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Cue people blaming this on "capitalists" and "market".
The Washington Post article on the subject is better and more comprehensive, but for some reason I can't access their site now.
Wednesday, December 16, 2009
Citigroup Given Large Tax Break
By Darryl R. Isherwood
FOXBusiness
Citigroup (C) stands to benefit by as much as $38 billion dollars from a recent Internal Revenue Service rule change designed to preserve the value of bank stock owned by the government.
The tax rule suspends restrictions on loss deductions for companies that sold stakes to the government as part of the Troubled Asset Relief Program.
Some critics of the deal say the taxes the government has agreed to forego far outweigh the expected profit on the sale of Citigroup stock.
According to the Washington Post, the rule is part of a broader attempt begun last year to shelter companies that accepted bailout money from tax consequences of the government investment. The report said that without the deal, Citigroup would not have repaid the TARP money at this time.
Separately, a large Middle Eastern sovereign wealth fund, Abu Dhabi Investment Authority, said it wants out of a deal that it says would require it to overpay on an investment in the bank.
The fund is seeking more than $4 billion in damages from Citi if the deal is upheld, saying there were "fraudulent misrepresentations" in the original agreement. The fund agreed to buy Citi shares at $31.83 each about two years ago.
Citi said it will vigorously defend itself against the allegations.
Shares of Citi are down 2.3% at $3.48.
LINK
Cue people blaming this on "capitalists" and "market".
The Washington Post article on the subject is better and more comprehensive, but for some reason I can't access their site now.
I blame this on corruption... They have to pay back $20 billion in TARP money and they get a $38 billion tax break? How is this not a scam?
Corruption? You blame an abstract concept?
I blame the people who allowed the government expansion and keep electing politicians that propose interventionist policies.
Congressman Paul RyanThirty years later, this crony capitalism is back with a vengeance, accelerated by an aggressive program by President Obama and the Democratic congressional leadership. It is wreaking havoc on economic recovery and fueling continued resentment among the American people.
(...)
We were told that the financial giants, most prominently Goldman Sachs ( GS - news - people ) and JP Morgan, were "too big to fail." We were given the same slippery justifications in diverting TARP funds beyond their original intent--moving into auto companies and heavy-handed neo-industrial policy. Yet in communities across America, bank regulators are busily shutting down banks that were "too small to succeed." The disconnect turns to frustration as bailed-out firms Goldman Sachs and JP Morgan announce record profits, while the community bank closes its doors.
(...)
The problem today has escalated far beyond partisan politics. Big businesses' frenzied political dealings are not driven by party or ideology, but rather by zero-sum thinking in which their gain must come from a compe or's loss. Erecting barriers to compe ion is a key to maintaining advantage and market share. With Washington leading the way, it makes sense for the big boys to redirect their resources to their lobbying shop and government affairs office. They're far less interested in expanding the economic pie than with making certain that they get their slice.
To be clear, the federal government should not stack the deck against big businesses either. The government does not have a stake in the fight between David and Goliath--our only concern is to make certain that it is a fair fight. The government today is far from an unbiased arbitrator, and it is smothering dreams and stifling growth.
(...)
For every encroachment into the market by the federal government--under the guise of "reform"--there exist pro-market alternatives that Republicans must articulate and passionately defend. University of Chicago's Luigi Zingales, who has written extensively on the issue of crony capitalism, reminds policymakers that the path forward requires “adopting a pro-market, rather than pro-business, approach.” We must champion an aggressive reform agenda to tackle our outdated financial regulatory structure, the convoluted and anti-compe ive tax code, and the looming en lement crisis, and to fix what's broken in health care, energy, and more. We should focus on removing the hurdles the government has erected, rather than further centralizing power in Washington. The legislative reform must focus on empowering individuals instead of bureaucrats.
http://www.forbes.com/2009/12/11/bus...paul-ryan.html
More politely, incentive to participate.
And one of the authors of all the financial bailout BS last year is now Obama's boy at the Treasury Dept. Good call, Barack
It's all good.
Government gets to use special "accounting tools" to spend pass the congressional budget limit even though they technically have no more authority to spend what they are spending.
Everyone's doing it.
This is what happens when you let the referee become a participant in the game.
Citigroup Inc., the last of the four largest U.S. banks to seek funds to exit a taxpayer bailout, raised $17 billion by selling stock for a price so low that the U.S. delayed plans to shrink its one-third stake in the lender.
Citigroup sold 5.4 billion shares at $3.15 apiece, less than the $3.25 the government paid when it acquired its stake in September. The New York-based bank said the Treasury won’t sell any of its shares for at least 90 days.
yep, classic results with unregulated/unenforced capitalism and markets.
If there's anything that's corrupt, predatory by definition, it's markets and capitalism.
bump!
There wouldn't be a government left if all the banks collapsed.
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