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To: steve harris who wrote (290752)	11/11/2010 8:48:31 AM
From: joseffy	Respond to of 306849

Stupidest Lawsuit Ever Has Us Suing Ourselves ....................................................... by Jonathan Weil Wednesday November 10, 2010 finance.yahoo.com Of all the absurdities to emerge from the government’s never-ending bailout of the U.S. financial system, here’s a new one that’s hard to top: The government, through Freddie Mac, in effect is now suing itself. Never let it be said that Bailout Nation doesn’t have a sense of humor. It would be only a slight hyperbole to say this may be the stupidest lawsuit ever. Here’s what happened. In July the Internal Revenue Service told Freddie Mac, the congressionally chartered housing financier, that it owed $3 billion of back taxes and penalties for the years 1998 through 2005. Rather than pay up, the McLean, Virginia-based company sued the IRS on Oct. 22 in U.S. Tax Court to contest its claims. Before Freddie Mac could do that, it had to seek written permission from its conservator, the Federal Housing Finance Agency. FHFA, whose mandate is supposed to include looking out for taxpayers, consented. Freddie Mac disclosed the suit last week in a footnote to its third-quarter financial report. Talk about biting the hand that feeds you. Here we have a government-sponsored enterprise -- which depends on Treasury’s financial support to remain solvent -- suing an arm of the Treasury Department. Some thanks this is. To date, Treasury has injected about $64 billion into Freddie Mac and collected $8.4 billion of cash dividends on its senior preferred stock in the company. The Treasury Department also holds a warrant to buy 79.9 percent of the company’s common stock for a nominal price. So Freddie Mac can’t claim it’s simply protecting shareholders by taking on the IRS. Under its conservatorship, the company’s board answers only to the FHFA, which has complete authority over Freddie Mac’s affairs. Lawyers Win The details of the tax dispute are beside the point. No matter how the case turns out, the result more or less should wind up being a wash for taxpayers. The only people who stand to make money from the litigation are Freddie Mac’s outside attorneys at Shearman & Sterling. Consider some possible scenarios. If the IRS loses, that would be a win for taxpayers in the sense that Treasury won’t need to send as much bailout money to Freddie Mac in the future. Yet the public also would lose because the government wouldn’t get its $3 billion of revenue. Alternatively, if the IRS wins, it would be a victory for taxpayers, too. Of course, they would still lose because Freddie Mac would have an even bigger capital hole after paying the $3 billion. The Treasury then would have to inject more money into the company to keep it from becoming insolvent and falling into mandatory receivership. Matter of Principle An IRS spokesman, Eric Smith, declined to comment. So did Robert Rudnick, a partner at Shearman & Sterling in Washington. Corinne Russell, an FHFA spokeswoman, declined to comment when I asked why the agency gave Freddie Mac permission to sue the IRS. FHFA’s acting director, Edward DeMarco, didn’t return phone calls. A Freddie Mac spokeswoman, Sharon McHale, cast the company’s decision to sue the IRS in terms of principle. “We believe that we did not in prior years have federal tax deficiencies and that we are not liable for any penalties,” she said. Freddie Mac, she added, “has an obligation to run the company according to the laws of the land. And in an instance where we believe we’re in the right, we believe we have an obligation to assert that.” No Call OK, fine. But shouldn’t it also have been the job of someone in the government to exercise some common sense here? Surely the head of FHFA could have picked up the phone and called someone at Treasury to work out a truce. Or, if that wasn’t possible, FHFA could have told Freddie Mac to pay its IRS bill, tap Treasury for more bailout money, and stop ringing up legal fees. For what it’s worth, I checked the disclosures at Freddie Mac’s cousin, Fannie Mae, which also was seized by the government in 2008. Fannie Mae reached a settlement with the IRS over its tax returns for 1999 through 2004. Score one for cooler heads. Freddie Mac said in its latest quarterly report that “it is reasonably possible” the company will reach a settlement with the IRS within the next 12 months. We can only hope.

