Section 382

There's the typical over-sensational headline and train wreck of a discussion over at reddit. I gave a brief reply there and perhaps I'll make a more full post here later but I wanted to fill in a few blanks on a current news item.

The precise headline should be "Treasury/IRS waives section 382 for bank mergers/acquisitions", but of course nobody knows what that means so it gets translated into "$140Bn give away to banks" which really doesn't describe the situation very well.

The provision keeps you from being able to buy a bankrupt company 'shell' and use its past losses to offset your future (and past) tax liability.

One of the angles the Treasury is pursuing is to encourage successful and sound banks to acquire failing ones. Waiving this limitation is one measure they took to do that. So while you might disagree with the fairness of it there is at the least a defensible logic to it.

My understanding of the "is it illegal?" question is whether or not the Treasury has the authority to do this on its own, or if it requires an act of Congress.

Like many news stories; if you listen really closely you can actually pick out all of these elements from Maddow's description of the situation. But they're subtle and easy to miss if you're not ALREADY familiar with the subject matter. Here's some much more in-depth coverage at The Washington Post.