Pacifica update: Bill Crosier, the network’s interim executive director (they’ve all been interim for years, since they can’t formally choose a permanent one) has decided to call for a bankruptcy filing, reminding directors who try to obstruct the move they could be personally liable for a breach of fiduciary duty. It wouldn’t surprise me if half the board members don’t know what that means.
[Weirdly, Facebook won’t let me post the resolution itself, just Crosier’s email.]
Subject: Bankruptcy motion – It’s time
Date: Wed, 27 Dec 2017 21:45:43 -0600
From: Pacifica Executive Director <ed@pacifica.org>
To: Pacifica National Board <pnb@pacifica.org>
Cc: Sam Agarwal_Pacifica_CFO <sagarwal@pacifica.org>, Ford Greene <fordgreene@comcast.net>
Dear PNB Directors,
Attached is a resolution for authorizing to file for Chapter 11 Bankruptcy and Reorganization. As is clear, we have exhausted all options at this time to secure a loan or to pay the ESRT [Empire State Building] judgment or to secure a forbearance agreement. Three attorneys have told us, in very clear terms, that Pacifica’s assets are in imminent danger of being liened or seized, some of which may happen today.
We have no written forbearance agreement of any kind with ESRT. They have a judgment against us and have filed in every state where we operate. Now that we are at this point, we must file chapter 11 to protect Pacifica’s assets, so we can continue operations.
All directors have a fiduciary responsibility to protect the Foundation’s assets. This decision has been blocked and delayed for a long time and cannot be delayed any further. Time has run out. Various delinquencies and financial distresses cannot be ignored. So, I urge my colleagues to do the right thing. Still, we can salvage and come out of this crisis. But later, we will not be able to do so. Waiting until Jan. 8 will be too late, as that’s when all the California properties will be at risk. Our other assets, including our bank accounts, are already at great risk of seizure.
As this issue is of critical importance to Pacifica, I am copying all Local Station Boards, the National Finance Committee, Audit Committee, and General Managers and Business Managers to keep them informed.
Please note that any attempt to block or unnecessarily delay this motion will be taken very seriously. As a follow up to our meeting with the California Attorney General Charitable Trusts Division, the officers would forward the outcome of this motion to their office with voting results. Directors may be held personally responsible for conscious disregard of their duties. Damages now can be very clearly specified and it will be the loss of property, interest and legal costs.
I’m sorry to have to put this so bluntly, but this is very important – perhaps the most important thing the PNB has had to do, to protect Pacifica.
Now is the time. We cannot wait any longer.
Bill Crosier
William G. (Bill) Crosier
Interim Executive Director
Pacifica Foundation
1925 Martin Luther King Jr Way
Berkeley CA 94704-1037
510-316-9783
The motion:
*Pacifica Bankruptcy Motion*
WHEREAS, on October 4, 2017, the Honorable Gerald Lebovits of the Supreme Court of the State of New York, granted summary judgment in the amount of $1,819,687.52 with interest and reserving attorney’s fees and court costs, in favor of plaintiff, in /ESRT Empire State Building (Empire State) L.L.C. v. Pacifica Foundation, Inc./, Case No. 656145/16, for the failure of Station WBAI to stay current on its lease payments for its broadcast antennae located on the Empire State Building in New York, New York;
WHEREAS, on November 16, 2017, the Clerk issued Judgment (“Judgment”) in the amount of $1,839,586.19 in /ESRT Empire State Building L.L.C. v. Pacifica Foundation, Inc/., reserving attorney’s fees and interest;
WHEREAS, on December 7, 2017, Empire State filed its Application for Entry of Judgment on Sister State Judgment in Los Angeles County Superior Court, Case No. BS 171750 and on December 12, 2017, personally served the same on Pacifica Foundation’s National Office, 1925 Martin Luther King Way, Berkeley, California (“National Office”);
WHEREAS, on December 7, 2017, Empire State served on the National Office and filed its Request to File Foreign Judgment in Superior Court of the District of Columbia, Case No. 17-0008138, in the amount of $1,839,586.19 at the rate of 9% interest;
WHEREAS, on December 11, 2017, Empire State served on the National Office and filed the Notice of Filing of Foreign Judgment in the District Court of Harris County, State of Texas, Case No. 2017-80997, in the amount of $1,839,586.19;
