Wednesday, December 05, 2007

It's Everywhere

Some folks never learn. The Big Shitpile visits California. Bloomberg (12.05.07):
"Orange County, California, bankrupted in 1994 by bad bets on interest rates, bought structured investment vehicles similar to those that caused a run on funds invested by local governments in Florida.

Twenty percent, or $460 million, of the county's $2.3 billion Extended Fund is invested in so-called SIVs that may face credit-rating cuts, said Treasurer Chriss Street.

Orange County Funds Hold SIV Debt on Moody's Review

"In all of its funds, the county holds a total of $837 million of SIV debt, including $152 million in its $3.5 billion of money-market funds that isn't under ratings review, said his spokesman, Keith Rodenhuis."

The problem? Very similar to Florida's, where "(m)uch of the worth less than 100 cents on the dollar and the rest is so troubled that its value can't be determined, according Chris Stavrakos, co-managing head of cash management for BlackRock Inc., the New York-based company hired to turn around the fund."

"'I don't think there are very many securities in this market we can liquidate at par,' Stavrakos said in an interview yesterday."

For sure, a good chunk of this crap (the stuff they can value) is worth less than what they paid for it. And a good chunk of this crap is so hosed no one really knows what it's worth.

And if you're a taxpayer, you shouldn't have to think too hard to guess who's going to be picking up the tab when all this shit finally tanks.

While you're thinking about that, there's this. Washington Post (12.05.07):

"During the hectic, closing weeks of this session of Congress, leaders of both parties say they are determined to pass legislation that would prevent 23 million middle-income Americans from being hit with a tax increase originally designed to target only the super-rich.

But chances are slim that Congress will find the $50 billion over 10 years needed to pay for that legislation, in large part because a proposed tax increase on Wall Street firms and their managers lacks enough support in the Senate."

Tax to Offset AMT Patch Appears Unlikely
"A sprawling, big-money lobbying campaign appears to have succeeded in preventing the proposed tax increase on hedge funds and private-equity firms."

If they don't get the patch approved, it's estimated there'd be "an average $2,000-per-family increase on 2007 income taxes". Problem is to be fiscally responsible, you'd want to at least offset the revenue decrease with an offsetting increase somewhere else. Like taxing some of the same fucks who made a ton of dough putting the Big Shitpile together.

But money talks. "Private-equity firms, whose multibillion-dollar deals have created a class of super-wealthy investors and taken many large corporations private, hired dozens of lobbyists and stepped up campaign contributions this year. They were retained to protect a special tax rate paid by investment firm managers on their income under a long-accepted interpretation of tax law."

Nice, eh?

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