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The Smartest Man In The Room??

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Post Options Post Options   Thanks (0) Thanks(0)     Back to Top Direct Link To This Post Posted: October/25/2010 at 11:18
Chris Farris View Drop Down
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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:

o Escrow funding ($7 billion)

o Dividend saving $7.5 billion

o Tax savings $7 billion

o Net favorable cash flow: $7.5 billion


US Treasury Tax Receipts:

o from BP Corporate income tax .... minus $7.5 billion

o from BP Shareholders' income tax ..... minus  $0.45 billion

o Net loss of US dividend income tax receipts ..... minus  $3.0 billion

o 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. 

Post Options Post Options   Thanks (0) Thanks(0)     Back to Top Direct Link To This Post Posted: October/25/2010 at 11:23
SVT_Tactical View Drop Down
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Thats just unsettling.
Post Options Post Options   Thanks (0) Thanks(0)     Back to Top Direct Link To This Post Posted: October/25/2010 at 11:56
tman1965 View Drop Down
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Very Disturbing.
Post Options Post Options   Thanks (0) Thanks(0)     Back to Top Direct Link To This Post Posted: October/25/2010 at 12:13
koshkin View Drop Down
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All very good points.  Keep in mind though, that BP ownership is almost 50/50 split between  US and UK.  When the company does well, its shareholders win.  BP is still trading fairly low, so perhaps it is time to buy some shares...

ILya
Post Options Post Options   Thanks (0) Thanks(0)     Back to Top Direct Link To This Post Posted: October/25/2010 at 13:10
Average Joe View Drop Down
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Community organizer = FAIL
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