State Loan Program That Rick Perry Touted Had To Be Bailed Out
Gov. Rick Perry has anchored his presidential campaign to his claims of creating jobs.
With no business record of his own, Perry must contrast his ability to create jobs with public money against the records of two front-runners, Mitt Romney and Herman Cain, who tout credentials as private employers.
His GOP opponents already have sniped at his gubernatorial record, saying Perry inflates his job-creation numbers and takes credit for a business climate he inherited. Perry’s efforts to create jobs and spur agribusinesses as the state’s agriculture commissioner during the 1990s might provide even more fodder for the opposition.
Over his eight years as Texas’ farmer-in-chief, Perry oversaw a loan guarantee program with so many defaults that the state had to stop guaranteeing bank loans to startups in agribusiness and eventually bailed out the program with taxpayer money.
The state auditor panned Perry’s claims of creating jobs and criticized Perry and his fellow board members at the Texas Agricultural Finance Authority for not following their own lending guidelines.
In some instances, the auditor said, Perry and the authority guaranteed loans to applicants with a negative net worth or too much debt. Citing growing debts, the auditor finally suggested that state officials consider dismantling the program.
Even as the first alarms were sounded, Perry defended the program, saying no taxpayer money was at risk, blaming others and claiming he had fixed it.
It only got worse.
By 2002, Perry’s successor, Agriculture Commissioner Susan Combs, a Republican, stopped making loans as the percentage of bad loans neared 30 percent.
By 2009, her successor, Agriculture Commissioner Todd Staples, also a Republican, asked the Legislature to pay off the loan guarantees with a $14.7 million appropriation. The finance authority could no longer afford the $541,000 to cover the annual interest on the bad debts, almost all of which dated back to Perry’s tenure.
“It’s bad,” Staples told the American-Statesman at the time. “Unfortunately, taxpayers are on the hook for something that happened as long ago as 1987.”
In effect, Perry, as governor, signed his own government bailout when he approved the 2009 appropriations bill.
The Perry campaign did not respond to questions about whether Perry, as president, would use public money in economic development programs and what lessons he learned from his experience guaranteeing risky business loans with public money.
Mired in partisan politics
When the Legislature created the Texas Agricultural Finance Authority in 1987, the intent was to boost the state’s agricultural economy by selling state-backed bonds to guarantee bank loans to entrepreneurs who could not get commercial loans. The goal was to create small businesses and jobs by processing — rather than simply growing — Texas agricultural products.
The program immediately got mired in partisan politics, with Agriculture Commissioner Jim Hightower, a Democrat, on one side, and the Republican members of the finance authority appointed by Gov. Bill Clements on the other.
The impasse ensured that no loans were made during Hightower’s term.
In 1990, Perry campaigned on a promise to create jobs and expand the rural economy by making loans to agribusiness startups that would process the state’s agricultural products.
Clements’ appointees to the finance authority board gave Perry, a board member, sole authority to guarantee loans before newly elected Gov. Ann Richards, a Democrat, could replace them.
Under the program, the state would guarantee 90 percent of a lender’s loan — up to a maximum of $5 million — to an applicant.
Entrepreneurs lined up for money to spin cotton into yarn, process meats, develop cotton insulation, market canna bulbs to wholesale nurseries and sell pinto beans as a ready-to-eat frozen meal, to name a few.
‘This has not cost Texans money’
Perry had made four loan guarantees for $5.8 million by the time the attorney general ruled that he had to share that authority with his fellow board members. Even then, Perry and his staff drove the decisions.
Mary Webb, a Richards appointee who joined the finance authority as chairwoman in 1992, said the part-time board members had to rely on Perry’s staff at the agriculture department when screening loan applications.
“They did the legwork,” she said. “We looked at the deals to see if they fit with the legislation: Would they create jobs and help the agriculture community?”
By the time Webb left the board in 1995, she said she knew a couple of loans were in trouble. She said she learned only later the scope of the problems with other loans.
The first loan guarantees were financed by selling $25 million in bonds.
Twice, in 1993 and 1995, Perry campaigned for voters to approve more bonding authority.
Perry claimed the first two years of the program had created 4,100 jobs and pumped $390 million into the economy by guaranteeing loans to 47 companies. He predicted more than 40,000 jobs could be created with the additional bonding authority.
He didn’t mention troubled loans as he touted the program’s virtues at a 1993 Capitol press conference: “We think that this Texas Ag Finance Authority is, without a doubt, one of the finest programs that the Texas Legislature, that the citizens of Texas have ever gone forward with.”
At another stop, Perry said, “We can truly say it has not cost the taxpayers of Texas any money.”
Voters turned him down in 1993, but Perry finally won an extra $200 million in bonding authority two years later.
