DM&E Financing revisited.

[Anonymous]

AG,

You and your conspiracy theories - it is not apt for this forum.

All corporations have sensitive internal information that is not germaine to public scrutiny.

Ahhh FM, so glad it is not you that holds the gavel at this forum.

Caution before the fact is not exactly conspiracy theory my friend.

Rest assured that if any of the majors. were asking to borrow so heavily (in terms of the ratio of  proceeds to net worth) and demanding secrecy, I'd be equally curious.

I see now.

Any railroad is welcome to borrow (or take outright) from the feds and keep all the corporate secrets in the dark, as long as the amount of the loan (or grant) is only a *small* percentage of that company's net worth, or at least a smaller percentage than that represented by the DM&E example? 

For the sake of argument, what exactly is that dividing line?  Legally?  Morally?  Practically?

Now, why is your "means test" better than that of the FRA?

[Anonymous]

Hi Murph,

I really want to straighten our favorite spud out on capitalism, could you let us know when we can wreck your thread ?

Fair enough.  When Murphy gives the go ahead, we can hash it out.

In the meantime, could you please answer or at least clarify your inference that:

"Increasing competition = anti-capitalism"

Specifically, why do you apparently agree with BNSF honcho Matt Rose that the entry of DM&E into the PRB (aka the "increasing competition" parse) is bad for the railroad industry (aka the "anti-capitalist" parse)?  Or do you object to that particular framing?

[Murphy Siding]

  It would be ironic given that in the 80's CNW was trying to pull up the tracks.  My how times have changed! 

     CNW was trying to pull up the tracks in the 80s, because they knew what DM&E has since figured out.  Whithout something big, like Powder River Basin coal, it was just a worn out grainger line with not enough traffic to support it.

[solzrules]

And so why should the government treat the DME any different than it did BNSF or UP when they made the same applications?

BNSF and UP are not the subject at hand.  What happened 5 years or 10 years ago on seperate matters entirely are not at issue, and even if they were,.. since when do two wrongs make a right?

the very  rationale smaks of "well gee, everybody else is doing it" and I just find it impossible  to sympathize with that mindset.  sorry.

(plus, in the case of BNSF and UP, how did the net proceeds of the  respective transactions compare to their net worth at the time?  Merely speculation I'll conceed, but my gut tells me that in the event they would have defaulted, the collateral they had riding on the line was substantially more than one auxillary rail corridor?  Am I wrong about that?)

No you aren't.  Can't argue there.  But then again, what would the BNSF's and UP's costs be in today's dollars compared to the DME application?  Me thinks about the same. 

If past history does not apply in this case then why are you demanding special treamtent for the DME if no prior FRA loans have been defaulted on and other railroads have proven that they can use the loans and repay them in a responsible fashion?  Why treat this loan like it is the first of its kind ever? 

I think you are just looking for any reason to drag this out and deny it for as long as possible.  Certainly your right to do that, just as it is mine to completely disagree. 

[Anonymous]

Any railroad is welcome to borrow (or take outright) from the feds and keep all the corporate secrets in the dark, as long as the amount of the loan (or grant) is only a *small* percentage of that company's net worth, or at least a smaller percentage than that represented by the DM&E example? 

For the sake of argument, what exactly is that dividing line?  Legally?  Morally?  Practically?

Good grief man, are you really that obtuse, or are you just trying to crawl under my skin?

It's a matter of what would be left, should the worst come to pass.

[Anonymous]

I think you are just looking for any reason to drag this out and deny it for as long as possible.  Certainly your right to do that, just as it is mine to completely disagree. 

"drag this out"?

Drag WHAT out?  Whether or not I happen to agree is going to have any effect on ?what?  lol!

Sorry man, but as a taxpayer I feel like public monies are mine (in part) I guess that is a bad habit I need to break. I think it has always been one of our society's shortcomings to see the community chest as some form of endless fountain for all to siphon from, or a pinata there for all to take their best shot against.

And I've only been advancing the spririt of this debate in the same sense I would if any other entity tried to borrow money from me, while declining full disclosure.

