Top 10 at 10: UK housing bubble tax?; Inside the squid; 'Save Fifi the Pomeranian'; Covenant 'lite' loans; Dilbert

Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please email your suggestions for Friday's Top 10 at 10 to bernard.hickey@interest.co.nz Moooo... 1. A faint whiff - Brian Fallow from the NZHerald was also at the Tax Working Group conference in Wellington on Tuesday. His column captures the mood nicely and makes the point that there are signs of complacency showing in the government now the 'crisis' appears to be over. I've written my roundup of the conference and what the government may do over here. I've also included my 'wish list' of more comprehensive reform that I think the government should do.

There was a whiff of incrementalism, even complacency, about Finance Minister Bill English's comments to the tax working group's conference on Tuesday. "We are not in a state of emergency with respect to revenue. We can take a long-term view," he said. "Not all the choices we might take need to be taken at the start." Those comments suggest next year's Budget may not be the game changer people are looking for. Had he been able to stay for the rest of the conference and listen to the presentation by some of the working group's members he would have got a clear message that the tax system has deteriorated beyond the point where tinkering and tweaking are enough.

2. Bubble Tax? - Here's a radical idea from no less than Adam Posen, a member of the Bank of England's Monetary Policy Committee. He would like to put some form of capital gains tax or stamp duty on houses to prevent more bubbles, The Telegraph reports. HT Gertraud by email

"If we can contemplate a Tobin tax on financial transactions, we should be able to set up something in a similar spirit for real estate transactions which are already taxed and regulated... it would mean having already existing title fees, capital gains taxes, stamp and transfer taxes, varying over time in line with price developments in the housing market more broadly." The Bank is currently investigating what extra "macro-prudential" tools it can create alongside interest rates to help it control the ebb and flow of the credit cycle. Mr Posen said policymakers should also "go after some of the problem directly, beyond the banking system itself", adding that the ideal solution was "an automatic stabilizer for housing prices". Britons' first homes are currently excluded from capital gains tax, but Mr Posen appeared to indicate that he may favour imposing capital gains on existing homeowners, saying: "One would have to be careful not to bias the system against new or existing housing, so stamp-type duties would have to be equalized in some sense versus transfers or capital gains."

3. Inside the squid - Bethany McLean is the reporter who blew the Enron story when everyone else thought Enron was 9th wonder of the modern world. Now she has written a 8,500 word article in Vanity Fair about what Goldman Sachs is really like. She should know. She used to work for the bank as analyst.

The article is dripping with detail and insight about life inside the 'Vampire Squid'. It's well worth a read if you're interested in the amazing Goldman Sachs, which appears to have used the financial crisis and its close connections with government to destroy a couple of rivals and generate a forecast US$16.7 billion in bonuses for bankers this year. McLean argues that Goldman Sachs is now run by commodity traders obsessed with making money for themselves and that much of its admirable culture built around its partnership was obliterated with its move onto the stock market in 1999. Many of its clients feel like they're being done over whenever they use Goldman Sachs, but they can't stop dealing with the biggest bully on the block.

Under the new leadership the culture of the firm seems to be changing. Once upon a time in the not-so-distant past, even a Goldmanite wouldn't have sniffed at a million dollars a year. But in recent years, the numbers have become multiples of that. (Of course, this is true across Wall Street, but particularly at Goldman.) In 2007, Blankfein made $68.5 million, the most ever for a Wall Street C.E.O. Cohn made $67.5 million. Fair or not, there's a sense that the numbers matter because the new Goldman cares about keeping up with the hedge-fund guys. "Everyone loves to hate Goldman Sachs, and Goldman loves to hate the hedge-fund community," says one trader. "They've gotten rich, but they haven't gotten rich like Louis or Julian or George" (legendary hedge-fund managers Louis Bacon, Julian Robertson, and George Soros). Under Blankfein, Goldman continued to grow exponentially: by 2007 the firm's revenues were $46 billion, nearly three times that of 2000. In large part, this was the result of a strategy, begun under Paulson but embraced by Blankfein, in which Goldman no longer sat on the sidelines, dispensing advice, but rather invested its own money alongside its clients'. Goldman now has a money-management business; a large private-equity business, meaning that while big buyout funds are Goldman's clients they are also its competitors; and a proprietary trading business, which exists specifically to trade Goldman's capital on Goldman's behalf"”so hedge-fund clients are also competitors. Across Goldman's many trading businesses, the line is fuzzy as to when the firm is acting for itself and when it is acting on behalf of clients.

4. Give the squid a gun - Bloomberg columnist Alice Shroeder recounts a story about how a Goldman Sachs banker is buying a gun to protect himself against the revolting masses. I love the line about Fifi the Pomeranian being taken hostage.

"I just wrote my first reference for a gun permit," said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank. Common sense tells you a handgun is probably not even all that useful. Suppose an intruder sneaks past the doorman or jumps the security fence at night. By the time you pull the pistol out of your wife's jewelry safe, find the ammunition, and load your weapon, Fifi the Pomeranian has already been taken hostage and the gun won't do you any good. As for carrying a loaded pistol when you venture outside, dream on. Concealed gun permits are almost impossible for ordinary citizens to obtain in New York or nearby states. In other words, a little humility and contrition are probably the better route. Until a couple of weeks ago, that was obvious to everyone but Goldman, a firm famous for both prescience and arrogance. In a display of both, Blankfein began to raise his personal- security threat level early in the financial crisis. He keeps a summer home near the Hamptons, where unrestricted public access would put him at risk if the angry mobs rose up and marched to the East End of Long Island. He tried to buy a house elsewhere without attracting attention as the financial crisis unfolded in 2007, a move that was foiled by the New York Post. Then, Blankfein got permission from the local authorities to install a security gate at his house two months before Bear Stearns Cos. collapsed. This is the kind of foresight that Goldman Sachs is justly famous for. Blankfein somehow anticipated the persecution complex his fellow bankers would soon suffer. Surely, though, this man who can afford to surround himself with a private army of security guards isn't sleeping with the key to a gun safe under his pillow. The thought is just too bizarre to be true.

