With a little help from our friends

By Jon Ralston

Friday, March 27, 2009 | 2 a.m.

At the intersection of politics and business, where the signs are often gray, finding the right way to go requires a firm ethical compass.

For instance: Suppose you are a U.S. senator and the largest employer in your state were in danger of going belly up. The company badly needs an infusion of cash and not a small one — $1.2 billion. And the request comes: Can you help us loosen up some funds from the banks?

What do you do?

A. Spring into action and call the financial institutions to preserve thousands of jobs by prying loose a loan.

B. Demur because you believe it is inappropriate for an elite elected official with power over banks to intervene for a private institution.

That was the decision Sens. Harry Reid and John Ensign had to make when MGM Mirage, beset by crushing debt and financing problems at CityCenter, asked for help. Both Reid and Ensign made choice A, setting off media interest when it was disclosed in a Review-Journal business column and then pounced on by freelance journalist Steve Friess and me.

Reid and Ensign have many defenders for their actions, those who insist that advocating for a constituent that employs thousands of Nevadans is no vice. And it is true that MGM Mirage was being squeezed by the credit crunch and requirements that prevented the federal government from lending to such a debt-laden company.

Their problem was real, but was the attempted solution extreme?

Reid and Ensign, through spokesmen, both insisted they had no choice because so many jobs were at stake.

“Senator Ensign called the banks to ask them to consider the project,” his spokesman, Tory Mazzola, said via e-mail. “The completion of the City Center project has huge ramifications on jobs and Nevada’s future economic well being.”

Said Reid front man Jon Summers: “Senator Reid has simply been asking banks to take a fair look at MGM’s City Center project to ensure that sound banking analysis is driving credit decisions, not irrational temerity over what is sometimes portrayed as a controversial industry. As we have seen on a national level, the lack of credit flow has created a hardship for a number of businesses and industries, including in Nevada. At a time when the state’s unemployment rate is higher than 10 percent, it makes sense that Senator Reid would take appropriate steps to try to help Nevada’s biggest employer complete the state’s biggest new project. With 10,000 current jobs and more than 50,000 direct and indirect future jobs on the line, Nevadans would expect nothing less.”

Really?

Would Nevadans be thrilled that their senators are trying to keep a company afloat that might employ someone in their house or someone they care about? Sure.

But how far they should go and who else they should be going to extremes for are conundrums that might not be so simple to solve.

No bank executive can receive a phone call from the Senate majority leader (or to a lesser extent the No. 4 Senate Republican) as just a chat about a Nevada company with some friendly advice to “be fair.” Such a call is freighted with much more importance and for some, perhaps, an implied threat: Help MGM Mirage or I will remember. Ensign may be the elephant but Reid is the one

with the memory — and that is no secret in D.C.

So even in the most benign interpretation — two guys zealously advocating for their state’s largest employer — there is a serious ethical question here considering the power Reid (especially) and Ensign wield. But beyond the propriety is the question of the utility of what they are asking for, especially after the company was rocked this week by a breach of contract lawsuit from its key financial partner in CityCenter, Dubai World.

Isn’t it possible Reid and Ensign could be inducing a bank — and most are not in good shape — to pour $1.2 billion down a sinkhole? Might it not be a wise investment for most banks? And imagine that choice for the banker on the other end of the phone line — make a potentially bad investment or risk alienating a powerful senator. I wonder how those decisions are made.

At the intersection of politics and business, where those gray areas abound, making the wrong choice could hurt you in business or politics — or both.