Treasury gives banks $140 billion tax break

[heyheybooboo]

Treasury gives banks $140 billion tax break

Some of the nation's biggest banks are in for a windfall - on top of the $700 billion Hank Paulson Golden Taxpayer Bucket-O-Cash Bailout - thanks to a new tax policy quietly issued by the Treasury Department.

The notice gives big tax breaks to companies that acquire struggling banks hit hard by the mortgage crisis. In some cases, the tax breaks could exceed the cost of acquiring the banks, according to analyses by private tax experts.

The change could cost the Treasury as much as $140 billion by enabling firms that acquire struggling banks to use more losses incurred by those banks to offset their own taxable profits.

San Francisco's Wells Fargo & Co., which made a bid to acquire Wachovia Corp. just days after the notice was issued, stands to reap about $20 billion in additional tax savings because of the change, according to the analyses. Wells Fargo paid $14.8 billion in a stock deal to buy Wachovia.

The notice was issued Sept. 30 as Congress debated the $700 billion bailout plan. Some members of Congress are upset that such a sweeping tax change was issued with no public hearings or congressional input.....

The Rape of the Taxpayer continues ...

Hank Paulson Golden Taxpayer Bucket-O-Cash Bailout $700 billion ..... check!
(tell me again about purchasing CMOs to increase interbank liquidity ???)

AIG (headed toward $190 billion), Big AutoCo (another $50 billion?) .... Where do you stop?

 

[dmcowen674]

Originally posted by: heyheybooboo
AIG (headed toward $190 billion), Big AutoCo (another $50 billion?) ....

Where do you stop?

A Revolution is where.

 

[Jeff7]

Next act of Congress: Raise the debt ceiling. Again.

Possibly >$1T for the Iraq escapades.
>$1T for the bank giveaways, and more if the credit card industry goes to hell.

I love how government can just pull money out of its ass, and no one seems to have a problem with it.

 

[brxndxn]

The American Republic will endure, until politicians realize they can bribe the people with their own money.

-- Alexis de Tocqueville

 

[Thump553]

Also from the same article:

When one bank acquires another, it is allowed under tax law to use some of the unrecognized losses of the bank it acquires to offset its own revenues for tax purposes. That lowers the tax liability of the merged bank.

Before the notice was issued, the merged bank could write off only a limited amount of the losses. The notice removed those restrictions, enabling the acquiring banks to make huge reductions in their tax liabilities.

This change made it far more appealing for another bank to take over a bank with heavy losses. Sounds like a better idea to me than having the FDIC step in. I think the Wachovia situation pretty much proved this-the government was going to take a heavy loss under the first (pre-change) merger. Instead Wells Fargo stepped in, with the result no taxpayer loss and better return to shareholders.

 

[Acanthus]

Originally posted by: Thump553
Also from the same article:

When one bank acquires another, it is allowed under tax law to use some of the unrecognized losses of the bank it acquires to offset its own revenues for tax purposes. That lowers the tax liability of the merged bank.

Before the notice was issued, the merged bank could write off only a limited amount of the losses. The notice removed those restrictions, enabling the acquiring banks to make huge reductions in their tax liabilities.

This change made it far more appealing for another bank to take over a bank with heavy losses. Sounds like a better idea to me than having the FDIC step in. I think the Wachovia situation pretty much proved this-the government was going to take a heavy loss under the first (pre-change) merger. Instead Wells Fargo stepped in, with the result no taxpayer loss and better return to shareholders.

Except theres an enormous taxpayer loss, if you dont see it you may need help managing a basic checking account.

 

[Thump553]

Originally posted by: Acanthus
Except theres an enormous taxpayer loss, if you dont see it you may need help managing a basic checking account.

The $140M is the highest estimate of the "tax loss" from this accounting change so far, the others are considerably (roughly 40%) lower. That's peanuts compared to the losses we would have incurred under the pre-rule change system. Take the Wachovia failure/takeover for example. Here's a summary of the pre-rule change deal (Citibank):

Under the terms of the agreement-in-principle, Citi will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion.

