« | Home | Categories | »

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

Quote

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.

previous post: Why the iPad Is the Most Hated Gadget Ever

next post: Head MPAA shill reduced to outright lies in bid to make the case for SOPA