Panic on the Street: Financial Markets in Crisis

The Billionaire Loophole: The Private Equity Tax Escape

by Samuel Bollier

On a walk through Times Square, a pedestrian can expect to see flashing lights, neon signs and Broadway theaters. Less apparent is that more than two dozen companies prominently located in the Times Square area - from the Toys 'R' Us flagship store, to the New York Sports Club, to Burger King - have been bought out by private equity firms in massive leveraged buyouts.

Times Square is "filled with people making $8 an hour, without healthcare, working for some of the wealthiest companies in the world," says Stephen Lerner of the Service Employees International Union (SEIU). Private equity-owned companies with operations in the Times Square area are worth more than $100 billion, according to SEIU estimates, employing more than half a million workers across the United States.

Private equity firms buy publicly traded corporations, reconfigure them, and then sell them back to the publicly traded markets. The top firms have yielded extraordinary financial returns in recent years, and private equity firms have gobbled up ever-larger corporations - two developments that have elevated their profile considerably.

But it is the mammoth compensation paid to the top private equity firm managers - and the fact that they pay taxes at a lower rate than garbage collectors - that has moved them from the business page to the front page. MORE>>

Financial Entanglement and the Developing World

by C.P. Chandrasekhar

Just as the world was recalling the 10th anniversary of the 1997 Asian financial crisis, evidence was accumulating that the global financial system was once again vulnerable. The extent of vulnerability was driven home by the simultaneous collapse of stock indices in the world's leading financial markets in July 2007, including those in so-called "emerging markets" in developing countries. What is disconcerting is that this synchronized collapse of markets was not the result of developments in each of the countries where these markets were located. Rather, the source of the problem was a crisis brewing in the housing finance market in the United States, the ripple effects of which encouraged investors to pull out of markets globally.

Underlying these ripple effects is the financial entanglement which results from the layered financial structure, the "innovative" financial products and the inadequate financial regulation associated with the increasingly liberalized and globalized financial system in most countries. MORE>>

The Foreclosure Epidemic: The Costs to Families and Communities of the Predictable Mortgage Meltdown

An interview with Allen Fishbein

Allen Fishbein is the director of housing and credit policy for the Consumer Federation of America (CFA). CFA is a national non-profit association of 300 pro-consumer organizations, founded in 1968 to advance consumer interests through education, research and advocacy. Fishbein frequently provides expert testimony before Congressional panels and is interviewed by national news media on a variety of home finance, consumer credit and regulatory policy matters.

MM: Was the current crisis predictable?

Fishbein: The current foreclosure epidemic was predictable and also avoidable. Industry analysts will tell you that the driving force was too much available capital chasing the highest possible yields. Investors found that high price subprime loans generated lucrative returns. The mortgage market was awash with capital. This, in turn, encouraged looser and looser underwriting. Lenders knew they had a ready outlet to sell the loans the made. So they went for volume and ignored sensible loan standards. MORE>>