Durbin Bill Designed to Throw Wrench in Wall Street Infrastructure Heist

Since we so seldom have positive news to report on NC, we thought it was important to highlight a promising development. Senator Richard Durbin has introduced legislation that would considerably complicate the effort of Wall Street players to pillage privatize state and government assets for fun and profit.

It is key to understand what a bad deal these transactions are for ordinary citizens. In addition to having sizeable up front fees, the return requirements are well in excess of the government entities’ borrowing rates, typically just under 20%. That means after you allow for the up front charges, the effective cost of funding is likely to be 20% or even higher. How does it make the remotest iota of sense for governments to fund at rates comparable to that of credit card borrowers? (Note this 20% figure applies only to a large portion of the funding, the equity slice, but given that these deals, involve aggressive rate hikes, and deals like the Chicago parking meter deal have NPVs for the deal of roughly 2x, if not more, than the sellers received, the extraction via user charge increases is extremely aggressive, and calls the attractiveness of the funding into question).

On top of that, the deals also impose serious restrictions on government sovereignity and often have extremely unfavorable clauses that serve to guarantee the investors’ returns. Again, one fundamental concept in finance is a risk/return tradeoff. A deal with a target return that high presupposes a high level of risk, so the degree of guarantees sought should lead to a large reduction in target returns. But as this Dylan Ratigan segment describes, that’s not how these transactions work:

Visit msnbc.com for breaking news, world news, and news about the economy

The Durbin legislation seeks to curb these abuses. Huffington Post summarizes its main provisions:

The bill would require states and cities to repay any federal funds they used to build or maintain the assets, such as toll roads or airports, as a condition of leasing them, likely thwarting many deals before they happen. It would also call for more transparency in the negotiation of such deals….

“I’m really trying to stake some ground here on a principle and position that we ought to reflect on,” Durbin told HuffPost. “The federal government is in debt. We are borrowing money to sustain our operations, and we’re sending some of that money to states and localities for investment in infrastructure. We’re making quite a sacrifice. If a decision is made by a local unit of government to privatize that public infrastructure, federal taxpayers should have a seat at the table.”….

Durbin’s bill would pertain only to transportation assets, and it would attach a federal lien on any transportation project that has received more than $25 million in federal money or is valued at more than $500 million.

If passed, the law would likely bring to an end the proposed privatization of Amtrak. This week House Transportation Committee Chairman John Mica (R-Fla.) rolled out a plan to privatize the rail service in the Northeast, claiming trains would run smoother between Washington and Boston if they were in the hands of private entities.

Given that some of the most heavily publicized examples of bad infrastructure deals, the Chicago parking meter deal and the Indiana toll road deal featured in the Ratigan video (which terminates in Chicago), took place in Durbin’s back yard, his antipathy for infrastructure sales appears to come from close contact.

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  1. John Merryman

    When will there be a media acknowledgement that it’s the same old over extension of debt and buying up distressed assets banks have been playing for centuries?
    Money is not a commodity being provided by banks. It’s a contract enforced by government. Finance is as much society’s economic circulatory system, as government is its nervous system. There is a necessary public utility here that has to be recognized before we fall that much further into feudalism.

    1. Foppe

      Right at the moment when you find a mainstream media outlet that isn’t owned by some large investor, and then probably only in the op/ed section, as this could never be recognized to be happening in the present. So maybe in 80 years or so, when there is sufficient distance to make it seem as though ‘this would never happen today.’ Why do you ask? :)
      (Though I have to say that this is unlikely to be mentioned even on publicly funded media.)

      As for ‘banks should be utilities’: maybe slightly sooner. If it keeps going at this rate, maybe in 5 years or so.

      1. Turban Bill

        seem as though ‘this would never happen today.’ Why

        Easy to see through this rational. Federales sell off Interstate Highways to World Bank who then trades Highway Liability Swaps for IBM Blue-Gene Swaps. World Bank charges highway passengers toll fees, but Federales tax the toll fees. Treasury then has gold from World Bank for highways plus income from tax on tolls. With that kind of cash T-bond ratings go up through the ceiling. As ratings go up Fed Governors can then easily dump their QE2 treasuries onto the secondary market for a profit. The futility of QE1 + QE2 is thus neatly covered-up and the true nature of the Fat-Bank-Bailout-Heist is forgotten forever.

