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LFC

Member Since 03 February 2012 - 03:42 PM
Offline Last Active May 24 2019 05:54 PM
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Topics I've Started

Anatomy of Vulture Capitalism

23 May 2019 - 12:02 PM

Cerberus Capital Management purchased Remington Arms in 2007. Remington is now in Chapter 11. The "financial engineering" that took place should be criminal. It'a appropriate that Cerberus lived at the gates of Hell.

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I asked Gustavo Schwed, a professor of private equity at New York University who spent 24 years in the industry, to help me review the documents. Schwed pored over the many years of financial data and located two separate debt transactions, one of which was so esoteric I would never even have known to look for it. Together, these transactions explained not just the mysterious 2012 loan but, indirectly, the way the deal finally unraveled.

In order to buy Remington, Cerberus, as most private-equity firms would, created a new entity, a holding company. Instead of Cerberus buying a gun company, Cerberus put money into the holding company, and the holding company bought Remington. The entities were related but — and this was crucial — each could borrow money independently. In 2010, Cerberus had the holding company borrow $225 million from an undisclosed group of lenders, most likely hedge funds. Because this loan was risky — the lenders would be paid only if Remington made a lot of money or was sold — the holding company offered a generous interest rate of around 11 percent, much higher than a typical corporate loan. When the interest payments were due, the holding company paid them not in cash but with paid-in-kind notes, that is, with more debt. These are known as PIK notes.

The holding company now had $225 million in borrowed cash. Cerberus, meanwhile, owned most of the shares of the holding company’s stock, basically slips of paper they acquired when they created the holding company. The handoff happened next: The holding company spent most of the $225 million buying back its own stock, effectively transferring all the borrowed cash to Cerberus. Cerberus would keep that money no matter what. Meanwhile Remington continued rolling along as though nothing had happened, because Remington itself was not responsible for the holding company’s debt. Remington was just an “operating company” that the holding company owned, something that allowed the holding company to borrow money, the way you would take a necklace to a pawnshop. These were garden-variety maneuvers in a private-equity buyout. In the trade, this is called “financial engineering.” People get degrees in it.

In April 2012, Cerberus did something fateful, which probably seemed smart at the time. It had Remington borrow hundreds of millions of dollars and use it to buy the holding company’s debt, effectively transferring responsibility for the principal and the interest payments onto Remington. America’s oldest gun company now owed the money that Cerberus had used to pay itself back for having bought the company in the first place. There were plenty of sensible reasons to do this. Gun sales were high, and the debt that Remington took out was cheaper to service than the paid-in-kind debt.

But there was a catch. Because the operating company borrowed the money with a normal loan — and not with PIK notes — interest payments were required in cash. Suddenly Remington was carrying hundreds of millions of dollars in debt that, if it could not be paid, would cause the business to go bankrupt.

By the time the factory opened in Huntsville, the various players stood in vastly different positions. The private-equity firm had made back its initial investment and was playing with house money. Remington owed hundreds of millions that it hadn’t borrowed. And its workers, urgently, had to make a lot of guns.

Wingnut Welfare: The Even Less Talented Children of Lesser Intellects

20 May 2019 - 01:00 PM

John Oliver trolled the shit out of no talent talking head Meghan McCain whose greatest personal accomplishment has been starting out as John McCain's ejaculate. She follows in the footsteps of other babied children who are right-wingnut welfare recipients like Jonah Goldberg.

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On Sunday evening, John Oliver dedicated the opening portion of Last Week Tonight to the 2019 Eurovision Song Contest—specifically, to the Icelandic group Hatari. Though the eye-catching BDSM-themed outfit placed 10th overall with their rendition of “Hatrið mun sigra,” they managed to attract headlines (and the ire of their Israeli hosts) for showcasing Palestinian flags during the vote-counting.

And if that weren’t enough, one of its members is the son of the Icelandic ambassador to the U.K.

“You may be thinking that’s the most embarrassing child of a prominent political figure you’ve ever seen, but let me remind you of the continued existence of Meghan McCain!” exclaimed John Oliver, before trolling her husband, Ben Domenech, publisher of the far-right rag The Federalist.

