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September 24, 2007

Congress Is Primed to Address Crisis Over Mortgages

The subprime mortgage crisis that threatens to send 2 million mortgages worth an estimated $500 billion into default has some lawmakers looking to the Federal Housing Administration and government-sponsored entities Fannie Mae and Freddie Mac as possible saviors for the shaky housing market.

The Tax Man Cometh, Perhaps, for Private Equity

Fueled by budget pressures and a desire to ensure fairness in the tax code, Congress is weighing two controversial proposals that would raise taxes on private equity firms.

Bill Would Freeze Fraudulent Lenders

Caveat emptor has always been an integral concept in free- market economies. It’s a Latin phrase encompassing the understanding that consumers are sophisticated adults capable of successfully engaging in commerce. But the concept of buyer beware is predicated on truth and transparency amid the transaction and is rendered impotent when fraud or misrepresentation strips buyers of their ability to utilize their skills and savvy as consumers. Unfortunately, fraud has played a significant role in the mortgage problems our nation now faces.

Stronger Consumer Protections Needed

It’s true, there are some things money can’t buy.
In an increasingly cashless society, we rely on credit cards to conduct many common transactions, such as booking flights and ordering things online. Credit cards also can add a level of security that is lacking with other forms of payment; if someone steals your wallet, you can kiss your cash goodbye, but you can always replace a credit card. And who hasn’t been thankful for the financial safety net that credit cards provide during an unexpected emergency?

Credit Card Industry Has Improved Practices

Credit cards have become essential in today’s marketplace, especially in today’s “e-marketplace.” They have evolved far beyond the simple payment device that originally was designed to provide convenience. Today’s credit cards provide substantial benefits to consumers, retailers and other businesses, and they have become a critical component in maintaining vigorous local and national economies.

Small Companies Struggle Under Act

When Congress passed the Sarbanes-Oxley Act in 2002, we got it mostly right. In the wake of the Enron and WorldCom accounting scandals, we acted deliberately and relatively swiftly to enact legislation that sought to reform corporate governance laws and provide investors with renewed confidence. Five years later, there is compelling evidence that the central provisions of the Sarbanes-Oxley Act have resulted in meaningful steps forward and that investor confidence is restored.

Section 404’s Costliness Hinders Act’s Effectiveness

In our current post-Enron world, there is general agreement that since Sarbanes-Oxley was implemented the financial reporting requirements are tighter, internal controls have improved and there is more transparency in the overall auditing process than pre-Enron. However, the estimated cost of implementing Section 404 has greatly surpassed original estimates and has brought into question the actual net benefits of the entire act.

Regulations Raise Fairness Question

What do a waitress earning tips, a real estate agent earning a commission, and a private equity executive managing other people’s money have in common?
They all receive risky, performance-based compensation for their services.

Congress Must Exercise Caution on Tax Changes

First, do no harm.
That should be Congress’ catchphrase. The mounting challenges threatening America’s supremacy as an economy and magnet for capital investment should require Congress to exercise extreme caution in contemplating tax increases. Yet despite the skittishness of our capital markets and the slashing of tax rates on investment around the world, a desire to find offsets for increased spending has instead fueled a drive for antigrowth tax hikes. Now it’s time for us to take a sober look at the harm tax increases would cause to the economy, job creation and the savings of ordinary Americans.

Taxes Fund Our ‘Civilized Society’

Few domestic issues have the potential to unite or divide our nation like tax policy. This is regrettable because taxes are the price we pay for civilized society and for our national security. We should not send the bill to our children. Our volunteer tax system depends on the public believing that every individual pays his or her fair share or we will not continue to have the high level of voluntary compliance that we rely on to collect our taxes. Unfortunately, recent changes to our tax laws and the failure to move forward on comprehensive reform have resulted in a tax code that is complicated, outdated and skewed in its benefits to the wealthy.

Lose or Lower Gains Taxes to Boost Economy

Economic developments in recent weeks have generated a great deal of concern. Turmoil in the subprime mortgage market has spilled over into the broader economy, exacerbating the housing downturn and rattling financial markets. The stock market has been volatile; oil prices recently topped $80 per barrel; and economic forecasters are expecting below-trend growth over the near term.