[Infowarrior] - Treasury's own Enabling Act?

[Richard Forno]

Salient points from today's WaPo article.   Compare that with similar  
situations involving USA PATRIOT Act, warrantless wiretapping, etc,  
etc, etc.   This is exactly what folks on both sides of the aisle  
worried about in September when Treasury lobbied for these powers.   
Turns out they were right to be skeptical.      -rf


http://www.washingtonpost.com/wp-dyn/content/article/2008/11/09/AR2008110902155.html

A Quiet Windfall For U.S. Banks
With Attention on Bailout Debate, Treasury Made Change to Tax Policy

The financial world was fixated on Capitol Hill as Congress battled  
over the Bush administration's request for a $700 billion bailout of  
the banking industry. In the midst of this late-September drama, the  
Treasury Department issued a five-sentence notice that attracted  
almost no public attention.

But corporate tax lawyers quickly realized the enormous implications  
of the document: Administration officials had just given American  
banks a windfall of as much as $140 billion.

The sweeping change to two decades of tax policy escaped the notice of  
lawmakers for several days, as they remained consumed with the  
controversial bailout bill.

< - >

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, which is so little-known  
that even influential tax experts sometimes draw a blank at its  
mention. 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.

Andrew C. DeSouza, a Treasury spokesman, said the administration had  
the legal authority to issue the notice as part of its power to  
interpret the tax code and provide legal guidance to companies. He  
described the Sept. 30 notice, which allows some banks to keep more  
money by lowering their taxes, as a way to help financial institutions  
during a time of economic crisis. "This is part of our overall effort  
to provide relief," he said.

< - >

No one in the Treasury informed the tax-writing committees of Congress  
about this move, which could reduce revenue by tens of billions of  
dollars. Legislators learned about the notice only days later.

DeSouza, the Treasury spokesman, said Congress is not normally  
consulted about administrative guidance.

Sen. Charles E. Grassley (R-Iowa), ranking member on the Finance  
Committee, was particularly outraged and had his staff push for an  
explanation from the Bush administration, according to congressional  
aides.

< - >

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.

< - >

"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?"