Can we reopen the Boscov's case now?
Maybe Hank Paulson, Ben Bernanke, George Bush and all the other suits involved in trying to save Wall Street should reconsider Boscov's relationship to my job, to the jobs of hundreds of my fellow Baltimoreans, and to the global economy. Boscov's was, for a time, a big advertiser in The Baltimore Sun, which pays my salary and the salaries of hundreds of other residents of the Greater Patapsco Drainage Basin.
But Boscov's, the family-run department store chain from Reading, Pa., filed for Chapter 11 last month and said it would start liquidating everything and closing stores, including three that anchored some of our largest malls - Owings Mills, Marley Station and White Marsh.
That was not a good thing.
About 1,400 employees, including 400 or so around here, will lose their jobs.
"There was no way that we could have ever anticipated these tough economic times," said Maralyn Lakin, Boscov's senior vice president. "So many people were affected with their mortgages and high gas and food prices. This is beyond what anybody expected."
That's as good an excuse as I've heard during the past couple of weeks. How about you?
In 2006, Boscov's started the most aggressive market expansion outside of Pennsylvania in its 89-year history. And it did this just as the economy started to tank. But how were they to know that? So why don't we bail them out, too?
Last month, when we got Boscov's bad news, The Baltimore Sun talked to one of those bright investment guys at Stifel Nicolaus & Co. "I felt like it was a robust business model for a decent economy," this fellow, David Fick, said. "But ... I think they expanded too fast and the economy caught up with them - and that combination was toxic."
"Toxic" has been used a lot to describe deals, instruments, assets and credit conditions in the big-player financial markets that American taxpayers are now expected to bail out. Here's just one example, from a headline in The Times of London: "Henry Paulson buries US toxic debt ... America is poised to spend billions to buy up the toxic bonds that have poisoned the financial system."
So if we're doing a toxic cleanup, why not clean it all up?
I know: Boscov's wasn't Lehman Brothers. It wasn't AIG. It wasn't "too big to fail." It wasn't a big player. George Bush probably thinks Boscov was Vladimir Putin's driver.
So of course it's ludicrous to consider a government bailout of lil' ole 49-store Boscov's, and the other retail chains that filed for bankruptcy this year, yet it's prudent for government to take on $700 billion in bad mortgage debt with the hope that, down the road, we'll recoup our investment and then some.
Hey, you know, maybe the bath-towel-and-appliance market will pick up again. We could get our Boscov's bailout back, right?
Bush and Paulson, his Treasury secretary, want broad powers to bail out companies that, lacking oversight and self-restraint, got into their own "toxic" deals and didn't anticipate the housing market collapse. The ripple effects of further collapse will be catastrophic, they say.
And that might be true, but remember: This is Bush with his finger on the panic button. When he proposes a bailout that could cost up to $1 trillion, and when he says the risk of allowing failure is too great - "Risks that America cannot afford to take" - this calls for a public trust he long ago squandered. So we have a lame-duck president making decisions - or deferring them to the Treasury secretary and the chairman of the Fed - that could have an effect on the quality of life of Americans for years to come.
Where are we getting this bailout money?
The national debt has grown during the Bush administration to nearly $10 trillion, according to the U.S. National Debt Clock. Add our obligations from unfunded entitlements - Social Security, Medicare, Medicaid - and the debt is more like $53 trillion. That's according to David M. Walker, the former head of the Government Accountability Office and leading man in I.O.U.S.A, an excellent documentary about the national debt produced by Agora Financial of Baltimore, the research firm and publisher of investment newsletters.
Addison Wiggin, the Agora partner who has been promoting the film and speaking to groups about the debt, answered questions after a screening at the Chesapeake Bay Film Festival over the weekend. "The crowd was astounded when we put the bailout in the context of the film," he says. "People keep saying the 'taxpayers' now own AIG, etc. But it's all on borrowed money. ... 'How long can this go on?' they wanted to know. That is a really good question."
Wiggin says that with all the moves made this year by the Fed, American taxpayers are on the hook for another $1.6 trillion in debt. "It's freaking unbelievable," he says. "In order to get his [bailout] package, Paulson had to ask Congress to raise the debt ceiling again. Now national debt is greater than 70 percent of [Gross Domestic Product], and the highest it got during the Great Depression was 44 percent."
Bernanke, the Fed chairman, is an expert on the Depression. He says we're not in one, nowhere near it, and who doesn't want to trust him when he says that? Then again, 14 months ago, Bernanke estimated losses from the subprime mess at $100 billion. I guess he was off a little.
Dan Rodricks can be heard on "Midday" on Mondays through Thursdays, noon to 2 p.m., on 88.1 WYPR-FM.