JP Morgan Paid $1.9 Billion For Washington Mutual And Now It Wants A $1.4 Billion Tax Refund

Business Insider ^ | 3/24/10 | John Carney

[Nachum]

JPMorgan Chase is negotiating with the FDIC for a tax refund related to its acquisition of Washington Mutual that could amount to $1.4 billion, The Wall Street Journal is reporting this morning.

A little noticed change in tax law was incorporated into the extension of jobless benefits last year. Under the new rules companies can use losses to apply for tax refunds against earnings from the past 5 years--up from just 2 years before the change.

It isn't just JP Morgan that is benefiting from the tax changes. The WSJ reports

[GeronL]

Wards of the state. Partners in crime.

[Parley Baer]

Obamaomics at work. Unintended consequences. Heck maybe intended.

[The_Victor]

I'm not going to get angry at JP Morgan for using the rules to their maximum benefit.

Our government on the other hand....

[Mouton]

Who do you think help write the rules?

[2001convSVT]

This is Fascism.

[The_Victor]

Who do you think help write the rules?

Our government can ask the advice of anyone, including you and me, for input in writing legislation. But it is Congress that writes and is ultimately responsible for the content of every law.

[griswold3]

Corporatism at work.
The Health Care bill was to transfer the burden on the taxpayer to ‘give our corporations an even playing field’.

[dragnet2]

Yes, but all the little tax peons must pay their bills!

[dirtboy]

A little noticed change in tax law was incorporated into the extension of jobless benefits last year.

And who was running Congress and signing legislation last year? The Democrats.

[Defiant]

If you go back to the posts from our fight against the TARP bill, one of the solutions I was suggesting as an alternative was a law that let the banks sell their losses to companies that had profits. So, for example, if WaMu had $4 billion in losses, and BofA had $4billion in gains, it could sell the loss to BofA at 50c on the dollar, and both would benefit. That would let the companies that were going under stay afloat. It would cost the government revenue (from BofA having lower taxes) but that would be fair, because companies like WaMu don't get money back from the government when they lose money, only when they make money. It would spread the gains and losses around in the industry. And it would benefit the overall economy by keeping banks like WaMu alive. The government and society would benefit in the long run.

Instead they passed that monster, the TARP bill. But it looks like when they forced banks with money to purchase banks that were going under, they sweetened the pot a little. If that was part of the deal going in, I'm ok with it. Those banks didn't want to purchase failing banks to begin with, the feds forced them to.

[CutePuppy]

Actually, things are a lot simpler - it's pure tax law. It's related to WaMu NOLs transferred to JPMorgan, and the issue was only who would get the refund (WaMu bondholders or new owner, JPMorgan) and part of that going to shore up FDIC. Liability of tax refund itself was not in question, only who gets to split it and in which proportions.

JPMorgan Near Tax Refund Deal with FDIC - CNBC / Reuters, 2010 March 24

As part of a larger settlement with Washington Mutual's bondholders, JPMorgan can claim $1.4 billion of funds in the FDIC receivership to protect itself against exposure to mortgages that WaMu serviced...

Washington Mutual, which is tied to the biggest bank failure in U.S. history, is eligible to receive about $5.6 billion in tax refunds as part of a court settlement.

WaMu was seized by the FDIC in 2008 and was later sold to JPMorgan for $1.9 billion.

On March 12, Washington Mutual agreed to split the two potential tax refunds with JPMorgan and the FDIC.

WaMu agreed to receive $900 million of a $2.6 billion expected return, with the rest going to JPMorgan.

A second $2.6 billion return will bring in $1.04 billion for Washington Mutual with the rest going to the FDIC.

[GeronL]

Simple?

Corporate welfare it sounds like.

You either owe $$ or you don’t. That would be simple.