Monthly Archives: May 2004

New Dallas stadium proposal

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Following up on this post from a couple of months ago on Dallas’ proposal to Dallas Cowboys owner Jerry Jones to build a new stadium in Fair Park for the Cowboys, Professor Sauer posts this analysis of Jones’ counter-offer to Dallas officials — i.e., the cost of the stadium would be $650 million, with the Cowboys paying roughly a third and getting $425 million in public subsidies from Dallas County. The public financing would be paid in part by a 3% increase in the hotel occupancy tax, which would raise that tax to the nation’s highest of 18%. Jones argues that the stadium and surrounding commercial and residential complex (which would include hotels) would “drive business to the metroplex.”
With pragmatic clarity, Professor Sauer observes: “If I were a hotel owner and Jerry Jones was asking for a subsidy to compete with me, financed by a tax on my business, I’d be hopping mad.”
Stay tuned on this one. Although Professor Sauer’s skepticism is undoubtedly correct from an economic standpoint, my sense is that Jones will be able to play on Dallas public officials’ concern over falling behind Houston in the “stadium arms race” to get a deal done that involves a boat load of public financing.

New Texas Supreme Court Justice Scott Brister

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This Chronicle story reports on the bloodier than normal confirmation of Scott Brister as a new justice on the Texas Supreme Court. Justice Brister got 19 votes in the Texas Senate, exactly the two-thirds majority necessary to be confirmed. Nine Democratic senators voted against him, including Houston senators Rodney Ellis, Mario Gallegos and John Whitmire.
Justice Brister was appointed by Gov. Rick Perry last November to a vacancy on the Supreme Court. At the time of his appointment, Justice Brister was serving on Houston’s 14th Court of Appeals, where he was chief justice. Justice Brister also served on Houston’s other intermediate appellate court — the 1st Court of Appeals — and was a judge for the 234th District Court in Harris County for 11 years.
Despite the divisive politics involved in his confirmation, Justice Brister has a fine reputation among the Houston bar as a jurist, and he will be a valuable addition to the Supreme Court.

Bernard Lewis on U.N. involvement in Middle East

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Princeton University Professor Emeritus Bernard Lewis is America’s foremost expert on Middle East history, and prior posts involving his work and views can be viewed here. In this Wall Street Journal ($) piece, Dr. Lewis makes some typically insightful observations in regard to relying on the United Nations as an agent for progress in the Middle East:

The record of the U.N. in dealing with conflicts is not encouraging — neither in terms of fairness, nor of efficacy. Its record on human rights is even worse — hardly surprising, since the members of the U.N. Commission on Human Rights include such practitioners of human rights as Cuba, Saudi Arabia, Sudan and Zimbabwe. In dealing with conflicts, as a European observer once remarked, its purpose seems to be conservation rather than resolution.
A case in point: In 1947 the British Empire in India was partitioned into two states, India and Pakistan. There was a bitter military struggle, and an estimated 10 million refugees were displaced. Despite continuing friction, some sort of accommodation was reached between the two states and the refugees were resettled. No outside power or organization was involved.
In the following year, 1948, the British-mandated territory of Palestine was partitioned — in terms of area and numbers, a triviality compared with India. Yet that conflict continues, and the 750,000 Arab refugees from Israel and their millions of descendants remain refugees, in camps maintained and staffed by the U.N. Except for Jordan, no Arab state has been willing to grant citizenship to the Palestinian refugees or to their locally born descendants, or even to allow them the rights of resident aliens. They are now entering their fifth generation as stateless refugee aliens. The whole operation is maintained and sustained by a massive apparatus of U.N. officials, some of whom have spent virtually their whole careers on this issue. What progress has been made on the Arab-Israel problem — the resettlement in Israel of Jewish refugees from the Arab-held parts of mandatory Palestine and from Arab countries, the Egyptian and Jordanian peace agreements — was achieved outside the framework of the U.N. One shudders to think what might have been the fate of the Indian subcontinent if the U.N. had been involved in its partition.

The Rocket continues to roll

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Roger Clemens continued his dreamlike hometown season as he hurled the Stros to their 10th victory in their last 12 games, 6-1 over the Marlins. The Rocket won his 7th straight game of the season, giving up only 3 hits, a walk and one run while striking out 11 in seven innings. For the first two thirds of the game, this was an old-fashioned late 1960’s-early 70’s pitching duel between Clemens and the Marlins’ Brad Penny, who dominated the Stros. However, Lance Berkman tied the game with a double to deep center off of Penny in the bottom of the seventh, and then Morgan Ensberg plated Berkman for the lead to secure the win for Clemens and send Penny to the showers. Bidg and the crew then put this one away with a four spot in the bottom of eighth.
Wade Miller takes the hill in an interesting matchup with the Marlins’ colorful Dontrelle Willis tonight at the Juice Box in the second game of this three game series.

