Thinking (Write Offs)

[Rajiv]

TH*NK*NG (WRITE-OFFS) by Fred Cederholm

I’ve been thinking about write-offs. Actually I’ve been thinking about BILLIONS, Sub-prime/ Alt A mortgages, banks, the former S& Ls crisis, billions, and déjà vu. The late Illinois Senator Everett Dirksen, a great orator, is perhaps most frequently remembered for his quip: “A BILLION here, a BILLION there and pretty soon you’re talking real money.” Dirksen was playing on the fact that you reach a point where dollar amounts become so large, they have little relevance or meaning - unless they are broken down, pro-rated, and allocated to where they impact individual or household levels.

You see last week saw more headlines involving the write-offs of investments in mortgage derivatives in the TENS of BILLIONS by still more banks and brokerage houses. In the US, front page ink shifted from Citibank to Wachovia, our seventh largest banking group. Be (un)rest assured, there will be far more ten, eleven, or twelve figure hits to yet other banks, pension funds, mutual funds, and insurance company portfolios! Huge losses to date haven’t scratched the surface, trust me on this.

There are a couple reasons for delaying/ breaking-up the announcements into bite sized billion chunks. First, there is identifying the investments. These were packaged in all shapes, sizes, and formats. One may TH*NK they don’t have any exposure, but as analysts (and auditors) dig deeper; these surface in hedge funds, mutual funds, money market funds, insurance company portfolios - you name it. Second, even if identified as CDO based, debates wrangle over valuation. Since most of them appear to be “amorphous globs of anonymous fungible debt” - NOT identified to specific properties or mortgages which might have some residual or cadaver value – the valuation becomes an all (par) or nothing (zero) proposition. Besides, nobody wants to acknowledge such a hit until they absolutely have to do it.

The “politics of panic control” is the biggest reason for spoon feeding this debacle to the public in bite sized billions. If they could quantify the ultimate total losses (I’m certain some super-dome-ball-park figure is being bantered about behind closed doors), the global public just couldn’t deal with it, the equity markets would tank, and the world’s intertwined banking/ financial systems would collapse. The bite sized billions approach may unnerve the public, but at least there is a perception that the problem is being addressed and dealt with. And… nobody has been forced out of business, into receivership, insolvency, or liquidation – not yet anyway. Bite sized billions in write-offs just can work miracles.

[jk]

Re: Thinking (Write Offs)

dirksen, who was minority leader of the senate during the 50's, actually said "a Million here, a Million there...." now that is so outmoded, that the quote isn't even remembered properly. it reminds me of dr evil, in one of the austen powers movies, who is brought by time machine from the 60's to the present. he is blackmailing the world and, in video conference with world leaders, demands "ten MILLION dollars." the world leaders all breathe a sigh of relief and chat about who'll pick up the tab as if they'd just gone out to lunch, while dr evil's minions anxiously tell him that things have changed.

[Rajiv]

Re: Thinking (Write Offs)

From senate.gov

Researchers have been unable to track down the quotation most commonly associated with Dirksen. Perhaps he never said it, but the comment would have been entirely in character. Cautioning that federal spending had a way of getting out of control, Dirksen observed, “A billion here and a billion there, and pretty soon you're talking real money."

From the Dirkson Center

"A Billion Here, A Billion There..."


Did Dirksen ever say, " A billion here, a billion there, and pretty soon you're talking real money"? (or anything very close to that?)

Perhaps not. Based on an exhaustive search of the paper and audio records of The Dirksen Congressional Center, staffers there have found no evidence that Dirksen ever uttered the phrase popularly attributed to him.

Archivists undertook the search after studying research statistics showing that more than 25 percent of inquiries have to do with the quote or its variations.

Here is what they examined: all of the existing audio tapes of the famed "Ev and Charlie" and "Ev and Jerry" shows, newspaper clippings in the Dirksen Papers, about 12,500 pages of Dirksen's own speech notes, transcripts of his speeches and media appearances, transcripts of Republican leadership press conferences, and Dirksen's statements on the Senate floor as documented in the Congressional Record.

Although Dirksen rarely prepared the text of a speech, preferring to rely on notes, he would jot down a few words to remind him of a particular turn of phrase. For example, in referring to the public debt or excessive government spending, Dirksen would write the word "pothole" to remind him to tell the following story, on this occasion in reference to the debt ceiling:

"As I think of this bill, and the fact that the more progress we make the deeper we go into the hole, I am reminded of a group of men who were working on a street. They had dug quite a number of holes. When they got through, they failed to puddle or tamp the earth when it was returned to the hole, and they had a nice little mound, which was quite a traffic hazard.

"Not knowing what to do with it, they sat down on the curb and had a conference. After a while, one of the fellows snapped his fingers and said, ‘I have it. I know how we will get rid of that overriding earth and remove the hazard. We will just dig the hole deeper.'" [Congressional Record, June 16, 1965, p. 13884].

On the same occasion, Dirksen relied on yet another "spending" story, one he labeled "cat in the well":

"One time in the House of Representatives [a colleague] told me a story about a proposition that a teacher put to a boy. He said, ‘Johnny, a cat fell in a well 100 feet deep. Suppose that cat climbed up 1 foot and then fell back 2 feet. How long would it take the cat to get out of the well?'

"Johnny worked assiduously with his slate and slate pencil for quite a while, and then when the teacher came down and said, ‘How are you getting along?' Johnny said, ‘Teacher, if you give me another slate and a couple of slate pencils, I am pretty sure that in the next 30 minutes I can land that cat in hell.'

"If some people get any cheer our of a $328 billion debt ceiling, I do not find much to cheer about concerning it." [Congressional Record, June 16, 1965, p. 13884].

But there are no such reminders for the "A billion here, a billion there . . . " tag line as there surely should have been given Dirksen's note-making tendencies. He spoke often and passionately about the debt ceiling, federal spending, and the growth of government. Yet there is no authoritative reference to the "billion" phrase.

The chief evidence in support of Dirksen making the statement comes from people who claim to have heard him. The Library of Congress, for example, cites someone's personal observation on the campaign trail as evidence. The Dirksen Center has received calls from people who heard Dirksen say those words, some even providing the date of the event. But cross-checking that information with the records has, so far, turned up nothing in the way of confirmation.

The closest documented statement came at a joint Senate-House Republican leadership press conference on March 8, 1962, when Dirksen said, "The favorite sum of money is $1 billion – a billion a year for a fatter federal payroll, a billion here, a billion there." [EMD Papers, Republican Congressional Leadership File, f. 25] But the "and pretty soon you're talking real money" is missing.

In another close call, the New York Times, January 23, 1961, quoted Dirksen: "Look at education – two-and-one-half billion – a billion for this, a billion for that, a billion for something else. Three to five billion for public works. You haven't got any budget balance left. You'll be deeply in the red." [Cited in Byron Hulsey's "Everett Dirksen and the Modern Presidents," Ph.D. dissertation (May 1998, University of Texas, p. 226]