American Apparel is always known for pushing the limits and their latest banner ad is no exception. Most of the pictures don’t even show the underwear, but I assume they knew that.

It’s the silent concession underlying almost every government bailout of a private company: the idea that, should the company fail, society as a whole would suffer. We heard this most recently in 2008, when AIG was rescued by the Treasury to ward off “systemic risk” to the economy. But this was hardly the only bailout to be justified in this manner. The “too big to fail” mantra has been used bail out several private companies from their own destruction.
Today, Focus offers a short history of these businesses – both what drove them to despair, and how they were bailed out.

F.A. Heinze Trusts

One of the earliest known “too big to fail” bailouts involved trusts owned by copper speculator and bank president F.A. Heinze. After an unsuccessful maneuver by Heinze to corner the U.S. copper market, bank depositors scurried to take their money out of Heinze’s trusts. As the trusts were more or less unregulated, they did not fall under the voluntary “clearinghouse system” of that time: a loose alliance of banks that lent money to each other during depositor runs. But as BusinessWeek explains:

“John Pierpont Morgan, along with other bankers he organized, provided $30 million to stabilize the trusts; the U.S. Treasury pitched in another $25 million. Morgan even asked New York clergy to implore their congregations to stay calm. The crisis prompted the creation of the Federal Reserve System six years later.”

Lockheed Aircraft

One of the better known government bailout beneficiaries was Lockheed Aircraft in 1971. A Time Magazine article from that year explained that Lockheed, facing bankruptcy after serious cost-overruns, rallied public support for the cause. Citing the roughly 60,000 American jobs that would be destroyed, Lockheed mobilized machinists and scientists to buy newspaper ads. Displaced aerospace workers “launched letter-writing campaigns, made speeches to P.T.A.’s and even organized a boycott of Wisconsin cheese and beer” to show Wisconsin Senator William Proxmire (a staunch opponent of the Lockheed bailout) that they meant business.

All told, it worked. The House of Representatives ultimately approved (by a narrow 192-189 vote) a federal guarantee of some $250 million in loans to the troubled aircraft company.

Chrysler

Just nine years later, another iconic American brand – Chrysler – came looking, hat in hand, for federal assistance. But as we’ll soon see, the 1980 bailout is tiny compared with the GM/Chrysler bailouts of 2008. In 1980, US News explains, bankruptcy seemed inevitable as Chrysler executives stared down a crushing $1 billion loss. Yet Congress would have none of it. In order to save auto industry jobs (and, some would argue, save face with auto unions), Congress acted to gaurantee $1.5 billion in loans to the suffering automaker.

Fortunately, supporters of the bailout like to remind us, Chrysler repaid these loans in full by 1983 and returned – temporarily – to profitability. The Chrysler bailout was also noteworthy for including many restrictions and requirements on Chrysler, such as defining exactly what the government’s money could and could not be spent on.

The Savings & Loan Crisis

Anyone who has read the Michael Lewis classic Liar’s Poker is familiar with the savings and loan debacle of the 1980′s. Once the industry was deregulated, hundred of S&L’s failed, one after the other, during the late 1980′s. In response, the federal government closed down the now-bankrupt Federal Savings & Loan Insurance Corp (which was intended to insure the S&L’s assets) in 1989. In one fell swoop, this manuever placed the S&L’s squarely in the hands of the FDIC. According to BusinessWeek, this led to the formation of “a temporary Resolution Trust Corp. to merge or close failing thrifts.”

When all the smoke cleared, the FDIC estimated that taxpayers spent “nearly $124 billion from 1986 to 1995″ to clean up the savings and loan mess. The problem, as some have pointed out, was not deregulation per se, but the fact that taxpayer money was at stake and therefore should have been regulated.

AIG

As noted earlier, AIG is arguably the poster child for the modern “bailout era.” In 2008, it was decided that the beleaguered insurance giant (which owned gigantic amounts of the credit-default swaps at the heart of the housing bust) simply could not be allowed to fail. To let AIG go bankrupt, regulators and businesspeople told us, would risk nothing short of a global economic collapse. A 2010 MarketWatch article revealed that Treasury Secretary Tim Geithner (and his predecessor, Hank Paulson) defended the mammoth $182 billion bailout.