“Oh no! Oh no! I bet her husband is going to get so mad at me now!” exclaimed Oliver. “What on earth is he going to tweet and then delete? I can’t wait to find out!”

The HBO host was of course referring to Domenech’s unhinged (and since-deleted) Twitter tirade aimed at Late Night’s Seth Meyers, who had the gall to… very politely question McCain on his show about her dangerous and disingenuous comments concerning Rep. Ilhan Omar (D-MN).


So who is Domenech? A self-starter who created a new wingnut media outlet? Nope. Another one who needed daddy to give him a start.

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For what it’s worth, Meyers is known as one of the nicer guys in Hollywood who earned every bit of his success, while Domenech, in addition to being fired from The Washington Post for plagiarism, is the son of Douglas Domenech, who served in the Department of the Interior during the George W. Bush administration—where Ben, despite his lack of experience, managed to land a gig as a speechwriter for Tommy Thompson, secretary of Health and Human Services.

AOC & Sanders Propose Providing Basic Banking Thru Post Offices

17 May 2019 - 04:51 PM

This piece at TAC was clearly written by an industry shill but the comments are abundantly informative about the possibility of providing basic banking services through the USPS. One of the things it could provide would be low/no cost accounts for lower income individuals so they don't get crushed by minimum account balance penalties. There are actually quite a few sharp people who comment over there who aren't right-wingnuts and have left some excellent comments on this topic. (Of course there are plenty of wingnuts at TAC too, especially the religious zealots who post on Dreher's stuff.) Here are a few goodies on this topic:

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Matt W says:
May 16, 2019 at 2:00 pm
Why does this author think the US Postal Service so uniquely incapable? In most European nations the Post Office makes a modest profit from its involvement in banking.

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Kent says:
May 16, 2019 at 2:39 pm
I get the author’s concerns here. I think the real issue is that the poor really don’t have access to free bank accounts from the private sector. They can’t keep their balances high enough.

So the postal service could be useful in providing free bank accounts, a place to direct deposit pay checks, and a place to turn deposits into cash. The postal service, being a part of government, might also have the ability to auto-deduct loan payments from employer paychecks, disability checks, etc… Japan uses its postal service for banking purposes, so they might be a good model.

My concerns would be more along the lines of scope creep. That what might start as a minimally profitable, conservative mechanism that is of great benefit to an under-served population, over time becomes some horrendous welfare program.

As for the postal service losing money, why hasn’t our President appointed a top-notch CEO type to work with Congress to fix this issue? I would also think that our Senate would be all over this. This is a fiscal responsibility issue.

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Joe O'Mahony says:
May 16, 2019 at 3:25 pm
One reason the post office “loses money” is that by law it must pre-pay pension and health care costs something the rest of the government and private business are not required to do. The Republicans saddled the PO with this obligations in order to destroy it. Another good reason not to be a member of the GOP.

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AlexArr says:
May 16, 2019 at 4:02 pm
Postal banking existed between 1910 and 1960 in the United States. The author seems to imply that postal banking is some hare-brained and untested scheme, when that is obviously not the case.

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Martin Ranger says:
May 16, 2019 at 4:11 pm
Absolutely nothing in this article is a valid argument against the post office providing basic banking services. Moreover, they seem to be working just fine all over the world.

A much better analysis can be found at:

https://www.barrons....king-1525092593

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TomG says:
May 17, 2019 at 9:16 am
Mr. Marchand comes off as an apologist for pay-day lenders and goes so far as to say, “Ocasio-Cortez and Sanders believe these loans are predatory and want to see rates capped and payday lenders destroyed.”

If pay-day lenders are not predatory, I don’t know what is. And if he thinks we won’t repeat big bank bailouts he is extremely naive. The ‘too big to fail’ model has only expanded since the last melt-down.

North Dakota has a long standing successful public banking industry. Perhaps we could look at the merits rather than be dismissive on the pretense that pay-day lenders and their so called ‘modest profits’ are doing some service for the working poor.

