Business Opportunity

Today I want to tell you a short story. Imagine I have a car. It doesn't matter if it is an old one, a fast or a cool one. I have a car. Now there is another person taking a look at my car. Following dialogue gets started:
He: "You have a nice car! Can I lease it from you?"
Me: "But then I don't have a car anymore."
He: "That's not a problem. I will lease it out to you immediately."
Ring! Ring! Ring! Alarm! Sounds suspicious.
Me: "What's the point of it!?"
He: "Wait, it's even better. I will you pay you money for this business!"
Ring! Ring! Ring! (Was that an alarm ring or the money sign in my eyes?)
He: "Yes! We are investors, the leasing rates are our investment and so they are tax deductible. We will just give you part of the tax reduction in advance."

Now replace me with German municipalities, the other person with American investors and the car with municipal facilities and services like incineration or sewage plants and you get so-called Cross Border Leasings (German). The article says around 150 contracts have been concluded over 30 to 80 billion Euros.

On the second ring I (smart-ass me, not the supposed me from above) would have asked pathetically if this isn't fraud - if not legally (obviously there was a loophole) then morally. A court in Cleveland, Ohio ruled in one case (Case No. 1:07-CV-857) last year that the tax saving has to be paid back by the investor - at least.

But now the German municipalities are left behind with these financial constructs and the problems they cause. They were backed by the now infamous Collateralized Debt Obligations which are nothing worth anymore (if they were ever) - and the German municipalities have to take all the risks and pay for possible losses.

This is economical growth simply based on the flow of money. Even better, the money wasn't actually flowing except for the initial payment. The investors borrowed the money from the same bank the German municipality had to pay the leasing rate to. And the investors did not have access to the money but it was used to pay their leasing rates. So it was simply moving money from one account to another, fictitious transactions which I consider fraud at the expense of American and German taxpayers.

One final point to add: The article only points finger at the German politicians for taking such high risks rather than questioning the approach because of the moral issues. Since moral obviously doesn't pay off and you can't charge somebody for irresponsibility politicians should finally be liable for their actions in office. They would think more than twice about such high-risk transactions.

Disclaimer: If I have oversimplified the case and there is economical sense in such a transaction I would really like to hear it. Feel free to contact me!