Boston Review published a story by a former Citi employee that reveals the everyday machinations engaged in by banksters to help their high-wealth clients evade income taxes through creating tax shelters that appear to satisfy legal requirements. See Omer Rosen, I, too, have messed with LIBOR: toying with the immutable laws of finance, Boston Review (July 30, 2012).
In the case reported in the article, the bankster was told that his "tax transaction" had to be a "financing transaction", so he needed to demonstrate that an above-market fixed rate (that worked only because the deal was a tax evasion deal so the taxes saved made up for the too-high rate) was theoretically a good business deal because the too-high fixed rate might end up lower than potential high LIBOR rates. So the bankster toyed with different scenarios for hypothetical LIBOR rates, creating ones that made the financing transaction look feasibly prudent even though everybody involved knew it was not a winner as a financing and was only a winner (if you overlooked the illegality) as a tax evasion technique.
These are the "too big to fail" banks that we are still coddling and that the Tea Party right-wingers in Congress want to coddle even more by repealing the minimal reforms put in place through Dodd-Frank. When will we start putting them in jail, rather than coddling them?
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