollar appraisal), Middle Sam gets a $200,000 home, Joe Six pack gets $50,000 on his credit card, and a free six pack for opening up a new charge card. Everyone would pay more points, maybe three or four or five. Who cares if the money is easy? Joe Six Pack’s interest would go from 10% to 22%, and instead of paying monthly, he’d be asked to pay every fifteen days. I’d bet our family farm that Buffet isn’t going to buy any of Joe’s credit card debt. And Carl. He’d do something for Carl that worked. Instead of calling the employer who didn’t really exist, and seeing income statements that didn’t really exist, he’d just call Carl’s income “Stated Income”… which means “state what you make” and we’ll accept that without any checking. So Carl borrowed Ten Million, bought the mansion, and the blond, and three Caddis, and lots of gold chains… and he paid 10 points or a million in cash. And he stated that he made more money than the Catholic Church.
But the banker knew that wouldn’t ultimately work. Carl wouldn’t make the first payment, Six Pack would try but would be over his head, Sam would lose his loan and only Fred would be alright. Fred, you see, sold his big new mansion to Carl with his unlimited credit. Then he converted his dollars to Euros and bought a retirement home in Panama.
And the banker? Instead of a measly $50,000, he made $500 Million dollars!
But, he knew that someday when bad stuff hit the fans, he would need someone to come up with more money to cover his golden parachute and get him out of this mess.
So, the banker really padded the paper. What is the note worth if the banker doubles the interest in three years and accelerates the payment, and “States” that the collateral is worth twice what it’s really worth? When the banker did that, the paper looked really good. And he sold that paper to Goldman Sachs which sold it to Wall Street, which now wants us to buy it.
When Lehman Brothers went, with their hat in their hand, begging gold man with his gold finger in everything for all our money… Paulson (gold man) told him to get lost and file bankruptcy. All the credit of the taxpayers would be needed to bail out his own company.
So, all Lehman Brothers could do was go looking for “Carl”. Carl had Rich Fred’s house, which he paid a huge fortune for and which, on a good day, with a good roof before the hurricane, was worth about half what he had paid, and he had his own mansion which he paid Nine Million for (10% of the “loan” went to pay the points to the banker and has now disappeared from all paper work… which on a very, very good day and a very good market would be worth a million bucks…) but Carl was no where to be found. His wife had left him, his blond had left him, his cars were being repossessed, and even his Mom was having a hard time. When she got him out of jail she borrowed against her home and she can’t pay that loan back. The relatively small loan against her home for the bail bond might be a pretty good bet - Buffet probably already bought it.
Carl’s “stated income” was five million dollars a year. But he still couldn’t get an old fashion, cash demanding Bond Company to post bail for him. Apparently, he got caught doing something frowned on and was locked up again. Carl had offered to double his “stated income” if someone would bond him out. In fact, Carl said he’d be willing to state anything the banker needed him to state.
So, the whole economy falls on Carl’s shoulders. Everyone is waiting for Carl to make the payments on his cars and his homes and his blond…but he’s literally all tied up right now.
Maybe Bush will pardon him and save America. Maybe not.
So, they had to find a better way - a new way - to pay for the banker’s golden parachute. And that fellow citizens, is the new improved, almost not even sounding like, giant tax!
So
it seems that these industries
are in a bit of a bind
The largest insurance company in the world, AIG, was a few hours away from bankruptcy. For the unenlightened, insurance companies make money selling promises to protect the people who pay them for protection in the event of a disaster, a lawsuit, a hurricane, or even death (life insurance). AIG took all that protection money and leveraged it with the likes of Merrill Lynch and Lehman Brothers and others. Like a drunk in a Vegas casino, AIG gambled, putting money on red…losing it, they ended up in the red… and so they needed a “bailout”. That’s right; the American taxpayer has bought them out; paid their debt and settled their vig (also known as juice or take, is the amount charged by a bookmaker or bookie, for his services). So now, in essence, we insure ourselves. Because, if you live in the United States, in some way, shape or fashion, either your car, or your life, or your wife, or the office building you go to work in, is covered by AIG. They may even have purchased the “promises” from your regular insurance company…and, without your permission or knowledge, you are represented by them. They already have your promises of payment for their services, whether you know it or not, and they gave you theirs, broke theirs, and now want another one from you in the form of more payment. This one they got completely without your permission.
So let me ask … Does it make any sense to give more money to firms whose irresponsible management shredded the money they had to begin with? Or, am I just not seeing something?
Pretending for a few seconds that we are a free market capitalistic society, what should have happened is that AIG should have gone bankrupt. Any honest insurance companies lurking around should have picked up their business, and all their assets should have been sold to cover the claims. That’s the way it used to work when an insurance company couldn’t pay its debts. And usually the reason is because of speculation investments… taking the protection money, and flushing it away on risky bets.
