Elon Musk, Inflation, HOAs, Credit Scores, and Jared Kushner
The world’s richest shitposter is in the news again, because he’s trying to do a hostile(?) takeover of Twitter for $40 billion dollars, an amount of money it’s not entirely clear he has, but that hasn’t stopped him before. He’s currently still fighting the SEC over his tweets, he’s facing an investigation over stock sales his brother made last year, and now he’s being sued for maybe manipulating Twitter’s stock price for his own benefit.
His latest problems relate to the billions of dollars’ worth of stock Musk had to sell last year to pay taxes - something he has rarely had to do while his wealth was tied up in Tesla shares. Another thing Musk did to cut his tax bill was give a bunch of money to charity. He disclosed to the SEC he’d donated $5.7 billion dollars’ worth of Tesla shares:
On paper, his $5.7 billion donation vaulted Musk up the ranks of the country’s most generous philanthropists in 2021—second only to the $15 billion donated by Bill Gates and Melinda French Gates to their joint foundation last year, according to the Chronicle of Philanthropy. But it’s also possible that Musk hasn’t yet given away a single cent of this largesse.
Yes, it’s highly possible since no charities have announced receiving a cent from Musk. What he likely did was put his shares in a donor-advised fund (DAF) which is one of the many tricks the wealthy use to avoid paying taxes:
These funds hold assets that are earmarked for charity, allowing the donor to take immediate tax deductions against their income for the year the gift is made—but without any obligation or deadline to actually distribute it.
You’re reading that correctly - rich people can park money in a DAF and get an immediate tax writeoff and the fund has no obligation to actually give the money out. Under the law, it can’t be returned to the donor, but the funds can essentially sit in investment accounts and gain value without ever being granted to anyone - a major criticism of Silicon Valley’s biggest DAF.
So Musk gave $5.7 billion to charity as part of a tax writeoff scheme. He did it without much fanfare, which sets him apart from many of the ultrawealthy, who use charitable giving as a smokescreen to turn attention away from how much they pay in taxes. ProPublica published a story about that this week, as a matter of fact:
The top 25 wealthiest Americans got $401 billion richer from 2014 to 2018, but paid just $13.6 billion in federal income taxes, a “true tax rate,” as we called it, of 3.4%.
There are a lot of things to get mad about in these documents, but pertinent to our discussion, here’s how the few rich people who went on record responded:
A spokesperson for Ken Griffin said the tax rates in the IRS data “significantly understate” what Griffin pays, because the rate was lowered by charitable contributions and does not reflect local and state taxes.
A spokesperson for Bloomberg told ProPublica for an earlier article that Bloomberg “pays the maximum tax rate on all federal, state, local and international taxable income as prescribed by law,” and cited Bloomberg’s philanthropic giving.
Yes, the rich love to point out how much they give to charity while neglecting to mention it serves as a huge tax writeoff, allowing them to pay effective income tax rates in the single digits.
Biden has proposed a new wealth tax that would go after unrealized investment gains. It’s a modest step in the right direction, so it’s unlikely it will clear a Congress full of millionaires. With no real reform, the ultra wealthy will continue to cook the planet, exert outsized control on political and legal systems, and grow their wealth at astonishing rates, while things get worse for the rest of us.
We have talked before about inflation, which has been a windfall for a variety of private industries like food and fuel producers. Much is made of gas and food prices in the US, but we are a country that produces a lot of its own food and fuel, and can survive a bit of inflation. Other countries are not so lucky:
Unrest in Sri Lanka, Pakistan and Peru over the past week highlights the risks. In Sri Lanka, protests have erupted over shortages of gas and other basic goods. Double-digit inflation in Pakistan has eroded support for Prime Minister Imran Khan, forcing him from office. At least six people have died in recent anti-government protests in Peru sparked by rising fuel prices. But political conflict isn't expected to be limited to these countries.
In places with tenuous supply chains and without the backing of the global reserve currency, any shock to the system can lead to economic and political turmoil. Countries like Lebanon are at the epicenter of the crisis:
In Lebanon, where nearly three-quarters of the population was living in poverty last year as the result of a political and economic collapse, between 70% and 80% of imported wheat comes from Russia and Ukraine. Key grain silos were also destroyed during the 2020 explosion at the Beirut port.
Poor countries, especially in the Global South, are the first to suffer when supply chain disruptions hit. When cargo containers cost twelve times as much as they did two years ago and take almost twice as long to make the trip, the carriers in charge of global trade are incentivized to keep expensive goods flowing into rich countries, and no one is interested in packing any of those empty containers leaving US ports with supplies to send elsewhere.
