How Democrats Make Millionaires

I love an eye-grabbing headline and today's The Wall Street Journal Online does not disappoint with "How Democrats Make Millionaires, According to tax proposals, lots of us are 'rich.'"

With the stock market down, kissing "goodbye to the bonus you were hoping to use to pay junior's college tuition" and worrying about there being a pink slip in your future, the advice is:

"Cheer up. Even in these hard economic times, Democrats across the nation are working on plans that will turn some of you into instant millionaires.

There's only one catch. You're not actually going to be bringing in a million-dollar income. But the tax man is going to treat you just as though you did."

How does this happen? In New York, Assembly Speaker Sheldon Silver coerced Governor David Paterson to impose a "millionaire's tax" on folks making $300,000 per year. New Jersey is the granddaddy of them all.

"In 2004, then Gov. Jim McGreevey became the first Democrat to get through a millionaires' tax whose reach extended to nonmillionaires. The McGreevey
"millionaires' tax" kicked in at $500,000. He justified it, moreover, by saying that any money collected would go toward funding property tax relief for the state's beleaguered homeowners.

"Five years later, we can see how that's turning out. Not only is Democratic Gov. Jon Corzine targeting property tax relief for many Garden State citizens, he wants to impose a "temporary" surcharge on the existing McGreevey millionaires' tax. "

Democrat Washington state legislators are floating the idea of a millionaire's income tax that would kick in at $500,000.

"And why not? So long as Democrats are willing to rewrite the tax code, almost anyone can wake up one day to find himself a millionaire."

Read the full column, How Democrats Make Millionaires.

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New Mortgage Plan Has Folks Buzzing

From Realty Times-- Washington Report: Mortgage Reform Bill by Kenneth R. Harney

"A massive new mortgage reform bill has Washington real estate and banking groups buzzing, both critically and in favor.

The bill was introduced last week by House financial services committee chairman Barney Frank -- who's arguably the most influential legislator on housing issues on Capitol Hill.

Supporters say the 151-page bill would have gone a long way to preventing mortgage lending excesses during the housing boom, especially no-documentation, negative amortization and zero downpayment deals, had it been federal law before the boom started in 2002 or 2003."

Here's how the bill would be different: First, lenders would be discouraged from making anything but "plain vanilla" 30-year fixed rate mortgages with full documentation and strict underwriting. Second, it would require lenders that originate other types of loans to retain at least a five percent ownership stake in the loan for its full term, even if it gets sold in the secondary mortgage bond market. Third, if the loan ultimately went bad, the originator would own a piece of the loss -- unlike today's system, where they can sell them and forget them.

Not everyone is ecstatic about the new program. Read the full story here.

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The Wizard of Id comments on the bailout

Editorial cartoonists are known for their, well, editorial comments. Today it reached the Sunday comics in the Wizard of Id with this take on the bailout:

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An A.I.G. Exec Quits in Public on Pages of New York Times

The New York Times has published an Op-ed written by Jake DeSantis. It's actually his letter of resignation submitted to Edward M. Liddy, the chief executive of A.I.G. Mr. DeSantis is or was an 11 year employee of the company and an executive vice president of A.I.G.'s financial products unit.

Not having been personally involved in the unit that brought A.I.G. to its knees, DeSantis expresses a sense of betrayal by the company and Liddy after they suddenly reversed themselves on employment contracts and retention payments negotiated last year.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

Read the full Op-ed, Dear A.I.G., I Quit!

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The Wall Street Journal on The Geithner Asset Play

The Geithner Asset Play -At least it's an attempt to clean up bank balance sheets - leads off today's Wall Street Journal's editorial page.

The best news about the new Treasury bad bank asset purchase plan is that Secretary Timothy Geithner has finally settled on a strategy. The uncertainty was getting almost as toxic as those securities. Now all Mr. Geithner has to do is find private investors willing to "partner" with the feds (Congress!) to bid for those rotten assets, coax the banks to sell them at a loss, and hope that the economy doesn't keep falling lest taxpayers lose big on their new loan guarantees.

The Journal sums up the program this way:

In simplest terms, Treasury is using loan guarantees and $100 billion in remaining TARP money to create a more liquid market for dodgy financial assets. These include those infamous mortgage securities, as well as various loans that may be nonperforming. The idea is to create new buyers for those assets, perhaps leading to higher prices than now exist in a illiquid market, and thus help banks gradually clean up their balance sheets.

What's not clear is how to carry out the plan. First, how to attract private investors, "who will have to accept Uncle Sam as a 50-50 business partner." Even if Mr. Geithner is good on his word that compensation limits will not be imposed on investors, "what happens if their asset purchases pay off in big profits?" Will a jealous Congress swoop in for a bigger bite of the pie.

Although the market responded with a roar, the devil will be in the details.

Read the full editorial here.

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