Excerpt
The Federal Reserve chairman, Ben S. Bernanke, delivered a detailed and forceful argument on Friday for new steps to stimulate the economy, reinforcing earlier indications that the Fed is on the verge of action.
Calling the persistently high rate of unemployment a “grave concern,” language that several experts described as unusually strong, Mr. Bernanke made clear that a recent run of tepid rather than terrible economic data had not altered the Fed’s will to act, because the pace of growth remained too slow to reduce the number of people who lack jobs.
The federal government said on Wednesday that the economy expanded at an annual rate of 1.7 percent in the second quarter, slightly higher than its initial estimate of 1.5 percent but lackluster in normal times. A measure of consumer confidence hit a three-month high on Friday, but that, too, was impressive only in comparison with the immediate past. The government will release a preliminary estimate of August job growth next week; it is expected to show that the unemployment rate remains above 8 percent.
Mr. Bernanke said that the Fed’s efforts over the last several years had helped to hasten economic recovery, that there was a clear need for additional action and that the likely benefits of new steps to stimulate growth outweighed the potential costs.
"Inquiry on Tax Strategy Adds to Scrutiny of Finance Firms" by NICHOLAS CONFESSORE, JULIE CRESWELL, and DAVID KOCIENIEWSKI; New York Times 9/1/2012
Excerpt
The New York attorney general is investigating whether some of the nation’s biggest private equity firms have abused a tax strategy in order to slice hundreds of millions of dollars from their tax bills, according to executives with direct knowledge of the inquiry.
The attorney general, Eric T. Schneiderman, has in recent weeks subpoenaed more than a dozen firms seeking documents that would reveal whether they converted certain management fees collected from their investors into fund investments, which are taxed at a far lower rate than ordinary income.
Among the firms to receive subpoenas are Kohlberg Kravis Roberts & Company, TPG Capital, Sun Capital Partners, Apollo Global Management, Silver Lake Partners and Bain Capital, which was founded by Mitt Romney, the Republican nominee for president. Representatives for the firms declined to comment on the inquiry.
Mr. Schneiderman’s investigation will intensify scrutiny of an industry already bruised by the campaign season, as President Obama and the Democrats have sought to depict Mr. Romney through his long career in private equity as a businessman who dismantled companies and laid off workers while amassing a personal fortune estimated at $250 million.
Some executives at the firms said they feared that Mr. Schneiderman, a first-term Democrat with ties to the Obama administration, was seeking to embarrass the industry because of Mr. Romney’s roots at Bain. Others suggested that the subpoenas, which were issued by the attorney general’s Taxpayer Protection Bureau, might be part of an effort to recover more revenue for New York under state tax law. The attorney general’s office does not have the power to enforce federal tax laws.
A spokesman for Mr. Schneiderman declined to comment.
The tax strategy — which is viewed as perfectly legal by some tax experts, aggressive by others and potentially illegal by some — came to light last month when hundreds of pages of Bain’s internal financial documents were made available online. The financial statements show that at least $1 billion in accumulated fees that otherwise would have been taxed as ordinary income for Bain executives had been converted into investments producing capital gains, which are subject to a federal tax of 15 percent, versus a top rate of 35 percent for ordinary income. That means the Bain partners saved more than $200 million in federal income taxes and more than $20 million in Medicare taxes.
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