PAYING OUR FEUDAL DUES
The more I think about Geithner's Public Private Partnership Investment Program, the more it makes me angry. Because it signals a shift a sorts. A clear demonstration -- in the open, as always, no "conspiracies" here -- that We, The People, will underwrite Wall St. . . . for Wall St.'s gain & profit. This is no emergency "bailout." This is the long-awaited "plan" to "clean up" the big banks' balance sheets, to rid them (and "us," we're told) of all those gosh-darn toxic assets that have been dogging us.
And what does the plan boil down to? We, The People, pay for all the garbage. Which stays in private hands. So that if, and when, that garbage regains any value, it remains in private hands. And the banks get above-market value to remove that garbage from their balance sheets. That's pretty much it. Socialized Risk & Privatized Profit at its most naked.
Think of it this way: I'm a rich guy in a rich town. Greenwich, CT. Or Malibu, CA. 5th Ave. For the Michiganers among us, think of Grosse Pt. or Bloomfield Hills. I've "come upon hard times lately," due to poor decisions, both personal & financial. Both of my luxury homes have fallen into embarrassing levels of disrepair, and my business -- the largest in town -- is in very bad shape. Laying off my workers, who no longer shop at the local stores, and the ripple effect is taking shape. Bad stuff.
So the town ombudsmen and muckety-mucks decide that they will shift your tax money away from local schools and parks and buses and paving . . . and use it instead for the following: Along with a consortium of nine-of-the-remaining-ten richest guys in town, they will buy my two enormous mansions for approximately 75% of their traditional "market value." You know, to ease my financial straits, so I can stop worrying and start focusing on my business again. Re-hire some of those workers I fired. Help the cycle of support for local business again (95% of which is owned by those nine guys).
But the nine guys will only put up about 10 or 15% of the money to buy my homes. They can't afford more because they have to "keep up with their businesses" (where they've been laying people off hand-over-fist) and "pay off their their homes" (which are already owned outright, just like mine). So the deal is as follows: In 2006, a board of "real estate experts" (all of whom worked for me or the other nine guys) determined that one of my homes was worth $20 million and the other was worth a cool $10 mill. But due to the current economic difficulties, today they tag them only at $13 m and $7 m. Tough times all around.
So, the nine private guys collectively agree to pony up $2 million while the ombudsmen & muckety-mucks scrape together the remaining $18 million to buy my homes so I can start to spend my billions on my businesses. About $6 million of the $18 million comes from current tax revenues & the remaining $12 million via municipal bonds they promise won't adversely affect the local budget. Actually, no one steps forward to buy the bonds, but the nine businessmen promise to buy them in six months if the town increases the yield. No deal is struck, but the town advances the funds anyway.
The other nine fellas (with the support of the town officials) are kind enough to let me stay in the $7 million home that they bought so long as I promise to pay back rent (of $3,000/month) once my business starts to hum again, which hasn't happened yet since I was disappointed to discover that the recovery is slow and I can't re-hire any of the workers I laid off, and in fact "have to" fire 5,000 more. And the other guys decide to hold onto the $13 million home, publicly making a big show out of waiting for the highest bidder to emerge.
And they, too, are terribly disappointed to see that the recovery to the local scene is slow to come and collectively fire 10,000 more workers.
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Skip five years ahead: The economy has slowly recovered after a dreadful downturn that saw 25% of the town's people out-of-work. Many left the town, never to return. Many others saw their dreams of retirement shattered. Others lowered their standards of living dramatically. And the town itself, saddled with tremendous debt from the municipal bonds, has no infrastructure or local business to speak of (the nine guys bought about $3 million worth after the town agreed to raise the yield, but the rest of the debt was just floated). Only the wealthy stretch of houses at the edge of town has retained any of its pre-downturn luster, with homes worth 85-125% of their 2006 value.
My "$7 million home" was worth $12 million when I sold it to an oil shiekh, thanks to the renovations I put into it. I never paid the back rent, since the town was so thankful for the baseball field I built on the site of one of my old businesses after I shut it down and made a nifty profit on the land and raw materials. And I bought back my "$13 million" home from the other nine guys for $7 million, which made them happy since they paid only $2 million for it. It's worth $23 million now, and my family is very happy to be living there again.
And we're all very thankful for the generosity of the little people who helped us out when times were so rough. We're even thinking of paying them back by re-hiring them at below-market wages. But not yet, since our overseas businesses are doing so well.
And what does the plan boil down to? We, The People, pay for all the garbage. Which stays in private hands. So that if, and when, that garbage regains any value, it remains in private hands. And the banks get above-market value to remove that garbage from their balance sheets. That's pretty much it. Socialized Risk & Privatized Profit at its most naked.
Think of it this way: I'm a rich guy in a rich town. Greenwich, CT. Or Malibu, CA. 5th Ave. For the Michiganers among us, think of Grosse Pt. or Bloomfield Hills. I've "come upon hard times lately," due to poor decisions, both personal & financial. Both of my luxury homes have fallen into embarrassing levels of disrepair, and my business -- the largest in town -- is in very bad shape. Laying off my workers, who no longer shop at the local stores, and the ripple effect is taking shape. Bad stuff.
