By Joe Queenan
Sunday, December 14, 2008
Taking a page out of the playbook of the Roman emperor Nero, Illinois Gov. Rod Blagojevich has done so many bad things in such a short period of time that some of his worst actions are likely to be swept under the rug. Nero, as even the dimmest schoolchild will recall, is famous for fiddling while Rome burned to the ground -- a flamboyantly insensitive gesture that has obscured the fact that he also kicked his pregnant wife to death, murdered his predecessor, masqueraded as a wild beast at gladiatorial events so that he could mutilate helpless captives bound to stakes and diverted himself on evening promenades by disguising himself as a street urchin, stabbing tipsy pedestrians to death and then chucking their bodies into the sewer.
It just so happens that Nero set fire to Rome not once, but several times, and did so as part of an impromptu urban-renewal project that served no purpose other than to line his own pockets. But because of the sheer impudence of setting the capital of the civilized world ablaze and then amusing himself on a musical instrument, Nero's other crimes are less well remembered, if they are remembered at all.
It would be a great tragedy if Blagojevich's crass attempts -- as described in juicy detail last week by prosecutors -- to auction off President-elect Barack Obama's Senate seat and shake down the Tribune Co. diverted the public's attention from his other misdeeds. Politicians are always demanding some kind of payback for favors, and Blagojevich wouldn't be the first pol to try to get journalists fired because he didn't like the things they wrote about him. In Illinois, in New Jersey, in Louisiana, this kind of brazen scuzziness is par for the course. Society can deal with it.
What's far more worrisome is Blagojevich's bizarre confrontation with the Bank of America. The day before he was arrested on charges of massive corruption, Blagojevich visited a group of striking workers at a North Chicago firm called Republic Windows & Doors. After being laid off the week before, the employees had begun a sit-in, demanding benefits they were still owed by their employer, which said it could not meet their demands because the Bank of America had cut off its financing. At this point, Blagojevich informed bank officials that unless they restored the shuttered window-and-door company's line of credit, the state of Illinois would suspend all further business with Bank of America. A few days later, the bank caved in and ponied up a $1.35 million loan.
The idea that the governor of a state as prosperous and important and sophisticated and upscale as Illinois would make this kind of threat is terrifying. Even more terrifying is that Bank of America saw no alternative but to give in. Yet even more terrifying is that nobody outside Chicago seems to have gotten terribly worked up about the situation, riveted as they are on the governor's more theatrical transgressions. But peddling a Senate seat or using scare tactics to shake down a newspaper are nowhere near so serious a menace to society as letting the government arbitrarily intervene in financial transactions between banks and creditors. A crooked governor we can all handle. But a governor who capriciously decides which commercial enterprises a bank must finance and which it can ignore is a scary proposition indeed.
Rome wasn't built in a day. But get the wrong politician in office, and you can burn it in a day.
What the grandstanding Blagojevich reportedly attempted to do in the Republic Windows vs. Bank of America set-to is precisely the sort of thing that happens in China, where the government routinely orders up bank loans to politically connected firms. Whether a failing company actually deserves financing becomes irrelevant to the conversation; the government doesn't want a company to fail, so it decides that it must not go under, even if it's run by clowns, stooges, gangsters or in-laws.
The ramifications are horrifying. A pitiful, badly run National Basketball Association franchise cannot meet its bills, so the bank decides to cut off its line of credit. The mayor of the city thereupon announces that the public really needs NBA basketball to maintain an acceptable level of civic pride, so he threatens to cancel all municipal business with the bank until financing is restored. But then the local Women's NBA team announces that it, too, is failing and wonders why the mayor hasn't intervened to restore its line of credit.
The crisis spreads. The local hockey team, which is also sucking wind, wants the mayor to cut off all business with the bank until it reopens the financial faucet. The local symphony, which is running a $15 million deficit, insists that the municipal government intercede on its behalf since it employs hundreds of musicians, and culture matters at least as much as basketball or hockey. Beloved local saloons, imperiled bistros and cash-strapped restaurants where the wait staff all sing arias from "La Traviata" as they sling the lasagna wonder why the mayor can't get their lines of credit restored, too.
Imagine how terrifying this thing would be if it spread to the local level. The village government of Sleepy Hollow, N.Y., or Little Venice, S.D., or Adjacent Knolls, Idaho, announces that it will suspend all business with Bank of America or Chase or Citibank unless it restores the line of credit it has just cut off to the cute little boutique that holds festive birthday parties and tasteful wakes for household pets. It doesn't matter that the cute little boutique has no chance of surviving the recession and that the bank was being perfectly reasonable when it cut off its line of financing. Until financing is restored, the village will do no more business with the offending bank.
The bailout hysteria gripping the United States has spawned the dangerous idea that politicians, as the taxpayers' elected representatives, should be allowed to pick winners and losers when jobs are being cut or windows being shuttered -- because taxpayers now have skin in the game. The pols don't even have to look at the books to see whether the enterprises are still commercially viable: The banks do business with the public, the public hates unemployment, the banks have a moral responsibility to shore up fatally wounded businesses, and that's the end of it.
The problem here is that the public also owns stock in banks such as Citigroup and Bank of America, and the public doesn't want the banks they have invested in to make any more bad loans. So when a politician steps in and says that a bank must restore financing to a dying company, he is rewarding one set of taxpayers and punishing another.
That pol may even be rewarding one set of taxpayers while simultaneously punishing them, because the guys who go on strike may have 401(k)s containing mutual funds that own tons of stock in Bank of America. And then the stock price of Bank of America drops precipitately because it is compelled to make risky or bad loans by politicians representing taxpayers who purport to be furious that banks keep making bad loans, except when the bad loans are made locally.
You can see how confusing this whole thing could get.
The nefarious Blagojevich will doubtless get his comeuppance for allegedly trying to sell Obama's empty seat to the highest bidder. So may the highest bidder. But the fallout from the Bank of America episode is less clear because nobody seems to be paying much attention to it. If Blagojevich's hardball tactics are allowed to stand, the state of Illinois could soon find itself in a situation in which it threatens to cut off all state business with the relevant banks until they lend money to the Tribune Co. so that it can jack up the payroll of its subsidiary, the Chicago Cubs, thereby enabling the team to go out and get a couple of left-handed power hitters who will help the club win its first championship since 1908, thereby raising enough cash to pay off the Tribune Co.'s debt and repay Bank of America. All things considered, reopening that window company's line of credit might be a wiser investment.
Joe Queenan writes frequently for the New York Times, Barron's and the Guardian. His books include "Balsamic Dreams," "Queenan Country" and a forthcoming memoir, "Closing Time."