Geithner in particular said that without the bailout, “thousands of more factories would have closed their doors; the value of American savings would have fallen even more. It would have brought about utter collapse.” Paulson, meanwhile, contends that the unemployment rate could have soared to 25% and beyond.

General Motors

Another prominent symbol of today’s bailout era is General Motors. In June 2009, the Washington Post outlined what brought the once-proud car company to its knees and how the government had to rush in to help. Following decades of heavy unionization, declining marketshare and lackluster leadership, GM finally sunk into bankruptcy. In order to rescue its corporate carcass (and many thousands of auto jobs) the U.S. Treasury literally bought a 60% stake in GM (controlling interest) in exchange for the $50 billion invested.

While GM is no longer technically bankrupt, the Post reminds us that “the company’s stock value would have to rise to unprecedented levels for the U.S. to break even on its investment.”

Citibank

Taxpayers are never happy about bailing out large companies, but going on three years later, it’s hard to use Citibank as an example of why. Last March, the New York Magazine followed up on the 2008 Citibank bailout:

“A few weeks ago, Citigroup CEO Vikram Pandit thanked the government for the $45 billion it gave his bank, which he said “built a bridge over the crisis to a sound footing on the other side.” Well, now it’s the government’s turn to thank Citigroup, because the Obama administration is about to sell its stake in the bank and make an $8 billion profit. Yay!”

Virtually no one predicted such a favorable outcome at the time of the bailout. Citi had just agreed to pay the New York Mets $20 million per year for the naming rights on their new stadium, and citizens and politicians alike protested feverishly. Some even demanding that Citi cancel the deal or give their bailout money back. Today, though, it can only be regarded as one of the most profitable bailouts in corporate history.

Fannie Mae & Freddie Mac

Unfortunately, there are no rosy outcomes to celebrate in the cases of Fannie Mae and Freddie Mac. The two federally sponsored mortgage institutions (which played a key role in worsening the 2008 housing bust) continue to drain even more taxpayer dollars than was originally expected. An October 2010 Washington Post article warned that the continued rescue of these organizations “is likely to cost taxpayers an additional $19 billion” and could total $124 billion more “if the economy starts shrinking again”, according to government projections.

This is on top of the $135 billion already spent to bail out Freddie and Fannie. Worst yet, the Post says, it seems likely that these two bailouts in particular “will be the most expensive part of the government’s response to the financial crisis” – and the odds of loan repayment are “slim” according to regulators.

Another day, another story of a record label bleeding money: According to its quarterly report, Warner Brothers lost a whopping $18 million dollars in the last three months of 2010, even as they had blockbuster albums from Josh Groban and Kid Rock. Warner’s hit was partially do to people selling off stocks: It’s the one major label that is still a public company. That’s probably why the label is trying to find a buyer, so that the stocks don’t continue to tumble.

You know there’s going to be a showdown over some communications technology issue when Google, Best Buy, Mitsubishi, Sony, TiVo and two other big companies start a new group with the word “alliance” in it. Sure enough, the septet has announced that they’ve united to defend the Federal Communications Commission’s new proposal for an “AllVid” standard that would make it easier for consumers to watch both pay television and the video they get from their home broadband network on the same screen.

Thus has been born the “AllVid Tech Company Alliance”—named in honor of the FCC’s suggested gateway interface.

“It is essential for the Commission to break down the wall separating the home network from [pay TV] networks—not just poke a few holes in it, or rely on progress on the peripheries,” the Alliance wrote to the FCC on Wednesday. “The seeds for real competition must emerge in chips, technologies, and interfaces that can be organic to tens of millions of products, services, and consumer uses—not just those presently conceived, but those that innovative minds, and users who can select and adapt their own devices, can conceive.”