Here’s how the Western press talks about supply chain crises:
Food prices have already skyrocketed because of disruptions in the global supply chain, increasing the risk of social unrest in poorer countries.
“The war just makes the worldwide situation for commodities more dire,” said Christopher F. Graham, a partner at White and Williams.
But don’t worry!
Jennifer McKeown, the head of global economics service at Capital Economics, said the global economy appeared relatively insulated from the conflict.
I don’t think the people at risk of starvation in the Middle East and Africa are comforted by this. Yes, the global economy is going to be fine, just like Americans are ostensibly fine paying another $2 dollars at the gas pump. The companies profiteering off the breakdown of global supply chains while countries burn and people starve should be held accountable by someone. Unfortunately, global monopolies are mostly immune to the actions of any one government, even one as central to the global economy as the US.
HOA stands for homeowners association. In Colorado, nearly half the state’s residents live in homes governed by an HOA. How’s that working out?
Many HOAs require residents to make routine payments, called assessments, to cover common expenses such as landscaping, trash pickup, water and sewer services, and amenities like neighborhood pools, clubhouses and playgrounds.
That seems reasonable. Like a condo owner, HOA fees go to maintain upkeep around the neighborhood. And HOAs are regulated, right?
Under state law, HOAs can initiate foreclosure proceedings against homeowners who owe money to them, and their actions aren’t subject to any oversight from regulatory agencies.
Oh, that doesn’t sound good:
[Colorado] HOAs filed more than 2,400 foreclosure cases from January 2018 through February 2022, according to an analysis of state court data by Rocky Mountain PBS and ProPublica.
During that same time, the analysis shows, at least 215 cases initiated by HOAs have resulted in sheriff’s sales in which the homeowners lose possession of their property.
During the pandemic, when states and cities issued foreclosure moratoriums, the HOAs weren’t always subject to them:
But HOAs had wide discretion to make their own choices, and in Colorado, roughly 450 HOAs filed more than 730 foreclosure cases from April 2020 through July 2021.
The majority of HOAs do not use foreclosure as a punitive measure against homeowners in their communities. But, as you might expect, giving unelected citizens unchecked power over things like landscaping and the community pool, some groups went off the rails:
One such pocket is Green Valley Ranch, one of Denver’s largest HOA communities, with more than 4,000 units.
Court data shows that the Master Homeowners Association for Green Valley Ranch has filed 79 cases since 2018.
A tenth the size of Green Valley Ranch is the Timbers, an HOA that has filed 41 foreclosure cases against 31 homeowners since 2018.
Since HOA contracts are required in many home purchases in Colorado, buyers are often unaware at the broad powers they’re giving up as part of their sale agreement. Often the liens the HOAs put on homes that lead to foreclosure are in the thousands of dollars - unlike bank foreclosures which may cover the entire cost of a mortgage. HOAs are suing to have homes sent to sheriff sale for unpaid legal fees to HOA attorneys:
Court documents show the Timbers obtained a default judgment for foreclosure of the Kunics’ home in the amount of $5,311.50, but only $480 of that total was actually owed for assessments, late fees and lien fees. The remainder represented legal costs of more than $1,800 and attorney’s fees of nearly $3,000, payable to the HOA’s collections attorney, Tammy Alcock. After the sheriff’s sale was scheduled, Alcock added another $1,920 in post-judgment attorney fees to the total.
Ideally, state and local taxes pay for maintenance of things like streets, water lines, and shared public property. But many residential communities in states like Colorado were structured differently - unsurprisingly, residents are reluctant to pay monthly fees on top of taxes and a mortgage to maintain facilities they may not even use. Unfortunately, in Colorado, that could mean losing your home if you have a litigious HOA in charge.
We have talked a bit about how credit scores - which, to be clear, are numbers generated by loosely-regulated private, for-profit companies - can prevent people from getting housing, having a bank account, or getting an affordable car loan. Well, good news! Credit reporting firms have decided to go a little easier on us:
Beginning in July, the companies will remove medical debt that was paid after it was sent to collections. These debts can stick around on a consumer’s credit report for up to seven years, even if they are paid off. New unpaid medical debts won’t get added to credit reports for a full year after being sent to collections.
The firms are also planning to remove unpaid medical debts of less than $500 in the first half of next year.
“This is an important step to support consumers in the wake of the Covid-19 pandemic,” the companies said in a joint statement. “These changes reflect our ongoing commitment to helping facilitate access to fair and affordable credit for all consumers.”
You may be wondering why all three companies had a simultaneous change of heart. It’s the same reason banks are tripping over themselves to cut their overdraft fees:
The CFPB earlier in March said that it planned to hold credit-reporting firms accountable for not taking enough action against companies that report erroneous medical debts.