As far as "what skeletons DM&E may be hiding", well, how would I know? THEY ARE THE ONES DEMANDING secrecy. Must be pretty juicy though otherwise they wouldn't be so dead set on hiding it. 

[Anonymous]

NSF honcho Matt Rose that the entry of DM&E into the PRB (aka the "increasing competition" parse) is bad for the railroad industry (aka the "anti-capitalist" parse)?  Or do you object to that particular framing?

My take on that would stem from a favorite saying by a very very wealthy former employer.

He would always tell me that an absolute fool was the most threatening form of competition  you could ever have to face. Because they will drive themselves to the poor house trying to take business away from you. (fwiw)

So, if the competition is destroying themselves and you in their struggle to gain market share, THAT is not good for capitalism

[Anonymous]

Any railroad is welcome to borrow (or take outright) from the feds and keep all the corporate secrets in the dark, as long as the amount of the loan (or grant) is only a *small* percentage of that company's net worth, or at least a smaller percentage than that represented by the DM&E example? 

For the sake of argument, what exactly is that dividing line?  Legally?  Morally?  Practically?

Good grief man, are you really that obtuse, or are you just trying to crawl under my skin?

It's a matter of what would be left, should the worst come to pass.

And what is the "worst" that may come to pass?  That we the taxpayers get to own our own railroad for a change?  And this is bad because..........?

[Anonymous]

BTW

Since BNSF is publicly opposing the DM&E expansion.....

......doesn't that make BNSF a NIMBY?

[solzrules]

"drag this out"?

Drag WHAT out?  Whether or not I happen to agree is going to have any effect on ?what?  lol!

Sorry man, but as a taxpayer I feel like public monies are mine (in part) I guess that is a bad habit I need to break. I think it has always been one of our society's shortcomings to see the community chest as some form of endless fountain for all to siphon from, or a pinata there for all to take their best shot against.

Oh whatever.  We've been around this ground probably 800 times.  Here we have a gov't lending agency with a good track record supplying low interest loans to create good paying jobs and they are still out to screw us, right?  How many layers of oversight do you want?  Better question:  How many of your tax dollars are you willing to spend investigating wether or not your tax dollars can be loaned out?  heck, by the time that's over with the FRA would have to charge a 90% APR just to cover their costs for researching, investigating, researching, investigating, researching, investigating, blah blah blah. 

And I've only been advancing the spririt of this debate in the same sense I would if any other entity tried to borrow money from me, while declining full disclosure.

If you were the lender and the applicant refused to fully disclose their business plan you would have every right to refuse the loan.  You aren't, so your business in this matter is irrelevant.  The DME HAS provided full disclosure to the FRA.  I think you're just upset that the FRA doesn't mean you.

As far as "what skeletons DM&E may be hiding", well, how would I know? THEY ARE THE ONES DEMANDING secrecy. Must be pretty juicy though otherwise they wouldn't be so dead set on hiding it. 

I fail to assume a massive scandal just because they don't tell me all the inner workings of their company. 

[Murphy Siding]

Hi Murph,

I really want to straighten our favorite spud out on capitalism, could you let us know when we can wreck your thread ?

Fair enough.  When Murphy gives the go ahead, we can hash it out.

In the meantime, could you please answer or at least clarify your inference that:

"Increasing competition = anti-capitalism"

Specifically, why do you apparently agree with BNSF honcho Matt Rose that the entry of DM&E into the PRB (aka the "increasing competition" parse) is bad for the railroad industry (aka the "anti-capitalist" parse)?  Or do you object to that particular framing?

      Here's an idea-start a new thread?

    (ps: might be an apple, not a spud?)

[Murphy Siding]

Any railroad is welcome to borrow (or take outright) from the feds and keep all the corporate secrets in the dark, as long as the amount of the loan (or grant) is only a *small* percentage of that company's net worth, or at least a smaller percentage than that represented by the DM&E example? 

For the sake of argument, what exactly is that dividing line?  Legally?  Morally?  Practically?

