So far, the $700 billion of baners has ONLY
been spent on executive
bonuses, salary increases, dividends to shareholders and on bank shopping
sprees of other banks.
It is NOT being spent to lower long-term interest rates, to increase retail
lending and prevent the deepening recession.
Now we find out, that the US Treasury has just illegally given banks a
monstrous tax dodge to boot. No one noticed this new bailout. They
it was illegal. So, they did it while everyone was distracted by the
Paulson has over-turned the intent of Congress to
limit abuses of companies
other companies to shelter their own earnings. More than a dozen
lawyers, who were interviewed by the Washington Post, said that the
Treasury had no such authority, Paulson and his cronies at the big banks
wanted this change for years.
There are many that Paulson did not
a finger to save Lehman Brothers, because he wanted to take out a
to his own firm, Goldman Sachs. Paulson knows that is where
will soon be "working" again to get his rich rewards for his "public"
The Federal Reserve continues to refuse to identify which banks
it has blessed with $2 trillion of your money!
Paulson must be put on trial. American taxpayers have been robbed blind
sociopaths like Paulson, Bush and Cheney.
WELLS FARGO HAS JUST TAKEN $25
OUT OF YOUR POCKET!
PAULSON IS A THIEF
HE HAS SECRETLY and ILLEGALLY
GIVEN BANKS A NEW $140 BILLION
(Headline is ours here at TigerSoft)
Report Taken from Washington Post - Amit R Paley, November 10, 2008
"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
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
The sweeping change to two decades of tax policy escaped the notice of lawmakers for
as they remained consumed with the controversial bailout bill. When they found out,
Some congressional staff members have privately concluded that the notice was illegal.
But they have worried that saying so publicly could unravel several recent bank mergers
possible by the change and send the economy into an even deeper tailspin.
"Did the Treasury Department have the authority to do
this? I think almost every tax expert
would agree that the answer is no," said George K. Yin, the former chief of staff of
Committee on Taxation, the nonpartisan congressional authority on taxes. "They
repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to
The story of the obscure provision underscores what critics in Congress, academia and the
legal profession warn are the dangers of the broad authority being exercised by Treasury
Secretary Henry M. Paulson Jr. in addressing the financial crisis. Lawmakers are now
looking at whether the new notice was introduced to benefit specific banks, as well as
whether it inappropriately accelerated bank takeovers.
The change to Section 382 of the tax code -- a provision that limited a kind of
tax shelter arising in corporate mergers -- came after a
two-decade effort by conservative economists and Republican administration officials to
eliminate or overhaul the law, which is so little-known that even influential tax experts
sometimes draw a blank at its mention. Until the financial meltdown, its opponents thought
it would be nearly impossible to revamp the section because this would look like a
corporate giveaway, according to lobbyists.
Andrew C. DeSouza, a Treasury spokesman, said the administration had the legal authority
to issue the notice as part of its power to interpret the tax code and provide legal
guidance to companies. He described the Sept. 30 notice, which allows some banks to keep
more money by lowering their taxes, as a way to help financial institutions during a time
of economic crisis. "This is part of our overall effort to provide relief," he
The Treasury itself did not estimate how much the tax change would cost, DeSouza said.
A Tax Law 'Shock'
The guidance issued from the IRS caught even some of the closest followers of tax law off
guard because it seemed to come out of the blue when Treasury's work seemed focused almost
exclusively on the bailout.
"It was a shock to most of the tax law community. It was one of those things where it
pops up on your screen and your jaw drops," said Candace A. Ridgway, a partner at
Jones Day, a law firm that represents banks that could benefit from the notice. "I've
been in tax law for 20 years, and I've never seen anything like this."
More than a dozen tax lawyers interviewed for this story -- including several representing
banks that stand to reap billions from the change -- said the Treasury had no authority to issue the notice.
Several other tax lawyers, all of whom represent banks, said the change was legal. Like
DeSouza, they said the legal authority came from Section 382 itself, which says the
secretary can write regulations to "carry out the purposes of this section."
Lawmakers decried the tax shelters as
a scam and created a formula to strictly limit the use of those purchased losses
for tax purposes.
But from the beginning, some conservative economists and Republican administration
officials criticized the new law as unwieldy and unnecessary meddling by the government in
the business world.
"This has never been a good economic policy," said Kenneth W. Gideon, an
assistant Treasury secretary for tax policy under President George H.W. Bush and now a
partner at Skadden, Arps, Slate, Meagher & Flom, a law firm that represents banks.
The opposition to Section 382 is part of a broader ideological battle over how the tax
code deals with a company's losses. Some conservative economists argue that not only
should a firm be able to use losses to offset gains, but that in a year when a company
only loses money, it should be entitled to a cash refund from the government.
During the current Bush administration, senior officials considered ways to implement some
version of the policy. A Treasury paper in December 2007 -- issued under the names of Eric
Solomon, the top tax policy official in the department, and his deputy, Robert Carroll --
criticized limits on the use of losses and suggested that they be relaxed. A logical
extension of that argument would be an overhaul of 382, according to Carroll, who left his
position as deputy assistant secretary in the Treasury's office of tax policy earlier this
Yet lobbyists trying to modify the obscure section found that they could get no traction
in Congress or with the Treasury.
