Generational Dynamics Forum - New Site

12-May-11 News -- Raj Rajaratnam conviction raises hopes of Pecora Commission revival

Regulators are as guilty as banksters

** 12-May-11 News -- Raj Rajaratnam conviction raises hopes of Pecora Commission revival
** http://www.generationaldynamics.com/cgi ... b#e110512b


** 12-May-11 World View -- Austerity riots in Greece
** http://www.generationaldynamics.com/cgi ... 12#e110512

Contents:
"Raj Rajaratnam conviction raises hopes of Pecora Commission revival"
"Pecora Commission"

### World View - Austerity riots in Greece
"Austerity protesters clash with police in Athens, Greece, during nationwide strike"
"With protests continuing, Syria threatens Israel"
"Egypt faces starvation as economy collapses"
"Proposed defense bill authorizes clandestine cyberspace operations"
"U.S. Postal Service to go bankrupt by September"

We've had the commission, the Justice Dept is refusing to prosecute.

http://www.rollingstone.com/politics/ne ... s-20110511

OLD1953 wrote:We've had the commission, the Justice Dept is refusing to prosecute.

http://www.rollingstone.com/politics/ne ... s-20110511

Thanks for letting me know. I added an update.

John

The fraud and larceny goes even deeper. Here's an example.

My wife started working for a company in the steel rack business in 2004. The company had been in business for close to 100 years and, at the time, was an American subsidiary of a larger Australian company. It was a good, steady and profitable (if unexciting) business. A couple of years later they were sold to a private equity firm. At the time I told my wife that she had better hope there isn't even the slightest downturn in their business because it would signal the end. Of course, the PE firm went through the usual drill: They drained the company of its cash and leveraged it up to its eyeballs. Sure enough, the economic downturn hit them in the 2nd half of 2008 and the company went from turning a profit to bankruptcy in less than 9 months! The creditors were screwed, the employees were screwed, but the PE guys pocketed millions in cash. None of them are in jail either.

jldavid47 wrote: Of course, the PE firm went through the usual drill: They drained the company of its cash and leveraged it up to its eyeballs. Sure enough, the economic downturn hit them in the 2nd half of 2008 and the company went from turning a profit to bankruptcy in less than 9 months!

The US tax code is such that companies interest payments are an expense and reduce "profits" and so reduce taxes, while dividends come out after taxes. A company in debt to its eyeballs does not pay much taxes and so can pay out more money to bond holders in interest than it ever could to shareholders as dividends. So a company is really worth more to investors when it is in debt. The tax code pushes companies to be leveraged to their eyeballs. There are unintended consequences that are not good.

This problem was the reason for all the "leveraged buy outs" before the 1987 crash and the proposed law change right before the crash.

http://pair.offshore.ai/38yearcycle/#1987crash