        Problem is that with passengers paying more to use highways, they have less to pay payroll tax, sales tax, income tax, and taxes on tax collections. Entire system collapses sooner than if Congress had just sat on its fickle fingers. Will the Durbin Bill pass muster? No! It is only advertised long enough for mob to say, “Look! The Durbin didn’t pass, because it was unpopular with Americans!”.

  2. Nexus

    The American people would be mad to let the Wall Street financial thugs to get their hands on assets that the public already owns. The spread of finance capital is like a virus that will ultimately destroy the host – the real economy.

    The issues raised are spot on in terms of the expense of private money lending (or debt) and governments being able to fund their own infrastructure. The evidence of letting the banks in is not good as no one private will make large scale investments – for instance building a 2,000MW power station. The experience of Australia and the UK of privatization is not a good one.

    Only the State can fund these large investments effectively, carry the risks and plan the investments from a State or National perspective – the interstate highways, power grid, water/sewage, etc, were not funded by the private sector in the US so it is incredulous to believe that the private sector will fund what are pubic goods – they will cherry pick at great cost to the public purse. In Australia the government is funding a national high speed fiber network to each home and business as an investment to benefit the nation.

    The outcome would be a further rapid decline in the quality of the US infrastructure and more debt! The final nail in the coffin of the US economy.

    1. CS

      Absolutely – and try voting out a corporate board once they start blackmailing the public with extraordinary tolls – for example on a road on which the public depends for getting from place to place. We can always raise taxes or float bonds to support infrastructure and vote out obstructionist politicians – but influencing corporate boards with a stranglehold on our mobility is another question entirely. Public infrastructure funding is a long-term investment. Corporate boards hungry for monopolies on infrastructure projects will try to squeeze out short term profits at public expense. Remember – Kucinich made his political reputation keeping Cleveland’s power generation public. He paid a short term price but won in the long term.

  3. plschwartz

    While we are at it, lets insist that we get our share of scientific discoveries that have been financed by federal funds.This is the Bayh Dole act. The recent Roche decision was about the division of the spoils between investigator and University.

    “Universities helped bring to market 4,338 new products between 1998 and 2006, or more than one product a day,” the AAU wrote, citing Google (Stanford), Internet Explorer (University of Illinois) and the fibromyalgia drug Lyrica (Northwestern University) as examples.
    The Association of American Universities also wrote that the law had made an “extraordinary contribution” to the national economy by helping to form more than 6,500 new companies from inventions created under the act, an estimated contribution of $450 billion to the U.S. gross industrial output and the creation of 280,000 new high technology jobs between 1999 and 2007.”

    Aint that sweet. Why not give the govt 50% interest in projects that we have funded?

  4. marat

    Whilst there are no doubt pros and cons for private infra investment, I’m not sure it is accurate to say the cost of funding these deals is 20%+. Whilst the required equity IRR for most of the infra funds investing in these assets is 15-20% (20% seems on the high side), don’t forget that’s just the equity return. With c. 75% of asset value funded by debt, the weighted average cost of funds begins to look more like 10% or thereabouts. Which in some cases is a justifiable premium to pay for the operational and financial discipline private investment can bring to an asset.

    1. Unsympathetic

      “operational and financial discipline”

      You’re kidding me, right? Private investment is good at nothing but paying CEO’s large bonuses, outsourcing to China, avoiding all infrastructure maintenance, and entering bankruptcy to preserve executive pay.

      This is not the type of discipline that city and state governments were elected to oversee. Any city/state official who sells off public assets (their citizens already went in debt for the creation of that asset) to private firms is simply not doing their duty to their citizenry.

      1. marat

        I prefer to be more cautious in making such general statements and think every situation has to be judged on its own merits. In the emerging markets, for example, the private sector is no doubt better at running some of these assets that the government.

