Borrowed time

There's so much to say about the way the "trifecta" Democratic government elected in 2020 failed to move on critical matters that could have warded off the coming collapse once they're out of power again. We've been warning about this for a while. The "one job" they had was to pass voting rights protections and the PRO Act. They refused to do either because Joe Biden didn't want anything to fundamentally change. And now it's just a waiting game until the Republicans take back the White House and can undo the temporary rulemaking that's been holding the dam back somewhat. 

For example, watch what happens when President DeSantis gets a hold of the SEC in a few years.  All of this will start to go the opposite way really fast. 

The SEC also proposed a new rule this month that would force institutional investors like pension or hedge funds to use qualified custodians to hold crypto assets, which would make it more costly for them to do so.

This aggressiveness has spread to the rest of the government. In January, a group of banking regulators essentially warned financial institutions against holding crypto assets, citing the risk of fraud. Banks have already begun to pull away from the industry. In addition, the Federal Reserve denied access to the payment system to a crypto bank called Custodia.

It should be said that this crackdown is happening without any new legislation from Congress. The SEC is using existing securities laws to contain the industry and section it off from the rest of the financial system. Discretionary enforcement and regulatory guidance depend on the regulators, and does not have the permanence or force of law. But a law from this set of legislators is unlikely to produce much of value for the public. Provisions like the one proposed by Sen. Elizabeth Warren (D-MA) to force crypto firms to comply more stringently with anti-money laundering laws would be welcome. But the more likely legislative outcome from a Congress littered with recipients of crypto cash would be some definitive de-fanging of the SEC’s efforts to enforce existing law.

Because they refuse to pass new laws and prefer to just shake a finger at the criminals for a few years, we're going to see major unmitigated looting of people's retirement funds. In the interim it's all just borrowed time. 

How many more Delawares?

How many Delawares do we have left to give to the Gulf of Mexico? This question is raised in  a recent T-P story highlighting the very-nearly-approved status of the long awaited Mid-Barataria Sediment Diversion Project.  "Decades in the making," says this article and that's certainly true.  "Game changing," it says also. Well, maybe it would have been if this and five or six other projects like it had begun decades ago.  But now it is much more likely too little too late. The coast has been neglected for too long and the seas are now rising too quickly. Eventually we are going to run out of Delawares.

Louisiana has lost land roughly equivalent to the size of Delaware since the 1930s. It could lose two more Delawares in the next half-century if no action is taken to stop it.

The catastrophe is no longer a pending event contingent on actions we can take anymore. It is already here. We see it all the time. We hardly even need to be told about it anymore, but we do love to read about it anyway. Here is a story from July of this year telling us one of our favorite tales.  The Louisiana coast, according to a new study from the US Geological Survey, is DOOMED. 

As the state's saltwater wetlands migrate inland due to sea level rise fueled by global warming, they will cause a loss of freshwater wetlands at a rate that is likely to be the highest in the nation, the study shows.

The study also raises serious concerns about the consequences of not keeping worldwide temperatures from rising more than 2 degrees Celsius above pre-industrial levels by 2100, which could result in global water heights of as much as 8.2 feet. In Louisiana, with subsidence, the water heights could be as much as 10 feet above present levels.

That worst-case sea level rise scenario would result in saltwater intrusion causing the collapse of thousands of miles of existing saltwater and freshwater wetlands, again exacerbated by human-caused barriers to their migration inland. 

2100 is not that very far into the future. 

2050 is even nearer.

It’s no surprise that Louisiana, where the seas are swelling and land is sinking, faces a daunting loss of property in the years to come. The Climate Central analysis estimated that more than 25,000 properties, totaling nearly 2.5 million acres in the state, could fall wholly below tidal boundary lines by 2050 — a number that far exceeds any other place in the nation. That would amount to 8.7 percent of Louisiana’s total land area, the report found.

Insurers have already decided what all of this means. They've decided it's time to cut and run. 

Louisiana Citizens Insurance Corp., the state’s insurer of last resort, wants to raise its already-high prices by more than half, following a dramatic increase in demand for coverage after eight private insurers collapsed [update: it is nine now]and nearly a dozen others exited the state.

