THE SUSPENSE, IT'S KILLING ME

It is common knowledge that the newspaper industry is going down the toilet, which is unfortunate for all of us because newspapers provide 90-something percent of the original reporting relied upon by other media. Most of what we read online or see on TV isn't "reporting" per se but re-reporting from major newspapers. We want them to continue to do the hard work but we don't want to pay for it.

This will have more consequences that we realize since smaller papers are usually the first to go, either going under or being purchased by larger media companies and filled with homogeneous wire service content. That means there is essentially no one paying any attention to what local governments are up to, and boy oh boy do local governments get up to some stupid crap. The Chicago Tribune just uncovered a fun little game the Chicago Public Schools played with its bond issues. Due to the district's financial problems, "plain old municipal bonds weren't good enough anymore, and banks were standing by with attractive new options. So…the chief administrative officer at CPS and other officials pushed forward with an extraordinary gamble. From 2003 through 2007, the district issued $1 billion worth of auction-rate securities, nearly all of it paired with complex derivative contracts called interest-rate swaps, in a bid to lower borrowing costs." Shockingly that didn't work, and instead of lowering costs it ended up costing over $100 million dollars more than traditional bonds would have.

In a vacuum this example is not that big of a deal outside of Chicago. What should be keeping us awake at night is the prospect of thousands of Bright Ideas of this variety lurking out there and waiting to blow up in our faces. There is nothing more terrifying than going to a city council meeting or becoming familiar with your local government on some level. You may find some shining examples of public servants here and there; overall, however, the people who have decision-making power at the local level in this country are not terribly bright. And for the most part we have absolutely no idea what they are doing. If they make decisions that affect us directly – putting up red light cameras, for example – we freak out. Not much of what they do is that visible, though.

Given the budget nightmares that city/county governments and school boards have confronted since 2008, we might reasonably shudder to think of how many shortsighted, risky, delusional, or otherwise harebrained schemes they signed off on in the last few years. With most of us (myself included) paying next to no attention to what is going on at the local level, it is highly likely that we'll be seeing plenty more of these little surprises. These are the governmental equivalent of taking payday loans – cash in hand today with the exorbitant costs punted into the future.

I can't wait to see all the disasters on which the clock is currently ticking without our knowledge.

23 thoughts on “THE SUSPENSE, IT'S KILLING ME”

  • P.J. O'Rourke's chapter on the local town meeting in Parliament of Whores pretty much nails the cast of characters.

    And of course, the vampire squids in our finance industry are thrusting their blood funnels into every orifice. The vast shoals of mooks always provide a reliably profitable feast, decade after decade.

  • Back in the late 70's, the Chicago Tribune bought two local newspapers, the Redwood City Tribune, and my hometown paper, the Palo Alto Times, and merged them into the "Peninsula Times Tribune". In 1993, they shut the paper down, while it was making a profit, throwing over 300 people out of work, and leaving people without a newspaper.

    Fuck the Chicago Tribune.

  • I believe our failure to take local and state government seriously in this country is demonstrated by our willingness to elect buffoons to serve in those offices. Tiny percentages of us turn out to vote in those elections, usually making our decision on name recognition or party alone.

    If you care about how this country is run, get involved in local and state level politics. At those levels, your letter-writing, campaign contributions, and neighborhood get-out-the-vote efforts have much more of an impact. Your voice actually will be heard by the candidate (unless you decide to support some asshole).

  • Oi vay! I live this one. I'm surprised that a city the size of Chicago got dicked. One would think they'd be able to afford some level of sophistication in its management team. Understand the people in question in LG—especially in rural areas—aren't necessarily stupid, more gullible than anywhere else or just a bunch of yokels. I'd say this proves that a clever snake oil salesman with a good scheme can bamboozle any number of people. Especially at a time when money seems to be falling off the trees as was happening before 2008. Some of these schemes have such convoluted Ts&Cs and a labarynth of layers that it would a battery of experts to comprehend them.

