One of the most astonishing scams in the US today is the use of tax payer money to build sports stadiums. The fact that this repeatedly occurs with or without public support displays cronyism in all of its glory. Such funding is a direct transfer of wealth from the average man to the politically well connected wealthy. As always, the politicians who endorse such schemes lie about the supposed economic benefits that will accrue to the community. Additionally, cost overruns of these projects rival those of NASA and the pentagon.
This practice is such a part of routine government business that I would normally not mention it. However, the Miami Herald’s findings of the funding situation of the Miami Marlins stadium were so outrageous as to be worthy of more publicity. Miami-Dade County was seeking financing of the Marlins’ new ballpark in the spring of 2009. At this time, due to the start of the current depression, credit was almost unavailable. Considering the collapse of the enormous housing bubble in Miami, the perceived credit worthiness of Miami-Dade County must have been abysmal. Thus, this was not a good time to seek credit. When Miami-Dade County officials approached Wall Street for loans, they were presented with offers of costly credit combined with outrageous repayment terms. A $91 million loan contracted in 2009 will ultimately cost $1.18 billion upon final repayment in 2048. As if this is not astonishing enough, there is a clause in the loan contract forbidding prepayment.
This is where the title of this blog post enters the story. If a rational person was offered such terms for a loan, they would decline. Recall, that this was a loan for a luxury good, the equivalent of borrowing money to go on an expensive vacation. As such, a rational person, even a profligate one, would decline the loan and try again later when credit conditions were more propitious.
I also note that whenever government workers deal with Wall Street, the latter wins. In the arena of finance, government workers are out of their league vis-a-vis Wall Street.
However, from the perspective of the government officials who approved this deal, they accomplished their goal: legally funneling tax payer money to cronies.
The government officials of Miami-Dade County win. Wall Street wins. The tax payers, as always, lose.
Addendum: H/t Hardball Talk.