WHEREAS, Empire State has taken the steps necessary to start to execute its $1,839,586.19 Judgment in the states of New York, California, Texas and Washington D.C.;
WHEREAS, Pacifica Foundation owns real property free and clear and five broadcast licenses, but does not have sufficient operating capital and reserves to pay the Judgment;
WHEREAS, Pacifica Foundation maintains real property and bank accounts in the states of New York, California, Texas and Washington D.C. which are at risk for being levied upon, liened against and seized;
WHEREAS, Empire State may execute its Judgment on bank accounts owned by Pacifica Foundation at any time;
WHEREAS, Empire State can record an Abstract of Judgment in California on Monday, January 8, 2018, which will become effective against real property in California;
WHEREAS, if Pacifica Foundation fails to file a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018, in California, and Empire State records an Abstract of Judgment on Monday, January 8, 2018, it will create a Judgment Lien which will become effective as against real property Pacifica Foundation owns and unnecessarily and unduly compromise Pacifica Foundation’s position in bankruptcy court;
WHEREAS, the recordation of an Abstract of Judgment in California will trigger the creation of a Judgment Lien that will entitle Empire State to add interest and attorney’s fees to its Judgment Lien and otherwise improve its position and damage Pacifica’s assets;
WHEREAS, for close to six months Pacifica Foundation has requested Empire State to sign a Forbearance Agreement in writing whereby Empire State would promise for a time certain not to execute its judgment and otherwise increase its legal advantage over the Pacifica Foundation by promising not to record an Abstract of Judgment or take any other steps to perfect a Judgment Lien or enforce the Judgment for the forbearance period, and Empire State has refused and continues to refuse to do so;
WHEREAS, Pacifica Foundation has failed to make any further monthly antennae lease payments to Empire State since May 2017 and will continue such failure into the foreseeable future;
WHEREAS, as of December 1, 2017, Pacifica Foundation’s monthly payment to Empire State is $60,991.16 and will continue to increase in amount every month thereafter until the lease expires in 2020;
WHEREAS, Pacifica Foundation cannot afford to make the ongoing and continuing monthly Empire State lease payments for the location of the WBAI broadcast antennae;
WHEREAS, Pacifica Foundation has failed to fund the retirement plan for its employees since FY2015 and owes said plan approximately $750,000
WHEREAS, due to Pacifica Foundation’s lack of compliance in funding its retirement plan for its employees, on December 12, 2017, the Newport Group, Inc., the manager of the plan “disengaged” effective immediately;
WHEREAS, Pacifica Foundation has mismanaged its fiscal responsibilities for a period of many years that has resulted in the accumulation of millions of dollars of debt;
WHEREAS, Pacifica’s Foundation’s credit rating is damaged, flawed and poor such that it can become eligible for cash loans only on the riskiest and most harsh terms for which it has no articulated plan for repayment and which necessarily would be secured by real property that Pacifica owns;
WHEREAS, the Pacifica Foundation has an ongoing duty to submit yearly independent financial audits to the California Attorney General Charitable Trusts Division on a timely basis;
WHEREAS, the failure of Pacifica Foundation to timely submit yearly independent financial audits to the California Attorney General Charitable Trusts Division will result in the revocation of its tax-exempt status;
WHEREAS, the Pacifica Foundation cannot operate without remaining a non-profit corporation with a valid tax-exemption in good standing in the State of California;
WHEREAS, on May 22, 2017, the California Franchise Tax Board revoked the Pacifica Foundation’s tax exemption for failing to timely submit yearly independent financial audits, which status was subsequently reinstated when Pacifica Foundation submitted its independent financial audit for FY2015 to the California Attorney General Charitable Trusts Division in August 2017;
WHEREAS, Pacifica Foundation has a fiduciary duty to protect its assets, not to expose its assets to undue and unnecessary risk and to exercise sound fiscal management looking into the future;
WHEREAS, the Pacifica Foundation has no other present means by which to protect its assets from imminent levy, lien and seizure;
