Man, am I tired of bailing out CIBC.
Here's a prime example of the "socialization" of private-sector losses that has been a fact of capitalism life since forever, but has come become a bit of a talking point in progressive circles since the spectacular flameout of global capitalism.
Recall that CIBC, or "the bank of running into sharp objects" (BRISO), took heavily losses from its dalliance with the unlamented Enron Corp.
Now CIBC its trying to get everyday Canadians to pay for its lack of judgment in hanging out with a bad crowd in Houston. For being gulled into the promise of a quick, fat profit by Enron executives who will languish for decades as guests of the U.S. correctional services system. Due diligence? That's for wusses.
When the private sector messes up, it takes a tax writeoff. Sounds innocuous. But that's money out or your pocket and mine. By declaring writeoffs against future profits, the business in question deprives government of revenue, which Ottawa then has to get from you and me. Through higher income taxes and user fees, cuts in services - you know the routine.
Tax writeoffs and writedowns are everyday business. It's government helping soften the blow from the fallout after a misguided corporate strategy or the blundering execution of one. It's how we subsidize the chronic mistakes in business. The MSM never describes it that way. It saves its outrage for $30,000 junkets by city councillors.
Except the government is us. So it's you and me being asked told to bail out CIBC's shareholders.
Repeatedly, over 30 years.
I've helped bail out BRISCO shareholders after the bank's craven stupidity in backing Massey-Ferguson Ltd., R.I.P; Dome Petroleum Ltd., R.I.P., Olympia and York Developments Ltd., R.I.P., Global Crossing LLC, R.I.P., Enron, R.I.P...
I know what you're thinking. How did CIBC manage to escape the epic Nortel Networks Corp. boondoggle?
Answer: Nortel made its feckless $34-billion (U.S.) worth of takeovers at the height of the tech and dot-com boom in the late 1990s by using its own hyper-inflated stock as "currency," and not bank loans. Good news for BRISO shareholders, whose management otherwise would have been at or near the head of the line of wiped-out Nortel creditors.
But that doesn't get Canadians off the hook. Nortel is sittling on billions and billions of so-called tax-loss carryforwards - deductions against future profits. And everyone picking at the Nortel carcass, L.M. Ericsson being the latest, takes away a portion of those tax deductions to apply against their future profits generated in Canada. So we'll all pay for Nortel's incompetence too - quite apart from the managerial ruination of our national R&D flagship. (Which we also subsidized with lavish R&D tax credits...)
The mind boggles that CIBC, as disclosed in its 3Q report Wednesday, has been trying to get Canadians to absorb the cost of its $3-billion settlement in 2005 with enraged Enron shareholders.
The Canada Revenue Agency earlier this month struck down the request. Good for it for the CRA, obviously. CIBC of course plans to go to court - another service paid for by Canadians - to fight the agency's ruling.
All this, by the way, shows up as a four paragraph story buried in the back pages of the Globe and Mail's business section. That Alberta is bracing for a bigger-than-expected budget deficit of several billion dollars, with the implicit suggestion such stories always have that governments don't manage their finances well, was on Page One that day. As if Edmonton had any control over plunging world prices for natural gas.
To think I've done so much for BRISO shareholders over the decades, and for the top management whose pay is tied to the stock price. And not one of the bastards has so much as sent me a thank-you card.