Shut Up, She Explained

Shut Up, She Explained

Free speech for TARP recipients? Jane Hamsher thinks not.

Jane Hamsher of Firedoglake surely considers herself a champion of civil liberties (and an ally of Big Labor). However, her view of legitimate dissent and free speech seems oddly cramped - apparently, equity analysts in the employ of Citigroup should not be allowed to express opinions contrary to the views held by Ms. Hamsher. Her attitude is mostly amusing, but depending on how influential these lefty blogs become or how widely shared her views are on the left this could become be scary - sort of a McCain-Feingold for TARP recipients and their clients, i.e., everyone. Here we go:

Today Citigroup lowered its rating on Wal-Mart from a buy to a hold because of the Employee Free Choice Act, "citing concern that legislation intended to make it easier for employees to unionize would raise the retail giant's labor costs and hurt its competitiveness."

This is startling for a lot of reasons, not the least of which is that they're downgrading the stock based on an assumption that a piece of legislation will pass that hasn't even been introduced yet.

The Citigroup analyst, Debora Weinswig, said Employee Free Choice (EFCA) "could be a significant drag to earnings."

It's hard to view this as anything other than a reckless and overt political act on the part of a company, Citigroup, that has made stupendously bad business decisions with dire economic consequences necessitating billions in taxpayer bailouts, at a time when the market can ill-afford it.

As to timing - the bill was introduced on Tuesday, so Ms. Weinswig was hardly out on a limb as to topicality. Whether the bill will pass remains up in the air.

With regard to "It's hard to view this as anything other than a reckless and overt political act on the part of a company, Citigroup", really? I have an easy time viewing this as one equity analyst, deep in the bowels of Citigroup, doing her job by offering an opinion on how legislation currently in the news might impact companies she covers. What is the political motivation of "Citigroup" (Who at Citi - the board? The CEO? Ms. Weinswig's boss?) in linking this bill to a decline in WalMart's fortunes? Ms. Hamsher does not attempt an explanation, nor does she explain why previous dubious lending decisions of Citigroup ought to influence the views of their equity analysts.

Ms. Hamsher attempts to argue from authority with unconvincing results:

I asked Pulitzer-Prize winning former New York Times reporter David Cay Johnston, author of author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense [and Stick You with the Bill], what he made of this announcement:

Citigroup's comment fit with the same pattern we see in utility regulation. Just as state regulators are about to vote on raising electricity and gas rates, the bond ratings agencies come out with warnings that they're thinking about downgrading the bonds. None dare call it "interference in the market."

None dare call it "interference in the market"? Do any dare call it "free speech"? Here in America, people (even bond raters!) are allowed to comment on the likely impact of proposed legislation and regulation. Well, that is my opinion, but perhaps I am behind the times - here is Ms. Hamsher:

Taxpayers now own a huge chunk of Citigroup. We should be looking a lot more closely about how, and when, these ratings get made.

We? Who is "we" - Henry Waxman? This is stifling of dissent, once considered the highest form of patriotism. And without bothering to research the point I will guess that Ms. Hamsher is firmly behind Paul Krugman in supporting the nationalization of our banks, presumably to be accompanied by further stifling of their viewpoints. Civil liberties for some!

I GUESS THE WALMART GUYS MISSED THIS IN B-SCHOOL: Former Hollywood producer Jane Hamsher takes time from her schedule to explain to WalMart management how they can boost their bottom line:

Even Bank of America admitted in an internal memo that increased wages for working people would mean "increased spending power of lower income consumers," which would mean that even if Wal-Mart was successfully unionized -- a big if -- they could make up the cost of higher wages with an increase in sales.

I am afraid that any response would spoil the moment; I want to savor this "Walmart could earn more if they just increased their cost base" theorem a bit longer.

OK. Since Ms. Hamsher is an orthodox progressive we can easily imagine her reaction if presented with the notion that the government could increase its revenue by cutting tax rates (another firedog favors "crazier notions of supply side economics" as a description of the Laffer Curve). Yet now we live in a world where WalMart can increase its profits by increasing its costs - can we call this "the Laugher Curve"? Why haven't WalMart's managers and owners figured this out for themselves? I blame false consciousness!

For the reality-based, Walmart's annual revenues as of Jan 2008 were roughly $380 billion; their cost of goods sold was about 80% of that, and "Selling, General and Administrative", i.e., payroll, was about 18% of revenue, or $70 billion. Even if none of that $70 billion went to taxes and housing (rent or mortgage payments), and even if WalMart employees spent 100% of their paychecks at WalMart, they would still provide less than 20% of WalMart's revenue. Dare we wonder whether the rest of WalMart's customer base, which is to say the vast majority, will pay higher prices just because WalMart employees are a bit more flush? And if their customer base is prepared to pay more, why the strange forebearance by the WalMart managers, who ought to be raising prices (and profits!) today. Inexplicable. Well, almost inexplicable - maybe this theory of "higher costs = higher profits" is bunk.

To be fair, I suppose that if enough of the American work force became unionized and if the resulting combination of inefficient work rules and higher pay resulted in a net transfer of wealth from owners (who no doubt shop at Saks) to workers (WalMart and Target customers all), then maybe maybe maybe WalMart would see a net benefit from the passage of card check - it is at least conceivable, although not what Ms. Hamsher argued. Of course, WalMart owners would see an even greater benefit if their competitors were saddled with inefficient unions while they remained free, even if they are no longer allowed to say so.