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Congressional Hearing On Hedge Fund Tax Evasion Through "Fictional Derivatives" - Live Webcast

Tyler Durden's picture




 

As reported yesterday, at 9:30 am this morning the permanent subcommittee on investigations will hold a hearing in which it will expose the latest tax-evasion loophole used by select high-frequency trading hedge funds which has the technical name "basket options", but which, thanks to Carl Levin's mnemonic of fictional derivatives" will be better known as such (read the full story How RenTec Made More Than $34 Billion In Profits Since 1998: "Fictional Derivatives")

It will be interesting to learn, although we doubt it will be discussed, how in light of collapsing trading volumes for underlying securities, how much of the record derivative and future trading volume in recent years is directly related to this kind of tax-evading trading, and perhaps just as important, whether Congress and the IRS will crack down on such practices in the future.

Watch it live below (link to the Senate website here):

The agenda of today's hearing:

The Subcommittee hearing will examine a set of transactions that utilize financial engineering and structured financial products to attempt to avoid paying U.S. taxes on short-term capital gains. Witnesses will include representatives of major financial institutions, as well as tax experts from a nonprofit institution and the U.S. Government Accountability Office.

PANEL ONE

    STEVEN M. ROSENTHAL
    Senior Fellow
    Urban-Brookings Tax Policy Center
    Washington, DC

    JAMES R. WHITE
    Director, Tax Issues
    U.S. Government Accountability Office
    Washington, DC

PANEL TWO

    MARTIN MALLOY
    Managing Director
    Barclays
    London, United Kingdom

    SATISH RAMAKRISHNA
    Managing Director, Deutsche Bank Securities Inc.
    Global Head of Risk and Pricing for Global Prime Finance
    New York, NY

    MARK SILBER
    Executive Vice President, Chief Financial Officer, Chief Compliance Officer, and Chief Legal Officer
    Renaissance Technologies LLC
    New York, NY

    JONATHAN MAYERS
    Counsel
    Renaissance Technologies LLC
    New York, NY

PANEL THREE

    GERARD LaROCCA
    Chief Administrative Officer, Americas, Barclays
    Chief Executive Officer, Barclays Capital Inc.
    New York, NY

    M. BARRY BAUSANO
    President and Managing Director, Deutsche Bank Securities Inc.
    Co-Head of Global Prime Finance
    New York, NY

    PETER BROWN
    Co-Chief Executive Officer and Co-President
    Renaissance Technologies LLC
    East Setauket, NY

Download the report, "Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits" [PDF]

 

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Tue, 07/22/2014 - 09:33 | 4987475 overmedicatedun...
overmedicatedundersexed's picture

Levin is hot and mad ...seems he is not getting the best insider info to front run the tax units..this thing will be all hot air and finger pointing.

Tue, 07/22/2014 - 09:38 | 4987501 COSMOS
COSMOS's picture

They wont do anything about it at the end of the day, they have their money invested with these funds LOL.  Just lots of talk and window dressing.

Tue, 07/22/2014 - 10:07 | 4987642 Greenskeeper_Carl
Greenskeeper_Carl's picture

congress critters don't need this shit to invest, they can trade on insider knowledge that would land the rest of us plebs in prison. And as much as i loathe these HFT firms, and big banks, brokerages in general, seeing as how i disapprove of nearly everything the govt does these days, I don't particularly want them recieving more tax money from anyone. It might make you 'feel good' to see these people get fleeced, but look at what the money is going to be used for: kill people somewhere on planet earth. Id rather private individuals keep their money. As loathsome as many of them may be, they can't come close to doing as much damage to humanity with that money as the govt would

Tue, 07/22/2014 - 10:10 | 4987652 taketheredpill
taketheredpill's picture

 

 

 

Agreed.  Closing the Barn Door after the Tax Horse has left.

 

Funds/Banksters will now move on to the second-tier (not as great but still workable) methods of tax-avoidance that they identified 10 years ago.

 

Assuming that they will not go after the tax revenue after the fact from the Fund companies.  THAT would be fun to watch.

