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Statement from Michelle Surka, program associate with U.S. Public Interest Research Group, regarding some federal agencies potentially reopening old banking settlements, as reported in today’s New York Times. The SEC is also reportedly delaying the final execution of August’s announced $16.65 billion settlement with Bank of America while deliberating about issuing waivers to soften regulatory repercussions of the deal.
“The SEC should take a stand and show that the settlement agreements it signs with banks over past misdeeds are not just ordinary costs of doing business.
“It’s good that agencies are examining how to better ensure that settlements deter future misbehavior. One improvement would be for government agencies to be more forthright about these deals in the first place. They should publish the full details of their settlements online, and be clear about whether sanctions will be waived that would otherwise be triggered by findings of misbehavior. Agencies should also be clear about whether the amounts they announce in headlines include ‘credits’ for actions the bank might take anyway or whether banks can write off payments as tax deductions to reduce the actual cost.
“If past settlements have been too soft to prevent banks’ further misdeeds, then one way government agencies can firm up the settlements they sign is to follow the example of the Consumer Financial Protection Bureau and explicitly prohibit settlement payments from being used as a tax deduction. This makes a big difference. This summer’s announcement of the SEC and Department of Justice’s settlement with Bank of America failed to mention that the agreement allows the bank to offset its costs with a $4 billion tax windfall. As it stands now, this information is not clearly reported.”
You can also read U.S. PIRG’s report on tax write-offs in settlements here: “Subsidizing Bad Behavior: How Corporate Legal Settlements for Harming the Public Become Lucrative Tax Write-Offs.
U.S. PIRG has created a fact sheet on Wall Street settlement tax deductions.
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