Winner takes all continues to crumble

The Texas private equity group that bought the Texas Rangers from George Bush and a group of other Texan cronies has defaulted on an interest payment on a $525 million loan secured by his ownership interest in the Rangers and hockey's Dallas Stars. They have retained Merrill Lynch to help them find an investor. Maybe Merrill can shop the interest to Lonestar and get 22 cents on the dollar. Or, yetter bet, Merrill could sell it to BofA.

First off, let me ask you, how big can the interest payment on a $525 million package of loans be? $50 million? Who knows, but not that much money for these people. Basically, they're pulling an Ecuador, saying, OK, we've decided not to honor this commitment. They coulda sold something. And if private market participants opt not to honor contracts like that, what does it say to the argument that the government wading into compensation agreements like AIG debases the sanctity of contracts?

Lastly, and most importantly, this is an indication that sports compensation, like executive compensation, will regress towards a mean, and pay differentials will narrow. Similarly, we read that Hollywood stars are less able to cut favorable deals these days. This is all for the good.

And I think that hockey should retreat to the North anyway.