 

Tue, 07/22/2014 - 09:42 | 4987511 ajax
ajax's picture

 

 

the stream isn't working

 

Tue, 07/22/2014 - 09:46 | 4987530 NoDebt
NoDebt's picture

It's over, dude.  You missed it.  They're done "investigating", the dog-and-pony-show is over and no evidence of wrongdoing was found.  Continue about your business.

What?  You expected something different than that?

Tue, 07/22/2014 - 09:53 | 4987565 ajax
Tue, 07/22/2014 - 10:32 | 4987749 ugmug
ugmug's picture

The next Congressional hearing.... How much porn watching is acceptable before it becomes a distraction from society's primary mission of viewing porn.

Tue, 07/22/2014 - 10:52 | 4987848 Bangin7GramRocks
Bangin7GramRocks's picture

"Ooooh, like I'm soooo scared!" - every hedge fund manager said with a sarcastic sneer.

Tue, 07/22/2014 - 09:32 | 4987480 Meat Hammer
Meat Hammer's picture

Explaining derivatives to the people who let derivatives exist. Priceless.

Tue, 07/22/2014 - 09:57 | 4987586 Hulk
Hulk's picture

They had to let them exist, to see how they worked, but then they became distracted by a shiny object...

Tue, 07/22/2014 - 10:13 | 4987666 Peter Pan
Peter Pan's picture

Exactly. You allow people to own pit bull terriers and then you wonder why kids' faces get ripped off again and again.

It's not the dogs that are at fault but those that allow them to be owned.

Tue, 07/22/2014 - 12:58 | 4988620 NidStyles
NidStyles's picture

You fell short a few grams of making weight, and your analogy is not even close.

Tue, 07/22/2014 - 09:36 | 4987488 medium giraffe
medium giraffe's picture

Fined $100! Next...

Tue, 07/22/2014 - 09:42 | 4987516 yogibear
yogibear's picture

Fine alias fee.

And envelops to the congressmen sitting on the panel.

Tue, 07/22/2014 - 11:15 | 4987958 Colonel Klink
Colonel Klink's picture

And by fine you mean campaign contributions?

Tue, 07/22/2014 - 12:10 | 4988305 medium giraffe
medium giraffe's picture

One does wonder where the money from these fines goes...

Tue, 07/22/2014 - 11:30 | 4988036 Squid Viscous
Squid Viscous's picture

Hopefully they will get a not so bad Monopoly card like "Go Back 3 Spaces" ... then continue on, fine gentlemen

Tue, 07/22/2014 - 09:36 | 4987494 RaceToTheBottom
RaceToTheBottom's picture

Done, Drinks are on me at the club.....

Tue, 07/22/2014 - 09:41 | 4987508 yogibear
yogibear's picture

In short, A dog and pony show for the public. It's Pay your token fine/fee and your free to continue. There are so many big-money lobbyist re-writing the laws in DC it's ridiculous.

Tue, 07/22/2014 - 09:42 | 4987517 youngman
youngman's picture

The hedge funds are much smarter than the Pols....they can talk circles around these guys...and they will..and the Pols will just nod and wink like they know what the hell they are saying..

Tue, 07/22/2014 - 09:47 | 4987536 khakuda
khakuda's picture

Hahahaha.  So much for Yellen's macroprudential policies!  What a joke, she is such a fool.

If there is a way around the rules, be they tax rules or rules limiting leverage, the finance guys/gals are sure to find them.

Tue, 07/22/2014 - 09:50 | 4987550 orangegeek
orangegeek's picture

another clusterfuck

 

nothing will happen

 

want proof?  remember 2007/2009?

 

and with a communist psycho in the WH, even moreso.

Tue, 07/22/2014 - 10:15 | 4987643 junction
junction's picture

The Wall Street Journal had an article July 7, 2014 about RenTec founder James Simons' grant of $50 million to Cold Spring Harbor Laboratory.  He had to have known about the Senate investigation so he tossed pocket change to this laboratory to burnish his reputation.  The latest tax collection figures show that for the federal fiscal year ending in September 2014, the tax collection totals are about 900 billion from income taxes, over 700 billion from FICA taxes (a fixed 15.3% total employer/employee payment on up to $117,000 in income) and about 130 billion in corporate taxes collected.  That FICA tax, a regressive tax no different than a sale tax, hammers the middle class hardest.  Which explains why the American middle class is in a steep decline. Leona Helmsley was right, "taxes are for the little people."