The organization has asked the Louisiana Department of Insurance for a 63% rate increase for personal property coverage, which would hit its more than 102,000 homeowners policies, records show. If approved, the rate increase could generate as much as $158 million that officials say is needed to cover their risk.

The last rate increase Louisiana Citizens received, by comparison, was 4.8% for new and renewing policyholders. It went into effect June 1.

The wave of hurricanes that began in 2020 triggered a chain of events that’s putting more pressure on Louisiana’s troubled insurance marketplace. Several insurers, crippled by a staggering number of claims, have gone out of business or pulled out of the state. They’ve left behind desperate consumers who are now flocking to Louisiana Citizens in numbers not seen in years.

The solution, just about everybody in politics seems to agree, is "resilience."

But what does resilience mean, exactly? It may sound like it has something to do with preserving vulnerable communities and infrastructure but it does not.  In the context of the cascading disasters of the 21st Century, "resilience" is a shell game of shifting risks. Its rhetorical purpose is to move the burden of mitigating and responding to the growing hazards of environmental damage and climate change away from the institutions responsible and onto the individual victims of that damage. "Resilience" is a politician's call for the powerless to bear the cost of crimes committed by the powerful.

It's a grift that can work in several ways. Last year, Entergy provided us with one example. At the time we had been told the private utility giant had agreed to front the money to build Sewerage and Water Board a new power station intended to finally obviate its reliance on the famous antiquated turbine system that powers the city's drainage pumps.*  But later in the year, they backed out of that agreement claiming that emergency response to Hurricane Ida had eaten too far into their cash.  So, naturally, the city then stepped in and used American Rescue Plan funds originally intended for COVID relief to pay for the station.  

*(note: even the initial promise here was suspicious at the time but since they broke it anyway that's a bit of a moot point now)

But 2021 actually turned out to be a great year for Entergy cash-wise. They had so much floating around that they barely knew what to do with it. They paid out $1.5 billion to shareholders. Entergy CEO Leo Denault received $17 million in compensation that year.  It is only to protect these pay-outs that the city was manipulated into spending COVID relief funds making up for Entergy's broken commitment. In other words, we ended up paying for the resilience of the company's profits by foregoing investment in the resilience of our own people. 

This isn't an unusual event. It's actually very much in line with emerging global economic strategy. Economist Daniela Gabor reported from the COP26 international climate summit last year that policymakers are financializing the climate response by blending public resources (like federal COVID relief to cities, for example) with "bankable projects" (such as Entergy's operations) that create returns for investors.  It turns out the global strategy is to shift the costs and risks associated with the ravages of climate change downward onto the many subjects of capitalism in order to protect the profits of its masters.

This is the Wall Street Consensus mantra: the state and development aid, including multilateral development banks, should escort the trillions managed by private finance into climate or the Sustainable Development Goals asset classes. The state derisks or “blends” by using public resources (official aid or local fiscal revenues) to align the risk-return profile of those assets (“bankable projects”) with investor preferences or mandates. Transforming climate or nature into asset classes necessitates the commodification and financialization of public goods and social infrastructure, beyond water, electricity and transportation, and including housing, education, healthcare; these have to generate cash flows that pay institutional investors. The consensus understands the state as a derisking agent: its fiscal arm enters public-private partnerships to render them bankable by transferring some of the risks to the balance sheet of the sovereign, while its monetary arm protects investors from liquidity and exchange rate risk.

And so there is a whole class of financial speculation based on this.

It's called Environmental, Social and Corporate Governance (ESG) investment. So-called "woke capital." 

Increasingly, big investors and fund managers are positioning themselves as ethical intermediaries at the center of a new movement for “impact investing” — investments that claim to prioritize environmental, social, and governance concerns. BlackRock, Invesco, Aberdeen, and Vanguard — all of whom who have signed on to the UN-supported Principles for Responsible Investment — promise that they can help align people’s money with their values.

“Socially responsible investing” has been around for decades, but it’s taken off recently. Sustainable assets under management are now estimated to be around $30 trillion. So-called green bonds — fixed income instruments used to fund green projects such as wind farms or low-impact housing — have proliferated. Even entire countries — Belgium, France, Poland, Indonesia — are issuing them.

