Commentary: Welcome to the Ownership Society
This article first appeared in the St. Louis Beacon: September 18, 2008 - I do not know about you, but I am in a pickle about the economy. On one hand, I read as of earlier today (05:13:33 PM GMT Sept. 18, 2008, to be exact), my share of the national debt is $31,642.25. And that's on top of all my other bills!
On the other hand, as a part of what I like to call "our investment syndicate" -- and what you might call "All U.S. taxpayers," who are busy bailing out financial giants right and left -- I am seeing a whole lot more on the asset side as each day goes by. But I also have a familiar feeling. You know the one. It is a little bit like reviewing my credit card bill after the family vacation and asking, What did I spend? Where did I spend it? And am I happy with what I got?
Here's what I am thinking so far:
I started with my/our newest investment AIG, American International Group, which our syndicate got in on to the tune of $85 billion. We now own 80 percent of AIG.
CNN's Ali Velshi tells us that we got a good deal in large part because we are charging 12 percent interest on our loans. So win - win, right? If they screw up, we own 80 percent of a large insurance company and if they don't, we get a 12 percent return for the 24 months they have on their bridge loan. What I do not know is if, as an owner, we get discounts on home, auto, fire, health or life insurance. I am sure the shareholder's information packet they will be sending out will clear a lot of things up. I just hope they use plain paper or emails. As new owners I think we need to stay focused on keeping costs down.
On the Freddie and Fannie bailouts, I think we are looking pretty smart. Buy low, sell high, as I have always heard. Fannie stock had a 52-week high of $70.57 on Aug. 22, 2007, and fell as low as $6.87. On Sept. 12, it closed at $10.25. Freddie shares had a 52-week high of $67.20 on Aug. 17, 2007, and fell as low as $3.89. On Sept. 12, our stock reached $7.75 a share. On the share price side, we are looking good. Still, there is a bit of a fly in the ointment: the increase in cost.
The initial bailout amount quoted at the beginning of the summer as $25 billion by the Congressional Budget Office is now being pegged by William Poole, former president of the Federal Reserve Bank of St. Louis, at closer to $300 billion.
It makes me think about a deal I once made with a college buddy. He would organize a party and I would put up the cash. It stated out with three cases of beer and a lot of chips. My estimated cost was $50. When I saw bottles of imported wine, cheese platters and Heineken rolling in, well to quote President Bush, "Fool me once ..., I won't get fooled again."
And near as I can tell on this Freddie/Fannie deal, we won't get any stock certificates or voting rites. No great seats in the corporate box. We won't even get a pen or a beer cozy with the logo. Hmm. So maybe this deal is a little less than perfect. Still, we now own part of more than 50 percent of all homes in the U.S.
Investing in real estate, how can that not be a good thing?
Our investment syndicate passed on Lehman, which frankly makes me happy. We already committed to absorb as much as $29 billion in potential losses as J.P. Morgan digests Bear Stearns. $20 million to $40 billion for another episode of "Banks Gone Wild," well, I for one am glad Hank Paulson did not find that deal the least bit titillating. It is not so much that if you have seen one bank you've seen them all. It is just that, personally, I think you have to diversify. Which brings me to cars.
I love the guys who run these companies. Three of them, the CEOs of Chrysler, GM and Ford met with House Speaker Nancy Pelosi to let her know that they want our team to come up with $25 billion for them. Now this part is great. You know what they want to do? Build fuel-efficient cars and use new technology. WOW. I like this kind of investment. Forward looking and innovative companies like these are always winners. I can't speak for everyone, but if I could I would say, "Count us in!"
I could go on, but really there is no reason to gloat. Besides, to be honest, the jury is still out on our investments on the Terror, Drugs, School Mediocrity and Culture Wars.
So for now, let me just say that as someone who recently added $310 billion to my assets and who sees a hefty bunch of opportunities ahead I am grateful to you, Mr. President. Although I did not understand what you meant at the time, I do now. So, kudos to you President George W. Bush. It is truly wonderful to be a part of the Ownership Society!
Steve Lawler is a St Louis based writer, organizational psychologist and Episcopal priest. He is the author of the forthcoming novel, “Father FX Explains God.” He teaches leadership at Washington University.