        The video shown raised a good point though – why are these leases in the US so long? In most countries around the world infrastructure concessions have a term of 25-30 years max, which is plenty of time to repay the debt raised to finance the deal and allow the investor to make their return. I have a feeling the valuation difference between a 25-year lease and a 99-year lease would be minimal (the cashflows are so far in the future the NPV impact would be negligible), so governments should still be able to raise the same amount of cash from divestment of assets on shorter leases and some of the issues raised around giving up control would be addressed.

          1. Apple...Meet Orange

            I’m confused again! How does the Durbin bill fit into the ubiquitous ‘conspiracy of complete kabuki’ meme? Enlighten me, kind sir, as I prepare for the apocalype of barbarians at the gates of Rome.

        1. psychohistorian

          marat said: “I prefer to be more cautious in making such general statements and think every situation has to be judged on its own merits. In the emerging markets, for example, the private sector is no doubt better at running some of these assets that the government.”

          If you are so damn cautious about making general statements how can you in the next sentence say there is no doubt that the private sector can do better than government. What say we get those aliens that are making your private sector run so well and focus them on good government so I don’t have to worry about the water I drink or whether I can shit in toilet or not.

          Misdirection number 5938523 from troll land

      2. craazyman

        I think marat has a point. A lot depends on extraneous factors, which unfortunately often go against the general public.

        In the energy/utility area, there have been numerous buyouts of U.S. utilities by infrastructure funds in recent years. None to my knowledge has been the kind of strip mining operation that we saw with the parking meters and highways — probably because of the political strength of state utility regulatory commissions, the commissions ability to extract concessions from the buyout group and the commission’s power to regulate the utility’s rates and capital structure going forward.

        In those cases, private operators can bring a certain discipline that might be directed in a healthy way. That’s not to say the same couldn’t be achieved with public ownership, but it is to say that private ownership isn’t synonomous with looting and financial rape.

        So much depends on the civic governance structure and the tradition of oversight. Power utilities have a generally strong tradition of both (more or less) — prompted to some degree by the Insull scandals 90 or so years ago.

        But it seems that parking meters, highways, airports, etc. lack the same regulatory rigor, and so abuses can occur that a public utility commission would never allow.

        I don’t think it’s so much private vs. public as it is good governance vs. absent or poor governance. Absent or poor governance seems to be the method operandi of our current economic/finance paradigm.

    2. Paul Tioxon

      WASHINGTON — In two weeks, the cost of traveling the 157-mile length of the Indiana Toll Road will rise more than 2 percent, from $8.80 to an even $9, for those who pay the toll in cash. The fare will jump a full buck for truckers hauling semi-trailers, from $35.20 to $36.20.

      The July 1 toll hike may not seem so painful, until you consider that those tolls were about half of their soon-to-be rates only five years ago — and that they hadn’t risen for two decades prior to that. Even harder to swallow for some drivers, truckers in particular, is the fact that their growing contributions go not to the State of Indiana but to overseas investors who’ve leased the toll road from the state.


      Some discipline from the private sector: 100% price increase for tolls in 5 years, matches the gas price increase at the pump.

      1. marat

        fair point. Governments need to be stricter (and have better lawyers and advisors) when negotiating the terms of the deals

        1. Jean

          “Governments need to be stricter (and have better lawyers and advisors) when negotiating the terms of the deals”

          But other departments at Cato and their ilk argue loudly, nonstop, that government is inherently inept, incapable. Yet when arguing for selling off public assets (around here at least), we are told not to fret, the populace needs to rely on the inept for protection.

    3. readerOfTeaLeaves

      With all due respect, the ‘logic’ of claiming that ‘private equity’ or ‘shareholders’ should profit every time that I turn on my tap, or enter my nearby arterial road, or stop at a public-funded stoplight is bizarre.

      Some things – like tap water, roads, wastewater treatment, are simpler to offer, maintain, and upgrade as *public utilities*. Everyone uses it, everyone pays in. The public power employee reads my power meter every month, then bills me per killowatt hour. The public water system employee reads my water usage and bills me accordingly.

