Posted tagged ‘section 163’

Should Banks Be Entitled To Tax Deductions For “Dividends” On TARP Stock?

January 30, 2012

By Jonathan Prokup & Dustin Covello

Four years have passed since Congress enacted the Troubled Assets Relief Program, better known as TARP.  After Treasury determined that frozen credit markets were threatening the U.S. financial industry and even the entire economy, it asked Congress to authorize the purchase of illiquid mortgages from banks.  Congress obliged, authorizing Treasury to purchase up to $700 billion of these so-called “toxic assets.”

Soon after the enactment of TARP, Treasury Secretary Henry Paulson changed course and decided that investing directly in the banks would better serve TARP’s goals than would buying illiquid mortgages.  Readers may remember Paulson’s next extraordinary and unprecedented move: summoning the CEOs of our country’s nine largest banks to Washington, the Secretary informed each of them that they must accept $25 billion worth of TARP investments—no questions asked.  As one observer told the New York Times, Paulson’s “was a take it or take it offer. . . . Everyone knew there was only one answer.” (more…)


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