TVA – the polliwog swimming in a trillion dollar toxic pond
March 25, 2009
It’s uncanny how much the national financial crisis and TVA’s financial crisis parallel. Both were caused by unwise decisions many years ago; spending like there was no tomorrow and, simply, both trying to milk the system for all its worth.
A liberal view of the world says “we deserve it, we deserve homeownership just like other Americans” and so the lending institutions responded to congressional pressures by selling mortgages to millions of people who qualified even with “no job, no money and no income”. But then that paper was sold as AAA-rated when basically it was a worthless pile of paper now known as “toxic assets”, an oxymoronic phrase.
The rest of the world-financiers believed the U.S. would back up Fannie Mae and Freddie Mac so it had to be good. Today’s stock price of both of these government-backed corporations is somewhere in the 80 to 90-cent range.
China, a major purchaser of our debt is having some misgivings about buying more of it. Of course, that money is not free of interest payments just as TVA’s billions of bonded indebtedness is not free. A high percentage of TVA’s income from sales of electricity goes to interest payments. How can electricity rates not go up?
With the downturn in the economy along with the rest of the world’s economic slowdown, crunch time has arrived and the paper-mache house suddenly came crumbling down.
TVA CEO Tom Kilgore does not like “mark to market” which establishes current worth, the present-day value of its assets. It is doubtful if TVA’s electricity production assets are worth half of what they now have on their books. And that makes bond sales even more speculative.
Even worse for TVA, electricity use is dropping off; practically all of TVA’s assumptions of growth now are greatly warped and require a whole new assessment.
Another oddity; TVA has floated a one-billion dollar, one-year loan from the Bank of America. Wasn’t it the parallel federal government that has pumped billions into that bank? Just more evidence that two parallel governments are involved here. Is the Bank of America loan to the TVA, a federal government agency, considered a “toxic asset”?
A lawsuit has been filed against the TVA on the Kingston dam breach to stop what they’re doing, they want the TVA to stop doing something and to just stand there before they mess things up even more through their “recklessness”.
All of the furor about the TVA which everyone seems to know about except the Obama administration goes on unabated. They seem unaware of it and somewhat detached. Action goes begging for FEMA or someone to step up and take over not only the Kingston clean up catastrophe but the failed TVA itself.
The reflection is on the U.S. Government through its agency the TVA and by reference a bad reflection on all Americans. Yes, it is time for the administration to do something about the TVA and that something needs doing now.
If anyone thought that the TVA would take actions in the best interest of the people involved in the Kingston mess and in reducing power rates, it would not have been hard to predict the opposite. It’s this way: TVA first, then everyone and everything else is next.
Senator Everett Dirksen from Illinois who once purportedly said, "A billion here, a billion there, pretty soon, you're talking real money", today probably would say the same about government spending but with a much larger bite, "A trillion here, a trillion there, pretty soon, you're talking real money".
Makes TVA’s $25 billion and mounting debt look almost insignificant.
Ernest Norsworthy
emnorsworthy@earthlink.net
http://norsworthyopinion.com