"It's really been the third rail of tax policy to touch 382," said Kevin A.
Hassett, director of economic policy studies at the American Enterprise Institute.
The Wells Fargo Ruling
As turmoil swept financial markets, banking officials stepped up their efforts to change
Senior executives from the banking industry told top Treasury officials at the beginning
of the year that Section 382 was bad for businesses because it was preventing mergers,
according to Scott E. Talbott, senior vice president for the Financial Services
Roundtable, which lobbies for some of the country's largest financial institutions. He
declined to identify the executives and said the discussions were not a concerted lobbying
effort. Lobbyists for the biotechnology industry also raised concerns about the provision
at an April meeting with Solomon, the assistant secretary for tax policy, according to
talking points prepared for the session.
DeSouza, the Treasury spokesman, said department officials in August began internal
discussions about the tax change. "We received absolutely no requests from any bank
or financial institution to do this," he said.
Although the department's action was prompted by spreading troubles in the financial
markets, Carroll said, it was consistent with what the Treasury had deemed in the December
report to be good tax policy.
The notice was released on a momentous day in the banking industry. It not only came 24
hours after the House of Representatives initially defeated the bailout bill, but also one
day after Wachovia agreed to be acquired by Citigroup in a government-brokered deal.
The Treasury notice suddenly made it much more attractive to acquire
distressed banks, and Wells Fargo, which had been an earlier suitor for Wachovia, made a
new and ultimately successful play to take it over.
The Jones Day law firm said the tax change, which some analysts soon
dubbed "the Wells Fargo Ruling," could be worth about $25 billion for Wells
Fargo. Wells Fargo declined to comment for this article.
The tax world, meanwhile, was rushing to figure out the full impact of the notice and who
was responsible for the change.
Jones Day released a widely circulated commentary that concluded
that the change could cost taxpayers about $140 billion. Robert L. Willens, a prominent
corporate tax expert in New York City, said the price is more likely to be $105 billion to
Over the next month, two more bank mergers took place with the benefit of the new tax
guidance. PNC, which took over National City, saved about $5.1 billion from the
modification, about the total amount that it spent to acquire the bank, Willens said.
Banco Santander, which took over Sovereign Bancorp, netted an extra $2 billion because of
the change, he said. A spokesman for PNC said Willens's estimate was too high but declined
to provide an alternate one; Santander declined to comment.
Attorneys representing banks celebrated the notice. The week after it was issued, former
Treasury officials now in private practice met with Solomon, the department's top tax
policy official. They asked him to relax the limitations on banks even further, so that
foreign banks could benefit from the tax break, too.
Congress Looks for Answers
No one in the Treasury informed the tax-writing committees of Congress about this move,
which could reduce revenue by tens of billions of dollars. Legislators learned about the
notice only days later.
DeSouza, the Treasury spokesman, said Congress is not normally consulted about
Sen. Charles E. Grassley (R-Iowa), ranking member on the Finance Committee, was
particularly outraged and had his staff push for an explanation from the Bush
administration, according to congressional aides.
In an off-the-record conference call on Oct. 7, nearly a dozen Capitol Hill staffers
demanded answers from Solomon for about an hour. Several of the participants left the call
even more convinced that the administration had overstepped its authority, according to
people familiar with the conversation.
But lawmakers worried about discussing their concerns publicly. The staff of Sen. Max
Baucus (D-Mont.), chairman of the Finance Committee, had asked that the entire conference
call be kept secret, according to a person with knowledge of the call.
"We're all nervous about saying that this was illegal because of our fears about the
marketplace," said one congressional aide, who like others spoke on condition of
anonymity because of the sensitivity of the matter. "To the extent we want to try to
publicly stop this, we're going to be gumming up some important deals."
Grassley and Sen. Charles E. Schumer (D-N.Y.) have publicly expressed concerns about the
notice but have so far avoided saying that it is illegal. "Congress wants to
help," Grassley said. "We also have a responsibility to make sure power isn't
abused and that the sensibilities of Main Street aren't left in the dust as Treasury works
to inject remedies into the financial system."
Carol Guthrie, spokeswoman for the Democrats on the Finance Committee, said it is in
frequent contact with the Treasury about the financial rescue efforts, including how it
exercises authority over tax policy.
Lawmakers are considering legislation to undo the change. According to tax attorneys, no
one would have legal standing to file a lawsuit challenging the Treasury notice, so only
Congress or Treasury could reverse it. Such action could undo the notice going forward or
make it clear that it was never legal, a move that experts say would be unlikely.
But several aides said they were still torn between their belief that the change is
illegal and fear of further destabilizing the economy.
"None of us wants to be blamed for ruining these mergers and creating a new Great
Depression," one said.
Some legal experts said these under-the-radar objections mirror the objections to the
congressional resolution authorizing the war in Iraq.
"It's just like after September 11. Back then no one wanted to be seen as not
patriotic, and now no one wants to be seen as not doing all they can to save the financial
system," said Lee A. Sheppard, a tax attorney who is a contributing editor at the
trade publication Tax Analysts. "We're left now with congressional Democrats that
have spines like overcooked spaghetti. So who is going to stop the Treasury secretary from
doing whatever he wants?"
There's much more to
read on this story and
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