Meanwhile, companies like Vanguard have set up new “green” exchange-traded funds that exclude oil and gas companies and nuclear power. Although funds that avoid “sin stocks” (adult entertainment, alcohol, tobacco, weapons, gambling) are an old idea, their pivot toward supposed green investments has proven extremely popular, fueling an expansion worth hundreds of billions of dollars.

How, you might ask, do investors and money managers determine if a company is really green? Back in the ’90s, the small number of investors interested in “corporate social responsibility” used metrics provided by the Global Reporting Initiative. These days CSR (corporate social responsibility) has been replaced with ESG (environmental, social, and governance) numbers that include data on emissions, labor practices, diversity, board independence, and supply chain information — the vast majority of which is self-reported by companies.

Maybe you can sense the turn that article (titled "Green Investing is a Sham") is about to take.  The point we'd like to make, though, is that it is also a  "resilience" strategy for finance. Former Blackrock investment strategist Tariq Fancy published a series of essays called “Secret Diary of a Sustainable Investor”  Here is what he says ESG investment is about.

Meanwhile, ESG 1.0 pollutes our airwaves, masquerading as the business community’s best and most honest answer to society’s challenges. One of the most ridiculous premises on which this rests is the bizarre conflation between fighting climate change and fighting climate risks. This is important: fighting climate risks in financial portfolios is not the same thing as fighting climate change itself. A friend of mine who lives in Miami was buying a house recently and seemed happy that my previous work was so heavily focused on climate risks, including extreme weather events that affect Miami. I felt bad breaking it to him: “Carlos, we’re not trying to save Miami from getting wrecked by climate change. We’re trying to get our money out before it hits.”

New Orleans is not going to be saved from climate change either. Instead it will be squeezed more and more tightly by tourism and real estate until the last profits are wrung out of whatever exploited and beaten down population can remain.. until they can't anymore.

"Resilience," then, is a long process of forcing you to adjust to increasing precarity. Some examples from this year: Over the summer, a judge ruled that insurance companies don't have to cover your evacuation expenses.  You have to be resilient. FEMA says changes to its flood insurance program are intended to price out something like one million people. Only those "resilient" enough to hack it in the coastal regions that have been their home can afford to remain. No one will help them move out of harm's way, of course.  Individuals bear the brunt of things like the rising costs of mortgages, insurance, and energy bills in New Orleans. We take on more of the risk of just trying to live here.

Here's a Times-Pic article from July 4 of this year where the reporter talks to people about what that feels like. I want to emphasize the allocative effect of these markets on who can and cannot weather the storm, so to speak. The spike in rates is specifically bad for individuals "who must rely on loans" to buy a home. 

“I just had a client get a $10,000 quote on homeowners insurance,” said (realtor Bryan) Jourdain. Before his client made an offer on the target house, Jourdain met with the existing owners and learned that they were paying $2,800 annually for coverage.

“I knew the buyer would have to pay more, but I guessed that the premium might be around $5,000,” he said. “$10,000 is ludicrous.”

For buyers who can afford such surprises, the jumps in cost probably won’t come between them and a new home. But for first-time buyers like Latiker and others who must rely on loans to close deals, such unexpected cost hikes can be deal killers.

On the other hand, for large investment firms that pay cash to turn houses into hotels... or more to the point, who seek to quickly flip properties as assets based on their potential profits as such... The cost of the transaction is not much changed. 

By leaving climate unmitigated, and by leaving the social costs to be borne by individuals experiencing "market forces" rather than as a community facing collective destruction, we have chosen, as a matter of policy, to sacrifice New Orleans as we know it to corporate profit "Resilience" it turns out, is a luxury good.

Anyway, we talked about this and more in episode 2 of CBC after having watched the straight-to-DVD classic "Hurricane Season" staring Forrest Whitaker.  It's a bit long but it's here if you're interested.

Which "outside firm"?

The new city administration is rooting around the building and rearranging the furniture and whatnot.  They have to go clear the old mayor's creepy murder yearbooks out of the office so the new mayor has a place to put her creepy altar. That sort of thing. It's all very normal.  Another normal thing that happens when a new administration comes in is they like to pick up the piles of money laying around in one corner and see if they like them better in a different corner.  In this case, we're looking at some $31 million in FEMA and HUD grants to see if maybe they need to live in their own little department.