So now, the United States of America is in the insurance business. And we didn’t do it in a small way. We started by taking over the largest insurance company in the world.
And this is only the very beginning. Next …? We have to give the government $700 Billion dollars, that’s close to $10,000 for every home-owning family of four in America, and since half can’t pay, that means $20,000, or more, for everyone who can pay. Carl’s Mom can’t pay as she is losing her home the old fashion way - a responsible person going under to save an irresponsible person. Or, if we don’t want to call it an income tax there is another way to tax it. It becomes an indirect pecuniary burden (since both candidates for president and both parties have promised not to raise taxes) … or in a single word, debt.
But
the government has no money,
so how are they going to get it?
The government will sell $700 Billion dollars in savings bond promises at high interest rates…good paper, based on the full faith and credit of the United States of America, and then buy the bad paper with it. Much of this bad paper will be bought from Goldman Sachs, yes, the same company that our new hero Paulson was running two years ago, before he became a public servant and then … suddenly, without any warning, learned that his company along with others like Lehman brothers had been screwing up. So now he will fix it. Some casualties like Lehman brothers his old competitor, and some winners, like Goldman his old company will stay alive-and-well with “Federal Reserve Money.”
The real Gold man is Paulson… but he wants much more gold and we are about to give it to him. If this were a James Bond movie, and our gold man was Gold Finger, then we would be turning over the freedom of the so-called free world to Gold Finger himself. No one would go to see that movie or buy that book. It simply wouldn’t be believable.
So now, the government sells $700 Billion dollars in promises to the world. Much of the money will end up in the hands of the oil rich people who bought out much of Barclays when it was still British. Much will go to pay the Chinese who bought a lot of this Goldman paper with their chests of gold and in a free market society would lose some of it now.
And then… it has to be paid back!
Our economy will be stressed even more. This credit will all leave the free market sector. It will no longer be available for home loans, or business expansion, or even health care, or undeclared wars against Iraq. And the guarantors, us, the tax payers, will have to make good on the debt.
There are only two ways. The first is honest but painful. Like a shot at the doctor’s office. We get taxed even more than we already are taxed. Pay it; suffer a little, move on. The second is dishonest, and much more painful, but perhaps our Grandchildren and great Grandchildren can be forced to share in it… the children who aren’t yet born. We just owe it and let it ride. The interest on the debt just accumulates. And we print more paper promises to cover it, which continues this last eight years of fast dollar devaluation.
This is burying our heads in the sand of debt, pretending it doesn’t exist, and hoping the Chinese or the Indians will loan us more of what was once our money. It will mean that Ford Motor Company will join Lehman Brothers and Merrill Lynch because, unlike the time of the Great Depression, people around the world no longer want Fords. They sell almost all their products in America…and we won’t have the money. We can’t sell Fords in China. They add a tax there. We have to pay a tax in Japan if we sell Fords there, too, just as in Europe. But we have given China and other nations a free ride into our ports. So, Ford will fall…the remaining American Ford jobs will disappear, or maybe the Chinese or the Saudis will simply buy Ford and make the products in their country. All the taxes paid by the American workers will no longer be paid. The “Ford” company which may not even still be American will deduct the cost of its Chinese workers’ salaries, actually lowering or even eliminating all of its taxes from US profits… and another tax burden will be left for those of us with the new $20,000.00 debt on our shoulders.
The crazy thing is, no one is even pretending that this newest tax burden…$700 BILLION Dollars … will be the last of it … only the start of it.
Paulson’s ultimate plan is to tax us with his failure.
Michael Minns is a lawyer and a former Boxing champion who defends citizens from the IRS, sues crooked lawyers, and wrote the best selling books "The Underground Lawyer" (available on Amazon.com) and "How to Survive The IRS: MY Battles Against Goliath".
His cases
have been published by the New York Times, Fortune Magazine, People
Magazine, and his face has appeared on the Good Morning America Show,
Hardball, and many others; but when he decided to write about this
current financial disaster, he chose the US~Observer. His victories
include the largest tax refund case in US history, the first and second
disbarment of IRS lawyers for misconduct in US history, and the largest
number of off shore acquittals in a single case in US history. The
largest legal malpractice judgment against a divorce lawyer in US
History, and the only “not guilty” verdicts in the famous
series of “Harboring” cases and murder charges in the
Gordon Kahl Arkansas trials. Quite a “partial resume.”
Lawyer Michael Minns’ website is: Minnslaw.com.
Editor’s Note: Why is Congress holding their current public hearings – given the fact that they have already paid out over one billion in bailouts (AIG, Freddie Mack and Fannie Mae). It is simply a façade as the decisions have already been made and Congress certainly didn’t get any permission for their bailout from our Constitution or the people it once protected. Fascism is alive and well in the United States of America…
© 2008 Michael Minns
