Word that 13 of the 23 largest beneficiaries of the $700 billion federal aid program for the financial sector owe over $220 million in unpaid U.S. income taxes is just the latest sorry saga to the corporate bailout scheme.
It this what Bush Treasury Secretary Hank Paulson intended when he made his evening plea to congressional Democratic leaders to give him the money to make sure banks don’t fail? The seeming willingness of the Treasury Department to ignore obvious problems in the implementation and oversight of the program indicate the whole program may be writ large in the history books as a fiasco.
A House oversight subcommittee investigation of the tax records of the top 23 firms accepting money from the program found that two of the 13 delinquent companies owe over $100 million each. An additional $330,702 in penalties is also due by those firms, and nine of the companies owe nearly $883,000 in unpaid federal employment taxes. There is a bit of guilt-by-association involved, since the specific names of the firms - which are among the top 20 participating banks, along with insurance giant American International Group, Inc. and two U.S. automakers - cannot be released due to IRS statutes.
To paraphrase Rep. John Lewis, Georgia Democrat, whose subcommittee conducted the review, what would an investigation of all 470 companies that received money from the program turn up? What if the sleuthing was expanded beyond their federal tax liabilities?
Qualms about the program’s mission and the treatment of U.S. corporations in the tax code aside, the findings also beg the question of how this could have happened. It is the law, after all, that companies and citizens pay taxes incurred. But it turns out the Treasury Department has simply required companies to sign contracts stating that they have no material unpaid federal taxes. No one at Treasury apparently bothered to ask for documentation or check with the IRS to see if it was true.
Given the giant hoops that everyday citizens with good credit are being forced into for home loans in the current credit environment, the irony can not be overstated.
With $300 billion already spent and more bailouts on the way, the Obama administration must ensure that such naivety and incompetence do not continue in this program nor find their way into the stimulus package’s spending. Making sure federal spending is conducted in a proper manner is an integral part of ensuring the fiscal responsibility that President Obama says he wants to impose on the federal coffers.
But with Mr. Obama traveling the country promoting his budget for next year, and Treasury Secretary Timothy Geithner under attack from all sides for his central role in the AIG bailout, and the Treasury Department seemingly flailing in exercising its duty to taxpayers, we wonder just who will actually do the job.