Consumers have little control over what is added to their credit reports, which rely on information submitted by lenders, collections firms and others.
Yeah! I’ve talked about how this happened to me. In another bit of (potential) good news for debt havers, the Department of Education has announced it will remove default status from an estimated 7.5 million borrowers whose loans marred their credit reports:
The Department of Education said borrowers who were in default before the coronavirus pandemic will receive a "fresh start" when payments resume, with the black mark removed from their credit reports.
This is an important reminder that a lender, or the US government, can simply send a note to the credit agencies and zap away negative marks. These scores are all totally made up! Speaking of making things up:
The Consumer Financial Protection Bureau is suing TransUnion and one of the credit reporting giant's longtime executives for allegedly continuing to employ deceptive sales and marketing tactics.
TransUnion tricked people into recurring payments after previously being fined for the activity, the consumer watchdog agency said Tuesday in a news release. The CFPB said it received nearly 150,000 complaints about TransUnion in 2021 alone.
Excellent. One of the three credit bureaus is doing dark pattern fraud on its websites:
For instance, Americans are legally entitled to a free credit report. But those who requested one from TransUnion were asked to provide credit card information that appeared to be part of an identify verification process, but in reality had consumers signing up for recurring monthly charges, the agency alleges.
TransUnion was bound by a 2017 settlement with the CFPB that forbade them from doing shady recurring offers, but they did anyhow. Very cool! It is good to see the CFPB threatening both banks and credit bureaus with legal and regulatory action, and it’s already resulting in positive changes that could save Americans billions a year in unnecessary fees and level the playing field for borrowers. Until the next election, at least.
One thing rich people who used to work in the Trump administration have done is go out and raise hedge or private equity funds. They can do this presumably because whatever corrupt-ish connections they made during their time in government can be leveraged to convince wealthy people to part with some of their fortunes. What if you’re simply a real estate heir who’s never really run a successful investment firm or done much of anything with your life? Well, don’t worry you can still have some money:
Six months after leaving the White House, Jared Kushner secured a $2 billion investment from a fund led by the Saudi crown prince, a close ally during the Trump administration, despite objections from the fund’s advisers about the merits of the deal.
What sort of objections?
Those objections included: “the inexperience of the Affinity Fund management”; the possibility that the kingdom would be responsible for “the bulk of the investment and risk”; due diligence on the fledgling firm’s operations that found them “unsatisfactory in all aspects”; a proposed asset management fee that “seems excessive”; and “public relations risks” from Mr. Kushner’s prior role as a senior adviser to his father-in-law…
So, typical stuff. Kushner’s shrewdest move during his time at the White House appears to have been starting a WhatsApp chat with MBS:
But days later the full board of the $620 billion Public Investment Fund — led by Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler and a beneficiary of Mr. Kushner’s support when he worked as a White House adviser — overruled the panel.
Another important thing if you’re a rich person with a paper thin ego is making sure you get a larger investment than one of your former coworkers, even if he’s more qualified to do actual investing:
The Saudi fund agreed to invest twice as much and on more generous terms with Mr. Kushner than it did at about the same time with former Treasury Secretary Steven Mnuchin — who was also starting a new fund — even though Mr. Mnuchin had a record as a successful investor before entering government, the documents show.
Strangely, other investors don’t appear to be flocking to Kushner’s fund:
Mr. Kushner planned to raise up to $7 billion in all, according to a document prepared last summer for the Saudi fund’s board. But so far he appears to have signed up few other major investors.
He should have secured a few more 12-figure weapons deals while serving as a WH advisor.
ARS Technica - “Meta, the company formerly known as Facebook, announced some initial plans on Wednesday to allow content creators to monetize its would-be Metaverse platform, Horizon Worlds. Meta's planned revenue share for contributors' creations could add up to nearly 50 percent.”
Gizmodo - “Nonetheless, the corn lobby has been pushing for more ethanol in gasoline for years, as bigger requirements boost corn demand and prices. Shifting the standard from E10 to E15 would call for a 50% increase in ethanol production, in theory amplifying the environmental consequences.”
8 News Now - “The federal lawsuit filed Tuesday by the Securities and Exchange Commission against Beasley, his law firm, several employees and promoters alleges investors were told they could “purchase interests in insurance tort settlements” and that they would receive at least 12.5% return every 90 days, court documents said.”
NY Times - “In a 21-page blistering critique on his website, Dr. Thaddeus is not only challenging the rating but redoubling the debate over whether college rankings — used by millions of prospective college students and their parents — are valuable or even accurate.”
Tips, thoughts, or abolition of credit scores to firstname.lastname@example.org