Fun with Financial Doomsday: Vault's Layoff Tracker



Just in case you haven't yet seen, I wanted to share an interesting little piece from job site Vault.com - while you're there, don't hesitate to take a look around at their useful and snarktactular commentary and features (like the pink slipped blog).

Vault also maintains a damn fabulous layoff tracker (go on, take a peek) and while the information is comprehensive, that also means it's frightening as all hell.

From the site:

In January 2009, the U.S. unemployment rate hit 7.6 percent (up 0.9 percent since November) and continues to climb steadily due to massive layoffs across a swath of industries. Financial services, retail and manufacturing remain the hardest-hit, although the scourge has more recently spread through tech employers and pharmaceutical companies, and some analysts predict that the rate may hit 9 percent before hiring picks up again. In all, the recessional economy has lost 3.6 million jobs; November, December and January contributed half the total. Here's an at-a-glance chart of some of the most notable staff cuts in recent weeks.


Go look.

I had absolutely no idea law was taking such a hit. Guess I need to get out more.

JP Morgan: Lays off 12000, Blames WaMu


$JPM may be the only FAILout recipient not doing too badly these days (it could be due to its incestuous ties to the Federal Reserve but I'll leave that conspiracy be for now), and while any good news will do these days, it seems the WaMu acquisition may be a bit more than our commercial banking pals can handle - despite the fat payoff they're looking forward to from the takeover:

JPMorgan Chase & Co. said [February 26] it expects to realize about $2 billion in savings related to its acquisition of Washington Mutual Inc., the failed Seattle thrift the bank acquired at the end of September.

The majority of the savings will be realized by the end of this year, according to slides on the company's Web site from an investor day presentation. This includes about $1.35 billion related to job cuts, the bank said. JPMorgan said about 12,000 jobs will be eliminated related to the acquisition. In December, the bank said it would cut a total of 9,200 jobs related to the WaMu deal. The 12,000 figure includes 2,800 jobs expected to be lost through attrition. At the end of December, the bank had a total of 224,000 employees worldwide.

Shares jumped $1.32, or 6.1 percent, to close at $23.05.

JPMorgan's purchase of Washington Mutual, the largest bank ever to fail in U.S. history, added massively to the bank's consumer banking business and helped the company book a $1.1 billion gain in the fourth quarter.
2800 due to attrition? Mmmkay.

$JPM is smooth sailing now, but inheriting WaMu's loans may prove too big a write-off to take, even for JP Morgan.

Assuming a 36 percent peak-to-trough decline in home prices, the bank expects remaining lifetime losses on WaMu's home lending portfolio to be $32 billion to $38 billion. The more home prices fall, the less banks will be able to reclaim on defaulted loans. The bank said it has not yet experienced losses beyond initial expectations. However, if delinquencies and losses did increase more than expected, the bank would need to add to loan loss reserves.

The bank sees $1 billion to $1.4 billion in quarterly losses from noncredit impaired home equity loans this year. Home equity losses are expected to level off in 2010, but will likely remain high, JPMorgan said.

Meanwhile, quarterly losses among subprime mortgage loans could be as high as $375 million to $475 million over the next several quarters, JPMorgan said.


Awww, poor JPM! That wasn't very nice of the FDIC to sell you troubled WaMu at bargain basement prices like that, even though you used government money to gobble it up. JPM has not yet posted a quarterly loss and plans to cut quarterly dividends by 5 cents per share to preserve precious capital.

And hey, if that doesn't work, maybe they can hit up the government for some more cash to eat up the floundering competition.

House Decides Bloggers are not Journalists



Way back in the day when I was in high school, I decided when I grew up I was going to be a journalist. I was going to go to school in Seattle since my favorite bands were from there and I was going to get a sweet spot at the Seattle Post-Intelligencer writing about nightlife and chasing down scandals. I wrote a science fiction novel my freshman year and also decided that I'd get it published before I graduated college. I would be a big, fancy hipster writer and therefore exponentially more awesome than my lame friends who would stay in Wisconsin and sell their souls to the beer companies for sad little paychecks.

When I took my ACTs junior year, it was decided that journalism would be a great career for me based on my amazing performance on the part with all the words (the part with the math... not so much. I still did better than most of my graduating class but safe to say it was pretty clear where I should head) so it made sense that I'd make a living writing.

...let's skip past the part where I left the Midwest and sowed my wild oats for a few years; safe to say, I didn't make it to Seattle and getting paid to write isn't as easy as the average 14 year old may believe.

