The New York Bailout Rules

New York, notorious as one of the most overbloated and wasteful bureaucracies, has been getting things right of late.

Firstly, we had that "photo-op flight" of Air Force One over the Statue of Liberty, which threw a significant percentage of the people in Lower Manhattan into panic, and caused the financial markets to take a little plunge. The White House looks like a smacked toochas with Louis Caldera proffering an official tail-between-the-legs apology, and our senior Senator, Chuck Schumer, vehemently and appropriately denounced the lamebrained secrecy tactics of the White House Military Office. This time, it wasn't Schumer who was the putzhead!


And then, there is Walter E. Carver. Mr. Carver's financial misfortunes drove him to seek public assistance, which he received for approximately two and one-half years, from September 1997 to March 2000. The terms of his public assistance required him to w-o-r-k at subsidized employment. After receiving the bailout from the New York taxpayers (myself among them), Mr. Carver got back onto his feet, and his financial luck markedly improved.

In fact, he hit a $10,000 prize in the New York Lottery.

And so, pursuant to New York's Social Services Law § 131-R, the State of New York claimed one-half of that $10,000 lottery prize as reimbursement for the public assistance provided to Mr. Carver.

Walter E. Carver brought a lawsuit against New York, claiming that the reimbursement requirement effectively brought his pay, for the w-o-r-k he did, below the minimum wage. Judge Schneier, of the Kings County Supreme Court, banged his gavel on his bench, and sent Carver right out of the courthouse. Three weeks earlier and three blocks away, Judge Sifton, of the U.S. District Court for the Eastern District of New York, did similar with Carver in his Federal Class Action suite on the same issues. That case is reported at 2009 U.S. Dist. LEXIS 27496. Thus far, Carver is a double loser (as is his attorney, Richard D. Lamborn, Esq.).

Carver's legal misadventures might not be complete. The wages he received, and the entire $10,000 lottery prize, are considered income for Federal and New York State taxation purposes. Wouldn't surprise me one bit if Carver gets Lamborn to tilt at the IRS windmill as well.

Meanwhile, New York would do well to (A) better enforce its policy of reclaiming lottery winnings from public assistance bailout recipients; (B) publicize the fact that such is done, so as to take much of the glamour attraction from that welfare magnet that is New York City; and (C) legislate similar statutes to facilitate the reclamation of lottery winnings from current and former prison inmates.

An ATM for the ATMs

One principle for which I developed great appreciation when I was with the Internal Revenue Service is the notion that any time money changes hands, information also is transferred. The information might be something as simple as the date and time on the receipt from the cash register, or it could be a whole series of legal documents, or anything in between the two extremes. Without going into the nitty gritty details at this time, suffice it to say that during my stint with the IRS, many a seemingly mundane document or scrap of paper or account entry led me to a past money transfer of more significant proportions. In fact, even after I handed back my badge and went into private practice, those skills I learned from my IRS days served me well, and continue to do so.


Just as information can lead one to money, so, too, can money be part of the trail to information. More to the point, money itself can constitute information, and therefore, evidence. In a city the size of New York, then, it is natural and logical that the police will have frequent occasion to take cash and currency as evidence of a crime. Thus, there are a number of rubberstamps which imprint legends such as "NYPD Evidence" and the like.

As the law enforcement people can surely confirm, police departments and prosecutors take great pains to document the chain of custody for their evidence, and to impose security measures to ensure that the evidence presented at trial is the same, untampered evidence that was found during the investigation. Even the IRS people do likewise; one rule was that we would never remove a staple from a tax return document without documenting when, how and why we did it -- so that there would be no issue over whether the tax return document presented by the IRS as evidence was the same tax return filed by the taxpayer.

So what does the NYPD do with its money evidence when the evidence is no longer needed? It had been exchanging it for regular cash with Chase Bank, with the understanding that Chase would, through the appropriate Federal Reserve channels, have the "NYPD Evidence" cash destroyed, along with other retired currency.

Well, it turns out that within about a month's time, two Chase ATMs, each in a geographically distant (by NYC Metropolitan Area standards) neighborhood, were reported to have dispensed some of that NYPD Evidence cash to ATM customers. The two ATM customers were quite credible: A retired FDNY dispatcher and a retired NYPD cop.

Seems that Chase, in addition to its Federal bailout, has now found another source of funding.

Chase spokespeople say that Chase is investigating. I say that the IRS should also be investigating! Someone ought to be chasing Chase!

Andy Cuomo's Little List

I have never particularly been gung-ho for ex-New York Governor Mario Cuomo, nor for his son, ex-Kennedy in-law and now New York Attorney General Andrew Cuomo. Having said this, it now must be acknowledged that Andy Cuomo is the public official who, perhaps, is coming through this AIG executive bonus brouhaha looking the best, and on that particular score, he has my full applause and admiration.

His 17 March 2009 letter to Congressman Barney Frank, excepts of which have been quoted in the media, is very telling, and is available at Andy's own official website here.

There is little I can say that has not already been stated by Andy Cuomo. I will observe, however, the following:


A. As this post is being written, Edward Liddy, AIG's Chair & CEO who was installed in his position by the US Government, is now being grilled by the House Financial Services subcommittee.

B. Everyone who is anyone in Washington is now expressing outrage, shock and revulsion at the bonuses. This, of course, is in response to the popular sentiment; many of them were the very ones who set up the current AIG bailout scenario in the first place.

C. Operationally speaking, the simplest resolution to this political problem would be for all of the recipients of the AIG bonus bonanza to simply return their bonuses (or, as a face-saving ploy, be allowed to retain, say, $100,000).

D. Recall that during the recent move to fill Hillary Rodham Clinton's seat in the Senate, Andy Cuomo effectively stepped aside so as to avoid a mudslinging contest with his ex-cousin-by-marriage Caroline Kennedy. There is little doubt that Andy has higher political ambitions, but he wisely recognized that a better opportunity is likely to present itself in the future, and that he can build upon his public good will by kicking butt in his current position as NY AG.


One thing Andy can do in order to motivate the AIG bonus boys to return their remuneration is to announce that he is furnishing the list of them to the Internal Revenue Service and to the New York State Department of Taxation and Finance, for whatever actions the respective taxation authorities deem appropriate.

Unlike Treasury Secretary Tim "Tax Cheat" Geithner, Andrew Cuomo still has the moral authority (or at least the appearance thereof) to play that card.

The Citi Never Sleeps

Here are the first five paragraphs of a news item from this morning:

"NEW YORK – Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes — making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages.

Citi said late Monday it won't initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower's principal residence, the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.

Citi said it is also working to expand the program to include mortgages the bank services but does not own.

Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.

Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout."


I'm sure that it will promote societal stability by keeping more people in their homes.


Query: How about people like me and my wife, who have at all times remained punctual and current in paying our mortgages to Citigroup? What sort of freebies do we get? Wouldn't we be better off defaulting, so that Citigroup can then reduce our mortgages too?

Just wondering!