Citi will acquire more than $700 billion of assets of Wachovia?s banking subsidiaries, and related liabilities. The FDIC has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets. Citi is responsible for the first $30 billion of losses on this portfolio, and expects to record these expected losses under purchase accounting upon closing of the transaction. Citi is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. Citi has also agreed to issue to the FDIC preferred stock and warrants with a combined value of approximately $12 billion. The FDIC has agreed to be responsible for any further losses on this portfolio.

Roughing this through the government would have been on the hook for roughly $258B, less whatever the value of the secured collateral is (I don't know who would have first shot at the collateral, Citibank or the government). Instead, post rule change we ended up with at deal where Wachovia paid $14B and assumed ALL the loss leaving the taxpayers on the hook for nothing (but whatever portion of this $140M tax "loss" is related to this deal).

I still think this rule change resulted in a win-win situation, but I'm willing to listen to another viewpoint that takes the complete picture into account.

 

[Acanthus]

Originally posted by: Thump553

Originally posted by: Acanthus
Except theres an enormous taxpayer loss, if you dont see it you may need help managing a basic checking account.

The $140M is the highest estimate of the "tax loss" from this accounting change so far, the others are considerably (roughly 40%) lower. That's peanuts compared to the losses we would have incurred under the pre-rule change system. Take the Wachovia failure/takeover for example. Here's a summary of the pre-rule change deal (Citibank):

Under the terms of the agreement-in-principle, Citi will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion.

Citi will acquire more than $700 billion of assets of Wachovia?s banking subsidiaries, and related liabilities. The FDIC has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets. Citi is responsible for the first $30 billion of losses on this portfolio, and expects to record these expected losses under purchase accounting upon closing of the transaction. Citi is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. Citi has also agreed to issue to the FDIC preferred stock and warrants with a combined value of approximately $12 billion. The FDIC has agreed to be responsible for any further losses on this portfolio.

Roughing this through the government would have been on the hook for roughly $258B, less whatever the value of the secured collateral is (I don't know who would have first shot at the collateral, Citibank or the government). Instead, post rule change we ended up with at deal where Wachovia paid $14B and assumed ALL the loss leaving the taxpayers on the hook for nothing (but whatever portion of this $140M tax "loss" is related to this deal).

I still think this rule change resulted in a win-win situation, but I'm willing to listen to another viewpoint that takes the complete picture into account.

I guess it's all a matter of opinion now anyway. No one here really knows how the "bad debt" the government is assuming for the banks is going to pan out.

 

[heyheybooboo]

Originally posted by: Thump553

Originally posted by: Acanthus
Except theres an enormous taxpayer loss, if you dont see it you may need help managing a basic checking account.

The $140M is the highest estimate of the "tax loss" from this accounting change so far, the others are considerably (roughly 40%) lower. That's peanuts compared to the losses we would have incurred under the pre-rule change system. Take the Wachovia failure/takeover for example. Here's a summary of the pre-rule change deal (Citibank):

Under the terms of the agreement-in-principle, Citi will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion.

Citi will acquire more than $700 billion of assets of Wachovia?s banking subsidiaries, and related liabilities. The FDIC has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets. Citi is responsible for the first $30 billion of losses on this portfolio, and expects to record these expected losses under purchase accounting upon closing of the transaction. Citi is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. Citi has also agreed to issue to the FDIC preferred stock and warrants with a combined value of approximately $12 billion. The FDIC has agreed to be responsible for any further losses on this portfolio.

Roughing this through the government would have been on the hook for roughly $258B, less whatever the value of the secured collateral is (I don't know who would have first shot at the collateral, Citibank or the government). Instead, post rule change we ended up with at deal where Wachovia paid $14B and assumed ALL the loss leaving the taxpayers on the hook for nothing (but whatever portion of this $140M tax "loss" is related to this deal).

