creators.com opinion web
Liberal Opinion Conservative Opinion
David Sirota
David Sirota
18 Apr 2014
Will Government Use Its New Leverage Over the Financial Industry?

If you read one business book this year, make it "Flash Boys" by Michael Lewis. The journalist famous for "Moneyball"… Read More.

11 Apr 2014
The Chicago Way

In America, there is regular ol' corruption, and then there is Chicago Corruption, with a capital "C." America'… Read More.

4 Apr 2014
The Labor Market's Double Standards

Technology, sports and politics are distinct worlds. They have their own junkies, their own vernaculars and … Read More.

Beware of Vampire Squids and Their Stadium Schemes

Comment

When it comes to media voyeurism and the economic insights it can provide, the ads in Vanity Fair rival Charlie Rose's television program as the best peep show of all. Between rip-and-sniff Dolce & Gabbana pages and come-hither Gucci models, readers get to see not what the kings are selling the lowly serfs, but what the royal family is telling itself.

This is why I read Vanity Fair — its ads provide a valuable glimpse into the palace. May's edition is no exception, thanks to Goldman Sachs — aka the investment bank at the center of Wall Street's 2008 meltdown.

On page 123 of the glossy mag, this very same bank presents itself as the savior of one of those Middle-American cities whose averageness (and baseball bats) makes it synonymous with good ol' fashioned Americana: Louisville, Ky.

As Goldman's ad tells it, Louisville's major problem was its desperate need for a new arena. That's when the bank swooped in with a "financing strategy" to build the stadium, which then supposedly led to "a vibrant downtown scene, where new businesses are opening, existing businesses are expanding and local restaurants are hiring more employees."

The ad exposes the bailed-out bank's secret fears and goals. Tarnished by SEC charges of stock fraud, Senate committee allegations of misconduct and widespread revelations about its shady business practices, Goldman wants to reassure current and potential clients that it's a straight shooter. In the Vanity Fair fable, Goldman thus casts itself as the altruistic hero, expecting readers to never Google "KFC Yum! Center," much less visit a place like Louisville, to verify the fairy tale.

It's a safe public relations wager — but not without risk. For if you do bother to click around the Internet, you'll inevitably find that the Louisville metro area is anything but a "vibrant" picture of job growth.

Today, it is suffering from an 11 percent unemployment rate — much higher than the national rate. It's also facing a $22 million budget shortfall.

While those problems may not be the new stadium's fault, it's far from clear that the Goldman-orchestrated deal helped improve Louisville's situation. In fact, new signs suggest the real story may be less the Vanity Fair ad's hagiography than yet another warning about the dangers of relying on Wall Street and stadiums for municipal economic growth.

As the Lexington Herald-Leader reported in a September 2010 editorial entitled "Arena Cautionary Tale," public revenue from the stadium "isn't living up to expectations in terms of paying off the debt incurred in building the facility." As a result, Louisville's already-strapped government "may be on the hook for an extra $3.3 million beginning in 2012."

That's because, as Goldman admits on its website, the deal was funded by a massive commitment of public revenues from taxpayers. If the arena isn't generating tax receipts committed to funding this $200-million-plus "Tax Incremental Financing" scheme, then taxpayers have to come up with that public money from somewhere else — most likely, from cuts to social services or from tax hikes.

This is the kind of story the Vanity Fair ad is supposed to obscure — the kind of story that got Goldman its Rolling Stone magazine billing as a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." It's a reputation the bank deserves — one that should make every local official in America hesitate the next time that squid slithers into their town.

David Sirota is a best-selling author of the new book "Back to Our Future: How the 1980s Explain the World We Live In Now." He hosts the morning show on AM760 in Colorado. E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

COPYRIGHT 2011 CREATORS.COM



Comments

2 Comments | Post Comment
So break up the big banks. Not to punish them, but to increase competition.
Use existing anti-trust legislation, the 1890 Sherman Act.
The 1985 AT&T breakup is a recent model and precedent.
We did this all before a century ago: trust busting in oil, rail, steel, cattle, more.
Comment: #1
Posted by: oddsox
Fri Apr 22, 2011 8:38 AM
(comment continued)

Justification for breaking up the big banks must be tied in some way to preserving fair competition in the marketplace.
The Sherman Anti-Trust Act addresses monopolistic practices, I believe there is room to build a case here.
But a better avenue might be the 1914 Clayton Anti-trust Act that specifically addresses mergers and acquisitions that substantially reduce market competition.

Any attorneys out there who want to weigh in on this?
Comment: #2
Posted by: oddsox
Sat Apr 23, 2011 8:03 PM
Already have an account? Log in.
New Account  
Your Name:
Your E-mail:
Your Password:
Confirm Your Password:

Please allow a few minutes for your comment to be posted.

Enter the numbers to the right:  
Creators.com comments policy
More
David Sirota
Apr. `14
Su Mo Tu We Th Fr Sa
30 31 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 1 2 3
About the author About the author
Write the author Write the author
Printer friendly format Printer friendly format
Email to friend Email to friend
View by Month
Marc Dion
Marc DionUpdated 21 Apr 2014
Deb Saunders
Debra J. SaundersUpdated 20 Apr 2014
Steve Chapman
Steve ChapmanUpdated 20 Apr 2014

16 Aug 2013 A Civics Lesson From America's Education Debate

27 Dec 2013 Celebrating the End of the Fake 'War on Christmas'

29 Apr 2011 Why the Fat Guy Should Lose His Privilege