The last few years have shown us what happens when an entire subculture loses its moral compass: Enron, Tyco, Adelphia, WorldCom, et al. And it's becoming increasingly clear that the current administration has embraced the unethical ethos of the corporate oligarchy from which so many of its members came -- and which all of them continue to serve. The same inability to distinguish right from wrong that characterized the corporate scandals is now dominating public policy. It's the ENRONIZATION of Washington. Want another example? How about the unprecedented aircraft-leasing deal currently being put together by the Pentagon and Boeing -- a plan that uses the same kind of accounting sleight-of-hand popularized by the gang at Enron. Here's how it works: instead of the Pentagon buying the 100 new jets it wants to use as aerial refueling tankers directly from Boeing, at an upfront cost of $138 million per plane, a special-purpose entity created on Wall Street will purchase the planes and lease them to the Air Force. That way the Pentagon gets to acquire the planes without having to dip into the Air Force's limited procurement budget, and Boeing gets to reap billions in new military contracts without having to show the debt associated with the shady deal on its balance sheet. It's an off-the-books win-win deal for them both -- but a losing proposition for taxpayers, who'll end up forking over an additional $8 billion to cover the interest payments on the leases. The sleazy new deal is being put together by the good bankers at Citigroup -- the same outfit that helped Enron defraud shareholders out of, what do you know, also $8 billion. Then there is the news that, in an effort to ensure the passage of its cherished tax-cut plan, the Bush administration buried a highly damaging study -- commissioned by its own Treasury department -- that found that it would take either the permanent elimination of all future federal discretionary spending or an immediate and permanent tax hike of 66 percent to cover the upcoming retirement and healthcare needs of aging baby boomers. You think that bombshell might have put a little damper on Bush's tax cut orgy? This is exactly the kind of skullduggery corrupt corporations used to conceal potentially disastrous news from investors -- like Adelphia hiding its $3.1 billion loans to the Rigas family in tiny footnotes in an earnings filing. It's time to expand the Right's definition of immorality beyond sex, drugs, and rock and roll to include lying, cheating, and callous indifference to those in need. CEOs lying to investors to pad their own pockets is bad enough. Political leaders lying to the American people to pad the pockets of their big buck contributors is immoral -- and intolerable.
Looks like a clip from Arianna Huffington: <a HREF="http://www.alternet.org/story.html?StoryID=16086">HUFFINGTON: The Enronization Of Public Policy</a>
What's the problem with this arrangement specifically? Looks like creative financing to me, neither unlawful nor unethical.
I think the problem is that instead of our government spending 13 billion 800 million to buy these 100 refueling planes they are going to do a complicated transaction in wich the total cost to tax payers will near 20 billion. 20 billion is a hell of a lot of money.
A billion here, a billion there, heck they can cut taxes again on the rich to raise revenue so it will cover the expenses.
If you don't have the cash, you get a loan or lease. Just like buying a house. The only thing that would be of concern is whether this new entity was an open-bid process to avoid cronyism and excess profits.
Not unlawful, not unethical and not even all that creative. This is simply lease financing. Thousands of companies do this all the time. It's accepted by the SEC and I believe is also in accordance with GAAP. So what? $138 MM/plane with 100 planes? So it would cost $13.8 B if purchased? Interest costs on the transaction are $8 B? Lets' say the useful life of the plane (and the lease) is only 10 years. That's $800 MM/year. If my interest payments on a $13.8 B loan are $800 M, thats less than 6%. If the lease is longer than that, the interest rate is even lower. The government is running a deficit anyway. It's just another form of debt. And it may not even be all that expensive. Why should I be concerned????
The problem is that procurement dollars are sparse as it is and since they both wanted to give Boeing, who gives out handouts like candy at Halloween, a little taxpayer funded love and get some new refueling tankers to boot, they found a way to satisfy both. But to me, I see it as a waste of money. We should have bought the things outright and raised procurement dollars. But to most, tankers are not a sexy way to spend money like Stealth bombers, cruise missiles, etc. So for that reason, we screwed.
