Tim Geithner twisting the facts on TARP Returns

By Binyamin Appelbaum
Washington Post Staff Writer
Wednesday, December 16, 2009

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

"The government is consciously forfeiting future tax revenues. It's another form of assistance, maybe not as obvious as direct assistance but certainly another form," said Robert Willens, an expert on tax accounting who runs a firm of the same name. "I've been doing taxes for almost 40 years, and I've never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts."

At the end of the third quarter, Citigroup said that the value of its past losses was about $38 billion, allowing it to avoid taxes on its next $38 billion in profits. Under normal IRS rules, a change in control would sharply reduce the amount of profits that Citigroup could shelter from taxes in any given year, making it much more difficult for Citigroup to realize the entire benefit before the tax breaks expired.

The precise value of the IRS ruling depends on Citigroup's future profitability and other factors, but two accounting experts said it was fair to estimate that Citigroup would save at least several billion dollars as a result.

Treasury acknowledged that the tax break was significant, but a senior official said the benefit was unavoidable. Either the government changed the rules and parted ways with Citigroup or the company kept the government as a shareholder and kept the tax break anyway.

Link to Full Article

Tim Geithner Interview with Maria Bartiromo/CNBC 3/29/10

BARTIROMO: I want to ask you more about how financial reform will play out, because it is important and we are going to see substantial change. Let me come back to that, because you are making the final preparations right now to sell the government’s stake in Citigroup, and that 27% stake and why now?

GEITHNER: Well, again, it points out how far we have come. I mean we have had $175 billion of the taxpayers’ investments come back to the Treasury because before, we forced these institutions to go out and raise private capital to replace the public’s investments and we have earned about $20 billion in profits on the investments. This is the next stage of us moving to make sure we are getting out of the financial system as quickly as we can, because we don’t want to be in the business of owning a share in a private company a day longer than necessary, and it is a sign of how much progress we have made already.

Grandpa: Mr. Geithner, you are completely misrepresenting the alleged return to us taxpayers. Also, cease with the government speak as we did not request you to “invest” in any Wall Street bank. What comes in the front door does not reflect what you have authorized to sprint out Treasury’s back door.

* Citigroup has the potential of a $38 billion tax break
* JP Morgan reported the potential of a $1.4 billion tax refund
* Wells and Fargo benefited from a $4.1 billion tax gain in 2009
   as a result of Wachovia losses
*Bank of America $500 million tax savings during the first 5 years
  of Countrywide Mortgage ownership.

Do you think we citizens do not read Mr. Geithner?