Feds vs. Feds in 'Stupidest Lawsuit Ever'

That's the characterization, with only "slight hyperbole," that Bloomberg columnist Jonathan Weil slaps on a suit filed by Freddie Mac, the congressionally chartered housing finance organization, against the IRS, which says Freddie owes $3 billion in back taxes.

What makes the suit arguably so stupid? Well, both Freddie Mac and the IRS are essentially arms of the U.S. government at this point. Freddie is under the control of the Federal Housing Finance Agency, created in 2008 as the housing market cratered. It relies on billions of dollars in support from the IRS's parent department, the Treasury, to stay afloat.

So, writes Weil:

Consider some possible scenarios. If the IRS loses, that would be a win for taxpayers in the sense that Treasury won't need to send as much bailout money to Freddie Mac in the future. Yet the public also would lose because the government wouldn't get its $3 billion of revenue.

Alternatively, if the IRS wins, it would be a victory for taxpayers, too. Of course, they would still lose because Freddie Mac would have an even bigger capital hole after paying the $3 billion. The Treasury then would have to inject more money into the company to keep it from becoming insolvent and falling into mandatory receivership.

(Hat tip: Cato@Liberty)