Lost among the fury about how taxpayers were treated in the Citigroup TARP repayment deal was the fact that Citigroup was given another secret bailout through the forgiveness of a $38 billion tax liability.
The law says that in the event of a change in ownership, companies can no longer use loss carryforwards to offset future income. This law is designed to prevent companies from running around gobbling up defunct companies just to get huge tax breaks. The government’s purchase of 34% of Citigroup’s common stock constitutes a change in ownership.
But it’s not that kind of change in ownership, the Treasury said, when it pronounced that Citigroup would be able to keep its losses after all and thus score another $38 billion gift from the taxpayer.
We don’t disagree with the Treasury’s legal logic here: This is clearly not the type of situation that the change in ownership law was designed to prevent.
That said, we have all kinds of problems with the Treasury’s justification for its decision, which is that they HAD to let Citigroup keep the $38 billion or Citigroup wouldn’t have been able to repay the TARP.
That’s just the kind of we-exist-to-serve-Wall Street logic we’ve come to expect from this Treasury Department, and it’s a disgrace.
In any event, Dennis Kucinich has vowed to get to the bottom of it:
Binyamin Appelbaum, WaPo: A House subcommittee said Thursday that it will investigate the Treasury Department’s decision to change a long-standing law so that Citigroup could keep billions of dollars in tax breaks.
Rep. Dennis J. Kucinich (D-Ohio) called Treasury’s action a “farce” and an “outrage” during a hearing Thursday of the domestic policy subcommittee of the House Committee on Oversight and Government Reform. Kucinich, the subcommittee chairman, said that he would demand an explanation from Treasury officials.
“This committee is not going to rest until we’ve examined this last deal threadbare, until we have spoken to every individual associated with it, examined every communication related to it, with every person that may have had an interest in it, or who may have had some kind of a channel of influence,” Kucinich said.
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