This subprime mortgage meltdown was a house of cards waiting to happen. The extent of the abuses that underlay and the myriad ways in which financial products were designed to leverage the returns, and more insidiously the risks, makes the whole thing a disgrace and a sad commentary on the world’s financial system that became enormously dependent on people being able to service debt that they had no hope of servicing in the first place.
Such is the case with leveraged buyout loans and the needless and reckless introduction of debt into Canada’s economy.. Such is clearly the case with BCE. The LBO of BCE is a totally absurd transaction that is fueled by greed and the need for Investment Banking Fees and Employee Stock Options gains with zero commensurate accomplishments to justify those gains......and the hubris of Teachers’ management. It is no coincidence that Maple Leaf Foods is the source of the lysteriosis outbreak. Maple Leaf Foods is another company whose goals and strategies and priorities were being laid down by the “stock jockey” mindset of people who run a pension fund, and for whom ROE means everything and food safety took a back seat.
It is for reasons like this that the Federal Pension Regulations PROHIBIT pension funds from owning more than 30% of the votes of a Canadian company. So what do the “stock jockeys” at Teachers do? They break the very spirit of that law, by creating some bogus arrangement with an ex employee, Morgan Mccague, to circumvent these rules.
Circumvent these rules? Sound like the very thing that caused the subprime fiasco.
Meanwhile the circumventing of these rules by Teachers in the case of BCE is having vastly negative consequences on Canada’s economy, such as:
Loss of $800 million per year in tax revenue
Loss of 2,500 high paying jobs (expected to rise to 4000)
Massive debt being introduced into Canadian economy at the worst point in the economic cycle ($44 billion in total for BCE, and increase of $32 billion from current debt levels)
Vastly diminished capital investment plan for Canada’s so called leading telco
Increased service costs to consumers
Reduced to a junk bond issuer at the cost to existing bondholders of $1 billion and vastly increasing BCE’s cost of capital
Displacement of average investors. BCE used to be Canada’s most widely held company, now it will have 4 owners, 3 of them US.
Former investors were taxable Canadians, new owners are not
Reneging on $1 billion in dividends payable to shareholders and promised to shareholders
Teachers’ should not be allowed to break its pension rules in such a blatant , crude and manipulative way. That’s how sub-prime mortgage meltdowns have their start. The Chairman of the CRTC was completely unimpressed by this phony arrangement devised by Teachers’ . As you know, I expressed that view before the CRTC.
Where is Ottawa? Where is Jim Prentice and Stephen Harper? They approved this transaction with the full knowledge of all the abuses that it represented and the negative consequences that it entailed I know, since I sent Prentice these very observations is letter dated February 26, 2008. It was hand delivered to him by the Chief of Staff of a former Prime Minister.
Tuesday, September 16, 2008
Posted by Fillibluster at 8:03 AM