Stupidest Lawsuit Ever Has Us Suing Ourselves

November 11, 2010 05:45

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 in effect is now suing itself.

By Jonathan Weil at


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.

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 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.


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