To: steve harris who wrote (290752)	11/11/2010 9:15:39 AM
From: joseffy	Read Replies (1) \| Respond to of 306849

White House edits stain its reliance on science ......................................................... … By DINA CAPPIELLO, Associated Press – Wed Nov 10, 2010 news.yahoo.com WASHINGTON – The oil spill that damaged the Gulf of Mexico's reefs and wetlands is also threatening to stain the Obama administration's reputation for relying on science to guide policy. Academics, environmentalists and federal investigators have accused the administration since the April spill of downplaying scientific findings, misrepresenting data and most recently misconstruing the opinions of experts it solicited. Meanwhile, the owner of the rig that exploded in the Gulf of Mexico, Transocean Ltd., is renewing its argument that federal investigators are in danger of allowing the blowout preventer, a key piece of evidence, to corrode as it awaits forensic analysis. Testing had not begun as of last week, the company says, some two months after it was raised from the seafloor. The blowout preventer could be a key piece of evidence in lawsuits filed by victims, survivors and others. Transocean was responsible for maintaining it while it was being used on BP's well. Investigators agreed to flush the control pods with fluid on Sept. 27 to prevent corrosion. But a Transocean lawyer wrote in his Nov. 3 letter that there have been no further preservation steps on the blowout preventer since then. The latest complaint from scientists comes in a report by the Interior Department's inspector general, which concluded that the White House edited a drilling safety report in a way that made it falsely appear that scientists and experts supported the administration's six-month ban on new deep-water drilling. The AP obtained the report early Wednesday. The inspector general said the editing changes by the White House resulted "in the implication that the moratorium recommendation had been peer reviewed." But it hadn't been. Outside scientists were asked only to review new safety measures for offshore drilling. "There are really only a few people that know what they are talking about" on offshore drilling," said Ford Brett, managing director of Petroskills, a Tulsa, Okla.-based petroleum training organization. "The people who make this policy do not ... so don't misrepresent me and use me for cover," said Brett, one of seven experts who reviewed the report. In a statement issued Wednesday, the White House insisted the review was properly coordinated and pointed to the inspector general's findings. "Following a review that included interviews with peer review experts, the Inspector General found no intentional misrepresentation of their views...The decision to implement a six-month moratorium on deep-water drilling in the Gulf of Mexico was correctly based on the need for adequate spill response, well containment and safety measures, and we stand behind that decision," White House deputy press secretary Bill Burton said. Last month, staff for the presidential oil spill commission said that the White House's budget office delayed publication of a scientific report that forecast how much oil could reach the Gulf's shores. Federal scientists initially used a volume of oil that did not account for the administration's various cleanup efforts, but the government ultimately cited smaller amounts of oil. The same report said that President Barack Obama's energy adviser, Carol Browner, mischaracterized on national TV a government analysis about where the oil went, saying it showed most of the oil was "gone." The report said it could still be there. It also said that Browner and the head of the National Oceanic and Atmospheric Administration, Jane Lubchenco, contributed to the public's perception the report was more exact than it was by emphasizing peer review. The new inspector general report said Browner's staff implied that scientists had endorsed the drilling moratorium, by raising a reference to peer review in the drilling safety report. At least one outside expert who was involved said he was convinced afterward that it wasn't a deliberate deception, and Interior Department officials told the inspector general they didn't deliberately make changes to cause confusion. "There was no intent to mislead the public," said Kendra Barkoff, a spokeswoman for Interior Secretary Ken Salazar, who also recommended in the May 27 safety report that a moratorium be placed on deep-water oil and gas exploration. "The decision to impose a temporary moratorium on deep-water drilling was made by the secretary, following consultation with colleagues including the White House." After one of the reviewers complained, the Interior Department promptly issued an apology during a conference call, in a formal letter and during a personal meeting in June. All seven experts asked to review the Interior Department's work expressed concern about the change made by the White House, saying that it differed in important ways from the draft they had approved. "We believe the report does not justify the moratorium as written, and that the moratorium as changed will not contribute measurably to increased safety and will have immediate and long-term economic effects," the scientists wrote earlier this year to Louisiana Gov. Bobby Jindal and Sens. Mary Landrieu and David Vitter. "The secretary should be free to recommend whatever he thinks is correct, but he should not be free to use our names to justify his political decisions." Those complaints were similar to those of other scientists. "Their estimates always seemed to be biased to the best case," said Joseph Montoya, a biology professor at Georgia Tech. "A number of scientists have experienced a strong push back." The inspector general's report said the administration did not violate federal rules because the executive summary did not say the experts approved of the moratorium and because the department publicly clarified what the experts said and had offered a formal apology.