Good grief man, are you really that obtuse, or are you just trying to crawl under my skin?

It's a matter of what would be left, should the worst come to pass.

      It appears, that what would be left would be a heavy duty coal line from the PRB to the Mississippi River.  Details beyond that are.....*secret*.

[Poppa_Zit]

"I doubt that AA intended from square one, to ultimately end up
compromising it's integrity to the extent it  did.  The size
of  client that Enron was, and AA's hopes of keeping the client
happy, probably played a role in an evolved form of complicitness.


I do think there is a valid parallel, if for no other reason than to
establish that we are in an era of monumental collapses that ultimately
left somone holding the bag.  Due caution does not seem at all
foolish to me, in the spirit of  "an ounce of prevention"



Boy, where were you during the Savings & Loan Fiasco? <grin>

The US taxpayer really took it in the shorts on THAT one.

[nanaimo73]

 In the meantime, could you please answer or at least clarify your inference that:

"Increasing competition = anti-capitalism"

Specifically, why do you apparently agree with BNSF honcho Matt Rose that the entry of DM&E into the PRB (aka the "increasing competition" parse) is bad for the railroad industry (aka the "anti-capitalist" parse)?  Or do you object to that particular framing?

I would say that pro-capitalism would be capitalists pooling their capital to make a good return on their investment. Therefore, pro-capitalism would be BNSF trying to make maximum profits.

Anti-capitalism would be socialism, basically any form of Government involvement. In this case, DME entering the PRB with 2 billion Government dollars.

Government dollars in this case are going to curtail BNSF's and UP's profits, aren't they ?

[Murphy Siding]

I think you are just looking for any reason to drag this out and deny it for as long as possible.  Certainly your right to do that, just as it is mine to completely disagree. 

"drag this out"?

     Come on AG- quit dragging this out.  Call the STB now, and give them your approval, so we can get this show on the road.

     The fact that it is being *drug out* makes me think that there are some higher ups that are skeptical, and want some reassurance as well.

[Anonymous]

 In the meantime, could you please answer or at least clarify your inference that:

"Increasing competition = anti-capitalism"

Specifically, why do you apparently agree with BNSF honcho Matt Rose that the entry of DM&E into the PRB (aka the "increasing competition" parse) is bad for the railroad industry (aka the "anti-capitalist" parse)?  Or do you object to that particular framing?

I would say that pro-capitalism would be capitalists pooling their capital to make a good return on their investment. Therefore, pro-capitalism would be BNSF trying to make maximum profits.

Anti-capitalism would be socialism, basically any form of Government involvement. In this case, DME entering the PRB with 2 billion Government dollars.

Government dollars in this case are going to curtail BNSF's and UP's profits, aren't they ?

That's the BIG LIE being bandied about, because both BNSF and UP have taken government dollars over hundreds of years, more specifically they've taken FRA loans for their PRB project a while back, so why not DM&E?

And conversely, if DM&E is not worthy of federal aid for it's railroad, then shouldn't the *pro-capitalists* BNSF and UP be forced to pay back their federal aid?  And I mean ALL OF IT, STARTING WITH THOSE FIRST LAND GRANTS!  You can't describe one set of entities as being pro-capitalist based on the relevent variables, then turn around and describe the second entity as being anti-capitalist based on those exact same variables.

There used to be a saying - "What's good for the goose is good for the gander" - an apt harbinger to oppose general discrimination.  Is not what's good for BNSF and UP also good for DM&E and others?

[Anonymous]

NSF honcho Matt Rose that the entry of DM&E into the PRB (aka the "increasing competition" parse) is bad for the railroad industry (aka the "anti-capitalist" parse)?  Or do you object to that particular framing?

My take on that would stem from a favorite saying by a very very wealthy former employer.

He would always tell me that an absolute fool was the most threatening form of competition  you could ever have to face. Because they will drive themselves to the poor house trying to take business away from you. (fwiw)

So, if the competition is destroying themselves and you in their struggle to gain market share, THAT is not good for capitalism

Oh brother!