      These are **SIMPLE** systems, and they work in part because of the simplicity.

      If these were ‘privatized’, how long would it be before Goldman Sachs and Citi would be creating Credit Derivative Obligations (CDOs) to place bets on whether the water usage rates in my neighborhood are ‘above X’, and then creating Credit Derivative Swaps (CDSs) to bet on whether the usage rates would exceed — or fall below — the gambled ‘X’ level? And wouldn’t the very creation of CDOs and CDS’s then also incentivize bankster employees to buy homes in my neighborhood (or simply pay people off) and thereby affect the rates of water use so as to ensure that their ‘bets’ in CDS’s would pay off?

      This is lunacy, upon lunacy, upon lunacy.
      Things that should be simple become complixified and then — wait for it! — the private equity owners will surely mismanage the resource and so in addition to paying far, far too much for water, roads, and sewer my neighbors and I will have a financial gun at our throats telling us that if we don’t bail out these incompetent fraudsters, then we won’t get any water from our taps, our toilets will not flush, and our roads will be strewn with glass and bailing wire until we pay the ransoms to bail out lost bets on CDS’s and also incompetent, profit-driven so-called ‘management’. Keep in mind that kind of ‘management’ is a shroud over what is essentially an extractive system.

      You seem to think that ‘efficiency’ is next to Godliness.

      You might want to spend a little time following the videos over at Institute for New Economic Thinking (ineteconomics.org) on the topic of ‘complex systems’.

      It turns out that the new understandings of complex systems show that efficiency is ONLY ONE parameter of whether or not a system will remain stable.

      Another absolutely critical factor is that there be REDUNDANCY.
      Now, ‘redundancy’ occasionally looks like paying people extra on the weekends because you are a public utility and so there is a union contract stipulating extra pay for weekends. I find that preferable to an ‘uber-efficiency’ model that would mean I can’t flush my toilet on the weekends unless I want to pay an extra fee (!). Because extra fees are embedded in the logic of so-called ‘efficiency’ models, like banks, that are fundamentally extractive.

      You may also find Lord Turner’s Keynote at the INET Bretton Woods conference worth a view — he emphasizes that after the recent financial upheavals, s-t-a-b-i-l-i-t-y as (what I would call a ‘design parameter’) a key factor of complex systems is becoming more and more relevant and needs a lot more focus.

      All these ‘efficiency models’ are fundamentally unstable.
      What we need is stability.
      To get stability, you need redundancy.

      Utilities are very stable.
      Part of the reason they are stable is because they mix redundancy with efficiencies in terms of scale.

      I’m with John Merryman in the sense that I think the concept of finance **as a form of infrastructure** is becoming more and more relevant.

      This is partly because it offers a more predictable, stable model and in an era of mushrooming demographics, urgent resource pressures, and climate instability that is going to become more and more resonant, relevant, and urgent IMVHO.

      On some levels, it doesn’t even have anything to do with whether banks are greedy, overreaching, or dumb. It’s because the background factors are shifting in ways that require predictability and stability, which the banks have proven themselves spectacularly unable to provide.

      1. readerOfTeaLeaves

        Sorry to come off as a crank and a scold, but I have heard the ‘efficiency’ argument for over 30 years and am completely fed up with its bogus so-called ‘logic’.

        Other resources for understanding why your ‘efficiency’ model is simply not able to provide what complex societies need in coming years would be Econned (esp the chapter, “Looting 2.0”) and maybe Nicholas Nassim Talib’s “The Black Swan”.

        What we need is stability.

        The banks offer increasing instability, at exponentially increasing expense.
        Their business model is creating neofeudalist political structures; either democracy will survive, or else the banks as they are currently configured will survive. The two can no longer survive in tandem.

        We are at an epic moment in history, IMVHO.
        And this whole issue of ‘privatization’, which is built on the completely ridiculous claims of ‘efficiency’ that does not actually map very well to complex biological systems is a false promise that needs to be exposed as the fundamentally destabilizing, predatory structure that it is.

