TXU Case Study in Speculation Hurting Consumers and Embarrassing Environmentalists

Memphis   Who wants to read another story about Wall Street hustlers and the funny money going south and then jumping through more hoops to try to save their butts in bankruptcy court?  Well in this case the answer is “Me!” when it comes to the wheeling-and-dealing involving TXU, the struggling Texas power company. 

            The bottom line is that the Wall Street folks that took TXU from being a major power company in Texas to being a financial plaything are trying to go to bankruptcy court in order to get rid of $32 billion worth of debt while managing to continue to hold ownership of the outfit.  The gang of KKR, TPG, Goldman Sachs and others are trying to bail themselves out of a disaster they made of the Texas utility operations on a bad bet that presumed natural gas prices would go up and that they would get away with charging more for electricity.

            This is one of those, “I told you so” moments, since ACORN in Texas had been pretty much all alone with precious few friends in opposing this crazy merger in the first place since we were arguing that we, as Texas utility bill payers were going to end up paying for this craziness.  Stacked against us on the other side, if you have a long memory, were a lot of big time environmentalists, like the Natural Resource Defense Council and the like who were lined up for this wild buyout for a couple of reasons.

            The buyers, included Bill Bondurant, who was on the board and a donor to some of the enviro national groups, and a mega-rich principal of TPG.  To get the environmentalists on their side they promised that if they made it through the Texas regulatory process with their help, they would shelve plans to build some of the coal fired plants that had been on TXU’s wish list.  I say “wish list,” because it was obvious to us, and I would have thought the DC enviro honchos, that the offer to not build some of the new plants was gratuitous anyway.  They didn’t have the money and they didn’t have the demand.  Regardless in 2007 as this deal was red hot, Texas ACORN was busing folks into Austin to protest its approval while the enviros were cutting the backroom deals in DC with the Wall Streeters, all of which were premised on us paying the bills at the end of the day.  We won some delays, but we were steamrolled.

            What goes around comes around, and they lost their shirts.  There’s some justice there, but somehow I’m not sure that Texas utility consumers won’t still end up paying for this big time.

Audio Blog on Texas Utility

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Come On! Private Banks Poaching Fannie Mae

subprime mortgage securitization
subprime mortgage securitization

New Orleans On ESPN’s Sportscenter during the seasons they have a feature called “Come on!” in which they feature unbelievable or bonehead plays.  We need that in other fields of public life and politics.  Reading about the efforts of banks like Wells Fargo and JP Morgan Chase along with the various trade associations to try to get their noses under the Fannie Mae and Freddie Mac restructuring tent to shill a profit by issuing government secured mortgages, I could only thing:  Oh, come on!  How ridiculous!!  These are the same banks that just brought us the Great Recession due to their irresponsible lending and securitization schemes, and now they should somehow be allowed to profitably issue government mortgages.  Though by now we all ought to be used to the way that Wall Street thumbs their nose at all of the economic realities that all of us face, this is wildly unbelievable.

Reading the New York Times article by Louise Story, it was clear this was another predator’s ball with not only Wells and Chase at the trough, but also Goldman Sachs, Credit Suisse, and Morgan Stanley.  All of this reminds me of the scam that the Obama Administration stopped in recent years of allowing private interests to wildly profit as the middle men brokers for federally offered student loans.  Banks were making out like, well how else can I say this, bandits.  Stopping this sticky fingered scandal saved huge amounts of money, but now they are baaaaccccckkkkk with something perhaps even more outrageous.

The other backassedwards part of this is the problem of misdirected blame that still falls in the direction of Fannie/Freddie for supposedly bringing down the house by loaning to lower income citizens without looking at affordability or sustainability.  I understand the ideological need to blame the poor, but it’s important to point out that there is still no factual evidence that these loans, that should have been encouraged by the government, had anything to do with the mess.    Not only would we be throwing out the baby rather than the bathwater, but it seems we would be institutionalizing the bathwater and leaving the baby homeless, so to speak.

There’s probably a debate worth having about how many and how much of the “middle class” need to have federally guaranteed mortgages through these vehicles, but it seems obvious the we will need even firmer support for working class families in the future to have a chance at home ownership in we ever get out of this recession.  We need to slap away the hands trying to pretend this is all a cookie jar, and tell them to not only mind their own business, but maybe even try to get better at it than they have been (let’s see banks portfolio more mortgages on their own before they claim to know how to issue others), and keep federal institutions trying to solve the puzzle of adequate and affordable housing for all Americans again.

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