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<DIV><FONT size=2>"And why are our local conservatives (loud proponents of free
enterprise/free markets) not screaming about this unneeded, unfair, totally
anti-capitalistic humongous infusion of <FONT color=#ff0000><STRONG>CORPORATE
WELFARE</STRONG></FONT>?"</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Speaking strictly for myself, it's been because instead of
yammering in multiple fonts and colors, I've been busy nagging my
representatives to the effect that if they ever wanted my vote in the future
they would vote no to any bale out plan what so ever. (or at least anything even
remotely to any of the plans I heard mentioned) For what it was worth, Mike
Crapo and Bill Sali were on board. Craig and Simpson caved. Jim Risch
indicated that he was not in favor of the measure. Sali walked the walk and will
definitely be getting my support (again) LaRocco, being his usual waste of
perfectly good oxygen wouldn't commit one way or the other and as a result Risch
will get my vote, not that there was much chance of it being
otherwise.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Does that answer your question?</FONT></DIV>
<DIV><FONT size=2>g</FONT></DIV></DIV>
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B>
<A title=deco@moscow.com href="mailto:deco@moscow.com">Art Deco</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A title=vision2020@moscow.com
href="mailto:vision2020@moscow.com">Vision 2020</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Monday, October 06, 2008 9:49
AM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> [Vision2020] A hidden
bailout</DIV>
<DIV><BR></DIV>
<DIV><FONT size=2>Below: an article on an under-the-table bailout of
banks, one in addition to the $700 Billion publicized one. Notice
this change in tax regulation was made by edict from the Treasury Department,
not by the congress, and is probably unconstitutional.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>And why are our local conservatives (loud proponents of free
enterprise/free markets) not screaming about this unneeded, unfair, totally
anti-capitalistic humongous infusion of <FONT color=#ff0000><STRONG>CORPORATE
WELFARE</STRONG></FONT>?</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>W.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Providence (God) is always on the side of the big dividends.
--Saki</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT
size=2>_______________________________________________________</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><STRONG><FONT size=5>After Change In Tax Law, Wells Fargo Swoops
In<BR></FONT></STRONG>
<P><FONT size=-1>By Binyamin Appelbaum<BR>Washington Post Staff
Writer<BR>Saturday, October 4, 2008; A01<BR></FONT></P>
<P></P>
<P>Wells Fargo's deal for <A
href="http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=WB&nav=el"
target="">Wachovia</A> could cost the federal government billions of dollars
in lost revenue as the San Francisco company takes advantage of a new change
in federal tax regulations designed to encourage bank mergers.</P>
<P>The change was made Tuesday by <A
href="http://www.washingtonpost.com/ac2/related/topic/U.S.+Department+of+the+Treasury?tid=informline"
target="">the Treasury Department</A>, one day after Wachovia agreed to be
rescued by <A
href="http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=C&nav=el"
target="">Citigroup</A>, and two days after Wells Fargo walked away from the
table, leaving Citigroup as the only bidder.</P>
<P>With the change in place, Wells Fargo renewed its pursuit of Wachovia, and
yesterday announced a surprise deal to buy the entire company for about $15.4
billion, topping Citigroup's $2.2 billion deal for most of it. Citigroup still
could sue or make a counteroffer. The winner will become the largest bank in
the Washington area.</P>
<P>In touting the deal, Wells Fargo executives said they did not need money
from the <A
href="http://www.washingtonpost.com/ac2/related/topic/Federal+Deposit+Insurance+Corporation?tid=informline"
target="">Federal Deposit Insurance Corp.</A>, which had agreed to limit
Citigroup's losses on a portfolio of Wachovia's most troubled loans.</P>
<P>"This agreement won't require even a penny from the FDIC," Wells Fargo
chairman Richard Kovacevich said.</P>
<P>But experts in tax law said the Wells Fargo deal actually was likely to be
more expensive for the government. Losses on Wachovia's portfolio of bad loans
would have been absorbed by the FDIC, which is funded by the banking industry.
