Treasury protecting the taxpayers from…Congress

Posted by Marc Hodak on November 8, 2009 under Governance, Politics | Be the First to Comment

Well, Treasury blocked the sale of Fannie Mae tax credits to Goldman Sachs and Warren Buffet:

Treasury Department officials blocked the deal after concluding that it would have resulted in a loss of tax revenues greater than the savings to the federal government had it allowed the sale. “In short, withholding approval of the proposed sale affords more protection of the taxpayers than does providing approval,” an administration official said in a statement.

As noted earlier, this sale would have helped Fannie and Freddie improve their financial positions while promoting the public policy intent of these tax breaks, i.e., spurring low-income housing.  The Administration’s objection no doubt centered on the idea that Goldman might have also benefited, a politically difficult fact that Saint Warren’s involvement could not overcome.

So Treasury, which appoints the board of Fannie and Freddie is breaching its duty of loyalty as the conservator of those wounded institutions, making it more likely that they will end up going to Treasury for another bailout, while undermining the public policy intent of Congress in creating those tax credits.

On the other hand, if Treasury can get away with arguing in favor of taxpayers on this tax credit, why don’t they overturn every tax credit in the name of helping taxpayers with something resembling a fair and flat tax?  Why should taxpaying renters be penalized by the existence of a mortgage interest tax credit?  Why should taxpaying singles and childless couples be penalized by a child care tax credit? ….