Institutional litigation reserves increasing

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On the heels of the news of Citigroup’s WorldCom settlement and increase in litigation reserves for other (i.e., Enron) investor litigation, this Wall Street Journal ($) article reports on the pressure that other financial services firms are facing to increase the amount of their reserves because of the darkening litigation environment.
Believe me, “dark” does not begin to describe the litigation environment surrounding the Enron litigation. “Black hole” would be more appropriate.
At any rate, the WSJ article notes that several other financial institutions are assessing what to do in light of the Citigroup action:

Because Citigroup also raised its reserves for liability associated with Enron Corp. — another company that like WorldCom hit the rocks after overstating its earnings during the market bubble of 1999 and 2000 — some legal and stock-market experts said the action put pressure on J.P. Morgan Chase & Co. to consider boosting its reserves for Enron as well.
“Citi’s move would appear to put pressure on [J.P. Morgan] to do something similar, given that JPM and Citi had business relationships with Enron that appear, in our view, to have been broadly similar in exposure,” Guy Moszkowski, who follows banks and securities firms at Merrill Lynch & Co., said in a note to clients late yesterday.

Funny that the WSJ article would quote a Merrill analyst:

Another firm with significant exposure to Enron-related liabilities is Merrill Lynch, which like Citigroup and J.P. Morgan settled regulatory charges, without admitting or denying wrongdoing, that it aided Enron in overstating earnings. . .
Citigroup yesterday added $3.3 billion, after taxes, to its litigation reserves, bringing the current total to $6.7 billion — which Chief Executive Charles Prince said was for “Enron, research and IPO litigations,” including some remaining WorldCom exposure. Mr. Moszkowski, the Merrill Lynch analyst, estimated the biggest chunk of that was about $2 billion for Enron.
As of year-end 2003, J.P. Morgan had $745 million in reserves for litigation, including $524 million for Enron. Bank analyst Susan Roth of Credit Suisse First Boston said that if J.P. Morgan brought its Enron reserves up to the Citigroup level, that could result in a charge of $2.5 billion, or $1.19 a share. Accordingly she reduced her price target for J.P. Morgan stock to $45 from a range of $45 to $50 a share.
. . . Last July, J.P. Morgan Chase agreed to pay $135 million to settle charges by the Securities and Exchange Commission that it helped Enron defraud investors. Citigroup also agreed to pay $120 million to settle charges that it helped Enron and Dynegy Corp. defraud investors.
Without admitting or denying wrongdoing, both institutions settled charges that they helped the companies mislead investors by characterizing loan proceeds as cash from operations. Merrill paid $80 million to settle SEC charges that it aided and abetted Enron’s fraud with two deals in late 1999, also without admitting or denying wrongdoing.
Citigroup’s WorldCom settlement “probably re-prices the cost of Enron- and WorldCom-” related liability, said Brad Hintz, who follows securities firms at Sanford C. Bernstein & Co.

“Re-pricing” the cost of Enron-related liability? I can already hear the plaintiffs’ lawyers using that term.

Capitalist roader map

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In performing research on a company or a particular director on a company’s board, it is often helpful to identify the company’s other board members and the other corporate boards on which those board members serve.
“They Rule“ is an extraordinary website that uses flash player to visualize a database that the rather interesting Josh On has created on certain publicly-owned corporate and institutional boards. You can choose either a particular board member or simply a corporate board. Then, the site will map the corporate board by identifying each board member, and then you can select a particular board member and it will map out each corporate board on which the board member serves. This process has amazing possibilities for tracking relationships between various corporate boards. Heck, I even expect Kevin Bacon to pop up before long!
To test “They Rule,” I plugged in the name of former Georgia senator Sam Nunn. He is on four boards and this is the map that “They Rule” produced:
they rule map2.gif
Hat tip to Boing Boing via Alex Tabarrok over at Marginal Revolutions for the link to this useful tool.