WHEREAS, the most effective way for the Pacifica Foundation to effectively protect its assets is by filing a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018;
WHEREAS, in order to file a petition in bankruptcy and to successfully do the work that is necessary to a successful use of bankruptcy protection, the National Office in Berkeley, California must gather information from the member radio stations in New York, Washington D.C., Texas and California;
WHEREAS, the National Office and bankruptcy counsel will have to work in close and continuing cooperation and that physical proximity best facilitates such ongoing cooperation;
WHEREAS, bankruptcy specialists, Reno F.R. Fernandez III, Philip E. Strok, and Pacifica General Counsel Ford Greene continue to advise and recommend Pacifica Foundation to file a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018;
WHEREAS, in order to accomplish the continuing work that submitting yearly independent financial audits requires, to continue to exercise accountable fiscal responsibility across the Pacifica Foundation’s radio network and to gather the foundational documents, records and financial data that maintaining a bankruptcy filing will require, Pacifica Foundation must authorize the hiring of additional employees to assist CFO Sam Agarwal;
NOW THEREFORE, it is hereby moved that the Pacifica National Board authorize its Executive Director William G. Crosier and/or Chief Financial Officer Sam Agarwal to employ the law firm of MacDonald Fernandez LLP to file a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018;
NOW THEREFORE, it is hereby moved that the Pacifica National Board authorizes Chief Financial Officer Sam Agarwal to employ two contractors to assist in discharging the tasks set forth herein above.
When this commentary was broadcast at the beginning of my radio show at noon, Pacific time, December 21, bitcoin was trading at about $15,600. It had a bad Friday, losing almost a quarter of its value, bottoming out at $11,858, before recovering to $14,267 as I’m posting this. I am not claiming cause and effect.
I’m going to indulge in a rare bit of holding forth on my own—on the topic of bitcoin. I thought of having a guest do that, but since I wrote a piece on the topic for The Nation back in 2014 (reposted here with no paywall), and have been keeping up with ever since. Some of what I’m about to say is drawn from that article, but it’s updated with material from the shimmering present.
Bitcoin, once a fairly arcane topic, is now everywhere. The market pundit Robert Prechter, who is a great psychologist of financial markets despite being a devoted follower of Ayn Rand and believing in a piece of superstition called Elliott Wave theory, once argued that in the course of a major bull market there’s something called a “point of recognition,” when the general public gets on board. That means it’s getting late in the run and it’s time for pros to think about getting out (though a serious mania can go on well after John and Jane Q get involved). It sure seems like we’re at the point with Bitcoin, whose price trajectory over the last few years resembles some of history’s great manias, like the Dutch tulip bulb frenzy of the 1630s, the South Sea bubble of the 1710s, and the U.S. stock market orgies of the 1920s and 1990s.
What is going on? Before getting into the details, I should say that money in general is not a simple topic. Most people have a good understanding of how gold, which is something of a primal money, is mined, refined, and shaped into ingots or coins. Slightly less obvious is why it has a monetary status unlike, say, platinum. But it is rare, pure, easily divisible, and has been highly cherished throughout the ages. Paper money is more complex. From 1900 through 1971, the U.S. dollar was backed by gold, meaning its value was legally defined by a certain weight of the metal. That ended in 1971, when Richard Nixon shocked the world by breaking the link to gold and allowing its value to be determined by trading in the foreign exchange markets. The dollar is valuable not because it’s as good as gold, but because you can buy goods and services produced in the U.S. with it—and, crucially, it’s the only form in which the U.S. government will accept tax payments. Among its many functions, the Federal Reserve is supposed to allow the issuance of just the right quantity of dollars—enough to keep the wheels of commerce well-greased, but not so much that things slip off the tracks in a hyperinflationary crisis.