How would AllVid break down this wall? FCC Chair Julius Genachowski described the gadget ten months ago, indicating cable, satellite, or telco video providers would send their signals to “a small adapter on the customer’s premises that would present a standard interface to all consumer devices.”

AllVid could be connected to TVs, computers—pretty much anything that can show multichannel video or Internet fare. Thus Internet and multichannel TV would be integrated.

The FCC is proposing this as a replacement for its failed CableCard device—the data/security card that was supposed to let consumers pick their own set-top box. Its limited capabilities made it a flop on the video device market.
Ignoring legal rights?

Can you think of any high-profile consumer product that is just dying for this new standardized gizmo to become a fact on the ground? That’s right: Google TV. The HDTV system integrates Internet and pay TV content, but Google, Sony and the gang don’t want to spend years coaxing suspicious broadcasters, content providers, and cable networks into content deals. They want a device standard in which Internet and cable content are interchangeable now (or relatively close to now).

Needless to say, the cable companies are far less enthusiastic about this idea. The National Cable and Telecommunications Association has thrown a host of theoretical roadblocks in front of AllVid. “Sony/Google are asking the Commission to ignore copyright, patent, trademark, contract privity, licensing, and other legal rights and limitations that have been thoroughly documented,” the NCTA  warned the FCC last week.

Clearly, the AllVid Alliance is a response to the cable industry’s opposition to this idea.

“Despite some recent progress in making television smart and connected, unless the Commission pursues a gateway approach[,] consumers will not have the sort of open and innovative competitive market to which they are entitled,” the AllVid coalition told the FCC.

The group says it wants the Commission to make a specific AllVid plan available for public comment as soon as possible.

Frog’s Leap Winery is an organic and biodynamic vineyard located in the heart of Napa’s Rutherford region. Back in 1975, owner John Williams was living in St. Helena on a property that was a frog farm during the 1800s. Yes, a frog farm! In 1981 he began working for Stag’s Leap Wine Cellars, an opportunity that enabled him and his buddy Larry Turley to make a 5 gallon jug o’ wine using “borrowed” grapes. As a homage to the grape’s origins–and the frog farm–they called it Frog’s Leap. Pleased with the results, they sold their motorcycles to produce another 500 cases.

Now entering their 30th year of production, Frog’s Leap has been a pioneer in terms of green winemaking. They were Napa’s first winery with certified organically grown grapes and the first California winery with a LEED certified building. But one of their most impressive accomplishments is that they grow all their grapes without the use of any water; they’re completely dry-farmed.

In 1994, Frog’s Leap moved from the St. Helena frog farm to the historic Anderson Winery in Rutherford. Turley didn’t follow as he went on to establish what is now Turley Wine Cellars. Anderson Winery was a ghost winery that had been established in 1884 by a German vintner. This new home, located in the Rutherford appellation, has many diverse microclimates and soil types. It also produces some of California’s most well known wines. The west side–called the Rutherford Bench–is home to some of Napa’s award-winning Cabernet Sauvignons. Frog’s Leap has four of their own vineyards on this Bench.

The property had been punctuated by a grand red barn which was Napa’s oldest board and batten building. Williams took great care in restoring the building. The barn was rebuilt using 85% of the original wood and is now surrounded by over 40 acres of organic estate vineyard.

“We certified our first vineyard organic 24 years ago and believe me, it was not a cool thing to do back then,” says Williams. Prior to 1987, Williams was buying grapes from other vineyards. That same year he purchased his first vineyard and began flexing his degree in agriculture from Cornell University. Initial soil inspections found the vineyard to be not only calcium deficient but also lacking in both zinc and boron. Growing up on a dairy farm, he was confident about the conventional methods in which to fix it; he was wrong. When the vineyard quickly took a turn for the worse, Williams started exploring alternatives. Through the owners of Fetzer Winery, John was introduced to Amigo Bob–an organic farmer from Mendocino County. Amigo Bob taught Williams how to farm with nature and not against it. John became a soil farmer and not just a grape grower.

“It [organic] was really the source of inspiration…that instructed us on the path of doing everything else. But organic farming came first,” Williams notes.