I suppose that DM&E is the "absolute fool" in your metaphor, wherein the entry of DM&E into the PRB will end up destroying all three railroads?

Such pedanticism!

Let's use that same analogy to describe what's going on in Montana - BNSF then would be the "absolute fool", abusing the monopolistic powers so much so that we end up with re-regulation of all the railroads.

Based on what we've seen coming out of DC, which version of the metaphor has a better chance at experiencing reality?

Personally, I think the metophor is a bit of an exaggeration in both cases.

 

Now, regarding deep dark conspiracy theories, how can you sit there and hype up some kind of internal DM&E plot, all the while ignoring the oddly out of character tactics of the Mayo boys?  Isn't it odd that Mayo is getting so absurding out of whack regarding DM&E's line improvement project, when....

A.  That line has been there for over a hundred years

B.  Mayo located right next to the line of their own volition

C.  Mayo has recieved some nice transportation benefits from this line over the years, and will probably continue to benefit as such

D.  There are literally thousands of medical establishments located next to busy raillines across the nation, some far busier than the DM&E line will ever be, yet we hear not a peep of concern from those establishments

Put 'em all together, and something fishy is going on, because with all the apriori evidence one would conclude that Mayo has nothing out of the ordinary to be concerned about, certainly not to the point of making an international incident out of the matter.

Who's really behind the Mayo front?  Shouldn't we have access to all such pertinent information?

Why all the secrecy?

Oh, and not to *change* the subject , but.....

 BNSF is a NIMBY!

[nanaimo73]

FM-

I'm not against DME moving into the PRB. I'm against your terminology, which is backwards. BNSF is being pro-capitalist, because they want to maximize profits. DME is being anti-capitalist, (socialist), if they use Government money to lower BNSF's and UP's profits.

[Anonymous]

And what is the "worst" that may come to pass?  That we the taxpayers get to own our own railroad for a change?  And this is bad because..........?

They would get to own a railroad  who's prospects for running profitably were so poor that it couldn't attract private investment to build it's own plant,.. for one

A railroad that even with a gov't loan, STILL  couldn't earn it's own keep (remember, we are assuming failure here because you posed the 'what if?")...for another

And, because deferred maintenance is the early refuge of a declining railroad, if such a failure did materialize, my heartfelt suspicion is that the condition of the repossessed plant would  end up being fit for the scrapper only.

In a nut shell, if this is such a great deal, then why isn't private money just dying to jump into it?  That is the litmus that I  use to validate my related concerns.

Here is why I suspect they (private sources of capital) are not overly enthusiastic.

Let's assume that once the plant is rebuilt with the $2.5B, that it ends up being worth $3B.  Just as a given, OK?

That still assumes that a buyer could be found with an interest in paying $3B to buy then  operate it.

Something just tells me that if DM&E trys their best, and fails.. lets say that the Borg decides to undercut the rate structure and DM&E (in consequence)  never gets traction to build market share...how many buyers would be jumping at the opportunity to stick their head in the same barrel?

My guess is very few. Not for the full $3B anyway.

So, the value of the repossessed collateral becomes a fraction of the assumed value up front

Shrinkage on a massive scale. with Joe Taxpayer holding the bag.

[Anonymous]

BTW

Since BNSF is publicly opposing the DM&E expansion.....

......doesn't that make BNSF a NIMBY?

I'm starting to hate NIMBY's too.  Just last week I decided to fire up the old Methlab, and the dang nimby's next door called the cops.  SPOIL SPORTS!!  wasn't even in THEIR back yard

[Anonymous]

Here we have a gov't lending agency with a good track record supplying low interest loans to create good paying jobs and they are still out to screw us, right?  How many layers of oversight do you want? 

My friend, I believe you would try and spite poor little red riding hood, for wondering why grandmama had such an enthusiastic fire in her eyes, wouldn't you?


You can disagree with me all you want, which is fine.

I don't really consider the FRA to be a lending agency. It is not their field of expertise, is it?  I always considered these loans to be a subsidiary of socialism they operate on the side.