But Bitcoin is another animal entirely. It is the first and most famous of a large and growing family of things called “cryptocurrencies.” Other family members include ethereum, ripple, dash, monero—but Bitcoin is by far the largest. The total value of existing bitcoins is now $261 billion—that’s a third bigger than the total value of Citigroup’s stock, and slightly below the value of Wells Fargo’s stock—real banks with millions of customers, making real money.
The semi-official definition of cryptocurrency is “a peer-to-peer, decentralized, digital currency whose implementation relies on the principles of cryptography to validate the transactions and generation of the currency itself.” (While that is a dense slab of prose, to be fair to the cryptoids, it wouldn’t be easy to define the dollar succinctly either.) What that all means is that bitcoin and the rest are electronic currencies—pure data entires in electronic ledgers—created and transferred by networked computers with no one in charge. The role of cryptography is not merely to guarantee the security of the transaction, but also to generate new units of the currency. New units of cryptocurrencies are “mined” by having computers solve complicated (and pointless) mathematical algorithms; once solved, a coin is created and its birth—with a digital signature guaranteeing authenticity and uniqueness—announced to the rest of the system. Every bitcoin includes a blockchain, an anonymous digital record of the unit’s transaction history. The creator earns the value of the new coin when it enters the system. You can buy or sell bitcoin on online exchanges, and there are even a few bitcoin ATMs scattered about. (The closest one to me in Brooklyn is about 2 miles away; the closest U.S. dollar ATM is at the deli half a block away.)
Mining requires enormous amounts of computing power. According to some estimates, bitcoin’s power use already may equal 3 million U.S. homes, topping the individual consumption of 159 countries. The bulk of this mining goes on in China, where most of the electricity comes from coal, so this is a dirty business. The number of bitcoin in circulation is supposed to top out at 21 million; we’re approaching 17 million now. As the limit is approached, the coin-creating algorithms get more difficult to solve, meaning more computing power is required, and more carbon is generated. Even the most seemingly immaterial of things often have deeply material roots.
I should emphasize that the algorithms used to generate bitcoin are pointless. They serve no useful purpose. To some partisans, that’s a good thing, because if they were tied to some useful purpose, that might confer some intrinsic value upon the currency; best to let its value float freely, limited only by the human imagination.
That’s the technology of Bitcoin; what about it as money? The classic economist’s definition of money is that it is a store of value, a unit of account, and a medium of exchange. You go to the store and find a can of tomatoes is priced at $3—unit of account, which the store will book as revenue when it’s sold. You take $3 out of your pocket or your debit card—you draw down the store of value (the cash on hand or in the bank), and use it as a medium of exchange. The value of the U.S. dollar is that everyone in the U.S. (and beyond) recognizes the currency as fulfilling successfully all these tests of money. The dollar is valorized by the goods and services that it can buy.
Bitcoin has serious problems in all three aspects. Over the last week alone, the value of bitcoin has varied from about $15,000 to $21,000. A year ago, it was worth just over $800. That’s not a very reliable store of value. [Note: it’s now $14,492. But wait a minute—it’ll change. Here is a live quote.]
Almost no one accepts bitcoin, nor do any businesses of note keep their books in bitcoin; it fails both as unit of account and medium of exchange. And its short history—the first bitcoins were minted in 2009—has been turbulent. There have been multiple thefts, frauds, and hackings, which partisans dismiss as growing pains. But with no regulator, no deposit insurance, and no central bank, this sort of thing is inevitable—it’s just tough luck. Introduce regulators and insurance schemes, though, and Bitcoin will lose all its anarcho-charm.
Gold is like Bitcoin in being a stateless form of money, which is why libertarians love it, but it does far better on the store of value measure. The price of gold varies by less than 1% a day—but its price is still more volatile than the much-maligned U.S. dollar. It is a semi-reliable store of value. But gold does little better on the other measures: there’s not much you can buy with it, and almost nothing is priced or accounted for in gold.
Despite that, gold retains an enormous phantasmic appeal—some “objective,” market-determined measure of value, unsullied by state intervention. Keynes called gold part of “the apparatus of conservatism.” That was an old conservatism, the conservatism of rentiers who loved austerity, because it preserved the value of their assets. Bitcoin serves a similarly totemic purpose for today’s cyberlibertarians, who love not only the statelessness of it as money, but also its power to “disrupt.” Bitcoin is part of the apparatus of anarcho-capitalism.
