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By: Marty Armstrong | March 25, 2021

The Democrats created the S&L Crisis by changing the amortization allowance in real estate. Once the Democrats did that, they created a one-way market where everyone who bought real estate for an investment wanted to sell. There was NO BID and because they had regulated S&Ls to lend on real estate in the local market, they created a complete nightmare.

The tax changes imposed by the Democrats set in motion from 1986 to 1995, the collapse of federally insured savings and loans in the US saw the closures from 3,234 to 1,645 which were left standing. The impact was not confined to just the S&Ls, for banks were also impacted by loan they made mostly on commercial property. Between 1980 and 1994 more than 1,600 banks insured by the FDIC were closed or received FDIC financial assistance all because of tax changes by the Democrats who never accepted responsibility for the impact on investment.

The market share of S&Ls for single family mortgage loans collapsed from 53% in 1975 to 30% by 1990. U.S. General Accounting Office estimated cost of the crisis to around $160 billion+ when the total national debt was $3.2 trillion or about 5% of the national debt. Today, that would be almost $1.1 trillion today.

The federal government ultimately appropriated $105 billion to resolve the crisis. After banks repaid loans through various procedures, there was an estimated net loss to taxpayers of somewhere between $123 and $133 billion dollars by the end of 1999.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 was the solution for something the Democrats created. Congress passed the act in 1989 which dramatically changed the savings and loan industry and its federal regulation which was signed into law on August 9, 1989. It provided for:

The Federal Home Loan Bank Board (FHLBB) and the Federal Savings and Loan Insurance Corporation (FSLIC) were abolished.
The Office of Thrift Supervision (OTS), a bureau of the United States Treasury Department, was created to charter, regulate, examine, and supervise savings institutions.
The Federal Housing Finance Board (FHFB) was created as an independent agency to replace the FHLBB, i.e. to oversee the 12 Federal Home Loan Banks (also called district banks) that represent the largest collective source of home mortgage and community credit in the United States.
The Savings Association Insurance Fund (SAIF) replaced the FSLIC as an ongoing insurance fund for thrift institutions (like the FDIC, the FSLIC was a permanent corporation that insured savings and loan accounts up to $100,000). SAIF is administered by the FDIC.
The Resolution Trust Corporation (RTC) was established to dispose of failed thrift institutions taken over by regulators after January 1, 1989. The RTC will make insured deposits at those institutions available to their customers.
FIRREA gives both Freddie Mac and Fannie Mae additional responsibility to support mortgages for low- and moderate-income families.

The legislation did not stop there. It also required S&Ls to meet minimum capital standards and raised deposit-insurance premiums. It limited to 30% of their portfolio’s loans not in residential mortgages or mortgage-related securities and set down standards preventing concentrations of loans to single borrowers. It required them to completely divest themselves of junk bonds by July 1, 1994, meanwhile segregating junk-bond holdings and direct investments in separately capitalized subsidiaries. The problem was I was advising on this crisis and some clients wanted to buy distressed S&Ls. I warned them against that move and indeed they lost everything because the government kept changing the capital requirements as the crisis continued. Those buying distressed S&Ls early on thinking it would be a good deal, found themselves in bankruptcy as criteria kept changing.

FLASH FORWARD TO 2021

The DEMOCRATS POSTURING TO CREATE THE NEXT INVESTMENT CRISIS

The proposals to eliminate long-term capital gains have a very profound impact for it can easily inspire people to take profits now on anything that would be subject to capital gains for any changes to tax law will most certainly impact 2022, but they could even make it retroactive to the beginning of 2021. That would be illegal, but it would take many years to reach the supreme court and, in the meantime, they would apply interest and penalties that would wipe out any profits and the Supreme Court would not defend the people in that case anyway. Add the proposed wealth tax of Elizabeth Warren, and we will not have to wait until 2032 for China to become the financial capital of the world.

Once again now that the Democrats have complete control of the country with just 50.4% of the popular vote, whatever has been on their wish list they are doing. They are going to give illegal aliens citizenship to increase their voter base and they are allowing people in prison to even vote yet most are there for drug crimes that were made excessive by the Clintons.