I still think this rule change resulted in a win-win situation, but I'm willing to listen to another viewpoint that takes the complete picture into account.

I will defer to your explanation but it is my understanding that the 'anticipated' future losses will be 'accelerated' to the current tax year.

 

[halik]

Originally posted by: dmcowen674

Originally posted by: heyheybooboo
AIG (headed toward $190 billion), Big AutoCo (another $50 billion?) ....

Where do you stop?

A Revolution is where.

ok

Motion to ban dmcowen next time he replies to any topic with "blah revolution". This shit is getting annoying; hippie movement died along with tie dye shirts in the 60s...

 

[Jaskalas]

Originally posted by: dmcowen674

Originally posted by: heyheybooboo
AIG (headed toward $190 billion), Big AutoCo (another $50 billion?) ....

Where do you stop?

A Revolution is where.

I opposed bailouts from the beginning. I still do, yet clearly there is no voice in Washington against government spending and waste. The parasite does not willing let go of its host when you ask nicely. It takes force to make them stop.

 

[Jaskalas]

Originally posted by: halik

Originally posted by: dmcowen674

Originally posted by: heyheybooboo
AIG (headed toward $190 billion), Big AutoCo (another $50 billion?) ....

Where do you stop?

A Revolution is where.

ok

Motion to ban dmcowen next time he replies to any topic with "blah revolution". This shit is getting annoying; hippie movement died along with tie dye shirts in the 60s...

I think you?ll find July 4, 1776 predates the 1960s.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

 

[SagaLore]

Free money! Lets start up the printing presses!

 

[Genx87]

Not sure where it stops. American Express was given Commercial bank status. I suspect they will be up next for a govt handout.

 

[jman19]

Originally posted by: heyheybooboo
Treasury gives banks $140 billion tax break

Some of the nation's biggest banks are in for a windfall - on top of the $700 billion Hank Paulson Golden Taxpayer Bucket-O-Cash Bailout - thanks to a new tax policy quietly issued by the Treasury Department.

The notice gives big tax breaks to companies that acquire struggling banks hit hard by the mortgage crisis. In some cases, the tax breaks could exceed the cost of acquiring the banks, according to analyses by private tax experts.

The change could cost the Treasury as much as $140 billion by enabling firms that acquire struggling banks to use more losses incurred by those banks to offset their own taxable profits.

San Francisco's Wells Fargo & Co., which made a bid to acquire Wachovia Corp. just days after the notice was issued, stands to reap about $20 billion in additional tax savings because of the change, according to the analyses. Wells Fargo paid $14.8 billion in a stock deal to buy Wachovia.

The notice was issued Sept. 30 as Congress debated the $700 billion bailout plan. Some members of Congress are upset that such a sweeping tax change was issued with no public hearings or congressional input.....

The Rape of the Taxpayer continues ...

Hank Paulson Golden Taxpayer Bucket-O-Cash Bailout $700 billion ..... check!
(tell me again about purchasing CMOs to increase interbank liquidity ???)

AIG (headed toward $190 billion), Big AutoCo (another $50 billion?) .... Where do you stop?

Not really news... when WFC said they weren't going to use taxpayer money it was exposed as being not true, but no one really cared I guess...

 

[the unknown]

Originally posted by: Jaskalas

Originally posted by: halik

Originally posted by: dmcowen674

Originally posted by: heyheybooboo
AIG (headed toward $190 billion), Big AutoCo (another $50 billion?) ....

Where do you stop?

A Revolution is where.

ok

Motion to ban dmcowen next time he replies to any topic with "blah revolution". This shit is getting annoying; hippie movement died along with tie dye shirts in the 60s...

I think you?ll find July 4, 1776 predates the 1960s.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Cool. So I guess democracy fails. Or the Republic version anyways. What new form of government shall we try today?After going shopping on wiki for various forms of government Here I decided on Technocracy.