By way of my fabulous career in accounting education, however, I've found my voice again, providing content for ten of 1000s of future CPAs whilst pulling in a pretty decent paycheck. Score! And because of my position on the fringes of the accounting industry, I've been able to keep on top of this project, connecting with professionals along the way. Pretty sweet gig. I've got to behave while on the boss's dime, but I've got the freedom to say pretty much whatever I want here on Jr Accountant (Lord knows I push that envelope), sharing insider information from within the California budget crisis, criticizing the powers-that-be, etc. At 28, it looks like I achieved my dream of becoming a journalist after all - if in some diluted Intarwebz sort of way.

But if the House has their way, "journalism" is about to get one hell of a makeover.

The Citizen Media Law Project reports:

The question of what makes a journalist is due for yet another round of debate, now that Congress is weighing two competing versions of a federal shield law for reporters.

Last Friday, the Senate introduced its own version of the Free Flow of Information Act, a follow-up to the House's action two days before. Both versions would provide new -- if limited -- protection against subpoenas for journalists, and both version contain a range of exceptions. Both bills were introduced in 2007 as well, with the House version passing overwhelmingly despite a veto threat. The Senate bill was passed easily out of committee only to die without a vote of the full chamber as the session ran out of time.

Again, the 2009 bills differ in a key respect, namely in how they define journalists. The Senate bill is fairly straightforward and generous in this regard. It covers a person "who is engaged in journalism," and defines the latter by:

the regular gathering, preparing, collecting, photographing, recording, writing, editing, reporting, or publishing of news or information that concerns local, national, or international events or other matters of public interest for dissemination to the public.

The House version, on the other hand, puts limits on who is covered in a way that potentially leaves most bloggers and many others outside the protective zone of the shield. From the bill:
The term "covered person" means a person who regularly gathers, prepares, collects, photographs, records, writes, edits, reports, or publishes news or information that concerns local, national, or international events or other matters of public interest for dissemination to the public for a substantial portion of the person's livelihood or for substantial financial gain and includes a supervisor, employer, parent, subsidiary, or affiliate of such covered person.

"Substantial" isn't defined, but one would assume that many bloggers, student journalists and even those who freelance for magazines or papers that pay poorly, could have a hard time utilizing the protections afforded by the bill, should this version become law.
Great, so my work blog is safe but it's also tame; is it for Congress to define a journalist and at all appropriate to declare that if you aren't paying the bills you aren't valid nor extended protection by law? I know a blogger or two who might be slightly offended to hear that their passion has been devalued by an incorrect definition.

I skip eating lunch and choose to blog instead. I wake up an hour early just so I can scan the headlines and put together a post as soon as I get into the office. I do it because this is what I love to do, and since I've got the CPA factory paying my bills, I don't have to pimp myself out for ad revenues or edit my opinions because I'm worried about losing sponsors. More power to you if you can actually make a living blogging but I'm not about to abandon my accountants so I can sit around and write all day; Jr Accountant is a passion of mine, not a pressure to perform.

And according to the House, that not only means that I am not legit, but I am also free game for a subpoenathon? I think not, guys.

14 year old me swore we were going to be a journalist when we grew up and God damnit that's what I'm trying to do.

46 States Could Face Bankruptcy in FY09/FY10



According to the Center on Budget and Policy Priorities, California isn't the only state in fiscal hot water. In fact, 46 states could find themselves bankrupt and destitute by the end of fiscal year 2010.

States are currently at the mid-point of fiscal year 2009 — which started July 1 in most states — and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps of $51 billion (over 10% of state budgets) have opened up in the budgets of at least 42 states plus the District of Columbia. These budget gaps are in addition to the $48 billion shortfalls that these and other states faced as they adopted their budgets for the current fiscal year, bringing total gaps for the year to 15 percent of budgets.

The states fiscal problems are continuing into the next two years. At least 45 states have looked ahead and anticipate deficits for fiscal year 2010 and beyond. These gaps total almost $94 billion — 16 percent of budgets — for the 36 states that have estimated the size of these gaps and are likely to grow as gaps are re-estimated in the next few months.

