President Obama and Goldman Sachs: A Quid Pro Quo?

Wall Street and the White House may be closer than the typical American thinks. One way this is accomplished is for a bank to contribute heavily to both presidential campaigns so as to be able to hedge political risk by getting ex-managers into strategic posts in the executive arm of the U.S. Government. This can be the case even when one of the candidates has campaigned on holding Wall Street accountable, such as after the financial crisis of 2008. There is the campaign slogan, and there is the political-economic reality underneath. 

The full essay is at "Obama and Wall Street."

General Electric: Tax Avoidance with Former IRS Employees In-House

The name of the game in all too many corporate tax departments is to minimize the tax due as much as possible. No countervailing notion of “corporate citizenship” or even “fair share” exists in that economic world of single-minded minimization of what is to be paid out. Put another way, responsibility does not compute in the business calculus. Advocates of corporate social responsibility got this wrong for decades by naively assuming that people who work in management roles cannot compartmentalize. Whether due to the strictures of a job description or financial pressures on a company, managers themselves may regret having to compartmentalize in order to keep their respective jobs. Sadly, all too often, a manager faces internal and external pressure to sign off on something that is admittedly unfair or too greedy. That the playing field itself may be slanted in the financial interests of large businesses goes beyond a manager's pay-grade, and even that of a corporation itself. For one to speak out in order to make the tilt explicit in society would deny the operative role of compartmentalization. Managers, even CEO's, may personally want a level playing field wherein corporations cannot yield an undue amount of wealth at the expense of other entities or persons, such a desire is outside of the business calculus. 
One manifestation of the tilted field is the ability of companies to bring IRS agents in-house as employees. In the debate on whether to end the George W. Bush Tax Cuts, the nominal (or statue) tax rates were salient. Much less was said of the effective rates, which are calculated by dividing the actual tax paid by total income (individuals) or net income (corporations). The New York Times reported in 2011: Although “the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.”[1] Although perfectly legal, the undue advantage means that the U.S. Government has had to look for other sources of revenue to make up for the lost revenue or do without the revenue, using debt to compensate. The "perfectly legal" aspect points back to the tax laws, and, more particularly, at the undue or even improper influence of the business sector in Congress. In fact, lest it be concluded that the business calculus is the reason for the tax avoidance (which is legal, unlike tax evasion), the financial power of business tilts the field not only by having too much influence in the crafting of tax legislation, but also in being able to hire ex-IRS employees to get "the inside scoop" on avoidance tactics. I now turn to the case of General Electric (GE) in 2010. 

The full essay is at "General Electric."

1. David Kocieniewski, “G.E.’s Strategies Let It Avoid Taxes Altogether,” The New York Times, March 24, 2011.

Mary Poppins Returns

Films are commonly known to have two or three dimensions in terms of perspective. Animated films were for decades in the twentieth century in two dimensions—a flat story-world—until the advent of animated films made to show depth, hence three dimensions. Still another, third or fourth respectively, dimension is the element of time in the story-world. Literally, as the still frames are moved one to the next, changes can be perceived in the story-world; you won’t see any change by looking at a frame. Then we get to the dimensions that extend outside of the story-world. One possible dimension is how the narrative or the story-world in a film relates to the book upon which the particular film is based. This dimension becomes visible in terms of meaning particularly when similarities exist, but differences too can prompt attention the dimension itself. In this essay, using Mary Poppins Returns (2018), I discuss another dimension that involves the content in a film but extends out into the world of the audience. When made manifest, this dimension can carry significant meaning for the audience, for this dimension involves both a society’s “social reality” and what is shown in a film.

The full essay is at "Mary Poppins Returns."

The U.S. Department of Justice: Big Banks May Legitimately Be above the Law

The Financial Times reported in 2013 that lawmakers in the U.S. Congress were claiming that the Department of Justice had been “too soft on big banks and their executives by failing to bring criminal cases related to the financial crisis.”[1] In the five years following the financial crisis of 2008, no Wall Street executive was criminally charged with fraud. The U.S. Justice Department chose not to go after the bankers for their lack of due diligence regarding their purchases of sub-prime mortgages from mortgage originators. This in spite of the fact that at Citibank, for example, a manager in the bank’s due diligence department estimated that 50% to 80% of the approved mortgages did not meet the bank’s credit policy, and yet Robert Rubin, the CEO at the time, did not act on the manager’s email. This suggests that a criminal complaint could have been lodged against the bank itself, but then what would be the implications for the financial system should Citibank had gone under after being found criminally guilty? Does it even hold that a guilty verdict would mean bankruptcy? Simply stated, a company can be so large that its failure due to a guilty verdict could harm innocent third parties, including stockholders, employees, suppliers, and even the general public if the bankruptcy triggers a systemic collapse of the financial system. Such concerns are called collateral consequences. After the collapse of Lehman Brothers in September 2008, systemic risk became a particularly salient concern for criminal prosecutors at the U.S. Department of Justice. Swayed by a desire to minimize the potential disproportionate harm to innocent parties from a verdict-triggered major bankruptcy, the prosecutors believed they were obligated to consider collateral consequences even if that meant that the really big banks would be immune from criminal prosecution. To such banks, this could be used as a competitive advantage because keeping within the constraints of law in making money would not apply. I contend, therefore, that the U.S. Government should not have taken collateral consequences into consideration. 

The full essay is "Big Banks above the Law."

 Mythili Raman testifying before Congress. mainjustice.com

1. Shahien Nasiripour and Kara Schannell, “Holder Says Some Banks Are ‘Too Large’,” The Financial Times, March 7, 2013.