Grants are currently managed within the department that receives them, both on the finance and the program side. Montano said he will move the financial aspects of grants into a centralized system that would pay for projects out of a separate fund.

Montano said he's still in the "discovery" phase of trying to determine whether the city can recoup the $31.3 million from the Federal Emergency Management Association and the Department of Housing and Development. There haven't been problems in that area before, but Montano said that when new administrations take office, there is always a significant effort to examine what the previous administration did to ensure grants were managed correctly.

"There haven't been problems," probably won't be any problems. But the new people like things the way they like them and it's obviously well within their prerogative to find out what suits them best.  Again, all very normal.  None of this is too important other than the fact that when you do go in and move all the money around, inevitably a little bit of change drops out.  So it might be interesting to note whose pockets it falls into.

Montano said he's contracting with an outside firm to ensure the city can match those reimbursements correctly, and he wants to change the city's practice of paying for grant-funded expenses out of the general fund. The CAO said he's concerned that relying on the general fund if grant reimbursements don't come through could be problematic, and he plans to establish new financial controls to avoid using the general fund as a "backstop."

Not that it's a huge deal. It's just that it's probably the most interesting thing in the story. The new CAO wants to separate grant disbursements from the general fund. Okay. Maybe. My guess is they might find that harder to do than they think but it's probably a fine idea.  But, in the meantime, they're paying some accounting (?) consultant X number of dollars.  That's fine, too. But I like to read the names of these firms in stories like this in case they become relevant later.

Oh also, there's some stuff about city credit cards in this story. But everybody agrees that's last year's news so do with that what you like.

Shitcoin

Too bad FNBC went under. Seems like they would have been exactly the people to handle the trade in these "pollution credits."

Matt Rota, policy director with the Gulf Restoration Network, raised questions about whether DEQ should play a role in regulating the financial transactions on which the trading program would be based.

"And there's the big question of why," Rota said. "Why has this come up? What are the specific pollution issues that caused us to look at this?"

Because it's a fantastic businees opportunity, probably.  Not only does it allow polluters to buy their way out of their responsibility to, you know, stop dumping poison into the water, but it also sets up a nifty secondary market for the credits.  This moring I sort of asked what we might call the new currency "mined" from Louisiana pollution and got what I thought was a clever answer.

ShitCoin

— Cade Roux (@caderoux) January 24, 2018

Whoever handles these financial instruments stands to make some money.

Sarah Mack, president of Tierra Resources, which is already creating wetlands to earn credits for sequestering carbon, with the credits bought and sold on a private market, said the department also needs to carefully review the infrastructure that will be required to run that market.

In her case, the project is co-sponsored by the Entergy Corporation, Comite Resources, and The Climate Trust, which are combining to voluntarily reduce carbon emissions blamed for global warming. The companies participate in one of several national and worldwide voluntary carbon credit trading banks.

Ha ha, yeah, that works very well.  But, hey, how much more exciting would it be if the State of Louisiana were the regulatory authority?  The great thing about Louisiana is we see an ongoing disaster like the criminal despoiling of our environment and immediately start looking for ways to parlay that into financial fraud. 

I'd like to keep following this story as it develops, but really, we should just skip to the end where everybody goes to jail.

How's the #Resistance doing?

Pretty well, it looks like.  Many of its founders are already getting rich Making American Great Again. 

Other Democratic lobbyists have found that their corporate clients’ interests align with the Trump administration. Some, like Podesta, are taking financial planning industry cash to work on the fiduciary rule.

Steve Elmendorf, a former senior advisor to Clinton’s 2008 run, maintained a high-profile role with Clinton’s 2016 run, raising $341,000 for the campaign. He is now one of the most prominent corporate lobbyists in Washington, D.C. Records show that Elmendorf, too, lobbied on the fiduciary rule. His client, the Securities Industry and Financial Markets Association, a trade group for firms like Prudential, has made delaying the rule a major goal and celebrated Trump’s move to delay implementation.