TABLE 1:
STATES WITH MID-YEAR FY2009 BUDGET GAPS
Size of Gap
Percent of FY2009 General Fund
Alabama
$1.1 billion
12.7%
Alaska
$360 million
6.8%
Arizona
$1.6 billion
15.9%
California
$13.7 billion
13.6%
Colorado
$604 million
7.7%
Connecticut
$1.7 billion
10.1%
District of Columbia
$258 million
4.1%
Delaware
$226 million
6.2%
Florida
$2.3 billion
9.0%
Georgia
$2.2 billion
10.3%
Hawaii
$232 million
4.0%
Idaho
$218 million
7.4%
Illinois
$4.2 billion
14.8%
Indiana
$1.1 billion
8.0%
Iowa
$134 million
2.1%
Kansas
$186 million
2.9%
Kentucky
$456 million
4.9%
Louisiana
$341 million
3.7%
Maine
$140 million
4.6%
Maryland
$691 million
4.6%
Massachusetts
$2.4 billion
8.4%
Michigan
$200 million
0.9%
Minnesota
$426 million
2.5%
Mississippi
$175 million
3.4%
Missouri
$342 million
3.8%
Nevada
$536 million
7.3%
New Hampshire
$50 million
1.6%
New Jersey
$2.1 billion
6.5%
New Mexico
$454 million
7.5%
New York
$1.7 billion
3.0%
North Carolina
$2.0 billion
9.3%
Ohio
$1.2 billion
4.2%
Oregon
$442 million
6.6%
Pennsylvania
$2.3 billion
8.1%
Rhode Island
$372 million
11.4%
South Carolina
$871 million
12.7%
South Dakota
$27 million
2.2%
Tennessee
$884 million
7.8%
Utah
$620 million
10.4%
Vermont
$66 million
5.4%
Virginia
$1.1 billion
6.7%
Washington
$509 million
3.4%
Wisconsin
$594 million
4.2%
TOTAL
$51.1 billion
10.5%
Note: An entry of “DK” in Size of Gap means that an estimate of the size of the projected gap in that state is not yet available.


Again, I'm no mathlete but those numbers look slightly frightening.

Some states have not been affected by the economic downturn but the number is dwindling. There are a number of reasons why. Some mineral-rich states — such as New Mexico, Alaska, and Montana — saw revenue growth as a result of high oil prices. However, the recent decline in oil prices has begun to affect revenues in some of these states. The economies of a handful of other states have so far been less affected by the national economic problems.

In states facing budget gaps, the consequences sometimes are severe — for residents as well as the economy. Unlike the federal government, states cannot run deficits when the economy turns down; they must cut expenditures, raise taxes, or draw down reserve funds to balance their budgets. As the current fiscal year ends and states plan for next year, budget difficulties are leading some 40 states to reduce or propose reductions in services to their residents, including some of their most vulnerable families and individuals.
And the verdict? States are on their own on this one. The federal government has its own printing press, what do the states have?

Not a damn thing, obviously.

California, Arizona, and Kansas have already openly expressed concerns over budget shortfalls, going so far as to threaten mass state employee layoffs and delay tax refund checks - which domino shall fall next?

Makes sense then that the states would be out to reclaim their sovereignty.

Head for the hills, kids. And I don't mean Hollywood.

Pro-Fed Propaganda at its Finest from the New York Times


Virginia Commonwealth University professor Dr. Melvin I. Urofsky recently published a New York Times Op-Ed piece that starts off anti-JP Morgan but flops midway through. Bloated with misstatements, the piece credits the Federal Reserve Act with restoring fiscal sanity to this country (!) by "allow[ing] Congress to take away banks’ control over currency, bann[ing] interlocking directorates (in which banker representatives controlled other corporations), and establish[ing] rules of fair competition."

WHAT?! Can someone please enlighten me as to how exactly the Federal Reserve Act encourages competition by running a money laundering scheme through the U.S. Treasury? Please? Thanks.

Some things never change. When President Obama spoke last week of “shameful” bonuses for bankers and the financial community’s “irresponsibility,” he echoed charges leveled nearly a century ago by Louis D. Brandeis. Brandeis, a commercial lawyer, leading reformer and future Supreme Court justice, described a dangerous combination of avarice, lack of accountability and poor oversight in “Other People’s Money, and How the Bankers Use It,” one of the best-known exposés of the Progressive era.

Published in 1914, the book was based on the revelations of the House of Representatives’ Pujo Committee about the predatory practices of J. P. Morgan and other big bankers. “Other People’s Money” influenced both Woodrow Wilson’s New Freedom agenda and Franklin Roosevelt’s New Deal. It also offers valuable lessons for today.

