Dictatorship of the Corporatariat

What does a socialised corporatocracy look like when the veils of “democracy” are briefly lifted? Only a week after the United States’ Federal Government effectively socialised its mortgage industry by taking over Fannie Mae and Freddie Mac (making 50% of existing mortgages and 70% of new mortgages government owned) to add to the existing socialised slice accounted for by the Federal Housing Administration, elements within that same Government are wheeling and dealing trying to come up with some “palatable” way to sell off the high-risk loving, failed investment shell Lehman’s in a way that avoids overtly committing too much public, immediate cash to the bailout. Not because it is averse to using public funds to shore up failed private investment schemes, of course, but mainly because the public kitty is unfortunately a little skint right now and needs another year or two of taxpayer take to fill it up again (about the most it can afford right now is to take an “eBay Approach” of accepting basically any junky crap as collateral for Treasury Notes). And by “palatable”, this means a purchase that would leave the Lehman’s principals with some acceptable bank from the whole mess and not prone to whining too much about it (much as the bid price for Bear Stearns was raised from $2 to $10 after the fact to assuage its major shareholders). Given the juicier targets in play, this seems unlikely.

Of course, the irony that this frantic dealing comes in the same week that the aristocratic division of the US Government (its “Senate”) issued a report concluding that the largest US banks had illegally colluded to enable foreign investment funds and hedge funds to improperly evade billions of dollars of US taxes, thereby profitting from the US market while avoiding any of the (mild) social responsibility to the commonwealth levied as a price for participation within that market and the right to extract wealth from that market. This revelation probably accounts for at least some of the apparent inability or reluctance of the US Government to commit public funds to a Lehman bailout, a factor that is preventing the other, circling vulture-mode banks from quickly “stepping in” to “save” Lehman Brothers. These titans of private enterprise will really only act in cases like this when their risk is diminished by large tranches of public funds, or loan guarantees.

Some of the country’s biggest investment banks and brokerage firms — including Morgan Stanley, Lehman Brothers Holdings Inc., Citigroup Inc. and Merrill Lynch & Co. — marketed allegedly abusive transactions that helped foreign hedge-fund investors avoid billions of dollars in U.S. taxes over the past decade … Wall Street firms actively competed with one another in dreaming up complex transactions that allowed hedge funds to avoid withholding taxes imposed on dividends paid by U.S. companies

The strategies enabled investors to avoid paying the 30 per cent withholding tax on income by treating dividend payments as returns on so-called equity swaps, stock loans or other derivatives transactions … Transactions by Lehman Brothers, Morgan Stanley, Citigroup, Deutsche Bank, UBS and Merrill Lynch are included in the report … Lehman estimated that in 2004 alone its transactions enabled clients to avoid as much as $115m in dividend tax payments.

Foreigners who invest in the United States are exempt from many U.S. taxes. If they invest in a U.S. company that pays a dividend to shareholders, however, U.S. law requires foreign investors to pay taxes on the dividends they receive. Dividends sent abroad are meant to be taxed at a 30 percent rate in most countries and at 15 percent in countries that have a tax treaty with the United States … Many foreign shareholders never pay the dividend taxes they owe, in part because banks are helping them escape paying them.

This is what a dictatorship of the corporatariat looks like in the early 21st century, what Orwell might have called oligarchical corporatism. While the political theatre of the US public elections continues with alarmist mutterings about the “cost” of paying for a socialised healthcare system or a class-based downward trend for the redistribution of wealth emerging within the cacophony of the “culture war” cries of sexism, racism, ageism, competing religiosity and cronyism, behind the veil vast dynamic and interlocking financial and political directorates set the agenda and operate the mechanisms for the real, upward redistribution and allocation of productive wealth to the ownership class, many of whom owe no allegiance to any particular national government.