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Journalist @baltimoresun writer artist runner #amwriting Chaplain PIO #partylikeajournalist
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Showing posts with label Business Econ Bonds. Show all posts
Showing posts with label Business Econ Bonds. Show all posts

Friday, May 23, 2008

20080520 Wall Street Journal: Hauser’s Law You can’t soak the rich by David Ranson


Wall Street Journal: Hauser’s Law You can’t soak the rich by David Ranson

Hat Tip: R2

You Can't Soak the Rich

By DAVID RANSON May 20, 2008; Page A23

Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system. His findings imply that there are draconian constraints on the ability of tax-rate increases to generate fresh revenues. I think his discovery deserves to be called Hauser's Law, because it is as central to the economics of taxation as Boyle's Law is to the physics of gases. Yet economists and policy makers are barely aware of it.

Like science, economics advances as verifiable patterns are recognized and codified. But economics is in a far earlier stage of evolution than physics. Unfortunately, it is often poisoned by political wishful thinking, just as medieval science was poisoned by religious doctrine. Taxation is an important example.

The interactions among the myriad participants in a tax system are as impossible to unravel as are those of the molecules in a gas, and the effects of tax policies are speculative and highly contentious. Will increasing tax rates on the rich increase revenues, as Barack Obama hopes, or hold back the economy, as John McCain fears? Or both?

Mr. Hauser uncovered the means to answer these questions definitively. On this page in 1993, he stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." What a pity that his discovery has not been more widely disseminated.

The chart nearby, updating the evidence to 2007, confirms Hauser's Law. The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket was brought down from 91% to the present 35%. This is what scientists call an "independence theorem," and it cuts the Gordian Knot of tax policy debate.

The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.

Read the entire piece here: You Can't Soak the Rich

Mr. Ranson is head of research at H.C. Wainwright & Co. Economics Inc.

See all of today's editorials and op-eds, plus video commentary, on Opinion Journal1.

And add your comments to the Opinion Journal forum2.

URL for this article:
http://online.wsj.com/article/SB121124460502305693.html

Hyperlinks in this Article:
(1) http://online.wsj.com/opinion
(2) http://forums.wsj.com/viewtopic.php? t=2605

http://online.wsj.com/article_email/article_print/SB121124460502305693-lMyQjAxMDI4MTIxMTIyNDE0Wj.html

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Monday, January 29, 2007

20070129 MBIA announces settlement


Bond Insurer MBIA announces settlement

January 29th, 2007

MBIA, Inc. (NYSE: MBI,) is a financial services company that was founded in 1973, and is considered to be the world’s largest bond insurer. The New York based company provides insurance for municipal bonds and mortgage-based securities.

MBIA has announced a $75 million settlement with the SEC, the New York Attorney General and the New York Insurance Department.

MBIA Inc. (ticker: MBI, exchange: New York Stock Exchange (.N)) News Release - 29-Jan-2007


MBIA Announces Settlements with the SEC, The New York Attorney General and the New York State Insurance Department

ARMONK, N.Y.--(BUSINESS WIRE)--Jan. 29, 2007--MBIA Inc. (NYSE: MBI) and MBIA Insurance Corporation announced today that they have concluded civil settlements with the Securities and Exchange Commission (SEC), the New York State Attorney General's Office (NYAG), and the New York State Insurance Department (NYSID) with respect to transactions entered into by MBIA in 1998 following defaults on insured bonds issued by the Allegheny Health, Education and Research Foundation (AHERF).

Gary C. Dunton, MBIA chief executive officer, said, "We are pleased that the AHERF-related investigations are finally behind us. MBIA cooperated fully with the regulators to resolve these matters, and we are grateful for the strong support of our employees, clients, shareholders and investors in MBIA-insured bonds during the long period while the investigations were being resolved. We are committed to earning their loyalty every day through our tradition of high integrity and excellent customer service as befits an industry leader."

