STOCK MARKET WATCH, Wednesday, March 16, 2011

The S.E.C., however, could decline to file suit against any of those who received Wells notices. Recipients of such a notice can choose to challenge the allegations against them in hopes of heading off any civil action. After receiving his notice in mid-January, Mr. Syron offered a rebuttal to the possible accusations on Feb. 22, according to his lawyer, Mark D. Hopson.

“We have made a submission to the commission which demonstrates that Mr. Syron, as C.E.O., oversaw a very rigorous and fulsome disclosure process and that the company’s disclosures were in fact wholly accurate and complete,” Mr. Hopson, a partner at Sidley Austin, said in a statement. “Any proposed charges against our client are completely without merit.”

Definitions of fulsome on the Web:

* buttery: unpleasantly and excessively suave or ingratiating in manner or speech; "buttery praise"; "gave him a fulsome introduction"; "an oily sycophantic press agent"; "oleaginous hypocrisy"; "smarmy self-importance"; "the unctuous Uriah Heep"; "soapy compliments"
wordnetweb.princeton.edu/perl/webwn

* abundant; copious; fully developed; mature; excessively flattering (connotes insincerity); offensive to good taste; tactless
en.wiktionary.org/wiki/fulsome

The issues relate to how the two companies defined subprime. While there is no universal definition, it is often identified with characteristics that include borrowers with low credit scores and poor payment histories. Fannie Mae and Freddie Mac, however, categorized loans as prime or subprime based on the lender rather than on the loan itself. At Fannie, the company adopted lenders’ differing definitions of what constituted Alt-A loans, causing the company to underreport its exposure.

During that period, however, both companies did disclose to investors breakdowns of their loan portfolios by slicing data according to borrowers’ credit scores and how much equity they had in their homes, among other information, filings show....

By 2005, lawmakers and lenders began to push the companies to delve deeper into the risky subprime markets, to enhance business and offer the chance of homeownership to a segment of the population often ignored by lenders. The companies, meanwhile, sought to regain market share that they had ceded to Wall Street.

1. Restore sound money. How can any business flourish when its money is being depreciated? Global companies can hedge against this "hidden tax" but small business (and wage earners) cannot.


2. Raise the cost of borrowing money and incentivize capital formation. If the Million-Price Project pegs inflation at 3%, then savings and checking accounts should pay 7%--a 4% real return--and it should cost 10% to borrow money. (Zero interest rate money available to Wall Street and the Too Big to Fail banks only encourages speculation and misallocation of capital on a grand scale. If an investment can't justify a 10% cost of borrowing, it's a poor investment and it shouldn't be made.)


3. Offer corporations a choice: since they're legally considered "persons" now,then they have a simple choice:

A. Pay the individual "persons" tax rate on all income, and have all corporate-specific tax breaks stripped away, or

B. Renounce their Supreme Court-granted rights to "personhood" and pay 0% income tax on all non-financial-related income.

Right now most global U.S.-based corporations pay around 3% effective tax rates because they game the system (which they own/influence). So eliminating the corporate tax rate for all non-financial-related income would wipe out the hidden "tax" of paying lawyers and lobbyists to game the system. It would also make the U.S. attractive globally...Many people want the clock to be turned back to when corporations paid significant Federal taxes. Since capital and assets can be shifted anywhere now, this is wishful thinking. Better to eliminate the wasted energy gaming the system and lower the tax rate on productive capital to zero, and tax individuals who receive income from the corporations--dividends, bond yields, salaries and bonuses, stock options, etc.


There is a caveat, of course:


4. Set the income tax on all finance-derived income for individuals, small business and corporations at 50% above the first $100,000, and 75% above $1 million. All income gained from churning, skimming, selling of "financial innovations," trading, derivatives, loaning money, any and all sources of income derived from financial sources, is taxed at 50% above the first $100,000 and 75% above $1 million....If an individual is able to generate $2 million in short-term churning, then they can afford to pay $1 million in tax. If a hedge fund skims $100 million, then they can afford to pay $75 million in tax....There is an alternative: quit skimming and start investing in productive assets...The $100,000 set-aside enables small-business money managers and the like to make a living by paying the same tax rates as everyone else. But once they start making more than $100,000 annually, then they pay 50% tax on all finance-derived income. The point here is to provide a disincentive to speculation and financialization and an incentive to production of tangible goods and real-world services. Once an economy has been incentivized in favor of financial speculation and gaming at the expense of producing real wealth, it is effectively doomed.


5. Set the long-term capital gains holding period at three years. All finance-derived income would be taxed at 50%, but truly long-term gains--three years or more--would be taxed at 25%. That incentivizes actual investments in productive assets as opposed to short-term (in high-frequency trading, mere seconds) churn and skimming.


6. Lower the Federal tax rate for sole proprietor/partnership enterprises to 7.65% up to $50,000 annually. Right now, the sole proprietor pays 15.3% self-employment tax and 15% regular income tax (on the first $34,000), an effective rate of 30%. The wage earner pays 7.65% plus the 15%. This disparity doesn't exactly encourage enterprise. Lowering the effective tax rate on the first $50,000 (the average income in the U.S. is $49,777 annually) to that of employees would level the playing field for those trying to earn their living as sole proprietors.


7. Fix the broken healthcare (a.k.a. sickcare) system in the U.S. How can any small business thrive when sickcare siphons off 17% of the U.S. GDP, compared to 8% in other developed nations such as France, Japan and Australia? I have proposed two ways to fix the system--both are acceptable in my view, which I have outlined here many times:


A. Eliminate the entire system of private insurance, Medicaid and Medicare. Everyone pays cash for all healthcare. This is effectively a reset to 1965. Please note the U.S. was a developed nation in 1965 and that by some metrics, was actually healthier then than we are now. Longevity has barely budged. In other words, a non-spin analysis would find we're getting precious little for 17% of our GDP. Such a reset would eliminate all the corruption, fraud, skimming and Central State-cartel controls that have created a monster which delivers decreasing health and costs that are double that of our global competitors.

B. Institute a national system based on the Veterans Administration: the entire system is opt-in (you don't have to go to the VA, you are free to pay cash and go wherever you want) and owned lock, stock and barrel by the Central State (Federal government)...The VA is not perfect--what large bureaucracy is?--but it has provided innovative solutions to large-scale care. Yes, there are lines, and yes there are limitations, but the system costs a fraction of the cartel-crony Capitalist quasi-private system that costs 17% of GDP. Since doctors are employees of the VA, there is no crushing burden of "defensive medicine" and malpractice, nor are there opportunities for gaming the system for millions of dollars, for example, owning the MRI machines and giving every patient an MRI test at your own lab.


8. Streamline Federal regulations down to one page (two sides) for all enterprises except nuclear materials or equivalent. Central State fiefdoms and their Cartel-crony Capitalist partners love 1,000-page regulatory schemes because they are extremely effective "moats" to small business competition. The vast majority of businesses could be regulated by two pages of common-sense, straightforward regulations--two sides of one sheet of paper. This would mean paring the armies of bureaucrats who are currently incentivized to increase the regulatory load on small business because more regulation is highly effective job security.