    I had the displeasure of having a freelance gig in a hedgefund for a couple of days—though you weren't allowed to call it that—just as the cracks started to appear in '07. Their policy was you had to give your sell order by no later than the 2nd week of the month, the sale would go through at the end of the month, then you would receive your cash by the 2nd week of the following month. I believe we can all agree that the single most important thing everyone needs not just in finance, but all areas of life/business is *information*. I was sitting near the client services team. People would call in to give their sell order, and ask what their position was, has the fund gone up/down?, is this a good time to sell? etc. The answers went like this: "We don't know and we cannot say." "We won't know what the fund is worth until it's sold at the end of the month." "Sorry we cannot advise if this is a good time to sell or not." etc etc. As you can see, they were very good at keeping people in the dark. I wanted to go find the CEO and postal on him and the whole organisation. That's how they treat mom and pop investors, imagine the scams they'll pull on (government) institutional investors.

    It's not just financial services that are keen to take bite or seven of the cherry. There's also an attitude that some businesses take towards government contracts, "Close enough for government work." Hate that saying and I hate the sentiment behind it even more. Why does government have so many operational issues? That's your answer.

    My council got shafted by an IT support company. Best way to describe the experience is to liken to buying a car. You agree on model, colour and the optional extras. When you go to pick it up you notice there are no wheels. Those are extra. Then there are no lights, those are extra too. You see where this is going. All the things that make the vehicle function were "extras". Those were just the obvious things they dicked us on. A year after we dumped them, we're still finding surprises. There's a group of people who firmly believe that government is solely there for them to feather their nests at public expense.

  • c u n d gulag says:

    Here's all you need to know:
    The biggest nuts in DC started out as seedlings on local school boards and in local governments.
    And as they fuck up, they move up – well before the poo-poo hits the ventilating blades.

  • It's not just the Chicago schools. This scam was perperated on city and state governments — and even the federal government — and governments, banks, etc. all over the world. They were sold these junk bonds, which the rating agencies criminally said were top-rated securities. This is what crashed the worldwide economy. No one knows how many trillions of dollars in junk js out there. But the billionaires are laughing all the way to their gated compounds.

  • The financial world is incredibly complex, but there is one very simple underlying fact – it requires economic growth in order to function. Investment, debt, lending, bonds, etc. are all based on the idea that there will be more wealth coming that allows you to recoup and investment, pay off a debt with interest, get back a loan with interest and so on. (No one wants to contemplate the fact that infinite growth on a finite planet isn't going to happen even if we had competent leaders, which we don't.) An end to economic growth is going to render most of our financial infrastructure useless and counterproductive. Looting pensions and vacuuming from the public trough are probably just staving off the reckoning somewhat.

  • Hogwarts FAFSA says:

    Xynzee, what you are outlining isn't really extreme. That sounds like a pretty liberal notice period, and the customer service group wouldn't know the real-time performance of a monthly aggregate fund. There is also liability involved in providing an unapproved mid-month performance estimate on the fly (what if the fund is down on the 10th but finishes the month strong, and the incomplete information you provided compelled the investor to exit before they would otherwise want to?), not to mention the unfair advantage to certain investors over others that a one-off estimate would provide. If a fund does provide that sort of info, they have to provide it to all investors in order to be above-board. The notice period also allows the fund to have sufficient cash on hand. The more the notice period is violated, the more likely you are to take a loss by dumping a position in a fire sale, which disadvantages your remaining investors. When numbers are finalized at month-end they are reviewed, signed, and documented for audit purposes, which is for the investor's protection as much as the fund's. I'm not claiming that the investment tactics of these types of funds are sunshine and daisies, but the standard notice periods are probably some of the least contentious aspects, and are very clearly laid out in the operating memorandum that the investors get issued prior to investing.

  • The City of Detroit just laughs at your idea that this is a recent trend.

    As for newspapers, the era of the family owned newspaper with journalistic integrity that did novel things like report on poor people and fund investigative journalism began dying in the 1980s. You might remember how eager the Reagan Administration was to approve JOAs. (Also something Imported from Detroit).

    The amalgamation of the various media industries in the 1990s (thanks Clinton!) and their inept handling of the competition related to the Internet just sped the process up. Factor in the nationalization of identity politics as people fracture and harden along idiological lines and here we are.

    None of this is new.

  • None of this is new.

    So, seeing as how it happens over and over and over again, what are we learning from this series of lessons? Merely that a sucker is born every minute and the world is full of clever sociopaths? What the fuck good is that?

