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Lee Schafer

Insights on Twin Cities business and economics

Nothing Clever About Medtronic Plaza - As a Deal

After the Minnesota Vikings and Medtronic announced that Medtronic's name would go on the plaza in front of US Bank Stadium, the e-mail notes came in again. Readers were insisting that Vikings Chairman Zygi Wilf is one clever dude and he’s once again completely outfoxed us.

Why, just look at the money Wilf was already getting for the naming rights for a stadium owned by the public. And now, it turns out, he even will get money for selling the name to the plaza fans will walk through to enter the stadium.

Zygi, brother Mark Wilf and cousin Leonard Wilf are the principal owners of the team and they are certainly accomplished business people. There’s at least a chance that they are near geniuses at the art of the deal. But there sure hasn’t been that much evidence of genius when selling the rights to name the stadium where their National Football League team will play.

The reason, of course, is that having a team get the money for the naming rights is hardly novel to Minnesota. It’s done that way everywhere.

And the reason the teams get the money is that naming rights are really nothing more than the team selling paid advertising for their sporting event.

No big time sporting event means no fans and no extensive media coverage, which in turn means no consumer eyeballs and no value in naming rights.

US Bank ‘s paying, best we can tell, $7.5 million per year to put its name all over what is now called US Bank Stadium. Since that deal was announced, Mercedes-Benz bought the rights to have its name on the still-under construction $1.4 billion stadium in Atlanta that will be the home field for the NFL’s Atlanta Falcons and Major League Soccer’s Atlanta United.

The Atlanta deal is for 27 years, and estimates for this one are up to $20 million per year. Mercedes also has the rights to the NFL stadium in New Orleans, and that figure is widely reported to be $6 million per year.

The Twin Cities was the nation’s 15th largest media market in one recent ranking, with about 1.7 million TV households. Atlanta was bigger, with about 2.3 million TV households, but not so much bigger that it justifies annual payments that are more than twice what they are here. Meanwhile, greater New Orleans was the 51st largest media market, less than half the size of the Twin Cities.

These look like good deals for the teams, at least compared to what we think are the terms here in Minnesota.

Yet there is no particular reason to think Falcons principal owner Arthur Blank or Saints owner Tom Benson are exceptionally clever deal guys, or to suggest they have outfoxed anyone. In that way, they are just like the Wilfs. 

The Economist and the Fed's Bloated Balance Sheet

The economist John Taylor came to Minneapolis this week to deliver a message that monetary policy needs to become more stable, rules-based and predictable.

Taylor, a Stanford University economist so well known he has an economic principle named after him, told the Economic Club of Minnesota gathering that monetary policy in the last 15 years has come to resemble the bad old days of the 1960s and 1970s, with policy moves he called “discretionary.”

While making clear that policymakers at the Federal Reserve used a lot of wisdom and courage to boost liquidity in the financial markets after the credit crisis of 2008, he also has been pretty pointed in his criticisms of the Fed since then.

We sat down briefly after his talk to discuss something he didn’t really discuss at length, and that’s the current size of the Fed’s balance sheet.

The Federal Reserve is still a bank, of course, and it does have a balance sheet. Ten years ago the Fed’s total assets were less than $850 billion.

After the financial crisis, and then three separate programs of buying securities known as quantitative easing, the Federal Reserve’s balance sheet ballooned to $4.5 trillion, about where it stands as of the end of the most recent quarter.

The Fed now owns $2.6 trillion of U.S. Treasury securities and about $1.8 trillion of federal agency and government-sponsored enterprise mortgage-backed securities. It’s easy to accumulate that many bonds with a program of monetary stimulus that as recently as two years ago meant buying $85 billion worth of securities a month.

As Taylor pointed out, there’s nothing “normal” about a central bank balance sheet that big. “Ultimately, they need to get the balance sheet down,” he said.

The smart thing to do would be some selling but only gradually, he said, as selling means taking money out of the financial system, a form of monetary tightening.

It’s an interesting and valid point he’s making.

Without any action at all, having a huge balance sheet will increasingly look normal to monetary policymakers, at the Fed and other central banks.  As brilliant as these people are, it just may become easier to forget that the Fed’s balance sheet only got that big because of an unprecedented and extraordinary program of buying securities to stimulate the economy.

And having an extraordinary policy become normal is the last thing we need.