by TW Collins
The Wall Street Journal calls it a bonanza:
As part of economic stimulus efforts, the incoming Obama administration is considering tax changes that could give stumbling financial companies increased tax rebates. Right now, companies can use losses to reduce taxes on any future earnings, as well as on profits going back two years. In theory, a company that lost $10 billion in 2008 would be able to claim back taxes paid on an equivalent amount of taxable income in 2006 and 2007.
The key Obama change is to extend the retroactive application to five years, theoretically increasing the amount of past taxes that qualify for rebate. The move could clearly benefit banks where losses in 2008 and 2009 are going to be so large that they overwhelm profits from the last two years.
This is basically saying that Uncle Same is going to bail out corporations that shoved profits forward, and caused economic meltdown. Companies like CIT Group which, became bank holding companies just to get TARP money, and then got $2.3 Billion, would be able to write off losses against taxes already paid. This is an already abused provision, CIT Group was flagged for misusing deferred tax assets under Sarbanes-Oxley.
This must make Jeffrey M Peek, the CEO happy. His company’s stock was at $36 when he took over, it trades at $4.90 today. He’s received $25 million in total compensation for this stellar performance.
Strangely, this provision will not force executives who sold options on inflated stock values to give the money back, but will allow them to force Uncle Sam to give back tax money. Pretty neat trick to run fictional profits, cash out options, and then have Barack Obama bail out your company with a tax break.
Related posts:
- Bank Bailout: When a Bonus Exceeds Earnings, How is It Not Fraud?
- Fox News Slags Stimulus Bill for Being Too Republican
- The Next Big Taxpayer Bailout? IMF Could Get Hundreds of Billions for European Banks
- Eric Cantor Says Stimulus Bill Failed, Except That Whole Creating Jobs in His Home State Part
- FDL Book Salon Welcomes Barry Ritholtz – Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy
Spotlight
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About Firedoglake
Advanced search
Poor little rich boys.
And this will stimulate the economy how? Serious question.
No more freebies and money for Wall Street. We need to make a big stink about this, and now. This is the kind of issue that will be easy for the average American to understand: no more handouts to Wall Street CEOs, no more handouts to greedy, selfish bankers.
does anyone know how much this will cost in lost tax revenue?
It won’t.
Wouldn’t fixing healthcare stimulate the economy? Why aren’t we doing that?
At some point the GAO would have to say how much it will cost.
This is just more evidence that Obama will be pursuing an extension of Paulson’s policies which is largely to shovel money as fast and as much as possible into the ongoing liquidity trap. In other words, this will likely have little or no effect on credit or reversing the recession. It will likely lead to greater consolidation, less competition, and far more entities too big to fail.
Obama and his economics team seem committed to the failed Japanese approach to the banking crisis. Banks will continue not to have address their insolvency in an open fashion and this means no one is going to trust anyone else, meaning credit will remain tight.
This actually seems reasonable to me…If my company (yes I have a little one) makes money every other year (about right) and the govt. charges me taxes for the years with gains and ignores the years with losses, then I’m getting screwed. I don’t see anything wrong with allowing them to go back a bit further under the circumstances…
Sickening.
If my company actually made zero income in the last five years when one balances profitable years with years in which there were losses, should I owe tax?
One of Reagan’s bullshit moves was to eliminate income tax averaging which creates a similar problem for individuals. If you have one exceptional year in a sea of mediocre ones, you should not pay taxes for the fat year as if you make that much money every year.
Thanks Stirling
digg
I never thought much of Obama’s economics team – - now I think less of them. Didn’t we vote for change?? This is just more Paulson.
it’s a way to protect speculators – who made a ton of money on the upside of the bubble but crashed big time on the down side.
no objection from me on the small family owned / community type businesses. big speculators are another story.
I don’t think I like this.
I don’t like this.
This sucks.
Wonder if we could get that back? Made alot of sense. I knew it was gone, but did not know the details.
BTW, selise, I saw this in your comment from an earlier thread:
Besides being an idiot, Dennis Ross knows squat about Iran. That Obama put someone whose only qualification is that he is in Israel’s pocket tells you just how much credence you can put in Obama’s pledge for an open discussion with Iran.
Same with Haass, he just has a book out with Martin Indyk and is a hawk on Iran.