“This is one of the few government programs that truly has worked,” Perry said. “This has not cost Texans money.”
In January 1997, State Auditor Lawrence Alwin first alerted state officials, saying Perry and the board had violated their own lending guidelines.
He said 10 of the 48 companies had defaulted, and six more were in trouble. The first bad loans were written off as uncollectible in 1995, according to records.
Alwin also debunked a $40,000 report by a state-paid consultant claiming the program had created or retained more than 5,000 jobs at a cost of $412 per job as well as contributing $600 million to the economy.
The consultant’s data, which Perry submitted to the Legislature, were “unverifiable, incomplete, untimely, and inconsistent” and based on unrealistic assumptions about job creation, Alwin concluded.
A year later, Alwin warned that the situation had gotten worse. The program was $5.7 million in the red because of bad loans.
The issue hit the newspapers.
Perry and his lieutenants defended the program.
Deputy Agriculture Commissioner Larry Soward told The Dallas Morning News that the audit reflected a number of bad loans made early in the program to farmers and ranchers trying their first business ventures.
“The business acumen of the people behind them might not have been as strong as possible,” Soward said.
But he insisted the program would rebound: “The fact that there is a negative balance does not mean the program is in trouble.”
Perry echoed a similar refrain in a guest column in the Amarillo Daily News.
“By their very nature, TAFA loans are considered higher risk. Because of this, some defaults were inevitable and a negative balance was expected in the early years of the program,” he wrote.
He blamed the problems on “some unfortunate decisions made by the previous TAFA board early in the program.”
Perry promised the problem was fixed. “Today, TAFA is on solid footing with a positive balance projected by 2010,” he wrote.
He reminded readers that the loans were funded by debt — commercial paper: “No taxpayer money has ever been used to make TAFA loans.”
In 1998, Perry was elected lieutenant governor, and Combs succeeded him as agriculture commissioner.
She talked of expanding the loan guarantee program to other borrowers beyond food and fiber processors. But she asked Alwin to do a follow-up audit.
His warning was prescient. He said a program that guaranteed loans to people who typically couldn’t qualify for commercial loans would have a hard time finding enough good loans to generate the income to offset the losses from the bad ones.
In 2002, Combs and the agricultural finance authority bowed to that reality, suspending any new loans.
Twenty-nine of 102 guaranteed loans defaulted, almost all of them during Perry’s tenure, according to the records provided this month by the agriculture department.
While the majority of the loans were in good standing, the majority of the original $25 million — $14.7 million — was bad debt. Just as the auditor warned, the income from the good loans could not generate enough cash to make the program self-sustaining.
“We hit a brick wall,” Staples said in 2009.
By: Laylan Copelin, American-Statesman Staff, Statesman.com, October 22, 2011
Rep. Cantor: Bought And Paid For By Wall Street Investors
Why has Rep. Eric Cantor (R-VA) been “increasingly concerned about the growing mobs occupying Wall Street,” while defending the Tea Party protests as an organic movement?” It’s all about the money.
Rep. Cantor’s campaign committee and leadership PAC have been bankrolled by Wall Street since he was elected in 2000. The financial industry has been his largest contributor, increasing donations to the congressman by 1,326% between the 2002 and 2010 election cycles.
So while Rep. Cantor may believe the Occupy Wall Street movement is “the pitting of Americans against Americans,” the reality is the movement is pitting Americans against his campaign contributors.
Then, of course, there is Rep. Cantor’s wife, Diana, a fixture on Wall Street. Ms. Cantor served as a VP at Goldman Sachs, a Managing Director at New York Private Bank & Trust, and currently is a partner at Alternative Investment Management, LLC – a firm that “invests mainly in hedge funds and private equity funds.”
According to Open Secrets
Thus far in the 2012 election cycle, Rep. Cantor is the second largest recipient of financial industry donations to House members.
In the 2010 election cycle, he was the third largest recipient of Wall Street cash. In fact, ever since his election to Congress, Rep. Cantor has been in the top 16 recipients of financial industry contributions.
Up to now in the 2012 election cycle, five of Rep. Cantor’s top 10 donors to his campaign committee and leadership PAC were in the financial industry.
Rep. Cantor is currently the second largest recipient of Securities and Investment contributions (which includes hedge funds, private equity and venture capital money).
During the 2010 election cycle, six of Rep. Cantor’s top 10 donors to his campaign committee and leadership PAC were from finance related industries.
During the 2010 election cycle he was the fourth largest recipient of Securities and Investment contributions.
