At an event today at Community Housing Solutions with Ohioans who were unlawfully foreclosed on, U.S. Sen. Sherrod Brown (D-OH) released a letter to federal regulators urging them to cancel tax breaks for big banks involved in the settlement deal on unlawful foreclosures.
Earlier this month, a preliminary settlement was reached requiring 10 financial institutions to pay $8.5 billion to homeowners who were hurt by the mortgage crisis through unlawful foreclosures or mortgage servicing abuses. Despite the harm these financial institutions have inflicted on American homeowners and the economy, they are able to deduct from their taxes costs associated with settlement payments.
"It's unacceptable that these Wall Street banks can write off these mortgage settlements, shifting the cost to taxpayers. Banks that take a family's home because of errors or fraud should not get a tax deduction and a slap on the wrist. Breaking the law should not be a business expense."
Brown sent a letter today to the federal banking regulators and the U.S. Department of Justice urging them to prevent financial companies from claiming expenses related to legal settlements as tax deductions. Under current law, companies are able to take advantage of tax rules to deduct from their federal taxes the full value of any settlement payouts.
Below is full text of Brown's letter.
January 17, 2013
The Honorable Benjamin Bernanke
Board of Governors of the Federal Reserve
Washington, D.C. 20551
Mr. Thomas Curry
Comptroller of the Currency
Administrator of National Banks
Washington, D.C. 20219
Dear Chairman Bernanke and Comptroller Curry:
In the wake of the global financial crisis, the United States government has brought numerous civil, criminal, and enforcement actions against the largest financial institutions. These actions have included securities fraud, fair lending violations, consumer abuses, and market manipulation. The most recent example is last week's $8.5 billion settlement between the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), and the nation's 10 largest mortgage servicers for widespread fraud in the foreclosure practices of these servicers.
The acts of these institutions are doubly harmful to ordinary Americans. They suffer first as homeowners, consumers, and investors, but they suffer again as taxpayers because companies can deduct the cost of penalties from their federal tax bills. It is simply unfair for taxpayers to foot the bill for Wall Street's wrongdoing. I urge you, the Justice Department, and the other financial regulators to adopt the practice employed by the Securities and Exchange Commission (SEC), which prohibits companies from deducting settlement costs as a business expense. This rule should apply to this settlement as well as any future settlements with financial institutions. For too long, too many have treated breaking the law as a cost of doing business. It is not. Breaking the law should not be a business expense.
Thank you for your attention to this important matter.
United States Senator
Cc: The Honorable Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation
The Honorable Eric Holder, Attorney General, U.S. Department of Justice
The Honorable Gary Gensler, Chairman, Commodity Futures Trading Commission
The Honorable Shaun Donovan, Secretary, U.S. Department of Housing and Urban Development