Friday, December 15, 2017

Bank Failure: Washington Federal Bank for Savings

There has been another bank failure in the Chicago area. Insured deposits in Washington Federal Bank for Savings, $132 million in total, have been transferred to Royal Savings Bank. Royal Savings Bank apparently has not acquired any of the assets of the failed bank. It will operate the two banking locations starting tomorrow but has not committed to keeping them open.

The failed bank had been in business for a century. The O.C.C. closed it after finding that its capital had been depleted so that its liabilities were greater than its assets. The bank’s financial distress was not reflected on its financial statements, so it may be that it was holding phantom assets that had to be restated when the bank was examined.

Assuming this is the last bank failure of the year, eight U.S. banks failed in 2017, along with five credit unions. This represents a normal pace of bank failures.

Earlier today, the NCUA placed Louisville (Kentucky) Metro Police Officers Credit Union into conservatorship. The credit union has 3,564 members. The credit will continue to operate while the NCUA tries to correct problems in its operations.

Thursday, December 14, 2017

Disney’s Star Wars Deal

In a deal that has been rumored for weeks, Disney will be buying the entertainment operations of Twenty-First Century Fox. It’s a deal that will leave the Murdoch organization owning just the Fox news and sports operations. A big question is what happens to Fox’s rights to broadcast NFL games under a multi-year arrangement with the league. It seems Fox will keep those rights, though surely essential details are spelled out in the fine print of the respective contracts.

This is a deal that looks eerily familiar to me after years of following the banking industry. When a bank has a mostly solid business but its future is in doubt because of a series of strategic mistakes, something that sometimes happens is that the bank is split in two. The good assets are put in one bank, often a new bank created just for that purpose, and the bad assets in another. This strategy eliminates the risk that a further decline in the bad assets will drag the good assets into a future business failure.

“Bad bank” might seem a strange description for the new, smaller Fox broadcasting business, but the deal will probably not close until the second half of 2019, and by then it might look like it is just in time. The broad underlying trend at issue is the downward trend in cable television. Already cable reaches more viewers who are retired or hospitalized than ones who hold jobs. Fast-forward a few years, and the number of cable viewers who are distinctly below retirement age will not be enough to support television industry in its current form. Fox News is aging worse than cable in general and would have to make a drastic change in its approach to make the leap to the Internet. At the same time that it faces this difficult transition, Fox News faces large potential liabilities from its fake news and abuse of employees. The Disney deal separates those weaknesses from the fundamentally sound entertainment properties. There is no problem with getting the films and entertainment series into future Internet distribution channels.

For Disney, the Fox deal is mainly about getting the Star Wars franchise under one roof. The rest of the assets just happen to line up well with Disney’s existing operations. In a statement, Disney says the combination will lead to billions of dollars in cost savings, and I don’t think that’s an exaggeration.

Tomorrow is the last business day before the week before Christmas. With the holiday season occupying people’s attention, the remainder of the year is a news hole, a time for businesses to make announcements that they want the broader public to overlook. I don’t think it’s a coincidence that the Disney deal is being announced today. There is no way to hide a TV business deal as large as this, with so many more details to be worked out over the coming year, but the two companies minimize attention by making the announcement now. The nationwide release of Star Wars: The Last Jedi tomorrow will further obscure this story. I am sure there will be many more announcements made in the coming week so that they can go relatively unnoticed, especially having to do with this kind of restructuring or where the focus is on a similar large-scale problem in a business. In business terms, this is a good time to talk about bad news.

Tuesday, December 12, 2017

“Yolk”: The Decline of Content Reaches the White House

The White House drew an unwanted form of attention last week when it issued a statement opposing “the yolk of authoritarianism.” This phrase was a simple misspelling. The writer meant “yoke” rather than “yolk.” Such a writing error is to be expected, but the staff at the White House didn’t have time to correct the error either before release or after. Some readers suggested that the presence of such a glaring error meant that the White House doesn’t take human rights as seriously as other issues, or that it is more understaffed than it appears.

I see the White House “yolk” as part of a trend. This kind of mistake started to appear in newspapers in the 1990s when publishers realized they could no longer afford to pay reporters and editors a professional salary. By 2000, content had declined so much that similar errors were appearing in books and on television. Again, the economic story was that workers were no longer being paid enough to produce consistently high-quality content. When fewer workers working at lower wages create more content, the quality of the content can only go down. More of the content you see is being produced by students and interns. Now it seems this trend has reached official White House statements, albeit ones coming from a White House that seems to be in perpetual crisis.

In the near term the best hope for better content is better technology. Just as new cameras are easier to control, new spell-checkers catch more misspellings. Ultimately, though, there is no substitute for human attention in the creation of good content, and attention is exactly the area where everyone, it seems, is looking for a shortcut.


Sunday, December 10, 2017

In Puerto Rico, 1,000 Uncounted Deaths

According to the government of Puerto Rico, around 60 people died from the effects of Hurricane Maria. Given the storm’s meteorological profile and the extent of damage observed, the official death count is such an outlandishly low number that demographers have done their own studies to try to arrive at the true number. Two different demographic studies released this month estimate between 1,000 and 1,100 deaths caused by the hurricane. The true numbers are surely higher still for two reasons. First, demographers are not yet able to adjust accurately for the decline in population caused by people moving away immediately before or after the storm hit. Second, the effects of the storm continue, with only about half of the island having electricity and a water supply that is safe to drink and with months to go before major bridges and roads are restored. The hurricane, then, may have caused or advanced the deaths of not too much less than 0.1 percent of the people present. That would be a mortality rate worse than most disasters, but it fits what we know about Hurricane Maria. This was not just another hurricane, but by some measures the worst ever to hit the United States.

Saturday, December 9, 2017

A Day of Snow, But Little Impact at Retail

With snow falling in Pennsylvania, I didn’t think about driving anywhere today. Snow is a mixed blessing for retail in the Christmas shopping season. Snow reminds shoppers to buy winter clothes, but it also makes them stay home. An unusually large snow storm on its way from the Rio Grande to New England has taken away a shopping day across the Mid-Atlantic states, but with two weekends remaining before Christmas, today was going to be a quiet day at retail anyway. The snow is light enough, probably 4 inches where I am, that it may be forgotten by tomorrow. In the last two days the same storm paralyzed Gulf Coast cities, but there too, only for a day. I’m told the snow there has melted away already. Heavier snow is expected across most of New England, but that is a region more accustomed to snow and it won’t represent the same level of inconvenience. Despite affecting half the country, this snowfall is only a minor delay for shoppers.