ABA Journal: Tax Law to the Rescue

From the November issue of the ABA Journal: Tax Law to the Rescue:  Those Big Bailouts Don't Really Help Homeowners, But There's Relief to Be Had From (Gasp!) the IRS, by Samuel L. Braunstein & Carol F. Burger:

[P]erhaps the most telling measure of the economic crisis has been the escalating involvement of the federal government in efforts to prop up various segments of the nation’s financial structure.

The government took its most dramatic steps as summer turned to fall. In early Sep­tember, it took over Fannie Mae and Freddie Mac, which between them hold or guarantee roughly half the nation’s private housing debt. Barely a week later, the government agreed to bail out insurance giant American International Group, even while it refused to help save at least one major investment banking house from bankruptcy. Then the Federal Reserve poured nearly $300 billion into global credit markets as the Bush administration and congressional leaders began discussing a plan to buy up distressed mortgages to ease the strain on financial institutions.

Eventually, these salvage efforts are supposed to bring stability back to nervous financial markets that will help make it easier for individuals and families to keep up with mortgages and get new credit to make consumer purchases that fuel the economy.

But the government’s latest rescue efforts have not included provisions aimed specifically at individual consumers. It’s been another story, though, with some earlier tax bills passed by Congress and signed by President Bush. Tax legislation implement­ed over the past year or so contains a number of provisions aimed at helping taxpayers caught up in the economic maelstrom that was initially triggered by the meltdown in the subprime mortgage market.