By: PR Watch, Center for Media and Democracy, October 18, 2011
The Tea Party Chronicles
Raising Cain
Herman Cain, the former CEO of Godfather’s Pizza is rolling in dough and rising in the polls. A new national survey of primary voters by the Wall Street Journal and NBC News has the Hermanator in first place ahead of Mitt Romney and all the other Tea Party types. The question is whether working families will support Cain’s plan for a national sales tax to pay for lower taxes for bankers and billionaires? I don’t think so.
Don’t Know Much about History
The Tea Party takes its name from the Americans who dumped British tea into Boston Harbor to protest taxation without representation in 1773. The Tea Partyers profess great reverence for the founders but the Tea Party candidates are clueless about the founding of our nation. Tuesday Rick Perry placed the American Revolution in the 16th century which would have given our founders only a few years to get things rolling after Columbus came to town. Previously, Michele Bachmann described the founders as abolitionists, a portrayal which would have greatly surprised the hundreds of slaves owned by George Washington and Thomas Jefferson. By the way, Representative Bachmann, the Boston Tea Party, like the battles of Lexington and Concord, was in Massachusetts, not New Hampshire.
Greed is Good
Greed is good should be the motto for the Party of Tea, the party formerly known as the GOP. Tuesday, Every POT member of the United States Senate opposed the president’s proposal to reduce payroll taxes and provide tax breaks for small businesses which hire people without jobs. Why did the POT spit the bit on the issue that Americans care most about? Because Democrats would pay for the tax cuts for working families and small businesses by making millionaires and billionaires pay their fair share of taxes. Greed is good for the Tea Partyers and their billionaire buddies who bankroll their big budget campaigns. Because the POT blocks action in Washington on jobs, thousands of Americans occupy Wall Street and streets across the country to protest corporate greed. Will the numerical advantage that the 99 percent have triumph over the money muscle of the 1 percent. Yes, it will.
ObamaCares
Time magazine released a new national survey yesterday that shows Barack Obama beating all his POT challengers. The secret of the president’s success is Obama’s caring. A clear majority (57 percent) of likely voters believe that Barack Obama cares about the problems of people like themselves. It’s not surprising that Americans feel that the president cares about them when the Party of Tea goes out of its way to cut Medicare and Social Security benefits for seniors but fights to the death to protect federal tax freebies for bankers, billionaires, hedge fund managers, and corporate jet setters.
It’s about Time
The same Time magazine national survey indicates that two of every three Americans believe the rich should pay more taxes. Which explains why more than half (54 percent) of the likely voters have a favorable opinion of the protesters against corporate greed while only one of four people (27 percent) have a favorable opinion of the Tea Party. The Tea Party has been replaced by the new kid on the block. Far be it for me to give advice to Republicans but they better quickly take back their party from the extremists before voters dump the old GOP into the harbor with the Tea Party.
By: Brad Bannon, U. S. News and World Report, October 13, 2011
“We Are The Whiners”: About Those ‘53 Percent’
Republicans have been preoccupied for much of the year with those Americans who don’t make enough money to qualify for a federal income tax burden. Some are working-class families who fall below the tax threshold; some are unemployed; some are students; and some are retired. These Americans still pay sales taxes, state taxes, local taxes, Social Security taxes, Medicare/Medicaid taxes, and in many instances, property taxes, but not federal income taxes.
This, apparently, annoys the right to no end. It’s why all kinds of Republican officials — including Mitt Romney and Rick Perry — want to “fix” what they see as a “problem,” even if it means raising taxes on those who can least afford it.
This argument is even manifesting itself in a new “movement” of sorts, intended to respond to progressive activists calling for economic justice.
Conservative activists have created a Tumblr called “We are the 53 percent” that’s meant to be a counterpunch to the viral “We are the 99 percent” site that’s become a prominent symbol for the Occupy Wall Street movement. The Tumblr is supposed to represent the 53 percent of Americans who pay federal income taxes, and its assumption is that the Wall Street protesters are part of the 46 percent of the country who don’t. “We are the 53 percent” was originally the brainchild of Erick Erickson, founder of RedState.org, who worked together with Josh Trevino, communications director for the right-leaning Texas Public Policy Foundation, and conservative filmmaker Mike Wilson to develop the concept, according to Trevino.
The overriding message is that the protesters have failed to take personal responsibility, blaming their economic troubles on others.
There are all kinds of problems with the right’s approach here, including the fact that they seem to want to increase working-class taxes and also seem entirely unaware of the fact that it was Republican tax cuts that pushed so many out of income-tax eligibility in the first place. There’s also the small matter of some of those claiming to be in “the 53 percent” aren’t actually shouldering a federal income tax burden at all, but are apparently unaware of that fact.