  • The late Joe Bageant once wrote something to the effect that "The job of local and state government is to take virgins and turn them into whores. Later, the job of national politics is to take those same whores and pass them off as virgins."

  • I'm not sure the average consumer considers marginal cost when deciding how much (including zero) he/she is willing to pay for, say, electronic access to the New York Times. I think he/she looks at the amount asked, determines whether he/she can get the same thing (or an equivalent) elsewhere for less, or whether he/she can do without the New York Times or its equivalent entirely and spend the price asked on somewhere else (or save/invest it). People who used to get home delivery are probably happy to pay the electronic price because it's much cheaper. People who are happy with the free news offered elsewhere may not be willing to pay the Times's asking price. But I doubt anyone is considering what the Times has to pay to make the paper available to them. And why should they?

  • I've been thinking that the opening lines of my stand-up act should be, "I'm an old-fashioned kind of guy – at least that's what my kids say when they see me reading a newspaper."

  • My local county paper ticked me off when they centralized all news from the state capital and decided to ignore all the other towns in the county, but they lost me when they got rid of the local delivery kids and hired the skeevy guy in the truck, who couldn't manage to deliver the paper anywhere on my half-acre property, or even anytime during the morning. What's the point of delivering the morning paper at 9 pm, to the neighbor's lawn (you could hear his beat-up pickup truck from a block away)? Even worse, every time it was rainy/snowy, the paper mysteriously landed in the water-filled ditch. The idiots who ran the paper helpfully outsourced their subscription and complaints line to the Phillippines, where English wasn't one of any of the languages their support staff spoke. I quit subscribing–occasionally I get an incoherent call asking me to re-subscribe, and I just laugh.

  • This post from OhioDailyBlog has an interesting take on the corruption that occurs when newspapers are captured by corporate interests for the benefit of promoting the right wing agenda. Here in Ohio the governor's race was treated as over after the Governor's office colluded with the Plain Dealer and Columbus Dispatch to reveal the Democratic candidate had failed to renew his driver's license for 10 years. Of course, the papers fail to mention that the candidate's son was diagnosed with cancer during that time period. This was treated as a fatal flaw while the corruption of John Kasich and the other GOP statewide office holders, which is epic, was completely ignored.

    The newspapers here are all owned by right wing outfits. They might reveal a Democratic Party member wrongdoing, but all GOP corruption is ignored or glorified, like the massive voter suppression by our Secretary of Suppression, Jon Husted.

    http://www.ohiodailyblog.com/content/how-newspaper-rigs-elections

  • Nobody ever in their right mind ever bought a newspaper for the news. They bought it for the classifieds and the coupons. They might have paid for delivery, but the news was funded by classifieds and corporate patrons. Then along came Craigslist and free classifieds. And whiny op-eds. Then bankrupt "news" papers. And holier than thou journalists who had gleefully chronicled the demise of industry after industry due to the web, suddenly thrown into the streets with the realization that their "product" had no value, and never did have. This is a feature of journalism, not a bug. Unless you provide useful info like the Wall St. Journal and Bloomberg.

  • Xynzee Says:

    "Oi vay! I live this one. I'm surprised that a city the size of Chicago got dicked. One would think they'd be able to afford some level of sophistication in its management team. "

    I'm sure that the management team was sophisticated, but I'm also sure that all that that meant was that they made sure that they were paid off.

  • Bitter Scribe says:

    OK, maybe I'll crack that Tribune piece. My first impression is that it was just more of the "blah-blah-blah public schools cost too much" bilge the Trib has been pumping for years.

    Regarding the role of newspapers, what we're seeing with the Internet is an accelerated form of shared content. And content sharing has been around since newspapers have. In the old days, they willingly shared with each other. Mark Twain wrote a sketch that alluded to a common task: writing the "exchanges"–news briefs condensed from stories in other papers.*

    But the Internet has made content-sharing, like a lot of other things, possible to an unprecedented degree. And the biggest problem is that everyone thinks that once they pay their ISP to get on the net, they should never have to pay for anything else.

    Advertisers don't want to pay either. Most Internet ads sell for maybe one-sixth of their print counterparts. That's what's killing newspapers–the revenue collapse.

    *Twain hilariously located the newspaper in Tennessee and made the editor a crank who worked insults into every "exchange," provoking armed attacks to the point where the newsroom was a war zone.

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