Our current crisis, after all, was in part fueled by bankers making big gambles with other people’s cash. They bundled and sold sub-prime mortgages, took their profits, and then left others holding portfolios full of worthless, even toxic, paper. This was exactly the kind of behavior that Brandeis despised. He believed that it was one thing for an individual to put up capital in risky ventures, playing to win but prepared for failure. But he saw the bankers of his time dodging failure by manipulating the marketplace at the expense of smaller entrepreneurs and consumers.

Are we speaking of the same JP Morgan which owns diluted stake in the Federal Reserve? Just making sure we're all on the same page here.

During the Great Depression, people turned to Brandeis once again. “Other People’s Money” was reissued in an inexpensive edition, and many of those who came to Washington to work on Franklin Roosevelt’s New Deal read it. The New Deal laws, particularly the Glass-Steagall and the Securities Exchange Acts, imposed long overdue regulation of the banking system, required the separation of banking from stock brokerage, and established the Securities and Exchange Commission to regulate the stock markets.

For Brandeis, regulation was not supposed to be a restraint on innovation or the entrepreneurial spirit, but rather a check on unbridled greed. He believed in a free market, but one in which the government enforced rules of fair competition so that the most talented could succeed. Clear rules would help ensure that business was conducted fairly and openly.
Yes, and the government is doing a wonderful job regulating things, aren't they? And, yes kids, we're referring to the same Glass-Steagall Act which former Treasury Secretary and Citigroup alum Robert Rubin sought to repeal - his success laid the framework for the current crisis, with a little help from our friends at the Fed, of course.

This is not the first time the NYT has published absolute bullshit, of course. Some examples may be found here, here, here, here, here, oh, and here as well.

Keep up the great work, guys. Way to keep journalism "honest."

Stanford's Auditors: We Have no Idea What You're Talking About



On Allen Stanford's official website, it might be interesting if under "Our Investment Philosophy" it read something like "scam the shit out of investors and piss off all of Antigua and a large chunk of Venezula" - it doesn't, of course, and the site is still as it was before the fraud was uncovered.

Meanwhile, the site belonging to Stanford's auditors (or at least those who he claimed audited his statements years previous), is nothing but a big 404 Not Found.

Perhaps that is because C. A. S. Hewlett has "no idea" who Allen Stanford is - and the only person who might be able to shed some light on his cooked books, Charlesworth “Shelley” Hewlett, died on New Years Day.

The SEC, which describes C. A. S. Hewlett as "a small accounting firm" has been thus far unable to make contact with the firm.

Financial Week reports on the strange case of Allen Stanford's "auditors":

Other staff don’t even seem to know Stanford. Two people in charge at C.A.S. Hewlett & Co, identified by Stanford as auditors of his offshore bank, told a Reuters reporter on Thursday there was no evidence of any ties to the 58-year-old financier and sports entrepreneur.

The man who would know, according to current manager Eugene Perry, is former chief executive Charlesworth “Shelley” Hewlett. He died January 1 at age 73, staff at the firm said.

Mr. Perry said he never met Stanford in his 10 years at the firm. While speaking with a Reuters reporter in the late Hewlett’s personal office, Mr. Perry telephoned a woman he identified as the company’s current leader.

“We are not privy to any information about any relationship with Stanford,” said the woman, who would only identify herself as Celia. Asked if she was aware of any files at the firm associated with Stanford, she said she was not.

As it turns out, the women on the other end was probably Celia Hewlett, the daughter of the audit firm’s founder. Celia Hewlett took over responsibility for the accounting firm from London after her father died. It couldn’t be determined for certain, however, if the Celia interviewed by telephone was the late Hewlett’s daughter.

Either way, C.A.S Hewlett firm is now at the epicenter of one of the biggest alleged investment scams in U.S. history. Federal agents on Thursday served Stanford with a complaint from U.S. regulators accusing the Texan of operating an $8 billion fraud centered on the sale of high-yielding certificates of deposit offered by Stanford International Bank (SIB), his Antiguan affiliate.

The interest in Stanford has extended across the Atlantic. Britain’s Serious Fraud Office said Thursday it was monitoring a possible link between the Hewlett accounting firm and Stanford.

“It’s a situation where there is the possibility there may be a U.K. link, and so we are monitoring the situation,” a spokesman for the SFO said.
Meanwhile, the SEC is in the hot seat for allowing yet another scam to run wild despite numerous attempts by whistleblowers to bring the fraud to justice. What exactly is the SEC's purpose again? Can someone please remind me?