Government's Use of Facial Recognition to Monitor People

17 May 2019 - 12:46 PM

EDIT: I updated the thread name. I think this is going to be an ongoing topic.

This should scare the shit out of people. JetBlue, with no opt in or notification, is using facial recognition as your "boarding pass." So where did they get pictures to compare to in the first place? Department of Homeland Security. How's that for scary Orwellian type stuff?

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So how concerned should we be that companies like JetBlue have access to this data?

"You should be concerned," the Electronic Frontier Foundation wrote on Twitter. "It’s unprecedented for the government to collect and share this kind of data, with this level of detail, with this many agencies and private partners. We need proper oversight and regulation to ensure our privacy is protected."

This has been happening for a while behind the scenes, and is likely to become more common. Delta opened the first facial-recognition-powered terminal last year in Atlanta. The Department of Homeland Security in a report last week said that it wants to roll out facial recognition technology to be used on 97 percent of departing airport passengers by 2023.

It's convenient and fairly sci-fi, but it appears a lot of passengers find it quite creepy, particularly because of privacy concerns.

The system called (in somewhat sinister language) "Biometric Exit" cross-references a photo of your face taken when you look into the camera with images from a Customs and Border Protection (CBP) database containing photos of you from passport and visa applications, The Hill reports.

“Once you take that high-quality photograph, why not run it against the FBI database? Why not run it against state databases of people with outstanding warrants?" Professor Alvaro Bedoya, founding director of the Center on Privacy & Technology at Georgetown Law, told The Verge.

"Suddenly you’re moving from this world in which you’re just verifying identity to another world where the act of flying is cause for a law enforcement search.”

As it stands CBP retains any images in its database that are flagged for inspection (e.g. because someone has outstayed their visa or failed to obtain a visa in the first place). That's a lot of data that departments like the FBI might like to get their hands on, and there's only going to be more of it as the system is rolled out over the next four years.

"Clinton Cash" Liar Is Now Going After Biden

13 May 2019 - 12:36 PM

The Clinton Cash douchebag is at it again and the author of this piece at TDB implores the MSM not to fall for it. This asshole is a proven liar and literally nothing he says or writes should be considered anything but a lie until clearly proven otherwise.

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Are we really going to do this again, Fourth Estate? Are we seriously going to let a far-right propagandist who’s a close buddy of Steve Bannon frame the discussion of the (for now) leading Democratic contender for president? We went down this road in 2015-16, and I had thought that most everyone on the sane side of the fever swamps agreed that it was a shameful moment for the media. So why would we repeat it?

I refer here to Peter Schweizer, whose “investigative journalism” in 2015 just happened to target Hillary Clinton and today just happens to target Joe Biden. What a coincidence!

Virtually none of his allegations about Clinton back then were true. I don’t know all the facts on Biden. The Ukraine allegations have been credibly debunked. On the China stuff relating to Biden’s son Hunter, I don’t know. If there’s something to it, then so be it. But we know enough about Schweizer’s method to be extremely skeptical of any claim by him.
I reviewed Clinton Cash in 2015 and summarized Schweizer’s method. Basically, he does just enough work that resembles journalism that he can sucker some people into believing that what he produces is real journalism. He procures documents and gathers facts, or “facts,” and he writes in the traditional way, so it reads like journalism.

But if you read closely and critically, you see that he just asserts that these facts surely mean X. Real investigative reporters—and I am not one, obviously, but I’ve known a lot of them, and some of the best, like the late, great Wayne Barrett—then make dozens of phone calls to the people involved. Anybody who’s done any amount of document-based reporting knows that things are often not as simple as a certain, highly selected set of facts makes them appear to be, and that you have to talk to the principals to learn the motivations that were behind the words on paper.

Schweizer doesn’t do this, and he gets stuff wrong. The most notable whopper in the Clinton book was an allegation that she changed from an anti- to a pro-India position on a nuclear agreement with the United States after Indian donors contributed to the Clinton Foundation. But Hillary had been for the deal the whole time. Another big Schweizer scoop, the Uranium One story, was a lie from front to back.