Frog’s Leap built Napa’s first LEED certified commercial house, complete with a geothermal warming and cooling system. The closed-loop system consists of 20 different wells and has the capacity to cool a total of 10 houses. The house serves as the winery’s administrative offices and its tasting room. But it isn’t the only LEED certified structure on the property. Frog’s Leap is also home to Napa’s only LEED certified green house, no pun intended. And as you might expect from an eco-conscious winery, the day-to-day operations are 100% solar powered and have been since 2005. But these improvements are not just about the environment, they’re also about good business. For example, their annual electric bill was $50,000 so solar made fiscal sense.

One of the more unique efforts that Frog’s Leap has made is in the area of water conservation. No water is used on the any of the grape crops. They are completely dry farmed. John explains that “all grapes in Napa for 125 years were dry farmed. Irrigation came to Napa in the 70s, was made popular in late 80s, and became required in the 90s. Now it’s thought to be completely impossible to grow grapes without water.”

Dry-farmed grapes not only reduce water usage but the resulting product is significantly better. First, dry-farmed vines have an extremely deep root. This makes them robust and much more resistant to diseases. In comparison, grapes that receive irrigation end up sitting on the vine significantly longer. The grapes themselves then have an extremely high sugar content which translates to a high alcohol content, a trend that has been plaguing California wines as of late. Alcohol content has increased by 10% since the late 80s! As the alcohol content in wine increases, acidity decreases and has to be added in later. These inputs start to make the irrigated wines all taste the same. You lose the terroir and it becomes more about winemaking-witchcraft than the nuances of the actual grape.

Napa is more than equipped for dry-farming, though conventional growers will tell you otherwise. But Frog’s Leap is not powered by unicorns…we checked. Dry-farming in Napa Valley requires 16-20 inches of annual rainfall in order for the vines to sustain the region’s hotter months (May to October). Napa receives about 36 inches annually.

But Williams understands that the success of Frog’s Leap is not just about the winery. It’s about community. A rarity in today’s agribusiness, all of the winery’s farm workers are full-time employees paid with living wages plus benefits. How does Williams responsibly employ a labor force and keep his wines around $30 a bottle? Well, the inspiration came from his days as a dairy farmer in New York where shared labor was part of the social fabric. Using this format, his workforce now maintains four other vineyards and one winery.

“In grapes, if you farm only grapes, you prune them and then there is nothing to do. Then you go pick the grapes and then there’s nothing to do. That is why we grow almost 70 different crops here. When were done pruning grapes we can then prune the fruit trees. Cross training and diversification of agriculture has helped bridge that gap. But this wasn’t enough. So we went to a few neighbors [and said] ‘You’re hiring and firing. It’s a pain in the ass. Let us do your work for you.’ Now we can keep these guys year round,” says Williams.

When tasting wines from Frog’s Leap, you’ll notice something you don’t often find at other wineries: consistency. Whether it be their Sauvingnon Blanc with its minerals and kaffir lime or the 2007 Merlot with notes of cigar and pepper, Frog’s Leap wines have a distinct thread of continuity between all varietals. They are flavorful but not outspoken as most California wines tend to be. The dry farming seems to amplify a wine’s sense of place, giving it both distinction and relation.

For example, their 2007 Merlot will definitely surprise you. California Merlots usually come with a big cartoon-y KAPOW à la 1960′s Batman. But not this one. It holds its ground without demanding the company of food. It sells for $34, a price point most of their wines revolve around. Only their Rutherford will set you back double at $75.

So, is Williams correct? Is irrigation seriously diluting the terrior out from California wines?

I am not sure. But it really does taste that way!

Read it and weep: “Germany leads the European nations in recycling, with around 70 percent of the waste the country generates successfully recovered and reused each year. To put that figure into perspective, consider this: In 2007, the U.S. was able to recover only about 33 percent of the waste generated that year.” Germany’s policies force companies to be much more waste-conscious than the US does (surprise, surprise). Read more about how they do it in Trash Planet: Germany, on Earth911.