If you want to keep tabs on the deals in Washington D. C., you need to subscribe to The Washington Post. It’s free on the Internet. Amit R. Paley’s article, “A Quiet Windfall For U. S. Banks,” in today’s paper is a perfect reason to subscribe. The article says that, while Hank Paulson was making his pitch to Congress for the $700 billion bank rescue, he released a quiet memo to banks saying that they could take the loss of any bank they acquire as a tax credit. So, Wells Fargo could write-off Wachovia’s loss if it acquired Wachovia. Wells Fargo paid $11 billion for Wachovia, but can get a tax credit of $25 billion for Wachovia’s losses. In other words, Wells Fargo will get a tax refund from the government. It’s the same for PNC which acquired National City Bank, to the tune of $5.1 billion. The total cost to the taxpayer for all bank acquisitions to date is estimated at $140 billion, all done through an obscure backdoor, and likely illegal, tax credit.
So now, everyone, even Republicans, in Congress and tax attorneys, except of course Paulson’s staff and bank lawyers, are quietly whispering foul, saying that the Paulson memo exceeded his authority and is illegal. Nobody wants to speak too loudly, however, since a public announcement would throw a wrench in the economic recovery. Does anyone doubt that we need a change in Washington where it’s okay to suck the life out of this country because we’re afraid to speak too loudly about wrongs? Is there one single honest person in Washington?