Fed Reserve Report: Some States' Policies Accelerating Personal Income Divide

Domestic concern over America's widening personal income gap has gotten the Federal Reserve Bank's attention. A recent Fed research report, according to a Washington Post story, details states whose tax policies effectively increase the wealth gap between the have-a-lots, the have-somethings, and the have-nots. Regressive tax regimes typically form the heart of levies that hammer the poor and working classes. The dwindling middle class is now discovering the potency of regressive tax schemes (i.e., everyone pays equally, such as gasoline taxes).

The right-wing won't have an easy reply for these findings. GOP presidential candidates, for example, can't smear the Federal Reserve as a tool of class warfare and retain a shred of their credibility. As the draconian GOP regime Kansas has demonstrated, the Republican mantra of "tax cuts" leaves the civic body fiscally bankrupt and its citizens morally shamed. What the Republican Party doesn't really want to talk about is its implicit embrace of a two-class society, although Mitt Romney came close to articulating this position during his 2012 presidential campaign. The common sense reality is that those on the bottom will pay for the luxuries enjoyed by the top, through regressive taxes and give-to-the-rich tax cuts. That scenario sounds more akin to a banana republic than a confident democracy.

"Big Six" US Banks Netted Billions Via Secret Federal Reserve Loans

Maybe Not.

Have you ever wanted to get a loan at a below-market interest rate? Well, not so long ago, one highly publicized way was to get a VIP mortgage from Countrywide Financial. Dozens of Fannie Mae officials did exactly that. However, that's small potatoes compared to the secret, below-market interest rate loans the Federal Reserve dished out to major US banks.

The Fed fought Bloomberg News in court -- and fought hard -- to keep the information about these loans from public access. Thankfully, Bloomberg won and has published a story about who got what. It's a very unsavory tale, in which banking titans and the Fed lied to the public and stonewalled Congress. The usual Wall Street suspects are at the top of this corporate welfare list. The stakes were enormous, but so were the rewards: $13 billion net profit for the banks that were treated to the Fed's dole.

It's understandable that the Fed wanted to prop up these bankrupt institutions. It is unacceptable that information about the use of tax money -- generations of tax money, given the scale of the bailouts -- be kept from the American people. What are these institutions afraid of? Their high-handed approach only contributes to suspicions that both the federal bureaucracy and major financial players are profoundly corrupt.

Meanwhile, to the reporters who fought the Fed and won -- thank you.

The Fed's "Operation Twist"

The Federal Reserve Bank recently launched "Operation Twist," a scheme apparently intended to keep the world safe for money. According to the Financial Times, the Fed's initiative plans to lower interest rates through buying and selling nearly $44 billion in US Treasuries. The idea is to "twist" the relationship between short and long-term interest rates, so that borrowing costs (especially for home mortgages) are lowered.

We'll see. In the meantime, if you're experiencing some heartburn over the cost of money, I suggest taking your troubles off your mind. Try a 60s approach to relaxation via the great Chubby Checker singing and doin' the real Twist. Here's a YouTube video of Chubby singing the famous tune on the Dick Clark Show. The clip is great fun: black & white, lip synched, and has screaming fans clapping in time with the music.

I once worked in a resort hotel kitchen where Checker was the main act. By that time, he lived in a very large house on the Main Line outside his native city of Philadelphia. Chubby walked through the kitchen and insisted that everyone working the line was to be treated well. I've always appreciated that moment, and I've kept an original LP of "The Twist" in my vinyl collection (yes, I have one).

The image shows the cover of the "Twister" game that the toy maker Hasbro produced a half-century ago. Somehow, the notion of "Twister" doesn't seem the best way to straighten out an economy that's tied up in knots.

The World's Piggy Bank

The Federal Reserve knows when to release bad news. The financial institution released more information about the names of Fortune 100 firms that borrowed money at the height of the 2008-2009 panic. In addition, at the same time, a number of foreign banks were essentially subsidized by the Fed. The story is breathtaking and scary.

Yet, who is paying attention? The WikiLeaks brouhaha has stolen all the headlines. What's striking about the WikiLeaks tale is that there isn't anything particularly stunning in the revelations. The talkers who provided the raw information that shaped the cables are naturally a bit uptight. But, honestly, is anyone surprised by the news that Vladimir Putin is a prick?

The Fed story is far more disturbing than just about anything in the WikiLeaks revelations. And that's why the Fed slyly put out the information today. Maybe Ben Bernanke isn't so dumb after all.

Double Down

The Fed's QE2 announcement reminds one of a gambler who doubles down after a loss. One can only hope the Fed is "on the money." If the Fed rolls snake eyes, the consequences are very bleak for the country. It won't matter which political party is in power.

Stuyvesant Town Rent Party

Those wild and crazy folks at Tishman Speyer (TS) are raising the roof at Stuyvesant Town, the Manhattan apartment complex TS owns. However, TS isn't sharing its love with tenants. Instead, according to Crain's New York, TS is "offering more than $20,000 in prizes to referring agents" who produce new tenants willing to pay "market rates" for Manhattan's best-known redoubt of rent control/rent stabilized tenancy.

Incentives are nothing new in New York real estate. What is a curiosity is that TS, which purchased the apartment complex from MetLife in a very highly leveraged deal gone stupendously bad, said "No Mas" to its high-profile creditors recently. That's right: bankrupt. Where is TS getting the red-meat money to throw at the retail rental agent dogs?

TS didn't limit its financial folly to New York. The firm owns a number of big-time buildings in Chicago which have cash flow issues. The Federal Reserve, one of TS' creditors in the Chicago caper, recently reworked TS' repayment terms so that they were much more favorable to TS. (Thank you, CrainsNY.) That means taxpayers are footing the bill.

Some rent party, don't you think?