The ink had not yet dried on the new tax bill that dramatically averted the dreaded fiscal crisis -- the default budget that was predicted to throw the U.S. economy back into a recession -- and already banks were squirming.
In a Securities and Exchange Commission filing, The Wall Street Journal reported, Goldman Sachs had distributed 508,104 shares valued at $64.8 million in December, a month earlier than normal, given the anticipation thick in the air that Congress would raise taxes on wealthy wage earners.
The bank dutifully withheld 48 percent of the awards, which went to the firm's top executives, to cover taxes, but pointedly assigned the compensation to the prior year, allowing them to be taxed before Congress raised the rates on those earning $400,000 a year or more.
The moral of the story is that certainly the country's most successful bankers should be savvy enough to dodge a simple tax law when they need to. This is what company shareholders and spouses and children of executives expect. Any bank that missed the deadline, frankly, is not keeping up. This thing was all over the newspapers, after all.
In the same news cycle, The Washington Post reported that a new study found that federal agencies have recently been taking better care to ensure that settlements paid by misbehaving corporations not be used as tax deductions.
How's that again?
It turns out that the millions and sometimes billions of dollars corporations pay to settle charges of illegal behavior can be written off as a business expense. Of course, corporations often enough need not admit any guilt related to the charges. After all, these are out-of-court settlements and court is the only place were guilt can be assigned.
Take, for example, the case of Wells Fargo settling charges that it steered Latinos and African-Americans towards high-interest sub-prime loans, charging them exorbitant fees along the way. The bank agreed to pay $175 million to have the charges dropped, allowing everyone to skip a drawn out trial.
Handily, the Post reported, the portion of the $175 million that is used to compensate victims can be written off as a business expense. Among the losers here are taxpayers subsidizing penalties imposed on corporations for wink-wink, nudge-nudge, illegal behavior.
But the U.S. Public Interest Research Group, a think-tank, found that federal agencies were paying more attention to penalties subsidized by taxpayers. Since 2003, the Securities and Exchange Commission has a blanket rule that forbids any of its punitive settlements to be used as tax write-offs. The Justice Department in two recent cases -- a $500 million settlement with UBS on Libor manipulation and a $4 billion settlement with BP over the Gulf of Mexico oil spill -- stipulated that the penalties not be handed off to taxpayers.
The question of the day, of course, is what happened to all those loopholes Republicans promised they would close as part of the new tax code? Was closing loopholes a pledge or a bargaining chip -- a promise or just a threat?
In international markets, the Nikkei 225 index in Japan was closed, while the Shanghai composite index in China rose 1.61 percent. The Hang Seng index in Hong Kong gained 0.37 percent, while the Sensex in India added 0.26 percent.
The S&P/ASX 200 in Australia climbed 0.74 percent.
In midday trading in Europe, the FTSE 100 index in Britain gained 0.1 percent, while the DAX 30 in Germany slipped 0.32 percent. The CAC 40 in France dropped 0.53 percent, while the Stoxx Europe 600 rose 0.29 percent.
Don't panic, stocks will rebound