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Thread: US taxpayers were just 'double screwed'

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    Banned Melonie's Avatar
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    Default US taxpayers were just 'double screwed'

    this one almost got by me ... and I'm sure that Bank of America, Countrywide and the US Congress are all hoping it gets by most US taxpayers ...


    (snip)June 25 (Bloomberg) — Bank of America Corp.’s $3 billion takeover of Countrywide Financial Corp. will be financed by 138 million tax-paying Americans.

    Bank of America, led by Chief Executive Officer Kenneth Lewis, can use tax write-offs to pay for Countrywide, the country’s biggest mortgage lender, said Robert Willens, a former managing director at Lehman Brothers Holdings Inc. who now runs his own accounting firm. Taxpayers may pick up about $5 billion of Countrywide’s losses over 20 years, he said. Countrywide shareholders approved the sale today. "(snip)


    Translation ... Countrywide has already foisted toilet paper mortgage bonds etc. onto the US FED and/or other gov't agencies which is estimated to result in $5 billion dollars worth of losses when that toilet paper must eventually be sold as a loss by those gov't agencies (with the $5 billion loss to the gov't till then having to be made up for by US taxpayers). But the US taxpayers is going to take a round of 'sloppy seconds' when Bank of America is allowed to write off the paper losses it has / will incur / inherit from buying out Countrywide against future Bank of America corporate tax liabilities ... which will amount to at least another $3 billion in lost corporate tax revenues (that will also have to be made up for by US taxpayers) and possibly $5 billioin or $10 billion over the course of many years.

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    Default Re: US taxpayers were just 'double screwed'

    Wasn't this Bernanke, the same thing that he did for Bears Stearns?

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    Banned Melonie's Avatar
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    Default Re: US taxpayers were just 'double screwed'

    ^^^ 'Helicopter Ben' is part of it. But so is the Democrat congress / treasury secretary Paulsen's 'subprime' mortgage bailout plan which would provide de-facto US government backed mortgage insurance on $300 billion dollars worth of 'toilet paper' subprime mortgages at the expense of the US taxpayer (and to the obvious benefit of outfits like Countrywide and their buyer Bank of America).

    In relation to the Bear Stearns deal, the 'subprime' mortgage bailout bill would propose to tackle the problem in the same way i.e. changing regulations on Fannie Mae / Freddie Mac so that the US gov't can accept more (and higher priced) 'toilet paper' as collateral while handing the bankers newly printed dollars in exchange. The SEC / treasury 'emergency' changes in regulations pertaining to allowing non-bank investment houses access to the FED 'window' i.e. the ability to pledge 'toilet paper' mortgage backed securities in exchange for newly printed dollars, was the mechanism by which a Bear Stearns bankruptcy was avoided (or should I say 'declaration' of bankruptcy). A HUGE amount of future loss risk has already been shifted from the banks / investment houses onto US gov't agencies, and the 'subprime' bailout plan will allow the shifting of much more.

    Again, the irony here is that aside from the shifting of risk (which will raise the credit ratings of mortgage lenders / banks / investment houses, will reduce their wholesale cost of money etc.), IRS rules permit the paper losses to be deducted against future corporate income tax liabilities. So the bailout plans not only provide immediate financial benefit to the mortgage lenders / banks / investment houses, but they will also provide a de-facto gov't subsidy for years to come (again at the expense of the US taxpayer, who must make up for these lost corporate income tax revenues via paying higher individual income taxes )


    However, the 'subprime' bailout bill has yet to be passed thanks to some last ditch efforts by Republican opponents.



    ... but sooner or later the 'bailout' bill is going to be passed.
    Last edited by Melonie; 06-29-2008 at 04:59 AM.

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    God/dess Deogol's Avatar
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    Default Re: US taxpayers were just 'double screwed'

    This will be all better when the Fed gets it's regulatory powers. (smirk)

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