Remember those massive fines against Wall Street banks for mortgage fraud? Well, the dirty little secret is the banks aren’t actually paying the fines, taxpayers are.
A loophole allowed banks to deduct 50-75% of the fines from their tax bill. Banks have so far deducted $40 billion in write-offs, which is more than double total welfare programs for needy families.
According to Newsweek:
At the Justice Department, senior officials like to congratulate themselves on the headline-making, big bucks settlements they have imposed upon banks and lenders for their part in causing the 2008 mortgage meltdown that sparked the biggest American financial crisis since the Great Depression.
But wait a moment. Those settlement figures are not quite what they seem.Buried deep in the announcements of the astronomical sums that Wall Street banks are being forced to pay is a dirty secret: A big chunk of the hundreds of billions of dollars banks have paid in settlements to various federal agencies and regulators since 2010 is deductible from the taxes banks and lenders pay.
When is a fine not a fine? When it can be put against your tax bill.
Because settlements can be deducted from tax liabilities, for nearly every dollar a bank or lender has pledged to pay in cash or pony up in other ways—such as through buying back soured mortgage-backed securities, extending cheaper loans or forgiving failed loans held by struggling homeowners—up to 35 cents will find its way back into bank coffers, a reflection of the 35 percent federal corporate tax rate.
Deep in the legalese weeds of the settlement documents lies buried treasure. Big banks such as Bank of America and JPMorgan Chase will receive deductions against the corporate tax that will amount to between half and nearly three-quarters of their multibillion-dollar settlements, at least. Meanwhile, midsized banks and nonbank lenders generally get to deduct the whole shebang.
Under Attorney General Eric Holder, whose agency has not prosecuted a single major bank or executive in the aftermath of the 2008 meltdown, the Justice Department has been criticized, not least by Democrats, for believing banks are too big to fail and their top brass too big to jail. But here’s the twist. It turns out that banks are also too big to tax: Windfall tax deductions set against the civil settlements imposed by the Justice Department total more than $44 billion, according to Newsweek estimates.
That’s a big sum. Yet it is not a figure the Justice Department appears aware of. In fact, the nation’s top law enforcement agency in charge of cracking down on perpetrators of the mortgage crisis says it has no clue exactly how much money and consumer-relief services the banks have agreed to hand over in settlements with the agency—or how much of a tax deduction the banks are getting through the settlement deals.
Newsweek went on to say:
Federal tax rules allow companies to deduct from their tax returns as an ordinary cost of doing business any settlement payments that are construed, explicitly or not, as restitution or compensation. Payments flagged as penalties or fines, typically outlined in criminal cases, are generally not deductible, as opposed to the civil settlements with banks.
Nicole Navas, a Justice Department spokeswoman, tells Newsweek that the agency has “engaged in a broad effort to hold financial institutions accountable for their misconduct related to the housing market.”
Misconduct, certainly. But accountable? Hardly.
“I would have thought that the DOJ would have had every reason to stipulate that these settlements are punitive and do not qualify for deductibility,” says Peter Enrich, a professor at Northeastern University School of Law. “It’s out of keeping with what the legal framework is meant to reflect.”
Similarly, JPMorgan Chase can deduct at least $7 billion of its $13 billion deal last November, and Citigroup can put at least $3 billion of its $7 billion deal last July against its taxes. This makes the total amount on which deductions can be taken as a result of settlements related to the wrongdoing that led to the 2008 financial crisis at least $44.1 billion, which translates into potential tax savings of about $15 billion.
By comparison, the Congressional Budget Office estimated in 2012 that the government’s $700 billion taxpayer-funded bailout of Wall Street financial institutions will ultimately cost U.S. taxpayers just $23 billion—and that mostly went to insurer AIG—as banks have paid back the federal funds they borrowed. (In another sign that government agencies can’t seem to agree, the Office of Management and Budget puts the bailout tab at $63 billion, meaning the settlement deductions would account for nearly 70 percent of the amount outstanding.)
Though the documents that record the settlements use hard words like “fraud,” “misrepresentation” and “deception” to describe the banks’ shenanigans, which would usually imply that deductibility was inappropriate, because the settlements were the result of civil rather than criminal actions brought by the Justice Department, punitive penalties translate in practice into a slap on the wrist.
You can continue reading more here if interested. In reality, most governments are a form of slavery and until humans beings begin to take back their innate spiritual power, this type of corruption will continue until our future generations literally have no future.