5. Credit card economics - Felix Salmon at Reuters points to some interesting maths from Rortybomb showing that a US bank is better off driving a delinquent credit card customer into bankruptcy than keeping them alive.

You're a bank, and one of your customers owes you $2,000 on her credit card. You have two choices: (a) You cut off her credit, convert the $2,000 to a loan, and she pays it off with 6% interest over four years. (b) You keep the credit card open, she struggles to pay back the balance at 30%, and eventually declares bankruptcy with a principal balance of $1,205 outstanding, which you never collect a penny on. Which of the two options do you choose? Mike Konczal has run the numbers, and it turns out that option (b) "” driving the poor customer into bankruptcy "” is actually more the more profitable of the two. What's more, the option value of option (b) is enormous: if she doesn't declare bankruptcy you can make more money still, and of course if she keeps on spending on her credit card, that's even more debt on which you can make predatory and usurious profits. This is a prime example of what Ronald Mann calls the "sweat box" of credit card debt

6. Now that's a return on investment - This is a great story from Mohamed Ahmed at Reuters about how Somalian pirates have set up a cooperative to 'fund' their operations, 'a sort of stock exchange meets criminal syndicate'. HT Felix Salmon at Reuters.

Piracy investor Sahra Ibrahim, a 22-year-old divorcee, was lined up with others waiting for her cut of a ransom pay-out after one of the gangs freed a Spanish tuna fishing vessel. "I am waiting for my share after I contributed a rocket-propelled grenade for the operation," she said, adding that she got the weapon from her ex-husband in alimony. "I am really happy and lucky. I have made $75,000 in only 38 days since I joined the 'company'."

7. Castles in the sand - Nouriel Roubini's RGE Monitor has some wise words on the real meaning of the Dubai debt debacle.

Although Dubai World's financing issues are not a surprise and are relatively small given global credit losses, they are a reminder that the vulnerabilities and imbalances that contributed to the credit crunch have not disappeared. Coming when investors already are concerned about the strength and duration of the economic recovery, and the cost of the fiscal policies that led back to growth, Dubai World's default risk may be only one of the risks that market actors were underpricing. In particular, attention has returned to sovereign credit risk, particularly in the eurozone and its periphery, where weaker countries, like Greece and the more indebted of the Central and Eastern European countries, are under pressure. Most markets"”beyond the most exposed local markets"”have shrugged off the news this week as the size of exposures became clear and hopes of support from Abu Dhabi rose. Globally some of the liquidity conditions that supported risk appetite, including core central bank policy accommodation, show no signs of being removed. UAE banks, which are already challenged by losses on mortgages as well as exposure to quasi-private companies that are undergoing restructuring, can access a new facility if needed, though the terms of this liquidity facility (beyond the price 50 basis points above the local interbank rate) remain unknown. EU banks' exposure to the UAE, and even the exposure of UK banks, seems manageable but adds to pre-existing vulnerabilities including Eastern European exposure.

8. Ponzi comeback - The FT.com reports there are fresh fears about the return of ponzi-like debt instruments as investors chase higher yields in the wake of the Fed's money printing. Oy vey...

Some of the most controversial financing practices of the credit-bubble years "“ from cov lite loans to Pik toggle notes and dividend recap exercises "“ have returned to Wall Street, stoking fears that debt markets are growing overheated. The techniques fell into disrepute during the financial crisis because they were based to varying degrees on the same rosy expectations that encouraged companies and consumers to assume what proved to be crippling levels of debt.

9. Will Bernanke be reappointed?- Fed Chairman Ben Bernanke will appear tonight for hearings in Congress on his reappointment. The whispers are there's a real chance he could be dumped. Yves Smith at Naked Capitalism has some of the inside stuff from a staffer in the Senate on what might happen. It seems there may be hope that Helicopter Ben will get shot down because the politicians are sniffing the political winds.

As a former staffer for one of these Senators [on the Banking Committee], I'll just point out the obvious: most of them have their fingers in the wind right now. they're leaning to confirm BB, because they don't want to be out on a limb, and there's a lot of talk coming from Wall Street that continuity is absolutely necessary to maintain investor confidence, and that BB is critical in this regard. On the other hand, they recognize that the Fed is very unpopular. If they see signs of strong sentiment against the Fed, they may vote against him, but this is all about politics right now. As an aside, the Fed is kind of asking for this by pushing so hard to be the central regulator. As a rule, central banks get to be independent, opaque, and imperious towards the people; primary regulators do not. Surprised that all the genius economists at the Fed aren't recognizing this basic dynamic.

10. Totally irrelevant video - A little girl gets her tooth pulled out by a remote controlled toy car jumping over a cat. I kid you not. Seems like these crazy Americans are resorting to strange measures to get their entertainment and do their dentistry without spending money.... "OK honey, that sounds great," the girl's Mum says in a chirpy way when told of the plan. I doubt my good wife would be nearly as sanguine if I tried this malarkey with my 7 year old daughter. Don't try this at home kids. But if you do, send me the video. Now where was that remote controlled car...here puss, puss, puss....