A whistleblower contacted US regulators more than five years ago with allegations that Sir Allen Stanford’s businesses were involved in an “illegal Ponzi scheme”, the Financial Times has learnt, raising new questions about why authorities waited until last week to shut down the alleged $8bn fraud.

Leyla Basagoitia, a former Stanford employee, raised a series of red flags about the tycoon’s empire in a 2003 employment dispute with her company at a tribunal run by the finance industry’s self-regulatory body. Ms Basagoitia also alerted the US Securities and Exchange Commission at about the same time, her lawyer said, echoing criticisms the agency ignored early warnings about the alleged $50bn Ponzi scheme run by Bernard Madoff.
Epic FAIL, guys. Either try harder or dissolve and let more competent bodies handle your duties.

So, uh, does auditor liability extend to beyond the grave?

Citi: Third Govt Handout is a Charm?



It seems as if the U.S. government has a bit of a cootie problem in the form of our buddy Pandit and the rest of the Citigroup squad, and no matter how much we spend to shake the bugs off our back, they continue to drag down the Dow and suck from the government teat. $C didn't have much room to wiggle, so for MarketWatch to announce that it dropped 50% today in response to the government's bailout buy off blowout is a bit excessive. 50% is nothing when you're trading at pennies and worthless to begin with.

Shares of Citigroup Inc. tumbled more than 30% Friday, retreating after it said the government agreed to boost its stake in the embattled company to about 36%, and as the firm reported another $10 billion in fourth-quarter losses and said it will suspend common- and preferred-stock dividends.

The plan is the government's third attempt in recent months to right the ship at Citi, which has been hard hit by bad risk management and huge investment losses.

"What we announced today was not an easy decision for us because we understand the impact of the dilution we are asking you to bear, but in the end, our business is about confidence," said Chief Executive Vikram Pandit on a conference call with investors and analysts Friday morning.

"As a matter of fact," he said, "the entire financial system depends on confidence and we wanted to take definitive steps to put all capital issues aside."

The company said it will issue common stock in exchange for preferred securities, which will substantially increase its tangible common equity, or TCE, without any additional U.S. government investment.

The Treasury said it will convert up to $25 billion of preferred stock issued under its Capital Purchase Program.


Yes, I'm sure it really pained Bandit to suck it up and request a third handout from Uncle Sam. That sheisty little prick better not have a job come Monday; if all of us are hurting and fearful of our own career safety, there is absolutely no reason that man should have job security. None.

When is it enough?

As much as I am against nationalization, how about the FDIC seizes the joint, sells off its toxic losses (so what if they are hard to value, surely it's got to be less than what we're going to have to keep pumping in to keep them afloat), and we call it even?

Oh, and Bandit gets sent to live the remainder of his natural life at Club Fed for crimes against the American people including but not limited to fraud and aggravated robbery.

But I suppose it's not robbery when you've got your boys on the inside greasing up the toxic machine *ahem* Geithner.

Yer effin wit our moneez! Knock it off!

The Troops are Coming Home - to Guard YOU

um what? That doesn't even make sense.


When news first trickled through that President Obama would make it his goal to bring all American troops in Iraq home before the end of his term, most were understandably elated. Regardless of your personal feelings on the war (I'll keep mine to myself, thank you very much), it has been a costly venture - both in terms of actual dollars and in incidental losses of life - and $11 billion a month just doesn't make sense. Good news, right?

Not so much. Obama's agenda may be less philanthropic than assumed if one is to believe this February 9th American Conservative article:

Americans have become so inured to the sight of federal troops fighting fires, rescuing flood victims from rooftops, and engaging in drug interdiction on the border that few eyebrows were raised when news broke that 20,000 active-duty infantry would soon be deployed on American soil for so-called homeland defense.

But critics say this development—announced by U.S. Northern Command (NORTHCOM) in October—is unprecedented and further evidence of a military mission-creep into domestic affairs, particularly in areas for which the National Guard and Reserves are already suited.

“I don’t get it. I don’t understand why they are further encumbering active-duty brigades with this kind of mission,” says Winslow Wheeler, author of America’s Defense Meltdown: Pentagon Reform for President Obama and the New Congress and one of Washington’s few civilian experts on the Pentagon’s Byzantine budget. “It sounds like someone is expanding his empire.”

