Isaac Laquedem

The Laquedem Made In Oregon Landmark Sign and Lottery Plan

I don't remember when the "Made In Oregon" sign in downtown Portland advertised White Satin Sugar (here's an image of it that the University of Oregon found), but it was then a plain outline of the state with a White Satin logo in the center.  The building beneath later became the property of Hirsch-Weis Co., an old-line manufacturer of work clothing and ship sails that started a line of skiwear in 1930, which it called "White Stag," the translation of the company's name.  Under the leadership of Harold S. Hirsch (1907-1990), a jovial Oregonian who brought back the idea from his years on the Dartmouth ski team in the 1920s, the White Stag line of skiwear grew to be the largest part of the company.  The company changed its name to White Stag in 1956.  When it bought the building, it added a white stag to the sign (it's still there today) and changed the text to read "White Stag," in the font that it used to label its clothing.  Here are photos of the White Stag sign and the sign as it is now.

After White Stag was sold to a conglomerate, the building became the property of the Naito family, owners of the Made in Oregon retail stores, who changed the sign text to "Made In Oregon" and the footer from "Sportswear" to "Old Town."  The University of Oregon now owns the building.  It very reasonably doesn't want to pay to advertise the Naitos' stores, and wants to put its own text on the sign.  The hitch is that the sign is a designated landmark, and can't be changed without the City's approval.  The City won't approve.  The University also doesn't want to pay the cost of lighting the sign unless the sign advertises the university, so it's gone dark.

Ramsay Signs, the company that owns the sign itself, proposes to solve the conundrum by taking the sign down.  That would be a shame.  That, combined with the City's reputation for being anti-business (something that part of the city council would like to change), led me to the Laquedem Made In Oregon Landmark Sign and Lottery Plan.

I recall reading that the sign costs about $20,000/year to maintain.  I don't know what it costs to light it up, so I'll guess that it's another $20,000.  That's $40,000/year.  Let's imagine that ten civic-minded businesses with significant operations in Portland would each pay $5,000 toward the cost to maintain and light the sign, and commit to do that for ten years -- or just pay $50,000 each up front.  That covers the cost to maintain and light the sign for ten years.

Each year, a lottery selects one of the businesses to be on the sign for the year.  At the end of 10 years, each business has had one year of being the icon in front of downtown Portland, inexpensive publicity for the $50,000 it would cost.  A plaque near the building would honor all ten donors.  The surplus covers the cost to rework the sign each year with the name of the lucky winner.  The City's part is to approve all ten designs at once through design review, so that the civic-minded businesses don't have to slog through Portland's land use process every year simply to update the sign.

Not every business would be able to buy a Laquedem Light-It-Up Lottery ticket.  To qualify, a business must have its headquarters within the City of Portland, be a for-profit enterprise (this prevents Duck boosters from buying all ten tickets), and employ at least X people within the city limits (perhaps 50).  If the tickets could be sold for more than $5000/year, some of the surplus would go to the University of Oregon for tolerating the sign on its rooftop.  If the tickets sell for less, the City would kick in the deficit and proudly point to its subsidy as evidence that it's open for business.

One variation on this would be for the City to pay the cost of the sign, and offer it free of charge for one year to any business that moves its head office to Portland with at least 100 workers, or opens a factory or office in Portland with at least 100 workers, as a sort of thank you for coming to Portland.  In years without new businesses, the City could draw lots and give the year's worth of advertising to an existing business that's been here for X years or more.  That's promoting business, in grand style.

The Laquedem Kick The Bad Bankers Out On Their Assets Plan

The balance sheets of American banks are bad, for two main reasons.  One reason is that many banks, principally regional and community banks, lent too much money to developers without paying enough attention to whether their communities had homebuyers to buy the houses the developers were buying.  The other reason is that some banks, mainly the large banks, bought derivative securities that they didn't really understand, and for which there is now no resale market.