Under the tax law change, those losses instead will allow Wells Fargo to
reduce its taxable income.</P>
<P>"They said they're doing it without federal assistance, but in reality they
are doing it with federal assistance. It's just tax assistance," said Robert
Willens, an expert on tax accounting who runs a firm of the same name.</P>
<P>The amount of lost tax revenue would depend on the future profitability of
Wells Fargo and the losses on Wachovia's loans, but based on Wells Fargo's
financial disclosures, <STRONG><FONT color=#ff0000>it could shelter $74
billion in profits from taxation.</FONT></STRONG></P>
<P>The Treasury Department said the change in tax laws was not intended to
benefit any particular company and had been under consideration for weeks. The
change was announced with a handful of other measures designed to buttress the
banking industry after the <A
href="http://www.washingtonpost.com/ac2/related/topic/U.S.+House+of+Representatives?tid=informline"
target="">House of Representatives</A> initially rejected the Treasury's
bailout plan.</P>
<P>Wachovia said it had no involvement in the change. Wells Fargo declined to
comment.</P>
<P>The Wells Fargo deal was greeted with joy by Wachovia shareholders, many of
whom thought Citigroup had taken advantage of Wachovia's short-term financial
problems to all but steal the company. Wachovia's stock rose 57 percent to
$6.13 in trading yesterday. But that was still below the roughly $7 a share
offered by Wells Fargo, reflecting continued uncertainty about which company
will prevail.</P>
<P>Wachovia and Wells Fargo have signed a merger agreement and both boards
have given their approval, although shareholders and regulators must still
sign off. Of course, Wachovia's board also has approved a sale to
Citigroup.</P>
<P>The New York company said it is reviewing its options. Citigroup and
Wachovia signed an agreement to negotiate a final deal exclusively. The
agreement, provided to <A
href="http://www.washingtonpost.com/ac2/related/topic/The+Washington+Post+Company?tid=informline"
target="">The Washington Post</A> by Citigroup, bars Wachovia from talking
with other companies. And legal experts said that it appears to be unusually
strong, giving Citigroup considerable legal leverage.</P>
<P>"Citigroup is now in a good bargaining position to go to Wachovia and Wells
Fargo and say, 'You know something, clearly you breached this agreement,' "
said Elizabeth Nowicki, a law professor at <A
href="http://www.washingtonpost.com/ac2/related/topic/Tulane+University?tid=informline"
target="">Tulane University</A> and an expert on mergers and acquisitions.</P>
<P>Nowicki said Citigroup could simply demand a large payment or it could try
to force Wachovia back to the negotiating table. Citigroup also could choose
to raise its bid, perhaps taking advantage of the tax benefits now available
to any bank that buys Wachovia.</P>
<P>Those tax advantages are the key to understanding the unusual events of the
past week.</P>
<P>Wachovia was laid low by a series of bad deals in recent years, culminating
in 2006 with the $25 billion acquisition of <A
href="http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=GDW&nav=el"
target="">Golden West Financial</A>, a major California mortgage lender. As
the housing market and the economy weakened, Wachovia found itself holding
hundreds of billions of dollars in troubled loans. By last weekend, federal
regulators were increasingly concerned that the company might collapse,
forcing the FDIC to cover its depositors.</P>
<P>Federal regulators thought Wells Fargo was ready to buy the bank, but the
company walked away from the table Sunday afternoon, saying it could not
afford to absorb the losses on Wachovia's loan portfolio.</P>
<P>That left Citigroup as the sole bidder. Government regulators negotiated
with the company through the night before announcing a deal early Monday
morning.</P>
<P>Citigroup agreed to buy Wachovia's banking business but not its retail
brokerage or asset management business. In exchange, the FDIC promised to
limit Citigroup's losses on a $312 billion portfolio of Wachovia's most
troubled loans. The government agreed to absorb all losses beyond $42 billion
in exchange for a $12 billion stake in Citigroup.</P>
<P>Wachovia and Citigroup immediately entered final talks on a merger
agreement. And Citigroup began providing Wachovia with cash to stay in
business.</P>
<P>Then, on Tuesday, Wachovia's troubled loan portfolio -- specifically its
losses -- were transformed by the government from straw into gold.</P>
<P>Companies are allowed to shelter profits from taxation based on their past
losses. When a profitable company buys a company with losses, however, the
government historically has limited the profitable company's ability to
shelter its income based on the acquired company's losses. In the case of
Wells Fargo, the company could only have sheltered about $1 billion in income
each year, said Willens, the accounting expert.</P>
<P>The Tuesday change, however, specifically removes limits on the income
banks can shelter based on the losses of acquired companies. In announcing its
deal for Wachovia, Wells Fargo estimates it would write down $74 billion in
losses on Wachovia's loan portfolio.</P>
<P>Losses can be used to shelter income for as long as 20 years. So under the
old law, Wells Fargo would have received a maximum benefit of $20 billion in
tax protection, and only up to $1 billion each year. Now, the company could
shelter from taxation its next $74 billion in profits.</P>
<P>The benefit is available to any bank. But right now, Wells Fargo is the
rare bank with profits that might be taxed -- Citigroup, for example, is badly
in the red -- because Wells Fargo has pursued an unusually cautious strategy
since a 1998 merger made the bank one of the largest in the Western United
States.</P>
<P>While Wells Fargo was one of the nation's largest mortgage lenders, and one
of the largest subprime lenders, the company avoided the excesses of its
rivals, dealing more cautiously with its customers. Wells Fargo also has
little presence on <A
href="http://www.washingtonpost.com/ac2/related/topic/Wall+Street?tid=informline"
target="">Wall Street</A> and largely avoided investments in mortgage-related
securities that are damaging other banks.</P>
<P>Regulators were surprised by the Wells Fargo deal and initially issued
statements expressing concern. But people familiar with the thinking of the
regulators said they were reviewing the situation primarily to determine
whether the government had any legal obligation to Citigroup, and that they
were not inclined to intervene unless they were required to do so.</P>
<P>For the FDIC in particular, the deal could come as a welcome relief, ending
its exposure to Citigroup's future losses. That is particularly important
because the FDIC initially estimated Citigroup's losses were unlikely to
exceed the $42 billion threshold. Wells Fargo's higher estimate of losses are
likely to be imposed on Citigroup even if it prevailed, exposing the FDIC to
billions of dollars in losses.</P>
<P>At the same time, the deal could complicate the FDIC's ability to deal with
future bank failures by reducing the willingness of banks to bid for failed
institutions.</P>
<P>Citigroup propped up Wachovia for a week and now may be left
empty-handed.</P></DIV>
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