The Inevitable Result of Government Bailout of Newspapers

A great morality play is running in southern California that gives a pretty clear view into where government funding of newspapers will lead.  Unfortunately, the article I have (via Glen Reynolds) is not written very clearly.  Here are the key facts:

  1. New ownership buys San Diego Union-Tribune, apparently the city's largest newspaper
  2. The new ownership group is funded in part by investments from public pension funds
  3. Public officials argue that since the paper is owned in part with some of their money, the newspaper should no longer be allowed to criticize public officials

Here is their demand:

As [police union] League President Paul M. Weber views it, that makes the League part owner in the flagging Tribune and League officials are none to happy with the paper's consistent position that San Diego lawmakers should cut back on salaries and benefits for public employees in order to help close gaping budget deficits.

"Since the very public employees they continually criticize are now their owners, we strongly believe that those who currently run the editorial pages should be replaced," Weber wrote in a March 26 letter to Platinum CEO Tom Gores.

Seems pretty plain to me.  And I see no reason why government officials, who always long to avoid criticism, wouldn't use investments of public funds to exercise the same leverage.  By the way, I loved this line:

"It's just these people on the opinion side. There is not even an attempt to be even-handed. They're one step away from saying, "˜these public employees are parasites,' " Weber said.

OK, if they won't say it, I will: "Those public employees are parasites."

  • GU

    “Since the very public employees they continually criticize are now their owners, we strongly believe that those who currently run the editorial pages should be replaced,”

    No, when the taxpayers pay your salary, you are not the "owner" of a subsidized newspaper. The arrogance of these "civil servants" still surprises me sometimes.

  • morganovich

    well, it's worked like a charm for silvio burlusconi...

  • Jeff

    I read this article earlier today, and had the exact same reaction. Public employees are parasites.

  • morganovich

    actually GU, you may be wrong about that. the buyer was a fund. the police pension fund is an investor in the fund. it's not like the government bought the police a newspaper here. once the money goes into their pensions, it's theirs. sure, they were paid that money from the public purse, but that does not make their assets publicly owned any more than your employer would own your house because they give you the salary that pays your mortgage.

    once the money is paid to them, it's theirs just like any other citizen.

    further, because the investment came from platinum equities, a private firm. such a firm can make demands as it sees fit based upon its voting control. a private majority shareholder has a great deal of power. that's black letter law.

    newspaper editorial view has long reflected the views of the owners. it's a good reason to know who publishes and pays for what you read. if the state government used direct taxpayer money to buy the paper then banned negative stories about the legislature, that would be a different situation, but this is a private transaction and really involves no one but those participating.

    where the police may have overstepped is that they are just one investor in platinum equity and only have $30 million in the fund. i have no idea how big platinum equity is. if they are a $100 million fund, these police can exert some real pressure and get them do do as they ask by threatening to switch managers if it is a redemption style hedge fund. if it's structured like VC where you fund the investment and then cannot withdraw but rather must wait to receive distributions as liquidity arises, then they have little leverage apart from refusing to participate in later vintages, which may be a fair bit of leverage if they are a big part of the fund. if platinum is a $2 billion fund, these cops have essentially no leverage. you don't get to buy 10 shares of berkshire hathaway and tell warren what to do.

  • GU

    Morganovich,

    Duly noted. I didn't read the article close enough. It would be interesting to know how big of a customer the police pension is for Platinum Equity. I would imagine that most other people investing with Platinum would disagree with the polices' position, and would lean toward the "public employees are parasites" view.

  • MJ

    They're getting it all wrong. The social engineering is actually quite simple: bar public pension funds from investing in news organizations.

  • James H

    They always said that the US is a big melting pot, melting the culture of the European Corporate State with the People's Republic of China's media control.

  • Spiro

    This makes me think of a drunk and disorderly guy getting approached by a policeman and yelling "Leave me alone (burp) I-I-I pay your salary-y-y...hey, police brutal-al-idy...."

  • Bob Smith

    Is this the new model of hidden subsidy? Subsidize the newspapers, not by federal tax breaks or outright cash grants and loans, but by having public employee retirement funds buy them and take them private. Once private, their finances don't have to be publicly disclosed, and actual amount of any loss (subsidy) can be cleverly hidden in the overall gain/loss picture of the fund.

  • http://draughtyoldfentales.blogspot.com Frugal Dougal

    I was very interested in reading this post over here in England. It's clear that public part-ownership of newspapers would be egregious - the Telegraph's investigation into politicians' expenses would have been shelved, for example.