Bank Bailouts have it upside down


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>   On Thu, Jan 29, 2009 at 8:52 PM, Russell wrote:
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Bank Bailout Could Cost Up to $4 Trillion: Economists

Jan 29 (Reuters) — Goldman Sachs estimated that it would take on the order of $4 trillion to buy troubled mortgage and consumer debt. That number could shrink if the program were limited to only certain loans or banks, but it could also grow if other asset classes such as commercial real estate loans were included.

That would also shrink if there was a payroll tax holiday and the states were given $300 billion on a per capita basis as delinquencies would subside and asset quality restored.

This problem is best addressed from the bottom up by enhancing the income of borrowers, not from the top down by assisting the lenders.

The Wall Street Journal said government officials had discussed spending $1 trillion to $2 trillion to help restore banks to health, citing people familiar with the matter….

The government would not necessarily have to spend the full $4 trillion to buy the assets. If it follows the model used in a Federal Reserve program to support consumer and small business loans, the government could potentially put up just 10 percent of the total.


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A Quiet Windfall For U.S. Banks


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A Quiet Windfall for US Banks

By Amit R. Paley

The financial world was fixated on Capitol Hill as Congress battled over the Bush administration’s request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.

Section 382 of the tax code was created by Congress in 1986 to end what it considered an abuse of the tax system: companies sheltering their profits from taxation by acquiring shell companies whose only real value was the losses on their books. The firms would then use the acquired company’s losses to offset their gains and avoid paying taxes.

Lawmakers decried the tax shelters as a scam and created a formula to strictly limit the use of those purchased losses for tax purposes.

But from the beginning, some conservative economists and Republican administration officials criticized the new law as unwieldy and unnecessary meddling by the government in the business world.

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>   Strange that this only gets disclosed after the election.
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Agreed!


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