The terms of the settlements, under which MBIA neither admits nor denies wrongdoing, include:

· A restatement, which was completed and reported in MBIA's third quarter 2005 earnings release, of MBIA's GAAP and statutory financial results for 1998 and subsequent years related to the agreements with AXA Re Finance S.A. (AXA Re) and Muenchener Rueckversicherungs-Gesellshaft (Munich Re);

· Payment of penalties and disgorgement totaling $75 million, of which $60 million will be distributed to MBIA shareholders pursuant to the Fair Fund provisions of the Sarbanes-Oxley Act of 2002 and $15 million will be paid to the State of New York. The Company accounted for the $75 million in penalties and disgorgement as a charge in the third quarter of 2005;

· MBIA's consent to a cease and desist order with respect to future violations of securities laws;

· A report by MBIA's independent auditors, PricewaterhouseCoopers (PwC), to MBIA's board of directors, the SEC staff, the NYAG and the NYSID concerning MBIA's accounting for and disclosure of advisory fees and the assets of certain conduits; and

· Retention of an Independent Consultant (IC) to review and report to the SEC, the NYAG and the NYSID on the evaluation previously undertaken at the direction of the Audit Committee of MBIA's board of directors by Promontory Financial Group LLC of MBIA's controls, policies and procedures with respect to compliance, internal audit, governance, risk management and records management, the Company's implementation of Promontory's recommendations; MBIA's accounting for and disclosure of its investment in Capital Asset Holdings GP, Inc. (Capital Asset); and MBIA's accounting for and disclosure of its exposure to the US Airways 1998-1 Repackaging Trust and any other transaction in which MBIA paid or acquired all or substantially all of an issue of insured securities other than as a result of claim under the related policy.

The settlements have brought the AHERF-related investigations against the Company to a close.

PwC completed and submitted to the SEC, the NYAG and the NYSID its report with respect to advisory fees and conduits. The report was reviewed by the regulatory agencies and has now been submitted in its final form. The Company does not anticipate further regulatory action with respect to the matters covered by the report.

The Independent Consultant began work in the summer of 2006 and is currently reviewing the matters described above. MBIA does not anticipate any further enforcement action against the Company with respect to any of the matters being reviewed by the Independent Consultant or with respect to any of the other matters that were under investigation. The Independent Consultant's work is ongoing, however, and the outcome and completion of the IC's work cannot be predicted. The Company is committed to a process for the review and implementation of the Independent Consultant's conclusions and recommendations.

MBIA made its original investment in Capital Asset in 1996 and increased that investment in December 1998, when it acquired the founder's interest in Capital Asset and became majority owner. It issued financial guarantee policies on three securitizations of Capital Asset tax liens in 1997, 1998 and 1999. All of the financial guarantee policies have been extinguished.

In 1998, MBIA insured Series A Notes issued by the US Airways 1998-1 Repackaging Trust, which held equipment trust certificates for 21 aircraft leased by US Airways (ETCs). In 2002, following the filing for bankruptcy protection by US Airways, MBIA voluntarily paid the Series A Notes before a claim was made under its insurance policy, and foreclosed on and purchased the ETCs in the Repackaging Trust. Because there had been no claim under its policy and the payment of the Series A Notes was voluntary, MBIA accounted for the cost of foreclosing on and purchasing the ETCs as an investment rather than as a paid loss for both statutory and GAAP purposes. In 2005, in response to the findings of the NYSID in the quadrennial examination for the period ended December 31, 2003, MBIA changed its statutory accounts to classify the cost of foreclosing on and purchasing the ETCs as a paid loss; this change in classification had no impact on its financial results for any period.

MBIA Inc., through its subsidiaries, is a leading financial guarantor and provider of specialized financial services. MBIA's innovative and cost-effective products and services meet the credit enhancement, financial and investment needs of its public and private sector clients, domestically and internationally. MBIA Inc.'s principal operating subsidiary, MBIA Insurance Corporation, has a financial strength rating of Triple-A from Moody's Investors Service, Standard & Poor's Ratings Services, Fitch Ratings, and Rating and Investment Information, Inc. MBIA has offices in London, Madrid, Milan, New York, Paris, San Francisco, Sydney and Tokyo. Please visit MBIA's Web site at http://www.mbia.com.

CONTACT: MBIA Inc. Michael C. Ballinger, 914-765-3893 SOURCE: MBIA Inc.