Banks are required to hold sums in cash, in federal funds (the same thing, really), or in short-term federal securities as reserves against possible losses on their assets.  Banks don't have to reserve anything against United States treasury obligations.  They have to reserve a little bit against municipal bonds, more against ordinary loans where the borrower's paying as agreed, still more against loans where the borrower's paying but the collateral isn't worth much, and much more against loans where the borrower isn't paying or has gone broke.  Banks also have to maintain a certain ratio of equity to assets.  For this discussion let's say it's 8%, meaning that a bank with $1 billion of assets must have $80 million of equity.  The equity, unlike the reserves, doesn't have to be in cash. 

Suppose a bank is holding $100 million of weird derivative securities, which until last year it could have sold for $100 million.  The bank could count those securities on its balance sheet at their market value of $100 million, and would likely have had to reserve only 1% or so, $1 million, against the likelihood of loss of value of those securities.

Then came the meltdown in the market for derivative securities.  Many securities attracted no bids -- that is, no one was willing to buy them at any price, even though they were making their payments as scheduled.  That made their market value zero under the accounting rules for banks.  Our hypothetical $1 billion bank with $100 million of derivatives, now freshly marked down to $0, now has an equity of $20 million below zero.

That's bad.  The Fed and the FDIC don't like banks to have negative equity.  Hence the plan, which may pass, to allow banks to sell their bad assets to a new bank to be formed solely for the purpose of buying the bad assets of other banks.  Our hypothetical bank could sell its $100 million of derivatives to Uncle Sam's Bad Bank for, let's say, $80 million, which turns the bank into a $980 million bank with $60 million of equity.  Not quite as good as it was before the crash, but still solvent.

More simply, the government proposes to isolate the bad assets of the banking system into a single Bad Bank, leaving the good assets to the private banks.  That's all very well, but it doesn't go far enough.  Who got those assets onto the balance sheets of the banks?  The Bad Bankers did, that's who.  Therefore, I propose the Laquedem Kick The Bad Bankers Out On Their Assets Program.  Each bank that participates in the Bad Bank program will identify the Bad Bankers who purchased, approved, and budgeted for those assets who are within the top three levels of management of the participating bank.  The employment contracts of those Bad Bankers will be assigned to the Bad Bank, and they will leave the employ of the banks.  In effect, the government will require the major banks to kick the Bad Bankers' Assets (spell it how you like) into the Bad Bank.  Shareholders of the participating banks won't have to stand the expense of paying the contracts of the Bad Bankers.  If the Bad Bankers are to collect on their lavish employment contracts, they will have to figure out how to make the Bad Assets pay.  For, to turn a phrase used by the anti-gun lobby, "Loans don't kill banks.  Lenders do."

The Laquedem Plan to Bail Out Detroit, Part IV: Personnel

Hire Steve Jobs to design a car, especially the controls and instrument panel.

The Laquedem Plan to Bail Out Detroit, Part III: Lease, don't Lend

Let's say that the automakers can't swallow Parts I and II of the Laquedem Plan.  What then? 

If the automakers are really that important to national security (a claim about which I'm dubious) and to the national economy (a claim that I'm willing, barely, to allow), and therefore need to continue in business, they don't need to continue with their current management.  In fact, they shouldn't be allowed to continue with their current management, because companies that are that important to the nation (taking the Big Three at their word) shouldn't be left in the hands of people who can't run them.

Hence, the Laquedem Carmaker Lend-Lease Program.  This isn't a plan to make new cars available for zero down, or for $99/month on a lease.  Instead, the government would take the Big Three into something akin to receivership and then offer to lease them to other automakers.  The new tenants could strike their own deals with the United Auto Workers and suppliers, without regard to the deals that the semi-defunct Big Three have struck.  For example, the government could lease General Motors to Toyota for five years, letting Toyota manage and operate GM, at the expense of the shareholders, and with a profit margin built in for Toyota if it brings GM back to profitability at the end of the period.  Toyota (or Honda, or Nissan, or anyone else) can't do much worse than the current managements, and might do a lot better.  The tenants would have the right to trim the operations of the Big Three to the point that they make sense. The unions that are willing to work with the interim operators would get chunks of stock in the automakers, and be rewarded if their employers are saved.  The unions that aren't willing to work with the operators will see their members out of jobs, but that's what would result anyway if nothing is done.

