Tuesday, July 17, 2007
Does Daley's Offer Sell Futures Biz Short?
I'm surprised Mayor Richard Daley is going out of his way to insult the city's futures industry.
This week, the mayor said he would be happy to provide a subsidy to the newly-formed
CME Group Inc.--the company spawned from the near $12-billion merger of the Chicago Mercantile Exchange and the Chicago Board of Trade. The value of the city-backed effort could run up to $40 million.Usually when the mayor makes such an offer, the companies (or developers) take the money and run.
But doesn't Daley know that the CME is made of sterner stuff? Doesn't he realize it's a bastion of risk-taking capitalists? Doesn't he comprehend that these flinty-eyed traders live by a code of the almighty "invisible hand", which guides the economy and recoils from government interference?
If Daley truly appreciated what the local futures business just accomplished, he never would have offered this assistance. When advocating the merger, leaders of both exchanges waxed on about how important it was to keep Chicago at the epicenter of the futures exchange industry. They never mentioned needing subsidies.
The merger is meant to stand on its own. It's designed to produce one muscular player that will compete with growing equity and futures exchanges in New York, Europe, the Far East and other global haunts. It doesn't require a measly government hand-out to make that happen.
Daley just doesn't seem to appreciate the free-spirited, independent ways of his city's futures industry.
Maybe his Boeing experience has jaded him. Back in 2001, the mayor was at the forefront of providing over $50-million (over a 20-year span) in city and state assistance as a means of successfully luring Boeing from Seattle.
Then again, you'd expect Boeing to gobble up the goodies. After all, the jet plane manufacturer and defense industry contractor is sort of a subsidiary of the government, unlike the futures industry which practices stoic self-sufficiency.
What's needed is an intervention.
CME leaders should sit down with Daley and outline their industry's bedrock free enterprise principles. They should tell him that Tax Increment Financing districts are better used for shoring up and revitalizing the city's neighborhoods, not for helping their well-heeled institution defray its infra-structure or real estate costs. They should reiterate that this merger is good for Chicago and that no city help is really needed to make it a success.
Moreover, they may want to tell Daley that no amount of public aid will stop the new CME from merging with another firm. And if it makes financial sense to relocate from Chicago to another corner of the world, the CME will make the move.
Most of all, they should tell the mayor "thanks, but no thanks" for his offer. The reason: The CME must live up to its free enterprise ideals.
Think this will ever happen?
That's because sometimes it pays to be insulted.