Holbrooke is Holbrooke. I think you don’t like him for what he did in the Balkans. Me for what he did in East Timor. I don’t think he is as awful as Ross but call me dubious on this.
Anne Marie Slaughter heads the Dean of the Woodrow Wilson Institute of Public and International Affairs. Lee Hamilton is its president. Slauhter was primarily known for stacking the institute with neocons.
So in short these are all very Establishment, very Clinton era choices. The same reasons they were not successful then is why they won’t be successful now.
I went to an obama rally. With Hillary. neither one of ‘em said anything about this. i feel duped.
if this is the kind of policy we’re going to get – what’s the end game look like? a long drawn out recession a la japan or something else? if we don’t address the trust issue substantively while continuing to throw more $$ at the problem in ineffective ways, is it possible we could see the dollar fall precipitously?
well, we wouldn’t want to diminish their bonuses would we?
Hate to see them bankers suffer, what will become of us if we let THAT happen?
Larry Summers = fox
Wall Street = henhouse.
This was entirely expected. Surely there are other favors needing to be done to help the struggling used-to-be-mega-rich?
Many on left-leaning blogs have thought Obama is an outsider.
We’ve seen the truth.
The reality is yet to sink into our consciences.
Stirling,
I have no disagreement with your analysis of this new bank bailout, but I would add an interpretation that this is a “bribe” intended to “make friends” of the normally Repug business community.
I’m not saying that I approve of the bribe, but that I do understand what it is.
Hey, it’s just another debt that PEBO is paying to his campaingn supporters. As Molly Ivins said, you dance with them that brung ya. What’s the problem? /s
As always, thank you.
Liberals/progressives could use an accounting evaluation that contrasts paper profits with things that produce real value. Making the food supply safer, more redundant, and less centralized has intrinsic economic value.
Making energy safer, more domestic/redundant, more sustainable, and less centralized has intrinsic economic value.
How do we measure that economic value and communicate it in an accessible way?
quick disclaimer: it’s not official yet, as far as i know, but chris nelson is not expected to be wrong.
re ross. that one scares me for all the reasons you note. bernhard actually title his post on the subject: Obama Prepares Iran Attack
re holbrooke. i don’t like him for what he did in the balkans AND east timor. also some of his pro-war rhetoric. don’t have a good feel about how dangerous he will be in that position.
bad news in my book. especially as obama hasn’t had anything to say about gaza until today (and only when asked).
The U.S. electorate has been “punked” by Obama. Strap in it’s going to be a very bumpy ride for the working and middle classes. For the elites, whose leader is now BO, not so bad.
You got something against the insurance industry? Obama will make sure they keep all they have worked so hard for in convincing the American booboise they have the best medical system in the world.
Just for the record. . . BO stinks so far.
Obi is going to be the one to tank the economy and drag us into more ME wars.
Change we can believe in is like deja vu all over again.
Oy
The economy is already tanked. PEBO will not be able to take credit for that (though the Rs will blame him, in a quid pro quo for PEBO’s postpartisanship).
CBS News this evening with the ever perky Katie Couric did a very nice fluff piece on Bush being a great environmentalist by setting aside more of the Pacific that has few resources to be exploited by big business. Somebody needs to draw a cartoon of Couric on her knees fellating the Decider wearing her CBS Tshirt.
Really, there seems to be no real purpose to this tax cut other than to throw money at financial institutions that have already proven that they will not use the money well. Why, I ask? Why?
I was looking through the Woodrow Wilson site. I can’t say for sure about the stacking charge. It was made by then current and former students about speakers in 2005. The Lee Hamilton thing is still good.
Wiki has an interesting list of alumni.
http://en.wikipedia.org/wiki/W…..al_Affairs
My favorites are Samuel Alito, Kit Bond, Larry Kudlow, and Judy Miller.
Campaign contributions demand a 1000% return on investment, or more.
Right, future contributions to political candidates should be deferred to purchasing weapons to storm the Bastille.
Emptywheel is upstairs, new post
iirc, i’ve heard slaughter give two talks (by podcast). one was very good (on torture – we shouldn’t) and the other one was disturbing. will have to look later though, now must return phone call to check up on friend in jordan headed for israel. back later….
New post