UnitedHealth, the health insurance giant, is also an Elmendorf client. Filings made to ethics officials on Capitol Hill reveal that Elmendorf is helping UnitedHealth work on issues related to the Affordable Care Act, including the health insurance industry tax, a provision of the ACA that UnitedHealth has made clear it seeks to repeal or delay. Congressional Republicans have said that, if they are successful with their overhaul of the law, the tax will be gone.

Meanwhile we're still arguing over whether Democratic candidates who run in conservative leaning districts should advance a progressive agenda or just drift along to where the money is.  If you're in the club who gets paid no matter who wins, you can see how this might not seem like an important matter to you.

Good morning

Let's have a look at that weather, shall we?

The world’s financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, according to a leading global banker.

William White, chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements, who suggests the stresses in the financial system are now "worse than it was in 2007."

Speaking to the UK Telegraph’s Ambrose Evans-Pritchard before the start of the World Economic Forum in Davos, White warned that macroeconomic ammunition to fight further economic downturns is essentially “all used up”.

“Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” he told the Telegraph.

“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something.”

Well that's disappointing.  Maybe don't go outside for  while.

Venture capital in the next 300 years

Congratulations on resil-ing like nobody never resiled before, New Orleans. As soon as we've all caught our collective breath, the mayor is going to start pushing us to help with his Tricentennial "legacy" project.

The history of the Landrieu administration will be written as a series of steamrolling PR stunts.  1) "We have to do all this stuff in time for the Superbowl!" 2) "We have to do all this stuff in time for Katrina10!" And now we will sprint with Mitch once again to celebrate 300 years of... well.. never quite getting everything done.

It will be a big party, though.  It's hard to imagine there being any Presidents this time. But we're going to have to come up with some sort of buzzword to match "Resilience" anyway. As long as they stay away from anything that invokes the idea of a "Next 300 years" or even a "Next 50 years"  they'll save themselves some embarrassment.

Although, some folks are already making contingency plans. 

A long-proposed offshore megaport at the end of the Mississippi River could start to take shape next year, with its supporters hailing it as the most significant economic development in Louisiana history.

Leaders at existing ports applaud their optimistic outlook but question whether the project is a viable undertaking.

Backers of the Louisiana International Deep Water Gulf Transportation Terminal (LIGTT) announced Monday (Aug. 31) they have amassed enough private financing to begin the first phase of a $10 billion project. They held a press conference at the Westin New Orleans, complete with champagne and the cutting of a cake shaped like a cargo ship.

The champion of the project is state Sen. A.G. Crowe, the Pearl River lawmaker who crafted a law approved in 2008 creating a public-private partnership to build the port. He serves as president of the board overseeing the port project as an adviser to its management team.

"No doubt this project has had its skeptics," Crowe said. "So did the Superdome. So did the Causeway."

Whoah talk about your Iconic Structures, right?   Of course they've only got $25 million to begin their $10 billion dollar project.  Also this could very well be something of a scam because 1) AG Crowe and 2) This probably isn't the end of this.

Crowe had originally sought investors for LIGTT through the EB-5 visa program, which provides U.S. visas to foreigners in exchange for significant investments. Such funding never materialized and money for the first phase will instead come from the Bank of Montreal and a handful of Wall Street investment firms, some represented at Monday's announcement.

Yeah, well, there's plenty of phases left. And those EB-5s can be a gold mine. 

(Horn Lake, MS) James Madison remembers when the GreenTech electric car plant moved into a vacant factory near his home in Horn Lake a few years ago.

But he hasn't seen much evidence of their work

"Ain't seen many electric cars come out from over there,"

More than a year ago, a whistleblower told News Channel 3 he didn't make any cars while working at the plant in Horn Lake.

Since then, others have come forward saying the same thing.

That, in part, has prompted a federal investigation into the car maker.

Part of that investigation centers on the companies use of the EB-5 visa program for its investors in China.

Those EB-5 visas allow foreigners who invest half a million dollars in certain businesses, and meet several other criteria, to come live in the United States.

"Ten days, I think about 14 different cities. We put on three to four conferences every day," said former Horn Lake Mayor Nat Baker, who Greentech asked to help sell the company to Chinese investors in 2010.

But he says the company spent as much time selling the visas as it did selling cars.
"It was kind of a 50/50, they presented the cars and they also presented the EB-5."

