As if more evidence was needed that Wall Street has rigged the game in its favor, the IRS is going to allow the banks that engaged in a massive nationwide program of mortgage fraud to write off their settlement:
Consumer advocates have complained that U.S. mortgage lenders are getting off easy in a deal to settle charges that they wrongfully foreclosed on many homeowners.
Now it turns out the deal is even sweeter for the lenders than it appears: Taxpayers will subsidize them for the money they’re ponying up.
The Internal Revenue Service regards the lenders’ compensation to homeowners as a cost incurred in the course of doing business. Result: It’s fully tax-deductible.
The New Untouchables. Break the law, get a bailout. Break the law again, get a tax subsidy.
At least one lawmaker, Sen. Sherrod Brown, D-Ohio, wants regulators to bar the tax deductibility of the lenders’ costs..
“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.”
But it is Senator Brown. In fact, breaking the law is not just a business expense for Wall Street, it’s their business. The Finance, Insurance, Real Estate (FIRE) sector of the economy does not actually produce anything. The only way Wall Street can make tremendous profits is through fraud and chiseling.
From the New Yorker:
For years, the most profitable industry in America has been one that doesn’t design, build, or sell a single tangible thing…
Lord Adair Turner, the chairman of Britain’s top financial watchdog, the Financial Services Authority, has described much of what happens on Wall Street and in other financial centers as “socially useless activity”—a comment that suggests it could be eliminated without doing any damage to the economy…”It is possible for financial activity to extract rents from the real economy rather than to deliver economic value,”…
Paul Woolley, a seventy-one-year-old Englishman who has set up an institute at the London School of Economics called the Woolley Centre for the Study of Capital Market Dysfunctionality. “Why on earth should finance be the biggest and most highly paid industry when it’s just a utility, like sewage or gas?”… “It is like a cancer that is growing to infinite size, until it takes over the entire body….
Financial markets, far from being efficient, as most economists and policymakers at the time believed, were grossly inefficient. “And once you recognize that markets are inefficient a lot of things change.”…
Even after all that has happened, there is a tendency in Congress and the White House to defer to Wall Street because what happens there, befuddling as it may be to outsiders, is essential to the country’s prosperity. Finally, dissidents like Paul Woolley are questioning this narrative. “There was a presumption that financial innovation is socially valuable,” Woolley said to me. “The first thing I discovered was that it wasn’t backed by any empirical evidence. There’s almost none.”
And now after blowing up the housing market, fraudlently foreclosing on homeowners, sabotaging the independent foreclosure review process, and paying a meager settlement – Wall Street gets to write it all off on their taxes.
What a country.