As Paul Harvey used to say, “The Rest of the Story……”
by Tom on December 16, 2009
in AllMarketsConsidered, Market Musings, banks
Okay, this is just a swell way to start off the middle of the week. The Washington Post has a story about how Citibank (you know the bank that we own a lot of) is paying back a LOT of the TARP money that the Federal government gave them. You know how there are a LOT of people saying that this is a sign that the banks are healthy. Well, here’s what could very well qualify as the rest of the story. A quick point by point listing of it:
- Citibank has lost money – according to this report from the Washington Post, over $38 Billion.
- By paying back the TARP money now, the government is giving them an exemption to a tax ruling.
- That tax ruling allows them to shelter $38 Billion in future profits from taxes.
So, what do we have here? We’ve essentially got a government that is changing the rules so that it appears that Citibank and others are totally healthy when in reality it’s not that way, it’s more a matter of these institutions attempting to save future tax dollars. Doesn’t that mean that our government is giving up future tax dollars to get back what is already ours?
Hmmm, I think there is more to this story…..
Tom Vanderwell
U.S. gave up billions in tax money in deal for Citigroup’s bailout repayment
DEAL MADE TO RECOVER BAILOUT
Firms exempted from rule when U.S. sells its stake
Citigroup says it has built up $38 billion in losses. With the tax exemption, it will be able to shelter up to $38 billion in future profits. (Richard Drew/associated Press)
Washington Post Staff Writer
Wednesday, December 16, 2009
The federal government quietly agreed to forgo billions of dollars in potential tax payments fromCitigroup 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.
While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.