At the same time, though, maybe they really are looking to build this massive floating port facility in the Gulf. After all, in "The Next 300 Years" industry and government can either invest in protecting the South Louisiana wetlands and the people who live there, or they can make sure they have the infrastructure to keep sucking money out of the area even after it's all sunk beneath the sea.

Or failing that, maybe they'll scam something off of at least the idea.

The one good thing that Ray Nagin pushed for

This 2004 capital improvements bond issue ended up doing a lot of good, especially after the hurricane recovery suddenly became a priority.  It ended up figuring prominently in Ed Blakely's ambitious rebuilding plan... even if that plan itself never materialized in the way Blakely imagined.

Anyway, it's almost all gone now. Here's a look at how they're planning to spend the rest of it.

Vampire Squids

They sucked out all the money.

“The health of the financial system might matter less for the real economy than it once did,” writes J.W. Mason, an assistant professor of economics at John Jay College who wrote the paper, "because finance is no longer an instrument for getting money into productive businesses, but for getting money out of them."

If it holds up, that has some pretty serious implications for how the Federal Reserve should go about tending the "real economy" in the future.

Here’s the data at the center of the report: In the 1960s, 40 percent of earnings and borrowing used to go into investment. In the 1980s, that figure fell to less than 10 percent, and hasn’t risen since. Instead of investment, borrowing is now closely correlated with shareholder payouts, which have nearly doubled as a share of corporate assets since the 1980s.

In other words, finance has been a drag on rather than a booster of wealth in the real economy since before someone my age would have even opened his first bank account.  Still, for whatever reason, we're supposed to keep playing the game.  Why?

Yes, please

I don't have anything to add here. But, more like this, please.

WASHINGTON -- Students taking out government loans to help pay for college should pay the same rock-bottom interest rate that the Federal Reserve charges big banks, Sen. Elizabeth Warren (D-Mass.) proposed Wednesday.

Now they tell us

Company promises to pay your mortgage for turning your house into a billboard but is several months too late to save the one house in America most suited for such a purpose.

Whoops!

Everyone knows about the recent rash of home invasions in Uptown New Orleans. Imagine what would happen if Serpas decided to just let the perpetrators go as long as they apologized.

Keep on TIFing

The special privileges built into our tax system are more complicated, regressive, and untenable than Ancien Regime France. Of course that doesn't stop our elites from figuring ways to slice out more parts of the pie before it explodes.

Under current agreements with the Louisiana Stadium and Exposition District that control the Dome and the New Orleans Arena, where the Hornets play, there is no sales tax on food or drinks bought at either facility. This means that without a way to lure crowds out of the arenas for food and drink, the city loses millions of dollars a year in potential tax revenue. A new district could potentially help with that conundrum, though such sports districts have not been as successful as hoped in other cities and the development itself could cost billions. The only developer other than Benson who has stepped in, Domain Cos., has already said that “public support” will be needed to realize its vision.

Where that public support will come from is unclear. Domain has suggested a “payment in lieu of taxes” agreement or a tax-increment-financing plan, both of which would dedicate tax revenue to private development.

I'm sure Saints fans in Champions Square would love to pay an extra 3 or 4 percent on top of their $9.00 beer price so that these guys can get their kickback.

And in China too

Analysts Warn of Risks Threatening China’s Banks

A report released on Wednesday by Fitch, the credit ratings agency, said Chinese banks were increasingly engaging in complex transactions that hid the size and nature of their lending, obscuring hundreds of billions of dollars in loans and possibly even masking a coming wave of bad real estate and infrastructure loans.

The report also said that Chinese regulators significantly understated loan growth in the first half of the year, by 28 percent, or about $190 billion, and that many banks continued to secretly shift loans off the books, resulting in a “pervasive understatement of credit growth and credit exposure.”

The Next Big Short

Mark Moseley: BP bankruptcy is a real fear

But, did we really get $20 billion “the next day”? Most U.S. news reports describe the fund as if $20 billion is already in hand, but it isn’t.

“BP has agreed to contribute 20 billion dollars over a four-year period at a rate of five billion dollars per year, including five billion dollars within 2010,” a White House statement said.

