Tuesday, December 9, 2008

At least one limit to bailouts

The big failure news is out of Chicago today. First, Sam Zell’s LBO of the Tribune Company has officially failed with its Chapter 11 filing. Secondly, the FBI arrested Gov. Rod Blagojevich (D-Ill.) to stop what U.S. Attorney Patrick Fitzgerald called a “corruption crime spree”.

Apparently the governor wanted to be paid in exchange for appointing President-Elect Obama’s preferred successor. As the criminal complaint alleges:

ROD BLAGOJEVICH stated that the Senate seat “is a f***ing valuable thing, you just don’t give it away for nothing.”
ROD BLAGOJEVICH stated that the “trick . . . is how do you conduct indirectly . . . a negotiation” for the Senate seat. Thereafter, ROD BLAGOJEVICH analogized his situation to that of a sports agent shopping a potential free agent to various teams, stating “how much are you offering, [President-elect]? What are you offering, [Senate Candidate 2]? . . . Can always go to. . . [Senate Candidate 3].”
Originally, Blagojevich hoped for a cabinet post (HHS) or ambassadorship, or later a plum job with a nonprofit or a union affiliated advocacy organization. One report (which I can’t confirm) was that most Obama was willing to do was help Blagojevich’s wife get a corporate board seat after Blagojevich’s term expired in 2010.

When it comes to bailouts, Gov. Blagojevich was willing to help the Tribune Company with its financial woes, but only in exchange for favorable news coverage.
According to the affidavit, intercepted phone calls revealed that the Tribune Company, which owns the Chicago Tribune and the Chicago Cubs, has explored the possibility of obtaining assistance from the Illinois Finance Authority (IFA) relating to the Tribune Company's efforts to sell the Cubs and the financing or sale of Wrigley Field.
Intercepted calls allegedly show that Blagojevich directed Harris to inform Tribune Owner and an associate, identified as Tribune Financial Advisor, that state financial assistance would be withheld unless members of the Chicago Tribune's editorial board were fired, primarily because Blagojevich viewed them as driving discussion of his possible impeachment. In a November 4 phone call, Blagojevich allegedly told Harris that he should say to Tribune Financial Advisor, Cubs Chairman and Tribune Owner, "our recommendation is fire all those [expletive] people, get 'em the [expletive] out of there and get us some editorial support."
To its credit, the Tribune refused to go along or buckle in — drawing at least one boundary between government money and private business failure.

What kind of banana republic do we live in, that the government would try to use its financial support of a newspaper to win favorable coverage? Oh, that’s right, Chicago has been such a place for 50 years, even if the allegations today are “staggering … even by Illinois standards.”

As Fitzgerald said this morning
If it isn't the most corrupt state in the United States, its certainly one hell of a competitor. This wire tap, I can tell you, from the FBI agents who participated in this wire tap investigation, were thoroughly disgusted and revolted by what they heard. And I think even the most cynical agents in our office were shocked. I want to thank them.

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