The Democrats have so embraced Marxism that they cannot help themselves punishing anyone who actually creates jobs because they only look at what a person makes rather than the jobs they create. This has been their manifesto always soliciting votes to attack the rich and the very hate crimes against religion, color, or gender is what they inspire with respect to simply class. They have called for higher taxes on the wealthy claiming now to help pay for additional federal spending on infrastructure, climate change, and COVID.

There are those pushing for a wealth tax of 2% on all your assets every year. So, in a bear market like the great depression, you will be paying 2% on the current value of your assets even as you lose 90%. They are about to create another major crisis by their reforms to capital gains and estate taxes. They intend to eliminate capital gains and you pay the same income tax on long-term investments. This will put Americans at a total disadvantage to foreign investors.

Democrats will soon be raising taxes on the rich, as lawmakers pivot to priorities beyond Covid pandemic relief and spending on infrastructure which never creates long-term employment. Raising the income tax is one thing, it is the attack on capital gains that is directed at ending the incentive to invest which will reduce jobs in the future. But they already have their eyes on Guaranteed Basic Income and think paying people to stay home will be the solution. Then they want to attack estates and do not believe in the age-old idea of leaving behind a better life for your children.

The White House and congressional Democrats have eyed higher taxes claiming this will raise trillions of dollars in additional revenue and they are point to the country’s infrastructure and combat climate change. But if they are destroying jobs and do not want people to commute to work, then why worry about infrastructure? Nevertheless, the Democrats are looking to buy the 2022 election by spending another $3 trillion for such endeavors, as reported by The New York Times.

Therefore, there is no question of whether tax rates will rise, but when, and which taxes. It has been the Capital gains taxes that have long been the core the Democrats tax wish-list to eliminate investment benefits. What makes people “rich” is not wages, but an investment. Instead of taking Social Security and allow it to invest rather than just buy government bonds so the average person would have benefited from the same rise in equities.

The Democrats want to raise taxes for Americans earning more than $400,000 which is above themselves, but it’s still unclear whether that’s for families or per individual. The plan would boost the top income tax rate and increase the tax more on their income for Social Security, for example.

Currently, the top tax rate on Americans is currently 37% rate on wages and a lower 20% rate on investment earnings (plus a 3.8% surtax). The Democrats want to increase the capital gains tax for also 39.6% ending the incentive to invest. Treasury Secretary Janet Yellen told the Senate in January that this change to capital gains taxes was a long-term goal of the Biden administration.

“We recognize that our tax system cannot be tilted toward corporate interests and the wealthy, while those that are sustained predominately by wages bear an unequal burden,” she said in written testimony during her confirmation hearing.

The capital gains policy would stretch far beyond the rich as they point to because a small business who earns $100,000 and retires selling his business for 10x earnings and getting $1 million would find himself suddenly paying 39.6%. Or someone selling their home which has appreciated because of inflation and the shift from urban to suburban is then confronted with a huge tax bill. Houses in Florida from the 50’s on the water which may have been $20,000 back then, sell for $1 million-plus today even as tear-downs.

Then Estate tax rules the Democrats want to change dealing with wealth transfers, like with the estate and gift tax. Currently, the law lets heirs receive an asset such as a stock or home at its current market rate instead of the original owner’s cost courtesy of a “step-up in basis” at death.

That allows the heir to sell the asset without paying tax on the appreciation over the owner’s life. The Democrats want to eliminate the step-up in basis as well.

Then there is the Wealth-tax hanging out there from the real extreme Democrats. Sen. Elizabeth Warren and Bernie Sanders, and eight other Democrats proposed the Ultra-Millionaire Tax Act in early March. They want to levy a 2% wealth tax on the net worth of households and trusts ranging from $50 million to $1 billion. The tax would be 3% for anything over $1 billion. The problem with that is that a company may then not find it beneficial to go public for they the shareholder would be taxed annually forcing them to actually sell shares just to pay the tax. True, it would have probably prevented Bill Gates from ever becoming a Billionaire but this means it would also cut-off future economic growth eliminating the very reason to go public.

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