Now we find that the treasury department approved a new loophole that enables banks to save on their taxes as well. The loophole: A bank must buy a faltering bank:
A tax change put into effect by the U.S. Treasury Department provides new federal and state breaks for banks that take over other failing financial institutions. The subsidies come on top of the $700 billion in bailout money that Congress authorized as part of the federal rescue plan.
The government is enticing big banks to buy small banks, something that will lead to huge banks - the kind that are "too big to fail." This is ridiculous. Here's what has already happened:
Days after the tax rule was changed, Wells Fargo successfully moved to acquire Wachovia Corp., whose losses on loans could reach more than $70 billion. Tax experts at Jones Day and elsewhere have projected that those losses will allow Wells Fargo to claim $20 billion to $25 billion in total tax breaks.
$20 billion to $25 billion! Wow! And who gets all the benefit? Who gets rich while Wachovia workers are fired? Wells Fargo. This deal also has repurcussions on revenues of the states - and it ain't pretty:
Most of the tax advantages will be claimed on federal returns. But state tax board figures obtained by The Times show California will take a $300-million hit this year. In subsequent years, that sum would gradually drop until the $2 billion in tax breaks is exhausted.
So not only do we make huge financial organizations "too big to fail," we reduce the money that financially strapped states collect. All of us ordinary people suffer.
To save our economy, both now and in the future, we must reduce the size of banks and other corporations so that they are not "too big to fail." To do this, we must reintroduce anti-trust laws. Too big is too bad.
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