The political cast of the Bitcoin universe is mostly libertarian, but it has a left wing. A paper written a few years ago by Denis “Jaromil” Roio, a hacker, artist, and graduate student, deploys quotations from Michael Hardt and Antonio Negri, Giorgo Agamben, and Christian Marazzi to give Bitcoin a revolutionary spin, creatively reading it as a way for “the Multitude [to construct] its body beyond language.” He does not explain how transforming the monetary instrument will change what is produced or how incomes are distributed.
There’s something to be said for bitcoin’s anonymity—though you have to wonder how impenetrable its veil is to the National Security Agency. For now, it’s a semi-safe way to buy drugs and weapons.
But aside from anonymity—which is nothing to sneeze at!—it’s hard to see what problem Bitcoin solves. The switch to paper money was a response to the crisis of the old gold-centered system. There’s no practical value to Bitcoin—anonymity aside, again—but it does carry political baggage. Leaving aside the entrepreneurs and speculators, who are just looking to get rich, the political vision of Bitcoin is of a decentered, stateless world, with competing money systems.
Competitive money, ending the state monopoly over money, has long been a dream of the right; in a 1976 paper, Friedrich Hayek argued for allowing multiple currencies to circulated within individual countries; competition would lead to the use of the soundest—meaning most austerity-friendly—currency and put a check on governments’ attempts to inflate their way out of trouble. That would mean no fiscal or monetary stimulus in an economic crisis—just let things run their purgative course. In this view, the New Deal lengthened the Great Depression; had the bloodletting continued after Roosevelt’s inauguration, things would have righted themselves sooner or later. And we should have done the same in 2008–2009.
Cryptocurrencies would be an advance on the idea of competitive currencies—improvised currencies that could challenge the state monopoly itself. (Actually we had competing currencies in the 19th century; all kinds of little banks issued banknotes that often turned out to be worthless.) Of course, there is no inflation, and government money has proved far more stable than its alternatives, either gold or Bitcoin. No bank depositor lost a dime in the financial crisis of 2008; you can’t say that about Bitcoin in its short life. But libertarians—and there are a lot of them in tech and finance, the co-parents of Bitcoin—are always worrying about inflation; they worry about it the same way that hedge fund titans see talk of lifting their tax breaks as a rerun of Nazi Germany.
So even though Bitcoin fails as money, it’s acquired a vivid life as a speculative asset. But unlike more conventional speculative assets, its value is completely immaterial. Stocks are ultimately claims on corporate profits, and bonds are a claim on a future stream of interest payments. You can say no such thing for bitcoin. Its only value is what someone else will pay for it later today or maybe tomorrow. And now they’re trading futures on it, which takes speculation into a fourth or fifth dimension.
And what a speculative mania it is. Everyone wants to be part of the action. Bitcoin imitators are sprouting daily. The other day, speculators forked over $700 million to a company, block.one, for a cryptocurrency that doesn’t really exist and, according to its sponsors, has no purpose. The company has disclosed almost no information about itself, and almost nothing is known about its founders. And early on Thursday morning, the Long Island Ice Tea Corp., which sells nonalcoholic beverages, changed its name to Long Blockchain, and its stock price promptly more than doubled. The firm has no agreements with any cryptocurrency promoters, nor does it have prospects for any. The mere name change did the trick.
It’s all nuts, but my guess that it’s not the kind of bubble that will cause broad economic damage when it pops. For that to happen, the bubble would have had to be financed by banks that would be put at risk of failure when things fall apart. That doesn’t seem to be happening. But shirts will be lost. More seriously, this bubble shows that some people have too much money. Our society—and I mean that broadly, since a lot of the money going into bitcoin looks to be coming from Asia—has plenty of cash for speculation and not much for human need.
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Posted in money, radio commentaries | Tags: bitcoin, bubbles, cryptocurrencies