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How to: Make a $50 billion loss into an asset

Posted on December 18th, 2011 at 17:09 by Sueyourdeveloper in category: News -- Write a comment


America’s tax code allows losses amassed during the meltdown … to be used to offset future tax bills. Since a bank is increasing its future cashflows by reducing expected tax payments, this is recorded as an asset on the balance-sheet.

JPMorgan Chase held DTAs of $16 billion at the end of last year, while Bank of America had $27 billion-worth. The undisputed deferred-tax king, however, is Citigroup with slightly more than $50 billion-worth, the largest discretionary accounting item in the company’s history (my italics).

To some, this looks highly optimistic. Mike Mayo, an analyst with CLSA, a broker, has relentlessly questioned Citi’s ability to produce enough taxable income to justify the asset and has suggested that it could be overvalued by $10 billion…

Conclusion: U.S. banks may be seriously inconvenienced by lower corporate taxes.

  1. And who was it the said the banks paid back their bailout money? Evidently they are still being bailed out.

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