        1. rps

          Truth needs no apology. Tealeaves your commentary is spot on as in hammer meet nail, Bang you nailed it! The private sector for the past 30yrs has been a swarm of locusts devouring the countryside and leaving behind devastation.

          We are living the end result of the private sector failures, not the public sector. Hank Paulson and Geithner’s multitude of bailouts/freebies are what brought the public sector to its’ knees.

          “It does not require many words to speak the truth.” Chief Joseph

        2. Doug Terpstra

          Thank you, Reader, for a resounding rebuttal of marat’s lawyerly defense of Goldman’s and Wall Street’s treachery. The shared commonwealth of the once United States, much of it infrastructure built up during the New Deal, were never predicated on efficiency alone but on broad value-added service and to provide an effective, enduring foundation for shared prosperity. That these common resources are now being systematically looted for private short-term profit is a crime and multi-generational tragedy.

    4. Yves Smith Post author

      I concede the 20% figure is applies to the equity and I should have made that clearer, but the funding cost on the whole puppy is simply not attractive, particularly when you see the gap between private and public valuations. You are ignoring:

      1. Up front fees

      2. The fact that past deals depended on monoline guarantees for the fundraising. So they delivered lots of losses to investors when the monolines tanked. I don’t know what the current borrowing costs on these deals is, but given the poor performance of past deals, it probably isn’t the best funding rate, even in this cheap debt environment. That why, as the Ratigan video shows, the guarantees are so aggressive, to help both the equity investors and to compensate for the lack of monoline guarantees

      3. Annual fees

      4. Realized returns v. target returns. Given how aggressive the fee increases on a lot of assets has been, it’s not unlikely that the realized return to the equity investor exceeded the target returns.

      The fee extraction from these deals is aggressive and not reflected in any one document. Given that a $1.15 billion Chicago parking meter deal had the NPV of its cashflows as projected by its new owners estimates as being worth between $2 and $4 billion, it was very clearly a transfer from the public to private hands, and not a cheap fundraising as you suggest.

      And as to getting “better advisors”, Chicago used William Blair, considered to be the blue chippiest of the regional brokerage firms. They have a very well respected investment banking team. And if Chicago were to have gone to a big Wall Street firm, they’d just be assigned the third tier team. So tell me how they get better advisors? Frankly, someone like me could do the analysis, but someone like me would tell them the value is sufficiently high the private investors would leave the table, which is not an acceptable outcome. You are never gonna get “better” advice because that would kill these deals.

      1. marat

        Just to clear up one or two misconceptions:

        1. Upfront fees
        Not sure which fees you are referring to here – arranging fees charged by the lenders? These are normally in the region of 1-1.5% on bank debt raised and lower on bonds, hardly outrageous. If the public sector entity goes to the bond market and borrows, then it would pay similar fees.

        2. Monolines – these were only relevant for bond-financed deals. Commercial banks doing infrastructure finance never needed to rely on monoline insurance to do deals. In addition, I don’t think it is right to say that the cost of funding has gone up due to monolines no longer being there – monolines themselves charged a premium for providing the guarantee, so whilst the coupon going to the bondholders may have been lower, the all-in cost to the borrower when you add in the monoline premium would probably work out to be roughly the same.

        Overall I think it’s a practical point of whether the municipality can go out to the debt markets and raise the same amount of money. If not (and for example the Indiana toll road deal raised 3.8bn USD – not a small amount!), then such sale+leaseback deals can be legitimate ways to raise money. No doubt they can be structured more favourably to the public sector entity – shorter lease terms, more risk transfer to investor, limits on allowable toll increases, revenue sharing with public sector above certain IRR/ revenue thresholds etc – but I don’t think blanket opposition to such deals has a lot of merit.

        I also take your point that unless these deals are very investor-friendly they may not happen – but this kind of analysis and market sounding needs to be done at an early stage, by advisors who are not remunerated on a success-fee basis and are therefore incentivised not to simply “make a deal happen”, but find the best fund-raising option for the municipality in question.

  5. deeringothamnus

    Such undemocratic privatization of public assets to government cronies is what made the oligarchs in Russia and quite a few other places.