Since the FRA is primarily a railroad related entity, I hardly call them neutral. To me "neutral" might  be some panel put together  of a few investment bankers from wallstreet, a couple economist university professors, and maybe a journalist or two, just to make sure that no redflags and being ignored as a matter of convenience.

I feel just in pointing out that it's the DM&E's  insistance that their loan application be treated as a secret, that is  functioning as a first red flag here. It's not like curiousity came unsolicited.

Nor is anyone trying to unlock proprietary contract terms DM&E has with it's existing customers, so the attempt to dismiss  the interest in the application as  compromising their  "secret",  appears  a convenient ruse.

"What have they got to hide?", becomes a question begging an answer, all by itself.

[solzrules]

And what is the "worst" that may come to pass?  That we the taxpayers get to own our own railroad for a change?  And this is bad because..........?

They would get to own a railroad  who's prospects for running profitably were so poor that it couldn't attract private investment to build it's own plant,.. for one

A railroad that even with a gov't loan, STILL  couldn't earn it's own keep (remember, we are assuming failure here because you posed the 'what if?")...for another

And, because deferred maintenance is the early refuge of a declining railroad, if such a failure did materialize, my heartfelt suspicion is that the condition of the repossessed plant would  end up being fit for the scrapper only.

In a nut shell, if this is such a great deal, then why isn't private money just dying to jump into it?  That is the litmus that I  use to validate my related concerns.

Here is why I suspect they (private sources of capital) are not overly enthusiastic.

Let's assume that once the plant is rebuilt with the $2.5B, that it ends up being worth $3B.  Just as a given, OK?

That still assumes that a buyer could be found with an interest in paying $3B to buy then  operate it.

Something just tells me that if DM&E trys their best, and fails.. lets say that the Borg decides to undercut the rate structure and DM&E (in consequence)  never gets traction to build market share...how many buyers would be jumping at the opportunity to stick their head in the same barrel?

My guess is very few. Not for the full $3B anyway.

So, the value of the repossessed collateral becomes a fraction of the assumed value up front

Shrinkage on a massive scale. with Joe Taxpayer holding the bag.

AG:  I would have to say that thus far this is the most convincing argument you have made.  Now, at least I can see your point of view. 

Got's to go, there's deer that need shooting.

 

[Anonymous]

     Come on AG- quit dragging this out.  Call the STB now, and give them your approval, so we can get this show on the road.

LOL! I'm sorry Murph, but with the pursuit of bin Laden consuming so much of my consulting time, and negotiating with the extraterrestrials...I've had so little time for the truly important things. 

[Anonymous]

I suppose that DM&E is the "absolute fool" in your metaphor, wherein the entry of DM&E into the PRB will end up destroying all three railroads?

Such pedanticism!

(*sigh*)  It was you asking how increased competition could be deemed 'anti capitalist', and I merely accomodated you with a reply.

Now you are trying to wage a war of semantics because you resent it?

"Absolute fool" were the words used by the quoted source

We could just as easily ues the expression 'misguided competition serves anticapitalist ends' and be just as accurate.

I think what Matt Rose is (rightly) getting at, is that using Taxpayer money to cut the profit out of hauling PRB coal will do more harm than good.

Clearly, his bias in rooted in his position as a competitor of DM&E, but that doen't mean he is necessarily wrong.

[Murphy Siding]

Hi Murph,

I really want to straighten our favorite spud out on capitalism, could you let us know when we can wreck your thread ?

     Well.......I've been biting my tongue a lot, hoping to forgo another round of open access discussions.  To tell you the truth, though, I have a lot of opinions about capitalism and competition. (As they relate to railroads, of course).

     You may fire when you are ready Mr. Gridley.

[Murphy Siding]

And what is the "worst" that may come to pass?  That we the taxpayers get to own our own railroad for a change?  And this is bad because..........?

