Billions MORE taxpayer dollars for Citibank!
- Banks went bankrupt
- Instead of shutting down the bankrupt banks and selling their assets to non-failed banks, the Federal Reserve and U.S. government bailed the failed banks out, at a cost of tens of trillions
- Most of the bailout money was handed over by the Fed with no strings attached
- A small fraction of the money was handed over by the U.S. government with thin strings attached, primarily limits on executive compensation at failed banks receiving TARP money
- Executives at failed banks balked at compensation limits, but
ShittybankCitibank NEEDED the bailout money
So, now, the federal government has re-written tax law to give Citibank additional massive tax breaks if Citibank returns its TARP money. As a political side benefit, Citibank’s return of its TARP money will help the government claim — utterly falsely — that the bailout cost taxpayers little or nothing:
The federal government quietly agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis.
The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors…
“The government is consciously forfeiting future tax revenues…,” said Robert Willens, an expert on tax accounting who runs a firm of the same name. “I’ve been doing taxes for almost 40 years, and I’ve never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts.”
…A senior Republican staffer also questioned the government’s rationale. “You’re manipulating tax rules so that the market value of the stock is higher than it would be under current law,” said the aide, speaking on the condition of anonymity. “It inflates the returns that they’re showing from TARP and that looks good for them.”
…The precise value of the IRS ruling depends on Citigroup’s future profitability and other factors, but two accounting experts said it was fair to estimate that Citigroup would save at least several billion dollars.
Posted by James on Wednesday, December 16, 2009