One additional wrinkle I'd like to see the government impose is that the directors of any automaker that accepts a bailout be prohibited from serving on the board of a public corporation until they take and pass courses in basic accounting and financial management.  I liken it to offering diversion to people convicted of drunk driving -- in this case the directors don't get to steer another corporation until they show that they've learned about the damage that results when they become intoxicated by the perks and nod off behind the wheel.

The Laquedem Plan to Bail Out Detroit, Part II

Ford Motor Company has two classes of common stock: one held by the public, and another held only by descendants of the original Henry Ford.  The Ford family stock has the right to elect its own directors and has superior voting rights.  Ford and General Motors have both issued bonds and may have preferred stock outstanding.  Preferred stock generally does not carry voting rights but does have the right to receive dividends ahead of common stock.  Both companies also have granted stock options to their executives.  Chrysler is a private company and I don't know its capital structure.

If the government (translation: you and me) lends $25 billion to the auto industry, our tax dollars need to have first claim on being repaid, ahead of the shareholders, ahead of the option holders, and ahead of the bondholders.  The government should require, as a condition of handing out money, that the recipient convert all of its bonds to common stock based on the market price of the bonds and the stock.  In the case of Ford it should require the conversion of the Ford family stock into common stock.  All preferred stock (if there be any) must be converted into common stock also, based on the market price of both.  (E.g., $15 in market value of preferred stock would be converted into $15 in market value of common stock.)  Each recipient should be barred from granting stock options until it repays its debt to the government.

Here is the government's chance (again translated: your chance and mine) to impose some rationality on an industry whose executives have mismanaged it for years.  Let's not pass it up.

The Laquedem Diet Plan for Banks Too Big To Fail (this means you, Fannie Mae)

The Federal Reserve Bank rescued Bear Stearns (an investment banking concern), or more exactly found it a dance partner, because Bear Stearns was too big to fail.  (James Surowiecki, writing in The New Yorker, parodied the phrase as "too dumb to fail.")  The phrase "too big to fail" means that an institution is so large, and therefore so important, to the nation's financial system that it must be kept in business because if it failed suddenly, its counterparties (the MBA's fancy word that means "the people it does business with") would also fail.  Fannie Mae and Freddie Mac are next on the "too big to fail" list.

Fine.

The immediate result is that businesses "too big to fail" get rescued, one way or another, and they, or the parties who swallow them up, get even bigger.  That begs the second step of rescuing businesses that are "too big to fail."  The first step is, obviously, to rescue them.  The second step is, or should be, to slim them down -- to feed them business Metrecal -- so that they are no longer too big to fail, and if they then make the same silly mistakes (or even new and improved mistakes) the government can let them fail, secure in the knowledge that they are no longer too big to fail.

So for example, if the government steps in to rescue Fannie and Freddie (which it shows every sign of itching to do), the government needs to force Fannie and Freddie onto a diet, and make them get smaller, either by sending back to the private sector some of the mortgage aggregation that Fannie and Freddie have been doing, or by making Fannie and Freddie split into about 5 pieces each. 

As a further preventative, institutions that are "too big to fail" should be prohibited from buying any other institution, or being part of any other merger, whatever.  Those who are already too big should be kept from merging their way into being an even bigger problem.

I don't think anyone in Washington has come forward to say this, in these plain terms.  I would myself, but I don't like the summer weather in the District, and I don't think this can wait until October.

The Laquedem Plan to Improve Bike Safety

The roads are dangerous.  Cyclists are slapping cars with their hands, breaking bus windows with their fists, vandalizing cars, and pounding on vehicles with their bicycles.  (Insert the word "allegedly" wherever necessary, and thanks to Professor Bogdanski for gathering these stories.)