Larry McMurtry on General Grant

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In this NY Times Review of Books review, my favorite novelist — Larry McMurtry, author of the incomparable “Lonesome Dove” and many other fine novels — writes about Mark Perry’s new book, “Grant and Twain: The Story of the Friendship that Changed America.” This is a magnificent review about the fascinating General Grant, who never seemed to be able to live up to other people’s expectations except President Lincoln’s. The entire review is a must read, and I pass along an the following excerpt that McMurtry uses from Grant’s “Personal Memoirs” that is the central focus of Mr. Perry’s book:

Put Grant in a fresh uniform and within half an hour it would look as if he had fought the Battle of the Wilderness in it. In uniform or out, Grant rarely seemed at ease, neither in his clothes nor in his skin. His penchant for casual, if not ragged, garb is never better illustrated than in the famous passage in his Personal Memoirs when he goes, at last, to meet Lee at Appomattox Courthouse in hopes of receiving the surrender of the Army of Northern Virginia?as poignant a moment, in my view, as one will find anywhere in the history of war:

When I had left the camp that morning I had not expected so soon the result that was then taking place, and consequently was in rough garb. I was without a sword, as I usually was when on horseback on the field, and wore a soldier’s blouse for a coat, with the shoulder straps of my rank to indicate to the army who I was. When I went into the house I found General Lee. We greeted each other, and after shaking hands took our seats….
What General Lee’s feelings were I do not know. As he was a man of much dignity, with an impassible face, it was impossible to say whether he felt inwardly glad that the end had finally come, or felt sad over the result, and was too manly to show it. Whatever his feelings, they were entirely concealed from my observation; but my own feelings, which had been quite jubilant on the receipt of his letter, were sad and depressed. I felt like anything rather than rejoicing at the downfall of a foe who had fought so long and valiantly….
General Lee was dressed in a full uniform which was entirely new, and was wearing a sword of considerable value, very likely the sword which had been presented by the State of Virginia; at all events it was an entirely different sword from the one that would ordinarily be worn in the field. In my rough traveling suit, the uniform of a private with the straps of a lieutenant-general, I must have contrasted very strangely with a man so handsomely dressed, six feet high and of faultless form. But this was not a matter that I thought of until afterwards….
We soon fell into conversation about old army times…. Our conversation grew so pleasant that I almost forgot the object of our meeting….

Laurie Myrolie updates Iraqi 9-11 links

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In this FrontPageMagazine piece, Laurie Mylroie reports on an important new piece of evidence that links Iraqi intelligence to one of the leaders of the 9-11 attacks on New York and Washington.
As this earlier post notes, Ms. Mylroie is a former Clinton Administration advisor on Iraqi intelligence matters who has clashed with Richard Clarke regarding his dismissal that Iraq was involved in either the 1993 World Trade Center or the 9-11 attacks.
Hat tip to Powerline for the link to Ms Mylroie’s article.

Citigroup WorldCom settlement: one down, Enron to go

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This NY Times article reports on the settlement of the WorldCom class action lawsuit against Citigroup. The $2.65 billion settlement is the largest ever by a bank, brokerage firm or auditor to settle an investor fraud case based on the purchase recommendation advice that such an entity gave to investors. It is the second-largest amount ever paid to settle a securities class action, trailing only the Cendant Corporation‘s payment of $2.85 billion in 2000.
Nevertheless, neither of those records is expected to last long:

The bank also said that it would take a charge in the second quarter of $4.95 billion to reflect the settlement and an addition to its reserves to cover exposure to Enron and other pending litigation. The charge is equal to roughly three months’ worth of its earnings . . . Citigroup has set aside $6.7 billion in all to cover its litigation exposure.

Ouch!
A couple of quotes of note from the Bloomberg article on the settlement:

Chief Executive Officer Charles Prince said Citigroup faced claims seeking $54 billion in the WorldCom lawsuit. “We made a $1.64 billion insurance policy to avoid a roll of the dice in front of a jury,” Prince said on a conference call with investors. “We want to put the entire era behind us.”
Saudi Prince Alwaleed bin Talal, Citigroup’s largest individual shareholder, said Prince and Citigroup Chairman Sanford Weill called him this morning and he told them “I’m backing them all the way. If this was to go to court it would be so big, God help us,” Alwaleed said. “The trend in the U.S. and New York is against corrupt practices. Look at Martha Stewart.”

War Theory

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This Wall Street Journal ($) article reports on an interesting area of Pentagon research that is not discussed much in the mainstream media — that is, the fundamental shift that has taken place over the past generation in the theory behind the way in which American military forces fight wars.
The WSJ article focuses on Thomas Barnett, a 41 year old obscure Defense Department analyst, teamed up with senior executives at the Wall Street firm Cantor Fitzgerald LP in 1998 to study how globalization was changing national security. The entire WSJ article is well worth reading, and the following are a few tidbits to whet your appetite:

One scenario [Mr. Barnett and his associates] studied was a meltdown caused by the Y2K computer bug followed by terrorist attacks designed to exploit the chaos. Mr. Barnett posited that Wall Street would shut down for a week. Gun violence, racially motivated attacks and sales of antidepressants would surge. The U.S. military would find itself embroiled in brushfire conflicts across the developing world.

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