Archive for March, 2009.
The final quarter of the last year witnessed a universal global meltdown, from which world economies are yet to recover fully. The crisis is indeed grave, as highlighted by the performance of the economy of the United States. In fact, during the third quarter of 2008, the financial markets of the US experienced a negative growth, a feature indicative of the acute financial economic crisis affecting the finance fields. Experts are of the opinion that the current financial situation is one of the worst to hit the world economy since the Great Depression of the 1930s. In the rather bleak current scenario, proper financial planning is extremely important to tide over the economic crises effectively.
This kind of situation is invariably marked by an increase in the debt burden of individuals. Consequently, the number of creditors of a person also goes up. A short-term, quick-fix solution might be the sale of most existing assets held by a person. The sale proceeds can then be used to pay off the dues of his/her creditors. However, this is not the ideal way to combat a scenario like this. Instead of panicking, a person needs to alter his financial aims and targets according to the situation. In case (s)he has already hired the services of an expert planner, the latter too can help him/her take such decisions that would suit the need of the hour.
During a period of crisis (like the current one), individuals need to adopt a more conservative and cautious approach than usual. The target rates of return from financial investments as well as one’s overall financial goals have to be scaled down according to the situation. Risky investment ventures should not be taken up, and too much money should not be spent on buying up additional assets at these times. Individuals also need to be aware of the legal aspects of his/her financial actions. Equifax, one of the three major credit bureaus of America, recommends that investors should seek help and advice from the Consumer Credit Counseling Service (CCCS). If a person is able to take prudent and informed investment decisions that are not too aggressive in nature, (s)he can continue to earn a steady flow of income, even during a period of financial crisis.
Finance and strategy-making assumes crucial importance at a time of financial economic crisis. Such plans keep in consideration the exact requirements of investors, and are dynamic enough to help people change their finance-related actions according to the overall financial scenario. With the help of proper planning, and the adoption of toned-down financial actions (with revised investment targets), individuals can indeed effectively combat the current financial crisis situation.
Income tax relief is a program created by the Internal Revenue Service (IRS) to assist willing tax payers in lowering the amount they owe in taxes, often times waiving or eliminating altogether their total owed to the government. This relief act is not a widely advertised program. The main reason, of course, is the fact that the IRS does not want people abusing this privilege, claiming hardship and inability to pay only because there is an option available that allows them to. Each person is reviewed on a case by case basis and is either confirmed or denied based on a number of factors including their net salary, their assets as well as other personal questions.
Meeting with a tax attorney or a tax accountant is a good place to start with your tax needs. These highly trained counselors are available to offer assistance and guidance concerning your income tax relief. Most online tax services offer many options, not just relief from taxes. The norm for what these online tax relief companies provide is IRS wage garnishing advice, penalty abatement, innocent spouse and audit defense. Penalty abatement is a tax debt resolution process in which a tax debtor challenges interest and penalties for a designated length of time. The taxpayers may request penalty abatement on the basis of with an administrative waiver, such as bad advice from a tax practitioner, reasonable cause like a death in the family or an error on the part of the Internal Revenue Service. Wage garnishing is a process what is granted by an order of the court or by the government by which the Internal Revenue Service obtains part of the salary of the tax payer directly from an employer who is behind in payments to the government.
Income tax relief is a way for you get a small break during the stressful tax time. It is a way to encourage tax payers to not be negligent on the taxes that they owe by giving them a little break on the entire amount. The IRS appreciates people taking the initiative to contact them and inquire about the offered relief. You are approved or denied on a case by case basis. You may have a large portion of what you owe waived, or just a small amount depending on your current financial situation. Any way you look at it, when it concerns your taxes, any relief is a good relief!
The recently released Global Finance Magzine rankings of the world’s safest banks is out, and the #1 choice says it all: kfW in Germany took the honours, and they’ve been owned by the German government since inception in 1948. Now I’m not advocating a complete change in the private sector nature of finance and capital, but Citibank (C:NYSE) is a unique case, and it’s balance sheet is just too big to fix.
The U.S. government might do it via the backdoor, with an increasing equity stake with each follow-on equity round. But as with AIG, they’ve proven they’ll do what it takes. Unless the U.S. government knows something about the health of Citi’s balance sheet that isn’t implied in the $1 share price, now is the time to step into the breech and nationalize Citibank.
When Goldman boss Blankfein spoke out against the concept (see prior post “Recession to be longest since WWII” March 9-09), is he also saying that “no one is too big to fail”? He didn’t go that far, as he has spoken in favour of government bailouts when there was no alternative. Does GS benefit if Citi continues to be Dead Bank Walking? Perhaps. But I don’t think that is driving his perspective; it’s likely just the classic “a free market is the only market worth living in” mentality.
But these aren’t times to live by a bumper sticker.
Why does saving Citibank a year from now make more sense than doing it today? The drip-drip-drip of the negative headlines and writedowns and so forth will continue to have a huge negative impact on the more healthy names, such as Wells Fargo (WFC:NYSE) and JPMorgan (JPM:NYSE).
It’s as though the powers that be will try leeches before resorting to the ultimate cure-all. Just get it over with. The slow motion train wreck won’t have a chance of ending until you do.
When the world returns to normal (at least a “new normal”), Citibank should be fixed and there might even be a willing IPO market. The U.S. Fed could be the new King of Private Equity at that point and just take Citi public again.
General Patton wouldn’t use incrementalism to win a battle, and this challenge certainly stacks up against the Battle of the Bulge. This time, however, it is the Germans who have the staying power, whether they be state-owned or publicly-held.
Posted on March 1st, 2009 by Eric in
General Calculated Risk looks at the latest plan floated by the Treasury — to make low-interest, non-recourse loans to private investors who buy bad assets — and immediately gets it: this is a plan to drive up the prices of toxic assets by creating a lot of moral hazard.
By offering low interest non-recourse loans, these public-private entities can pay a higher than market price for the toxic assets (since there is no downside risk). This amounts to a direct subsidy from the taxpayers to the banks. It is amazing how many different ways they’ve tried to recycle the same bad idea.
Indeed. Every plan we’ve heard from Treasury amounts to the same thing — an attempt to socialize the losses while privatizing the gains. We’re going to buy up all the bad assets at premium prices; no, we’re going to offer the banks guarantees against losses; no, we’re going to let private investors buy the stuff, but offer them de facto guarantees against losses in the form of non-recourse loans.
Underlying all this, apparently, is the theory Tim Duy sums up so aptly:
Policymakers are assuming that restoring proper functioning in credit markets - and confidence in general - is equivalent to a housing price rebound. They seem incapable of envisioning a world in which this is not the case. This tunnel vision prevents policymakers of trying to devise policy which assumes that the many of the assets in the banking system are simply “bad.” For Bernanke and Geithner, there are no bad assets. Only misunderstood assets.
And the insistence on offering the same plan over and over again, with only cosmetic changes, is itself deeply disturbing. Does Treasury not realize that all these proposals amount to the same thing? Or does it realize that, but hope that the rest of us won’t notice? That is, are they stupid, or do they think we’re stupid?
I don’t know which possibility is worse.