It's time to separate cyclists from cars so that both can ride safely.  We need more car lanes on our streets.

Our new toll bridges - brought to you by . . . .TriMet?

I am still working on the Laquedem Plan to Finance Interstate Transportation And Make Tax-Free Shopping Easier for Washingtonians, but one piece of the plan involves some overlooked bits of Chapter 267 of Oregon Revised Statutes, the chapter that sets out the powers of mass transit districts such as TriMet.

A mass transit district (in this case, TriMet) has the power to build, buy, lease, and operate any improvements and facilities necessary or desirable for the mass transit system of the district.  It may also enter into contracts with public agencies of the State of Washington to act jointly or in cooperation with them.  ORS 267.225 allows a mass transit district to enter into agreements with other governmental agencies for the joint use of public right of way. 

"Mass transit system" includes anything that provides mass transportation for passengers, or provides for the movement of people.  This includes bridges that carry buses and allow people to move.

To pay for the system, a mass transit distrct can impose service charges and user fees under ORS 267.320, and it can use these funds to finance the construction, repair, operation, and use of any part of the "primary transit supportive system."  The phrase "transit supportive system" means those facilities that are the surface transportation system of a county, including roads, rest areas, park-and-rides, transfer stations, malls, and parking lots.  The "primary transit supportive system" means "those facilities upon which or adjacent to which the district physically operates."   

If TriMet will operate buses across the Interstate Bridge, then the bridge can be part of the primary transit supportive system, and TriMet can acquire the bridge and charge tolls.  (The highway department itself can't charge tolls because the bridge has been paid for -- long story -- but other agencies can, if they can acquire the bridge from ODOT and WSDOT.)

In fact, as I read the statute, TriMet can charge tolls for pretty much any part of the transportation system that it can acquire, as long as it is operating a transit system (meaning a bus) on the bit of the system for which it's charging a toll.  It's something to think about.

The Laquedem Plan for how the City of Portland shows it means business on streets

Public sentiment about the street fee proposed by Commissioner Adams is that the streets need to be repaired, but the public doesn't trust the City to use the money only for street improvements.  A subsidiary theme is that the City of Portland doesn't have enough money to maintain the streets because it's spending street money on mass transit instead of on streets.

I have devised a way for the City Council to make its pitch for a transportation fee credible.  It should provide that until (a) the Sellwood Bridge is replaced, and (b) one-half of the dirt and gravel streets in Portland are brought up to City standards, none of the street fee money may be used for any other purpose.  One flaw in my idea is that the Sellwood Bridge belongs to Multnomah County and not to the City of Portland.  However, the Sellwood Bridge and the Interstate Bridge are the two most pressing street needs now, and any new street tax should help pay to rebuild one or the other.

The Laquedem Intrastate Bridge Replacement and Renaming Plan

If I'm correct that the spans of the Interstate Bridges are in decent shape and that it's the piers and supports that aren't braced against earthquakes, then when (if) the Interstate Bridges are replaced, Multnomah County should grab a few of the low spans from the state and barge them up the Willamette.  The county could then recycle the spans to replace the Sellwood Bridge, which may be a lot cheaper than building an entirely new bridge.  Though bridge spans don't compare with the fabled nine lives of cats, they do get re-used; if memory serves me rightly, the Vista Bridge replaced an older span that was moved south a few miles to serve for 60 years as the Terwilliger Bridge, and when the Terwilliger Bridge was replaced the old span was moved east of the Cascades, where it still serves traffic over some rugged canyon.

The Interstate Bridge could then become the Intrastate Bridge, an adjustment requiring a change of only two letters.  Or the bridge could be identified, in its new location, as the Cesar Chavez Bridge, thus simultaneously renaming and relocating a portion of historic Interstate Avenue without changing anyone's address.