So the town ombudsmen and muckety-mucks decide that they will shift your tax money away from local schools and parks and buses and paving . . . and use it instead for the following: Along with a consortium of nine-of-the-remaining-ten richest guys in town, they will buy my two enormous mansions for approximately 75% of their traditional "market value." You know, to ease my financial straits, so I can stop worrying and start focusing on my business again. Re-hire some of those workers I fired. Help the cycle of support for local business again (95% of which is owned by those nine guys).
But the nine guys will only put up about 10 or 15% of the money to buy my homes. They can't afford more because they have to "keep up with their businesses" (where they've been laying people off hand-over-fist) and "pay off their their homes" (which are already owned outright, just like mine). So the deal is as follows: In 2006, a board of "real estate experts" (all of whom worked for me or the other nine guys) determined that one of my homes was worth $20 million and the other was worth a cool $10 mill. But due to the current economic difficulties, today they tag them only at $13 m and $7 m. Tough times all around.
So, the nine private guys collectively agree to pony up $2 million while the ombudsmen & muckety-mucks scrape together the remaining $18 million to buy my homes so I can start to spend my billions on my businesses. About $6 million of the $18 million comes from current tax revenues & the remaining $12 million via municipal bonds they promise won't adversely affect the local budget. Actually, no one steps forward to buy the bonds, but the nine businessmen promise to buy them in six months if the town increases the yield. No deal is struck, but the town advances the funds anyway.
The other nine fellas (with the support of the town officials) are kind enough to let me stay in the $7 million home that they bought so long as I promise to pay back rent (of $3,000/month) once my business starts to hum again, which hasn't happened yet since I was disappointed to discover that the recovery is slow and I can't re-hire any of the workers I laid off, and in fact "have to" fire 5,000 more. And the other guys decide to hold onto the $13 million home, publicly making a big show out of waiting for the highest bidder to emerge.
And they, too, are terribly disappointed to see that the recovery to the local scene is slow to come and collectively fire 10,000 more workers.
---------------------------------------------------------------------
Skip five years ahead: The economy has slowly recovered after a dreadful downturn that saw 25% of the town's people out-of-work. Many left the town, never to return. Many others saw their dreams of retirement shattered. Others lowered their standards of living dramatically. And the town itself, saddled with tremendous debt from the municipal bonds, has no infrastructure or local business to speak of (the nine guys bought about $3 million worth after the town agreed to raise the yield, but the rest of the debt was just floated). Only the wealthy stretch of houses at the edge of town has retained any of its pre-downturn luster, with homes worth 85-125% of their 2006 value.
My "$7 million home" was worth $12 million when I sold it to an oil shiekh, thanks to the renovations I put into it. I never paid the back rent, since the town was so thankful for the baseball field I built on the site of one of my old businesses after I shut it down and made a nifty profit on the land and raw materials. And I bought back my "$13 million" home from the other nine guys for $7 million, which made them happy since they paid only $2 million for it. It's worth $23 million now, and my family is very happy to be living there again.
And we're all very thankful for the generosity of the little people who helped us out when times were so rough. We're even thinking of paying them back by re-hiring them at below-market wages. But not yet, since our overseas businesses are doing so well.
Labels: Serfs Worked The Land And Owed Rent To Their Lords, Sound Familiar
posted by Mike at 5:46 AM
8 Comments:
Great post, Mike. With this post, you've laid everything out as it's happening now and, unfortunately, could very well happen down the road. I hope the naysayers read this thoroughly and understand the scenario as you laid it out.
I wish they would understand, but I don't hold out much hope. Many do seem to get it, but the majority either don't seem to want to understand the situation or are too bound up in partisan loyalty to accept reality.
A few of the left-leaning blogs I frequent are focusing on what they see as Republican obstructionism and are accusing naysayers of wanting Obama or America to fail. Don't get me wrong, I am not suggesting that the Republicans have all the answers, but I don't think opposition means that a person desires failure. It sounds an awfully lot like the right accusing the left of a lack of patriotism for not supporting the invasion of Iraq.
We need party division, so that 'We' can scapegoat 'Them'.
Without party loyalties, people would be pointing fingers at the perps, rather than each other.
Well-put; though, because it's a Monday, my head is spinning somewhat.
Applesaucer
"Grrrrrrrrrr."
Good post, Mike. Not sure what I need to hope for. The only thing I know that's worse is the Republican plan to insure the toxics.
I am not suggesting that the Republicans have all the answers, but I don't think opposition means that a person desires failure. It sounds an awfully lot like the right accusing the left of a lack of patriotism for not supporting the invasion of Iraq.
I generally agree. I believe many of the GOPers are just making noise, being oppsoitional. But that doesn't mean they aren't right in their criticisms.
Of course, if they were in charge, they'd be advocating the same thing.
Both parties suck.
though, because it's a Monday, my head is spinning somewhat.
???
The only thing I know that's worse is the Republican plan to insure the toxics.
Haven't heard this one yet. Need to look around.
I don't think opposition means that a person desires failure.
I agree. Opposition means you don't think their solution will work.
It sounds an awfully lot like the right accusing the left of a lack of patriotism for not supporting the invasion of Iraq.
Yes, it totally does.
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