Pentagon officials say that having a permanent, ready-reaction force capable of responding to a catastrophic event—natural or manmade—is a sensible and necessary outgrowth of post-9/11 national security. But the move has constitutional experts, civil libertarians, and retired and active military scratching their heads. Politicians are now demanding answers, wondering how close the military is to violating the Posse Comitatus Act, the 1878 federal law passed after Reconstruction to prevent federal troops from conducting domestic law enforcement. A separate Department of Defense directive prohibits the Navy and Marines from engaging in such activities.

“We were encouraging the Department [of Defense] to do something different than this,” says an aide to Sen. Patrick Leahy (D-Vt.). The chairman of the Senate Judiciary Committee thinks the federal government “jumped without weighing the pros and the cons,” while reacting to fears that the country would not be able to respond effectively to a future disaster. “[Leahy] asked for a briefing and is watching how it is being handled.” But like any expansion of Washington’s power, a dramatic reversal now seems unlikely unless President Barack Obama gets personally involved.

Oh, and as if the thought of a military already stretched-too-thin turning inward to fight a war (or the potential thereof) against America's own citizens isn't enough to frighten you, how about the price tag for next year's war efforts?

The Obama administration wants to spend about $75 billion on the wars in Iraq and Afghanistan through next fall, costs that were largely set by the Bush administration. On top of that, the new budget proposal asks Congress for $130 billion for next year.

Obama's budget doesn't list the projected costs for each war individually, and a defense official said the $130 billion war request also includes some costs for other overseas spending such as military help in Pakistan.

And as in years past, the figure for what Obama now calls "overseas contingency operations" doesn't give the complete picture of war spending. Like the old separate war requests under the Bush administration, the Obama category omits military pay, health care and other costs.

Those costs are part of the nearly $534 billion Obama wants for regular Pentagon operations next year.

Altogether, Obama is asking for $739 billion for the military through the fall of 2010.

I believe in a well-funded and supported military - and of course would much rather see our military buffed up than see money fly flippantly around for welfare state handouts. But I refuse to believe in funding an inappropriate use of America's military.

This isn't your own private GI-Joe set, you guys, get with the program...

Due Care - Not Just for Accountants Anymore

Geithner? He's down the street...


In the latest issue of AICPA's Journal of Accountancy, an interesting real-life example of judicial estoppel as leveraged against a (non-CPA/accountant) taxpayer. And a caution to the non-accountants out there unfamiliar with the lingo; just because you don't understand what "due care" is doesn't mean it can't be used against you in Tax Court. Then again, you probably shouldn't eff with the IRS.

According to the March 2009 JoA piece, in the case of Dominick J. Vincentini v. Commissioner, "the Tax Court ruled that a taxpayer was not entitled to claim a theft loss where he had failed to show he had no reasonable chance of recovering his stolen money during the tax year in question."

However, Vincentini in the tax year in question was in fact running a phony investment operation to generate fraudulent losses.

Read the JoA article for the details but after the court decided that "under Internal Revenue Code § 165, taxpayers may claim a theft loss if they can prove (1) a theft occurred, (2) the amount of the loss and (3) the year of discovery of the loss. The taxpayer proved items 1 and 2. The government contested item 3, the year of the discovery."

Since the taxpayer could not prove that he may have at some point had a reasonable possibility to recover some or all of the loss for not pursuing recovery of the losses, he was not entitled to claim theft loss as a deduction.

In the end, it was ruled that Mr. Vincentini had "relied on the advice of an accountant who worked for Anderson Ark [his fictional loss-producing entity] and therefore was not independent, the court found that the taxpayer did not exercise due care. Consequently, the negligence penalty was upheld."

Granted, this guy had it coming.

Due care in 150 words or less:

Due care can also be interpreted to mean the knowledge and diligence to satisfy the expectations of a “reasonable” person. CPAs encounter this aspect of their due care standard whenever legal due diligence is called for. This usage of “due” differs from the first two because it refers to a minimum legal standard rather than a personal or professional technical standard. This standard of due care can also be superimposed on any service provided by a CPA whenever the quality of the CPA’s service comes into question in a legal dispute.

Due care for non-accountants:

Know what negligence means? It's the opposite of that and only applies to "reasonable" people (giving people too much credit, yes, but we're talking about accountants here, most of which are entirely reasonable).

Now you know what not to do when trying to rip off the IRS.

