... actually, he's the smartest Wee Wee of all time
Posted on 09/24/2010 6:37:53 AM PDT by edcoil
At first, it seemed like a miracle that our President was able to convince BP to establish a $20 billion escrow fund to compensate those hurt by the oil plume in the Gulf of Mexico.
After all, he had no constitutional power to force them to do so; so had to resort to Chicago-style negotiating.
Ever wonder why BP made the concession so quickly?
Take a closer look at the effect on BP's finances for the answer:
1. BP will establish a $20 billion fund, but will pay only $7 billion into it during 2010.
2. BP is a British corporation, but has a very large operating entity in the US . However, only about 30% of its income is derived from the US.
3. By Generally Accepted Accounting Principles (GAAP), BP must book the entire $20 billion expense in the year accrued. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.
4. The President also convinced this massive corporation to show their concern for the "small people" by withholding dividends to their shareholders for the last 3 quarters of 2010.
This reduces their outward cash flow by about $7.5 billion, including approximately 40% of that amount to US citizens. If the Bush tax cuts survive through 2010, the US Treasury will lose another $450 million in taxes on that amount. No need to even discuss the effect on the US economy.
Now, let's summarize the results into bullet points easily understood by all.
BP Cash Flow:
Escrow funding (Minus $7 billion)
Dividend saving (Plus $7.5 billion)
Tax savings (Plus $7 billion)
Net favorable cash flow for BP: Plus $7.5 billion
US Treasury Tax Receipts:
From BP Corporate income tax .... minus $7.5 billion
From BP Shareholders' income tax ..... minus $0.45 billion
Net loss of US dividend income tax receipts ..... minus $3.0 billion
Total tax receipts loss: $10.95 billion. A huge hit!
Many feared this would happen. After all, our President was the most inexperienced man in the room.
Did he "Kick Ass", or did he get "Sucker Punched"? Or, is this another 'backroom deal' Obama negotiated which will ultimately get him a huge financial 'plum'? Should Obama be negotiating anything dealing with money and finances at all?
Bottom line: The $20 Billion BP is putting up will create a $7.5 Billion positive cash flow for BP this year and a $10.95 billion loss to our Treasury.
But, Obama actually thinks he really did something special and "kicked ass'.
In reality, BP executives are laughing at him and kicked his ass. He is in over his head when he starts dealing with savvy business people, much less savy voters.
but the community organizer is qualified!
ROFL
In reality, BP executives are laughing at him and kicked his ass. He is in over his head when he starts dealing with savvy business
THAT WAS EASY!!!!
“He is in over his head when he starts dealing with savvy business people”
Which is...........just about anybody isn’t it?
Could he see Russia from Chicago?
Interesting analysis.
It seems like a “Please don’t throw me in that briar patch!” moment. Maybe Obama should have read more Uncle Remus — but I guess those stories aren’t so popular in Indonesia.
... actually, he's the smartest Wee Wee of all time
What grade did Obama get in Accounting 101 at Occidental and Columbia? Oh, that’s right. According to the Poli-Sci program, Accounting is not a required subject. Can this guy even balance a check book?
I think a better description would be that they gave him an atomic wedgie
No matter what the issue, no matter who is in the meeting, Obama is always the least qualified guy in the room. - Rush
BP contributes a lot of money to Great Leader. Should they not receive a benefit in return. The scale of Enron and George Bush is eclipsed by BP and Obama - and don’t expect that to make any headlines.
I know that osamaobama is a total rookie and has no concept of finances but even though Geitner and Summers etal are communists, surely they {or their staff} can run a financial model that would have shown this to the one before he went goofffffy.
BP makes out, the Feds lose $11 Billion and the rookie thinks he's the baddest boi in the hood.
From an e-mail. What has happened to our “press?”
The analysis seems to only focus on the first year.
The next 2 years it’s a net loss for BP.
Oh? What is going to happen to the unspent 13 billion dollar in the escrow fund?
“By Generally Accepted Accounting Principles (GAAP), BP must book the entire $20 billion expense in the year accrued. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.”
“…will create a $7.5 Billion positive cash flow for BP this year.”
That first part sounds correct, but I think on a cash flow basis, the tax savings will not occur until the escrow fund payments are made. So if in the first year, if BP pays $7B into the fund, it will only reduce tax payments that same first year by the tax rate on the $7B. On the accounting books, the $20B liability would hit and the full tax savings offset would show up on the balance sheet, but the actual tax payment cash impact would occur in the years the actual escrow payments are made.
I am not an accountant (and my tax skills are as bad as Geithner’s), but that is my understanding of how accrued expenses work for tax purpose. But the end result, after all $20B is paid over a few years, is the same.
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