Buffett's Good Deed

Whee, it's great to be a billionaire! You can do good and make even more money at the same time! I'm writing about Warren Buffett: he sinks $5 billion into Bank of America preferred stock, which pays a guaranteed 6% dividend, gets a warrant for buying 700 million more shares at $7.14: the stock opens at $8.29 and still closes at $7.65.

Buffett supported a bank that has a legion of lawsuits against it for it’s alleged fraudulent mortgage vehicles; it lost 36% of its stock value because of its overexposure to those same mortgages, made worse by the continued decline of the housing market, and its over-investment in European sovereign debt: Greece, Ireland, etc.

Buffett is viewed as doing the administration a favor, by helping to rescue a bank that looked as if it might lead to a replay of 2008. Credit Default Swaps on BAC had reached higher spreads than it faced in 2008-09 at the height of the financial panic.

So, Warren Buffett is not only a rich man getting richer, he's a hero to the administration, especially since he just advocated (in a New York Times op ed) that Congress should raise taxes on people like him. If he weren't so old, perhaps Obama should ask him to run for Vice President, or other Democrats might urge him to run against Obama.

Billionaires. Have you noticed that billionaires seem to be taking over our politics? On the "left" we have Warren, George Soros and… (are there any others?), in the center there is Michael Bloomberg, and on the far right there are the Koch brothers, among many, many others.

Does that tell you something?

One of our two political parties refuses to raise taxes on the wealthy. On the other hand, the GOP wants, in effect, to raise taxes on the middle class. It advocates discontinuing the payroll tax cut put in place last year to stimulate the economy, while insisting on extending the Bush tax cuts permanently.

The Bush tax cuts disproportionately favor the wealthy, which is one of the reasons why there is such a proliferation of billionaires, and other super-wealthy. Not only are the top tax rates the lowest they've been since the 1920's, many dividends are exempt, and capital gains are taxed at less than half the top rate--lower than middle class incomes. On the other hand, the payroll tax is a flat tax with a cap at a bit over the first $100,000 of income. A cut in its rate disproportionately favors those earning under that, but, those with million dollar incomes only pay the tax on one-tenth of their income. The tax cut hardly matters to them, so, the GOP wants to scrap it. Why?

Perhaps to drive the nation back into recession, to enable Republicans to beat Obama, to dismantle the New Deal and to insure that the wealthy rule. The takeover of the new Roman Senators: it could happen here.