  6. F. Beard

    I am opposed to all privatisation as long as so-called “credit” (money from nothing) is used for the purchase. Why should public assets be sold for what is essentially counterfeit money?

    Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take this power away from them, and all the great fortunes disappear, and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create money and control credit. Attributed to Josiah Stamp by Silas W. Adams in The Legalized Crime of Banking (1958) from http://en.wikiquote.org/wiki/Banking [bold added]

  7. Bernard

    the wheeling and dealing of America is in full swing. the out right hatred of anything “public” is the excuse the Elites have to sell.

    remember “government is the Problem” said St. Ronnie. after 40 years of these lies and PR, only a few who see the BS/private profit behind this “reality” will stand up to the lies, professed by profiteers like “marat”.

    i expect a lot more scams to be done and it will take a lot of stupid and greedy sales before enough “idiot” American even get a clue. Americans have been sold the Republican “Government is the Problem” for so long they don’t think public anything is “good.”

    so what else is new. i doubt Durbin’s intentions will ever make it out of Congress alive. we are toast , people

    1. F. Beard

      remember “government is the Problem” said St. Ronnie. Bernard

      Government IS the problem. It enforces the money monopoly that allows the banks to loot us.

      Progressives and liberals made a deal with the devil and imagined they could remain in control. Well, now the devil is outmanoeuvring you. Poetic justice?

  8. Schofield

    Outside of natural causes like prolonged drought, etc. we are now forced to recognize that economic crashes like the current Great Recession are the consequence of poor social cooperation. We are starting to see that we have to change this and can no longer believe in self-organizing myths like the Invisible Hand which clearly doesn’t consistently provide a Helping Hand to all citizens. There is no longer any way to avoid the effort to create better methods of social cooperation and top of the list must be the creation of a better system of money creation and circulation than the abusive one we have at present. This has to be followed by devising a means of routinely and genuinely capitalizing all citizens both economically and democratically to remove the current abusive aspects of capitalism. There is no option but organizing so that individualism is properly balanced by mutual cooperation.

  9. Belly Lox

    “one fundamental concept in finance is a risk/return tradeoff”

    Another fundamental concept in finance is the confidence trick. This swindle is referred to as a short-con because it is quick and easy to pull off.

  10. Larster

    What’s truly depressing is that all of the privatizing R’s (Walker, Daniels, Kasich, etc) are vehemently opposed to raising taxes. However, raising tolls by 100% over five years is not a problem. That’s free enterprise.

    You would have to be totally stupid to not see that wholesale corruption will result, if this trend continues.

    1. NaluGirl

      This kind of thing has been going on in other countries for decades, a lot of it being promoted by the American-run IMF and corporations. Read “The Shock Doctrine” by Naomi Klein and “Confessions of an Economic Hit Man” and “Hoodwinked” by John Perkins to see why we should not be surprised that the chickens are finally coming home to roost.

  11. rps

    “Suppose a white man should come to me and say, “Joseph, I like your horses. I want to buy them.” I say to him, “No, my horses suit me; I will not sell them.” Then he goes to my neighbor and says to him, “Joseph has some good horses. I want to buy them, but he refuses to sell.” My neighbor answers, “Pay me the money and I will sell you Joseph’s horses. The white man returns to me and say, “Joseph, I have bought your horses and you must let me have them.” If we sold our lands to the government, this is the way they bought them.” Chief Joseph

  12. FatCat!

    FatCat! here, so shut up and listen up, MY little debt-ridden stupid peons!

    Let me make one thing clear: What was your country is MINE now! This is MY Corporate States of America now! Is that clear?!!!

    As far as MY treating MY country the way I treat third world countries, you had better expect more of that from ME. This is a third world country now. You are all just a bunch of niggers in my book. All I want to hear from you is Yassa Massa! Is that clear?!!!

    So you better get used to MY shock doctrine, MY disaster capitalism, MY idea of privatization, MY free market economy, MY idea of democracy, MY elections, MY justice system, MY Supreme Court, MY U.S. Congress, MY U.S. Senate, MY U.S. President, MY 50 state governors, MY 50 state houses of representatives, MY 50 state supreme courts. Is that clear?!!!