---

Mathematician and hedge-fund founder James Simons was among the first in the financial field to use quantitative strategies to predict market activity. Now one of the biggest philanthropists in the New York area, he is investing in researchers who are using quantitative methods in the field of biology.

On Monday, Cold Spring Harbor Laboratory will announce a $50 million gift from Dr. Simons and his wife, Marilyn, from their Simons Foundation. The gift is aimed at enlarging and institutionalizing the Simons Center for Quantitative Biology, which brings together scientists working in math, physics, computer science, engineering and biology. Their research focuses on population genetics, genetic disorders and diseases, as well as disorders like cancer, autism and depression.

The gift follows several others made over the last decade to the private research and education institution. Previous grants have supported scientists working on the causes of autism and cancer, among other areas. Marilyn Simons, who has a doctorate in economics, serves as vice-chairwoman of the board of trustees for Cold Spring Harbor Laboratory, based in Cold Spring Harbor, N.Y., on Long Island.

In an interview last month in the New York offices of his foundation, Dr. Simons, 76 years old, said his foundation is "backing down from broad institutional support," and his organization won't be making "too many" more grants like the one made to support a quantitative biology center at Cold Spring Harbor Laboratory.

"We're moving in the direction of collaborative, goal-driven science," he said—a kind of grant-making that is "exciting" and "fills a niche."

Dr. Simons, who worked as a code breaker for the National Security Agency during the 1960s, founded Renaissance Technologies LLC, one of the country's leading hedge funds, in 1982. Now a billionaire, he stepped down as chief executive of the East Setauket, N.Y.-based firm in 2010, but still serves as its board chairman.

http://online.wsj.com/articles/a-50-million-gift-to-cold-spring-harbor-l...

 

Tue, 07/22/2014 - 10:11 | 4987654 Pumpkin
Pumpkin's picture

That DC stamp approval can be fairly expensive, but still remain extremely profitable.

Tue, 07/22/2014 - 10:16 | 4987676 pupdog1
pupdog1's picture

That sounds like quite the blue ribbon rogue's gallery of financial terrorists.

Tue, 07/22/2014 - 10:22 | 4987715 pupdog1
pupdog1's picture

Hollywood couldn't make this stuff up...

 

"Panel One

JAMES R. WHITE
    Director, Tax Issues
    U.S. Government Accountability Office
    Washington, DC"

 

 

Tue, 07/22/2014 - 10:47 | 4987793 yrbmegr
yrbmegr's picture

Tax fraud is the largest sector of the white-collar crime industry, and there is zero law enforcement presence.  Nobody ever gets prosecuted for tax fraud or tax evasion.  Might as well make paying taxes optional.  Another possibility is just to confiscate assets.

Tue, 07/22/2014 - 11:05 | 4987910 Squid Viscous
Squid Viscous's picture

fuck you Levin, die soon please

Tue, 07/22/2014 - 11:13 | 4987950 monad
monad's picture

Lookie over here sheep, while I stand behind you and unzip my fly...

Tue, 07/22/2014 - 12:40 | 4988502 mtl4
mtl4's picture

Why does anybody even show up for these Committee hearings anymore, we all know how this goes.......

1) Send big check to donkey party HQ

2) Ensure your entire company had a "hard drive crash" (claim tight IT budget for lack of backups)

3) Plead the 5th when questioned on anything

 

Voila, no charges filed.

 

Tue, 07/22/2014 - 12:46 | 4988538 Otto Zitte
Otto Zitte's picture

4) Move business to India.

5) Send immigrant workers to continue business in States.

Tue, 07/22/2014 - 13:18 | 4988744 rosiescenario
rosiescenario's picture

"Fictional derivatives".....as opposed to "Non-fictional" ones???

 

Are these folks for real???? This is akin to a discussion on the emperor's tailor.

Tue, 07/22/2014 - 15:12 | 4989391 mtl4
mtl4's picture

It's always fun to throw an oxymoron or two in there, isn't it!?  

 

 

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