Monday :: Aug 20, 2007

The American System at Work

by soccerdad

Another day another clear example of how the American System works. First up an article from the NYTimes which shows that losing your house is just the beginning of your problems.

Two years ago, William Stout lost his home in Allentown, Pa., to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for $1, county records show.

Agnes Mouser, a 65-year-old widow in Texas, received a $10,000 tax bill after foreclosure on her loan to pay off credit-card debt.
Despite the setback, Mr. Stout was relieved that his debt was wiped clean and he could make a new start. He married and moved in with his wife, Denise.

But on July 9, they received a bill from the Internal Revenue Service for $34,603 in back taxes. The letter explained that the debt canceled by Wells Fargo upon foreclosure was subject to income taxes, as well as penalties and late fees. The couple had a month to challenge the charges.

The bottom line here is that the IRS considers that removal of debt as income. Given that house values are falling its important to know that if you are forced to sell your house for less than the mortgage and the Bank forgives you the difference, thats income according to the IRS. So this is a clear way for the government to ensure that those in economic hardship remain in that situation.

At the other end of the income spectrum we talked about how the government has no problem bailing out a bunch of irresponsible investors. Today we get further insight into what happens at the high end of the income distribution.

Here is an excellent article summarizing the events at Countrywide Financial. Countrywide is just another group of thieves who wrote mortgages for people who could not afford them and now is in danger of going belly up. They had a run on their bank operation last week and a sizeable portion of those holdings are not federally insured. The article recounts the recent history and the expected effects if Countrywide where to go belly up; loss of jobs etc. But lets get to my favorite (sarcasm) part.

Meanwhile, Angelo Mozilo, chief executive officer of Countrywide, recently exercised options for 46,000 shares in the company and then sold those shares for $1,306,400, according to Thomson Financial.

Mozilo owns 1,378,390 shares of company stock (497,297 held directly and 881,097 indirectly).

Over the last two years, in addition to the current filing, Mozilo has been awarded stock four times totaling 787,694 shares, and has exercised options 270 times totaling 14,553,538 shares and has sold shares 268 times (14,550,928 shares for $536,348,378).

Yes where else but in America can you run a company into bankruptcy, inflict harm on your employees, and customers and walk away with a cool half a BILLION dollars

What a country!!!

soccerdad :: 5:01 PM :: Comments (9) :: Digg It!