    What was your roads are MY now. What was your schools are MY charter schools now, and you better believe it I’m gonna have MY teachers teach creationism and Intelligent design in your kids’ biology classes…LOL What was your Army is MY corporate security force now. Is that clear?!!!

    You didn’t like it when you had unions, you didn’t like it when you had civil rights, you didn’t like it when you had democracy. You thought socialism was bad for workers. So you better love the capitalism I have prepared for you. Is that clear?!!!

    I call the shots now, so let’s start on the right foot today. Why don’t we begin by having all 300 million of you chumps bend over, ’cause I feel horny today, I feel like screwing somebody. Let’s start with the elderly, the unemployed, and the uninsured. And I better not hear any dissent among the middle classes, or I’ll start with you first. All you are allowed to say is: Yassa Massa!

    Is that clear?!!!


    1. Cedric Regula

      I’m always looking for a silver lining in this massive dark cloud of privatization that stretches far further than the eye can see.

      But even tho it’s hundreds of miles from me, I’m very certain my beloved Hoover Dam is at risk.

      And if there is one opportunity Fat Cats won’t miss, it’s selling water to desert dwellers, especially those “underwater” on a mortgage in CA, AZ and NV that can’t even run away.

      So my idea (bankable, I hope, but I hate writing detailed biz plans) is to get in the novelty plumbing business.

      I think Feudalism, with it’s Barrons and such owning heavily fortified castles on waterways will strike a sort of perverse chord with the Little Peoples.

      I propose manufacturing water faucet handles that look like medieval castles, sort of like the “rook” on a chessboard.

      Fat Cats should love the idea because it like poking the serfs in the eye with a sharp stick.

      Serfs may go for it because many are generally wise asses and know when they are getting screwed, and this would be a way they can prove it to friends, family and neighbors.

      Environmentalists should go for it because it is a constant reminder that we need to conserve water, one of our most precious natural resources.

      The government should go for it, because they could fund it, and do something good for the environment and the environmental lobby.

      The only thing missing is the link between me and the government funding.

      Can a I get a Fat Cat anywhere interested?

      1. FatCat!

        Cedric Regula,

        FatCat! replying to you, so you better listen up or else!

        Yes, I like the way you think. I already have the Hoover Dam on MY list, and 25 of MY most predatory attorneys and lobbyists are working on privatizing the thing. I have similar plans in place for the entire supply of fresh water in north America and Europe. In 5 years all MY peasants will be paying MY water rates! MY long term plan for the U.S. and Europe is to reduce the population by two thirds, and so “death by dehydration” has been selected as the most cost-effective method of population reduction.

        But I am always looking for bright people to add to my “Greed Team” so please submit your business idea along with a 25 page essay explaining why you hate human beings who are not as brilliant as ME, and why I deserve to rule the world. Mail this material to:

        Charles G. Koch Foundation
        1515 N. Courthouse Rd.
        Suite 200
        Arlington, VA 22201
        Phone: 703-875-1600
        Fax: 703-875-1601
        Email: email@cgkfoundation.org

        Make sure that you send copies to my brother David and my other foundations, because my family likes to keep all our evil works well synchronized so we don’t overlap with one another. Mail copies here:

        David H. Koch Foundation
        Cato Institute
        Claude R. Lambe Charitable Foundation
        John Birch Society
        Citizens for a Sound Economy (CSE)

        Send it immediately, or else!

        1. Jean


          I’d like to highlight some of your more innovative ideas here as well, as we all limp along struggling to make money. Your policy on kidney transplants (AKA organ vending):

          “Kidney transplantation in the United States is burdened by a terrible policy failure. The cost of this failure will be paid in the currency of years of human lives unnecessarily lost, as well as a massive increase in federal expenditures over the next decade and beyond. The number of patients with end-stage renal disease (ESRD) in the United States has grown, but the supply of kidneys—for the preferred treatment for ESRD, kidney transplantation— has not kept pace with the demand. Unfortunately, the issue is not simply one of supply and demand: in the United States the supply of kidneys for transplantation is kept artificially low by a prohibition on the sale of human organs.

