Monday
Nov102008
Celebrating Bankers: The $140 Billion Tax Cut in the Bailout
Monday, November 10, 2008 at 9:02
A reader from New Zealand tips us off to today's front-page story in the Washington Post:
The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.
But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.
The Treasury Department effectively removed a 1986 Congressional provision that limited tax shelters in corporate mergers. The move may be illegal, although the Treasury is trying to cover itself by saying that the notice is an "interpretation" of the law.
One immediate effect of the "interpretation", which came a day after the House of Representatives initially rejected the $700 bailout plan, was to make the rescue of troubled banks and financial companies more attractive. For example Wachovia, one of the largest banks in America, was going to be taken over by Citicorp but, after the ruling, Wells Fargo swooped in and made a successful bid.
President-elect Obama may want to consider, as he considers a tax reduction plan (still unclear how he's going to finance it...), that another $100 billion has just been slammed on the Federal Government's budget deficit.
The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.
But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.
The Treasury Department effectively removed a 1986 Congressional provision that limited tax shelters in corporate mergers. The move may be illegal, although the Treasury is trying to cover itself by saying that the notice is an "interpretation" of the law.
One immediate effect of the "interpretation", which came a day after the House of Representatives initially rejected the $700 bailout plan, was to make the rescue of troubled banks and financial companies more attractive. For example Wachovia, one of the largest banks in America, was going to be taken over by Citicorp but, after the ruling, Wells Fargo swooped in and made a successful bid.
President-elect Obama may want to consider, as he considers a tax reduction plan (still unclear how he's going to finance it...), that another $100 billion has just been slammed on the Federal Government's budget deficit.
tagged Bailout, Banks, Taxes in US Economy
Bailout, Banks, Taxes in US Economy