FDIC: 2008 Q4 Sucked, We're Broke, and Oh Yeah, Increasing Fees



The FDIC announced today to no one's surprise, the final quarter of 2008 beat the living crap out of FDIC-insured institutions:

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported a net loss of $26.2 billion in the fourth quarter of 2008, a decline of $27.8 billion from the $575 million that the industry earned in the fourth quarter of 2007 and the first quarterly loss since 1990. Rising loan-loss provisions, losses from trading activities and goodwill write-downs all contributed to the quarterly net loss as banks continue to repair their balance sheets in order to return to profitability in future periods.

More than two-thirds of all insured institutions were profitable in the fourth quarter, but their earnings were outweighed by large losses at a number of big banks. Total deposits increased by $307.9 billion (3.5 percent), the largest percentage increase in 10 years, with deposits in domestic offices registering a $274.1 billion (3.8 percent) increase. And at year-end, nearly 98 percent of all insured institutions, representing almost 99 percent of industry assets, met or exceeded the highest regulatory capital standards.

"Public confidence in the banking system and deposit insurance is demonstrated by the increase in domestic deposits during the fourth quarter," FDIC Chairman Sheila Bair said. "Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times."


Clearly, Sheila. Not.

This is the same Sheila Bair, mind you, who said that it is " simply impractical to try to do a forensic analysis of each and every one of these delinquent loans" in regards to offering assistance to homeowners under OMGObama's mortgage salvation scheme. Yes, kids, she means that even if assets or income were misstated on mortgage applications or homes otherwise fraudulently secured through questionable mortgage practices, those shady homeowners get to keep their cribs and you get to foot the bill. Is it also simply impractical, then, to expect an accounting of these funds?

The "fund" is hurting, of course, and while the official answer is that the FDIC has been forced to take on more failed banks than usual (oops!), perhaps if the Treasury kept their paws out of it all these years they might have a better buffer to work with.

The federal government’s bank insurance fund dropped by the end of last year to the lowest point in more than 25 years, and the number of banks at risk of failure nearly doubled, according to the head of the Federal Deposit Insurance Corporation, The New York Times’s Eric Lipton reports from Washington.

“There is no question this is one of the most difficult periods we have encountered during the F.D.I.C.’s 75 years of operation,” Sheila Bair, the agency’s chairwoman, said at a news conference on Thursday where she released a status report on the nation’s 8,300 federally insured banks.

Over all, the nation’s banks lost $26.2 billion in the fourth quarter, the biggest quarterly lost since the F.D.I.C. began collecting data on quarterly earnings. Almost one in three banks lost money, Ms. Bair reported.

Already this year, 14 banks have failed, compared with a total of 25 banks last year and 3 in 2007. Ms. Bair said that the agency had placed 252 institutions on its watch list — meaning they were at risk of failure—compared to 76 banks at the end of 2007.

With all of the bank failures, the F.D.I.C.’s insurance fund has dropped to $19 billion, the lowest it has been since 1993, at the end of the savings and loan crisis. The insurance fund had $52 billion at the end of 2007.

The F.D.I.C. — with the insurance fund now at such a low level — is required to increase it and it will move to do so on Friday by increasing the amount banks must pay in deposit insurance.

Congratulations, Sheila Bair - you ARE the weakest link.

Want to stimulate the economy? How about demanding a forensic investigation of any and every mortgage-holder who applies for relief under OMGObama's plan? Oh wait, I know why... because the Treasury and US government only want to make sure that the commercial banks which are crippled by mortgage default get their money. It has absolutely nothing to do with keeping people in their homes; if it did, Ms. Bair and the rest of the tools running the show would make each and every applicant prove before receiving any federal funds under the program that their mortgage was obtained legally without fraud or misstatement, intentional or otherwise. That would free up the money to ensure it gets to those who need it most.

But we all know that's not how the FDIC and Treasury get down, don't we?

Fed's Fisher: It's Deflation We're Worried About




Dallas Fedhead Richard Fisher is at it again, this time expressing a tiny bit of concern over the threat of deflation. Umm... has he spoken to Zimbabwe Ben lately? I can't imagine that deflation should be too much of a worry. Reuters reports:

U.S. central bankers will pay special attention to ensure the economy is not strangled by a persistent decline in prices, or deflation, a top Federal Reserve official said on Tuesday.

"Deflation is as dangerous as inflation, and we will take every step to counteract it," Richard Fisher, president of the Federal Reserve Bank of Dallas, told reporters after a speech at Bryant University in Smithfield, Rhode Island.

As companies across the country cut jobs and consumers spend less, many economists are worried about the potential for a sustained decline in prices.