But putting that aside, take a look at Erick Erickson’s argument, presented in a hand-written message posted to the Tumblr blog: “I work three jobs. I have a house I can’t sell. My family insurance costs are outrageous. But I don’t blame Wall Street. Suck it up you whiners. I am the 53% subsidizing you so you can hang out on Wall Street and complain.”
Just for heck of it, let’s take this one at a time.
The very idea that Erickson works “three jobs” is rather foolish.
Blaming financial industry corruption and mismanagement for Erickson’s troubles selling his house is actually quite reasonable.
If Erickson’s reference to “family insurance costs” is in reference to health care premiums, he’ll be glad to know the Affordable Care Act passed, and includes all kinds of breaks for small businesses like his.
And the notion that victims of a global economic collapse, who are seeking some relief from a system stacked in favor of the wealthy, are “whiners” is so blisteringly stupid, it amazes me someone would present the argument in public.
If there are any actual “whiners” in this scenario, shouldn’t the label go to millionaires who shudder at the idea of paying Clinton-era tax rates?
By: Steve Benen, Contributing Writer, Washington Monthly-Political Animal, October 11, 2011
The Occupy Protests: A Timely Call For Justice
Occupy Wall Street and its kindred protests around the country are inept, incoherent and hopelessly quixotic. God, I love ’em.
I love every little thing about these gloriously amateurish sit-ins. I love that they are spontaneous, leaderless and open-ended. I love that the protesters refuse to issue specific demands beyond a forceful call for economic justice. I also love that in Chicago — uniquely, thus far — demonstrators have ignored the rule about vagueness and are being ultra-specific about their goals. I love that there are no rules, just tendencies.
I love that when Occupy Wall Street was denied permission to use bullhorns, demonstrators came up with an alternative straight out of Monty Python, or maybe “The Flintstones”: Have everyone within earshot repeat a speaker’s words, verbatim and in unison, so the whole crowd can hear. It works — and sounds tremendously silly. Protest movements that grow into something important tend to have a sense of humor.
I can’t help but love that House Majority Leader Eric Cantor called the protests “growing mobs” and complained about fellow travelers who “have actually condoned the pitting of Americans against Americans.” This would be the same Eric Cantor who praised the Tea Party movement in its raucous, confrontational, foaming-at-the-mouth infancy as “an organic movement” that was “about the people.” The man’s hypocrisy belongs in the Smithsonian.
Most of all, I love that the Occupy protests arise at just the right moment and are aimed at just the right target. This could be the start of something big and important.
“Economic justice” may mean different things to different people, but it’s not an empty phrase. It captures the sense that somehow, when we weren’t looking, the concept of fairness was deleted from our economic system — and our political lexicon. Economic injustice became the norm.
Revolutionary advances in technology and globalization are the forces most responsible for the hollowing-out of the American economy. But our policymakers responded in ways that tended to accentuate, rather than ameliorate, the most damaging effects of these worldwide trends.
The result is clear: a nation where the rich have become the mega-rich while the middle class has steadily lost ground, where unemployment is stuck at levels once considered unbearable, and where our political system is too dysfunctional to take the kind of bold action that would make a real difference. Eventually, the economy will limp out of this slump, and things will seem better. Fundamentally, however, nothing will have changed.
Does that sound broad and unfocused? Yes, but it’s true.
The Occupy Wall Street protesters saw this broad, unfocused truth — and also understood that the place to begin this movement was at the epicenter of the financial system.
For most of our history, it was understood that the financial sector was supposed to perform a vital service for the economy: channeling capital to the companies where it could be most effectively used. But the rapid technological, economic and political change the world has witnessed in recent decades created myriad opportunities for Wall Street to channel capital to itself, often by inventing exotic new securities whose underpinnings may not exist. The 2008 financial crisis demonstrated the urgent need for reform.
It’s not that investment bankers should be held responsible for all the ills of the world. It’s that Wall Street is emblematic of an entire economic and political system that no longer seems to have the best interests of most Americans at heart.
So a ragtag group — not huge, but idealistic and determined — camps out in Lower Manhattan. A similar thing happens in two dozen other cities. And maybe a movement is born.
Already, after less than a month, commentators are asking whether the Occupy protests can be transformed into a coherent political force. For now, at least, I hope not.
We have no shortage of politicians in this country. What we need is more passion and energy in the service of justice. We need to be forced to answer questions that sound simplistic or naive — questions about ethics and values. Detailed policy positions can wait.
At some point, these protest encampments will disappear — and, since the nation and the world will not have changed, they’ll be judged a failure. But I’ve got a hunch that this likely judgment will be wrong. I think the seed of progressive activism in the Occupy protests may grow into something very big indeed.
By: Eugene Robinson, Opinion Writer, The Washington Post, October 10, 2011
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