          “If a decade’s worth of reports in the transplant literature are to be believed, only one country in the world does not suffer from an organ shortage: Iran. Although Iran clearly does not serve as a model for solving most of the world’s problems, its method for solving its organ shortage is well worth examining. Organ donation is ubiquitous throughout the world, but Iran is the only country that legally permits kidney vending, the sale of one individual’s kidney to another suffering from kidney failure.

          “After a critical examination of what can be learned from the Iranian experience that will help the United States solve its organ shortage, certain conclusions seem inevitable: The portion of the National Organ Transplant Act of 1984 which prohibits the sale of organs should be repealed. The savings that will likely accrue should be spent on long-term study and maintenance of the vendor system and on the creation of mechanisms to ensure fair trading. Finally, because so much is still unknown regarding how organ sales would work in the United States, individual transplant centers and organ procurement organizations should be permitted to experiment with how to implement a system of organ vending.”


          1. Cedric Regula

            I don’t know how Cato missed this, but obviously organs need to trade on an exchange. Maybe an ETF for those with multiple organ failure, or the more frivolous whom just get the urge to change out all their organs at once.

            I usually don’t like thinking about two problems at once, but my potential water problem is still bugging me.

            As a home brewer of beer, I happen to know that beer is 99.9% water(really). So you can see how outrageous water cost is a concern to me.

            I do know people are 50% water, so here is a source I could use on brew day. But I have concerns that my friends would like me less if I brewed beer from people instead of just using tap water the way we do it now. Sustainably is a problem too, kind of like a 2nd Law of Thermo thingy.

            But I was thinking maybe if we go big and build an organ-water separation facility…lots of nested corporate shells in Cayman so nobody would know…..

  13. taxpayer

    Private operators more efficient? Where I live (in the home of Magnetar), the City owns & operates the water and sewer system, and several years ago automated the meter-reading. Gas and electric private monopolies send (separate) meter-readers around every month.

    Anyhow, it is good to see Durbin’s name associated with something positive, usually it is otherwise.

  14. Wat

    I wish bloggers and journalists would always remember to publish the name or the calendar number of the Congressional bill being discussed, so readers can make sure to include an accurate reference in our ensuing correspondence with our reps. I prefer not to write to my senator thus: “You know, Dick Durbin’s bill against privatization.” Thanks.

  15. Dr. Wu

    This brings to mind the recent Onion article, “American People Hire Lobbyist.” Unfortunately, that is fiction. Durbin’s bill will surely be defeated once his colleagues’ corporate masters remind them of the federal prime directive: privatize profits, socialize risk.

  16. Martin Finnucane

    So: the public debt is this generation’s selfish profligacy at the expense of future generations. But: giving our public assets to a neo-feudal rentier class, to extract rents on the same from our grand- and great-grandchildren, is just and prudent? An apt Libertardean sentiment: better a $10 tax to a Fat Cat, than a $1 tax to a bureaucrat. If its the kiddies that end up paying, no problem: they’ll appreciate the chance to pay to Fat Cats.

    Yes, I understand a state is not the state. But I favor bailing out the states, so I think I’m on the right side here.

    The execrable Niall Ferguson wrote something for newsweek advocating selling off our highways, etc. to address “our” putative budget crisis:


    After a session of projectile vomiting (I’m very sensitive), I wrote a late response. I think Ferguson proposes his rape plan in secret revenge against the current world hegemon, out of sentimental attachment to his true beloved, the British empire. The sun has set on the Union Jack, so here’s his poison pill for the upstart Yankee interloper. Or, at least that’s this ersatz Irishman’s opinion.

  17. ep3

    yes yves, optimism would be nice. but i doubt what’s going on here is to “save the republic”. This is probably one of those bills that looks like it does a good thing but actually backdoors companies into more access to privatized public works. notice the comment “federal taxpayers have a seat at the table”. That would mean “u donate to local candidates campaign funds to gain access to these contracts. we at the top level want access to those campaign monies”.

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