There’s Skullduggery Afoot

If you haven’t read Naomi Klein’s The Shock Doctrine, you have missed a clear account of how the powerful operate behind the scenes. It should be required reading for all our elected officials. Perhaps then, they would not be so easily snookered.

The powerbrokers with a laundry list of goals, just keep pushing to achieve them. No matter how many times they fail, they just keep trying. Sometimes they manage to distract the populace and quietly slip something in under the radar. But their biggest moves take place whenever there is any kind of turmoil – be it a natural calamity or a man made crisis. During these times they take advantage of the confusion and shock caused by the upheaval to force something through and pressure Congress using fear. The fear of looking unpatriotic as with the Iraq war resolution, or in this case, the fear of making waves that might add to the financial crisis.

A November 10 Washington Post article, A Quiet Windfall for U.S. Banks, describes this latest move of Bush and company to make changes that serve business interests but not the interests of the people.

In September, at the height of the $700 billion bailout hullabaloo, the Treasury Department issued a notice that changed “two decades of tax policy.” This change, which has to do with the use of losses to offset gains in mergers, gave American banks a tax break worth an estimated $140 billion; reducing government revenues and essentially increasing the bailout by that amount. So now instead of a $700 billion bailout, we have a $840 billion bailout - without voting on it.

Is that legal? Maybe not. According to the Post article:

More than a dozen tax lawyers interviewed for this story -- including several representing banks that stand to reap billions from the change -- said the Treasury had no authority to issue the notice.

When asked if Treasury had the authority to do this, George K. Yin, former chief of staff of the Joint Committee on Taxation said:

I think almost every tax expert would agree that the answer is no. They basically repealed a 22-year-old law that Congress passed, as a backdoor way of providing aid to banks.

What makes this move, at this time suspect? If claims by Treasury spokesman, DeSouza, that the legal authority came from Section 382 itself is true, why wait until now to do it?

The change to Section 382 of the tax code -- a provision that limited a kind of tax shelter arising in corporate mergers -- came after a two-decade effort by conservative economists and Republican administration officials to eliminate or overhaul the law… (emphasis added). Until the financial meltdown, its opponents thought it would be nearly impossible to revamp the section because this would look like a corporate giveaway, according to lobbyists.

So what are our elected representatives going to do about this?

Lawmakers are considering legislation to undo the change. According to tax attorneys, no one would have legal standing to file a lawsuit challenging the Treasury notice, so only Congress or Treasury could reverse it. Such action could undo the notice going forward or make it clear that it was never legal, a move that experts say would be unlikely.

Then what is the problem? F E A R !

… several aides said they were still torn between their belief that the change is illegal and fear of further destabilizing the economy.

Some legal experts said these under-the-radar objections mirror the objections to the congressional resolution authorizing the war in Iraq.

"It's just like after September 11. Back then no one wanted to be seen as not patriotic, and now no one wants to be seen as not doing all they can to save the financial system," said Lee A. Sheppard, a tax attorney who is a contributing editor at the trade publication Tax Analysts. "We're left now with congressional Democrats that have spines like overcooked spaghetti. So who is going to stop the Treasury secretary from doing whatever he wants?"

Sounds like it’s up to we the people. If we don’t voice our objections, if we don’t let Congress know we are paying attention to how well they protect our interests as they promised to do when they passed the bailout bill, then we cannot just blame them.

Obama made it clear that if we want change, we have to work for it. Are we up to it?