The Bush administration almost slips one by everyone

Source: "A Quiet Windfall For U.S. Banks: With Attention on Bailout Debate, Treasury Made Change to Tax Policy," by Amit R. Paley, The Washington Post, November 10, 2008.

In late-September the Treasury Department issued a five-sentence notice changing the interpretation of a 22 year old law. The change WAS to Section 382 of the tax code which prevented companies from sheltering profits by writing off losses of companies that they had recently acquired. The change is now seen as encouraging the acquisition of companies with losses by companies with profits, having the effect of providing tax incentives for the acquisition of failing companies. The Washington Post article suggests that this may give banks a windfall of $140 million, and that other firms (such as those in the biotechnology industry) will also profit.

Apparently the change occurred with almost no public notice, in part due to the timing in which the media were full of the subprime mortgage meltdown and bailout. Apparently the new rulings are very controversial, with conservative tax lawyers holding they are legal and within the limits of regulatory flexibility given to the administration by the Congress, while others hold that they are not legal.

Comment: It sounds to me as if the new regulations will contribute to further concentration of American industry and reduction of competition. I wish I trusted the Bush administration more. Some of people are probably going to get still richer due to the action done silently in the final days of its lame duck status. JAD