They would get to own a railroad  who's prospects for running profitably were so poor that it couldn't attract private investment to build it's own plant,.. for one

A railroad that even with a gov't loan, STILL  couldn't earn it's own keep (remember, we are assuming failure here because you posed the 'what if?")...for another

And, because deferred maintenance is the early refuge of a declining railroad, if such a failure did materialize, my heartfelt suspicion is that the condition of the repossessed plant would  end up being fit for the scrapper only.

In a nut shell, if this is such a great deal, then why isn't private money just dying to jump into it?  That is the litmus that I  use to validate my related concerns.

Here is why I suspect they (private sources of capital) are not overly enthusiastic.

Let's assume that once the plant is rebuilt with the $2.5B, that it ends up being worth $3B.  Just as a given, OK?

That still assumes that a buyer could be found with an interest in paying $3B to buy then  operate it.

Something just tells me that if DM&E trys their best, and fails.. lets say that the Borg decides to undercut the rate structure and DM&E (in consequence)  never gets traction to build market share...how many buyers would be jumping at the opportunity to stick their head in the same barrel?

My guess is very few. Not for the full $3B anyway.

So, the value of the repossessed collateral becomes a fraction of the assumed value up front

Shrinkage on a massive scale. with Joe Taxpayer holding the bag.

     I had in mind that the $2.5B investment would leave a plant worth at least $2.5B, if the railroad failed.  Now I have my doubts,and wonder if this is part of the reason that private investors seemingly had doubts. In our city, I can point out several businesses that started up new, and went through 2 or 3 sets of owners before settling down and becoming profitable(?). My old boss ran his business profitably until he died at 91 and was a very sharp financial man.   I asked him how there always seemed to be a new set of owners to jump in, where the old ones had just failed.  What he said made perfect sense to me.  For every investor who's going broke, there's another investor (the greater fool theory(?) ) who thinks he can make it.  All he thinks he has to do differently, is buy the plant at a much cheaper price-like at a liquidation sale.  If it's a workable business, the process repeats, until someone buys the plant cheaply enough to make it work.  Who's to say this isn't what's going on here, only on a grander scale?  

     If  UberDM&E were to go under, the plant wouldn't just sit there.  No one would sit still for that.  What would be the options?  A fire sale?  A Penn Central? A Conrail?  No one is quite sure.  There, I believe, may be part of the problem.

[nanaimo73]

Who's Mr Gridley ? A replacement for Louis Rukeyser ? Horace Greeley ?

Could Dave Smith be a socialist, without knowing it ?

[Anonymous]

  All he thinks he has to do differently, is buy the plant at a much cheaper price-like at a liquidation sale.  If it's a workable business, the process repeats, until someone buys the plant cheaply enough to make it work.  Who's to say this isn't what's going on here, only on a grander scale?  

     If  UberDM&E were to go under, the plant wouldn't just sit there.  No one would sit still for that.  What would be the options?  A fire sale?  A Penn Central? A Conrail?  No one is quite sure.  There, I believe, may be part of the problem.

Doesn't DM&E have like 6 years before they have to start making payments?

That would suggest to me that any failure is likely to be 6-8 years down the road.

how long will a railway hold up under heavy coal use?

What a theoretical receiver ultimately takes over might have a value far below $1.5B

[Murphy Siding]

Who's Mr Gridley ? A replacement for Louis Rukeyser ? Horace Greeley ?

Could Dave Smith be a socialist, without knowing it ?

     I was going to raz you about your American history, but then, maybe that's not a priority in Canadian schools?

     During the Spanish-American War, Around 1899(?) the American fleet steamed into Manilla Harbor, The Phillipenes, to take on the Spanish fleet.  The Spanish fleet was mostly old, small, *pea-shooters*.  American admiral Thomas Dewey was said to be so underwhelmed by the Spanish fleet, that he simply turned to his gunnery officer, and said "You may fire when you are ready, Mr. Gridley".  It was a short, one-sided battle.

[nanaimo73]

That is one war I have not read a lot about. Then again, it wasn't much of a war, was it.

Say, in two years, someone from Wyoming will be out of a job. His former company could afford, and build, this new DME line. Perhaps DME should hire him as their vice President.