"Bipartisan Pair Of Senators Wants To End Pernicious Tax Break For Big Banks"
Many of the nation’s largest banks have, in the last few weeks, signed settlements with the federal government over a variety of foreclosure abuses. Bank of America, Goldman Sachs, and Morgan Stanley will all be paying up, as will a slew of other banks who joined an $8.5 billion settlement.
However, tucked away in these settlements is a problem: the costs are tax-deductible. As the New York Times’ Gretchen Morgenson explained, “the banks can claim them as business expenses. Taxpayers, therefore, will likely lighten the banks’ loads.” At least two U.S. senators think that taxpayers shouldn’t have to cover the cost of the banks’ mistakes:
“The government is abetting the behavior by not preventing the deduction,” said Sen. Charles Grassley, R-Iowa. “The taxpayers end up subsidizing the Wall Street banks after the headlines of a big-dollar settlement die down. That’s unfair to taxpayers.” [...]
At least one lawmaker, Sen. Sherrod Brown, D-Ohio, wants regulators to bar the tax deductibility of the lenders’ costs. Brown made his argument in a letter to Federal Reserve Chairman Ben Bernanke, U.S. Comptroller of the Currency Thomas Curry and other top regulators. The Fed and the comptroller’s office, a Treasury Department agency, negotiated the foreclosure abuse settlements with the banks.
“It is simply unfair for taxpayers to foot the bill for Wall Street’s wrongdoing,” Brown wrote in the letter dated Thursday. “Breaking the law should not be a business expense.”
The latest round of bank settlements has already been panned by critics for letting banks “sweep past abuses under the rug.” And now taxpayers are subsidizing the slight cost that the banks will be paying.