Hmm. So the escrow account is really only a $5 billion fund for 2010, with additional $5 billion installments in each of the next 3 years. This assumes BP doesn’t renege, or its stock doesn’t tank, or its liabilities don’t grow exponentially, or oil prices don’t plummet, or their shareholders don’t revolt, or it doesn’t pursue bankruptcy or insolvency protections. Given the circumstances, $5 billion in escrow seems like paltry insurance against the possibility of BP bankruptcy. Perhaps the loss mitigation specialists at BP look approvingly at this arrangement, as the $5 billion payment buys BP six months of precious time. And what is with the 4-year payment plan, anyway? BP couldn’t afford $20 billion over 2 years? That’s disturbing. Won’t they need to, if they are going to pay all the claims in a reasonable amount of time? The terms of this escrow deal raise more questions than they answer.

So BP is on the hook for 3 additional $5 billion payments over the next three years. You could look at that as three years of increasing risk, or an opportunity to start shopping right now for someone to sell you a credit default swap on these escrow payments. If BP goes bankrupt and misses a payment, you clean up big time. It's what Goldman Sachs would do.

Caveat, Douchebag

Our friend Poochie has a Tweeter Tube too.

you think your (sic) buying LA film tac creits. but the fuckn snapper didnt... wow this is a fucked up world we live in

If you really are that impressed with your inherent superiority to the "fuckn snapper" maybe you could demonstrate that by taking the initiative to do some research on the "LA film tac creits" before blindly throwing your money into Uncle Rico's helmet.

"We also need some way to make us look official, like we got all the answers. "

Last week we asked whether former Saints long snapping specialist Kevin Houser was a small-time Bernie Madoff who suckered Saints players and coaches into a ponzi-like investment scheme based on the promise of state tax credits available from a local film studio. But based on this story we read in the T-P Saturday, we're not sure that's quite right. The Madoff character in this situation is Louisiana Film Studios owner Wayne Read.

While more than two dozen Saints football players and coaches fear they may have lost nearly $2 million they entrusted to Louisiana Film Studios owner Wayne Read, they are not the only people in the New Orleans area who say the motion picture executive owes them money.

The financial dealings of the Elmwood film studio that have come to light in the past week show that Read accepted cash payments from the Saints members without returning the tax credit investments or explaining what happened to their money.

After signing a contract for construction work on the studio that he later canceled, he is also being sued by the contractor for $681,000 in unpaid invoices. And St. John the Baptist Parish is still waiting for Read to pay $100,000 that local officials say he owes for bills related to his use of the parish's civic center for a movie production in 2007.

Louisiana's "Hollywood South" film industry sprang up virtually overnight when the state instituted its tax credit finance scheme in the early 2000s (Jesus that's sort of a long time ago now). The state grants tax credits to film production companies who raise cash by selling them at a discount to brokers or directly to investors who can apply them against their income tax liability.

While the tax credit scheme may have helped attract Hollywood star power to Louisiana, it's the back-end trading in taxpayer-financed investment vehicles that has attracted so much local talent to the game. Opportunistic lawyers like Read and former LIFT Productions CEO Malcolm Petal suddenly became studio executives with the power to distribute lucrative tax shelter opportunities to the well-off. According to the T-P, Ron Forman's son was President of Read's firm for a time proving once again that the Formans know a thing or two about making a buck off of government financed entertainment amenities.

But apparently that business model with regard to the film industry is still in need of some tweaking. Petal pleaded guilty last year to bribing a state official for inflating the value of tax credits allotted to LIFT. Read, meanwhile, seems to have been accepting "investments" in tax credits he hasn't been able to deliver.

Kevin Houser, who was dismissed Monday as the long snapper for the Saints, became a point man for Read's effort to raise money among the team's current and former players and coaches. In November, 27 men with ties to the Saints -- including coach Sean Payton, quarterback Drew Brees and former quarterback Archie Manning -- paid large sums of money with the expectation that by the end of March they would get back about $1.33 in tax credits for every dollar of their investment.

In correspondence to Houser in December, Read said he planned to spend $12 million to buy the property and $13 million on reconstruction, and that the credits would be delivered by the end of March.

"No risk to you all," Read wrote.

By the deadline, Read had not even applied for the tax credits from the state film office and had not met at least two important requirements to qualify for them.

