Crony Capitalism Update

“We’re not bound by the same laws as you are” Edition

If anyone out there had any questions as to why the Automaker and Financial Bailouts stank on ice, here’s a little reminder.

Gangster Government at Treasury?

By:Michael Barone | The Washington Examiner

If this article by professors at Harvard Law School and Indiana University Business School is correct (hat tip to Paul Caron’s taxprof blog and Glenn Reynolds’s Instapundit), the Treasury acted contrary to law when it ruled that post-bankruptcy General Motors could utilize $45 billion in pre-bankruptcy net operating losses to reduce any corporate income taxes it may owe. The article is
entitled “Can the Treasury Exempt Its Own Companies from Tax? The $45 Billion GM NOL Carryforward,” and the authors’ answer is No.

“Treasury solved this problem by issuing a series of “Notices” in which it announced that the law did not apply. On its terms, § 382 states that the NOL limits apply when a firm’s ownership changed. That rule, the Treasury declared, did not apply to itself. Notwithstanding the straightforward and all-inclusive statutory language, GM would be able to continue to use its NOLs in full after the Treasury sold its
stock.

The Treasury had no legal or economic justification for these Notices, which applied to Citigroup and AIG as well as to GM.  Nonetheless, the Notices largely escaped public attention, though they had the potential to transfer significant wealth to loyal supporters (the UAW). That it could do so illustrates the risk involved in this manipulation. We suggest that Congress give its members standing to challenge such manipulation in court.”

This Red Queen approach to the law cannot be allowed to stand.

The levels of uncertainty which have been introduced into our foreign policy, our regulatory schemes, and the law itself are inimical to the long term interests of the Republic.

UPDATE: Glenn “Instapundit” Reynolds on 0bama Administration lawlessness:

All I can say is, you expected respect for legal niceties from a Chicago machine politician? Hey, Rube!

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