Foreclosure-Gate: State Officials Starting to Question Securitization Fail

08-26-2011 • NakedCapitalism.com/

I’ve been wondering when cash strapped states might look to the apparent failure of mortgage securitizations to adhere to REMIC rules as a possible trigger for tax assessments. The IRS simply refuses to go there. I was given a pretty close to temporaneous report last year when a lawyer who understood the tax issues contacted the IRS; the enforcement officer who took his call, who was very senior, understood the implications immediately and was very keen. But she reported back later that the question had gone to the White House and the response was “We are not going to use tax as a tool of policy.” So enforcing statutes is somehow abusive? This is either a deeply internalized Wall Street centric view of the world, or just plain corruption, take your pick. The IRS can always defend its stance because tax notions of what constitutes a valid transfer don’t have to map onto the legal treatment.