So it seems that Wayne Read and not Kevin Houser is running the (somewhat sloppy) Madoff-like enterprise of misleading investors until more investors can cover their investment. Which means that Houser, as the sales stooge, is more like Uncle Rico from Napoleon Dynamite.


Kevin Houser (T-P photo)


Uncle Rico imagining tiny little seahorses

Think about it. Rico is an ex-(sort of) football player who sells crappy Tupperware and herbal breast-enlargement products door-to-door. Houser is an ex-(sort of) football player who sold products of a similar value to his teammates in the locker room. Rico liked to make home movies of himself throwing a football in an unusual fashion to nobody in a corn field. Houser wanted to make movies and was often seen throwing a football in an unusual fashion (between his legs) to nobody (Saints' punters) on the football field. Both men thought they had a quick way to make some "sweet moola". Both really really wish they could go back in time now.

Is Kevin Houser Bernie Madoff?

Who can blame the T-P, really? When a story drops into your lap that ties together the Saints, the motion picture industry, financial scandal, and Rob Couhig can you really do anything but blow it up all over the front page?

BATON ROUGE -- Archie Manning, Drew Brees and coach Sean Payton are among more than two dozen people with ties to the Saints who together put nearly $2 million into an Elmwood film studio that has failed to return their investments as promised.

Louisiana's film industry is financed through a program which grants tax credits to studios and production companies who then sell them at a slight discount to wealthy investors (professional athletes being one example) for cash. The investors can then apply the credit to their state income tax liability and end up coming in between 30 and 40 percent ahead on the deal. In this case, state tax dollars would reimburse Saints players for fronting the money to make movies. This taxpayer financed system of wealthy individuals shifting money back and forth is the lifeblood of Louisiana's "Hollywood South" film industry. Facing competition from other states, the Legislature extended and increased the credit in the recently concluded session. And while he isn't too keen on crucial mental health services for New Orleans residents, the governor is unlikely to veto this appropriation.

In addition to attracting film production to the area, the tax-incentive program has also caught the attention of the FBI on occasion. Late last year, attorney and LIFT Productions CEO Malcolm Petal pleaded guilty to bribery charges stemming from a scheme to acquire more value in tax credits than he intended to spend on film production.

Bribery is one way to game this system. Another would be fraud.

Manning and an attorney for one of the players said Wednesday that they thought they were taking part in a routine tax credit program offered through Louisiana's motion picture studio incentives until they discovered that the studio project never received state authorization for the credits and that their money was at risk.

"They weren't approved -- there was no reason to think they would not be, " Manning said.

Manning said he had received a telephone call from an FBI agent seeking information about the studio's investment plan.

Wayne Read, chief executive of Louisiana Film Studios, said that he was not aware of any federal investigation and that the Saints investors would get their money back as new financiers are brought into the project, which he said could happen in two weeks.

Read (another attorney-turned-movie mogul, by the way) intends to repay the Saints players, not with tax credits, but with money acquired from "new financiers." Not that Read is actually running a Madoff-like ponzi scheme but we'll easily forgive these Saints players if they continue to squirm over these next "two weeks." In Read's defense, since he hasn't obtained any tax credits, we can reasonably assume that he hasn't tried to bribe anybody.

On the other hand, I know these guys are pro-athletes and all but man this is... not smart.

(Recently released deep snapper Kevin) Houser and the other Saints members made their investments in late 2008 and were due to receive their tax credits by the end of March, according to a tax credit contract and Houser's attorney, Rob Couhig.

The studio has yet to obtain the credits, Read said. Studio officials are talking to potential long-term investors for the project, and an announcement could be made in two weeks, he said. The money from the new backers would be used to return, at a minimum, the original amounts paid by the Saints investors, Read said.

Read said that although he received money from many of the Saints members, he had contact only with Houser. In some cases, players invested money without signing agreements, Read said.

Is this true? Did Saints players and coaches (Sean Payton was an investor) simply drop their five and six figure sums in a hat (helmet?) that Houser and Couhig passed around the locker room? Did they even tell them what it was for? Maybe they just told them they were getting into show-biz. We already know that Payton has been trying to sell a screenplay. Was this his way of getting his beak wet in the industry?