The Dallas Fed calculates price pressures based on personal consumption expenditures, or PCE, and in the bank's December report, the bank found that more than 50 percent of the market basket was going down in price, Fisher said.

But Fisher cautioned it was far from certain whether this decline will continue in coming months.

"There are price pressures on the downside, but we will make sure that deflation does not take hold," Fisher said.

At the same time, Fisher said U.S. central bankers are keeping a watchful eye on inflation. Some economists have voiced concern about the potential for inflation down the road as the Fed has cut interest rates to near zero and pumped hundreds of billions of dollars into the financial system to unfreeze key credit markets.


Kansas City Fedhead Thomas Hoenig said just a little over a month ago that while always a small possibility, deflation is unlikely and not worth the worry. So what story are we going with here, guys? Can the Federal Reserve get their act together and agree on one lie to spew across the board?

Dear Mr. Fisher and the rest of the Federal Reserve Dollar Destruction Team: deflation is a highly unlikely possibility if you continue to pump out the funny money and make promises to floundering financial institutions to keep them covered. It's called debasing the currency, guys, and unlike most of what you're pulling out of your a$$ets lately, you're doing it right.

Fisher also said it will be tough to overhaul the nation's regulatory system in the wake of failures that included regulators' initially missing the Madoff case and overly aggressive lending to homeowners.

"It will be simplified," Fisher said of the regulatory system. "The problem with Washington is that nobody wants to give up authority and this will be a tough negotiation," he added, noting, "It ought to come out simpler and more productive than it is now."

But he also warned that regulation must not stifle innovation. "You can't contain human initiative, but that doesn't mean you shouldn't be able to guide it somewhat," he said.

I have a suggestion for Mr. Fisher: Regulate the Federal Reserve. It is surely a Pandora's box they don't want to open up at the Fed, so if he's going to be bold enough to suggest more regulation, he's got to also accept the possibility that his own crooked institution will feel the regulatory crunch.

Have fun with that one, guys...

OMGObama: Magician of a Shrunken Deficit

Alright so uhhh here's the plan... we're going to fix the budget...
...by spending HELLA money! Yes! Get Geithner on this...


Now I'm no mathlete or anything but something doesn't quite work out correctly in regards to President Obama's pledge to slice the deficit in half by the end of his term. Call me crazy but unless the government plans to get into the illegal street drug business to cover all the promises he's made in just little over a month in office, we're going to have a serious cash issue when all is said and done.

OMGObama has, to date, pledged countless trillions of dollars to stem systemic bank failure, frozen credit, universal health care deficiencies, massive mortgage fallout, and is in the process of sending 17,000 more troops to Afghanistan. So I ask you, Mr. Obama, how exactly do you propose to shrink the deficit in 3 3/4 short years with debut spending like that? Let me guess. It starts with taxes.

Reuters reports on current deficit spending:

President Barack Obama was set to propose record deficit spending on Thursday in an attempt to drive the U.S. economy out of a recession showing every sign of deepening across the world.

Europe and Asia presented a grim picture, with Britain launching a huge scheme to insure "toxic assets" threatening major banks, euro zone economic sentiment slumping and Japan's Finance Minister declaring a very bleak outlook for first quarter GDP.

The Royal Bank of Scotland, one of the worst hit by 'toxic assets' in Europe, reported the biggest loss in British corporate history -- 24.1 billion pounds ($34.3 billion) -- and said it would turn for help to the scheme that may cover up to 500 billion pounds' ($712 billion) in bank liabilities.

The scale of government intervention across the globe would have been unimaginable a year ago, not least in the United States where there is strong resistance to state involvement.

President Obama will forecast a 2009 deficit of $1.75 trillion in his first budget proposal on Thursday, setting goals of overhauling the healthcare system and shoring up the U.S. economy. The plan must be approved by Congress.

The deficit would represent 12.3 percent of U.S. gross domestic product -- the largest share since World War II.


Ooooh! I get the math now! Mr. Obama announced that he would cut the deficit in half by the end of his term. As confuzzled as I was as to the details and how exactly he would achieve this goal with his "Debt We Can Believe In" program, I get it. He will halve the deficit by inflating it to comical proportions first. Except there's nothing funny about the U.S. trying to dig itself out of a debt hole by producing more debt.

Good luck with that plan, sir, I shall be in Canada shooting beavers for dinner and warm pelts.

Can someone please find OMGObama a real economist? My 5 year old just learned how to count to 500, maybe he's available. If not, what's Schiff up to? Someone please enlighten these guys.