Corporate Welfare

Nothin' Shakin' on Shakedown Street

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I'd like to take this opportunity to apologize for the Dead reference in the title. I don't actually like that song very much.

Writing in the Houston Chronicle, business columnist Lorren Steffy argues that the oil spill liability fund "isn't a shakedown, it's more like a gift to BP":

For the past two months, BP's stock has been battered. Its shares are worth half what they were before the April 20 accident, and it's lost almost $97 billion in market value. That…leaves it vulnerable to a takeover. The fear is that BP would file bankruptcy as part of a merger and attempt to wall off its Gulf oil liabilities.

The fund offers BP investors some parameters for the company's liability, although BP still may be required to pony up more money if the $20 billion isn't enough. BP can pay the $20 billion over three years—an easy installment plan for a company its size.

The columnist acknowledges that "claims paid under the fund won't preclude business owners from seeking further redress in the courts later." But he thinks the arrangement could still help the company avoid some legal costs, since "victims of the Gulf oil disaster may be more willing to accept less money if they get it more quickly." In that case, we could end up with a scenario in which "BP pays less overall than it might have to if some of these cases went before juries in, say, southern Louisiana. In fact, BP may be spared punitive damages completely in civil claims."

Steffy might be on to something. While I'm wary of reading too much into short-term market moves, it's worth noting that BP's stock took a rare tack upwards after the escrow fund was announced. Jerry Taylor of Cato notes (via email) that under the agreement, "BP commits no more money than they probably would have to commit anyway, it gets the feds to buy-in to the disbursement mechanism (reducing the chance of future political wrangling), and puts a federal official in charge of disbursements so BP doesn't have to be the bad guy when claims aren't realized. The fellow in charge, by the way, was 'Dr. No' when dealing with 9/11 claimants, so it's not obvious that the floodgates will open."

Steffy's conclusion:

That's hardly the harsh treatment of private business that [Rep. Joe] Barton bemoaned in his apology last week. Barton later apologized for his apology, but even that ignored the point that the spill fund is more like government-sponsored legal aid for one of the world's biggest oil companies.

NEXT: If You Love Newspapers, Let Them Go

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  1. I find it amusing that people are trying to punish the privately owned stations. They had nothing to do with the oil leak in the gulf. They are just poor working stiffs like the rest of us.

    Lou
    http://www.anon-vpn.at.tc

    1. If I owned a BP gas station, I would do anything within my power to get out of the contract that puts their logo on the station right now, including unilaterally breaking said contract.

        1. Does the Urkobold realize that the picture of Gemma Atkinson he has on his post can be enlarged by clicking on it?

          And at this point I should point out that the picture is not the only thing enlarged after said clicking.

          1. SOON, SHE WILL FILL GIANT BILLBOARDS, ENLARGING MEN EVERYWHERE!

            1. I like the way you roll

      1. I wouldn’t be surprised if the majority of stations revert back to their old name of Amoco.

  2. And just wait until the government comes up with all kinds of new regulation that will keep new players out of the game, but won’t affect “existing” contracts 9like the ones BP already has).

    If I played the market, BP would be one of my short term (3-4 year) picks.

    1. Regulations like these:

      http://econfaculty.gmu.edu/wew…..ragedy.htm

  3. I don’t see the specific problem with this fund. The government, under existing law, has the ability to fine BP as much as fifty billion dollars or more (the fine can be up to $4,300 per barrel spilled, and there has been/will be lots of barrels spilled). That’s on top of clean up costs. So, by playing ball with this fund, BP is making a pseduo plea bargin, to try to avoid the government from bankrupting them completely. Nothing wrong with that.

  4. YOU ARE
    RESPONSIBLE
    FOR STINKY COUNTRY-ROCK

    1. I warned them.

  5. The escrow fund isn’t the issue. The federal fiduciary isn’t the issue.

    The issue is that the escrow fund appeared after a well-publicized dressing down by the President.

    This could have been done over the phone to mutual advantage. Instead the president had to use the whole episode for political advantage and take the US one step closer — whether intentional or not — to fascism.

  6. I don’t see the specific problem with this fund.

    There is absolutely no Constitutional authority for the President or the Executive Branch to receive, administer, and disburse these funds.

    Zip.

    Zero.

    Nada.

    1. Point A
      Under the modern interpretation of the commerce clause, you lose.

      Point B
      Even under the OLD commerce clause, an oil spill occurring in the ocean and is/will be effecting many states at once, you lose. An oil spill the size of Missouri hitting an entire coast line is interstate commerce, if anything is. So the government certainly has the power to regulate as to this oil spill even under a strict interpretation of the constitution, and the means they choose to do so are up to the legislature. So the question is really is there any law permitting Obama to do this? I don’t know the answer to that one.

      1. That’s all fine, Toxic, but the Commerce Clause sets forth an area where Congress can legislate.

        It doesn’t give any power to the Executive Branch.

        So it has exactly nothing to do with what we’re talking about here.

        1. If you read my post, you would see the last sentence, which says the issue is whether the legislature has given the executive branch the power to do it, if even that is actually needed.

          If he’s just throwing some weight around and negotiating, I’m not seeing a problem, constitutionally or otherwise. I realize this runs contrary to general libertarian sentiment, but when a company fucked up and is destroying billions of dollars of US citizen’s property, destroying our environment, putting tons of people out of work, and massively damageing an already shitty economy, this MIGHT, just maybe, you know, be a time where anyone besides a flat out anarchist can admit that dealing with this kind of catastrophe is one of the main reasons we even have a government.

          1. When that deal fucks up the standing of thousands of claims once a full assessment comes to light, I have no doubt those of you who support this abortion of a deal because it was signed in Messiah semen will forget where you stood, and instead express outrage that BP gets way with it.

  7. So will the gulf shore businesses get to sue the government for failing to properly regulate the blow-out preventers along with BP?

    It’s getting a little tiresome to continually hear that the FEDERAL GOVERNMENT which was responsible for regulating the rig in the first place shares none of the blame with BP.

    Never mind the drilling moratorium/ban which has already costs millions and thousands of jobs, when does the MMS take the stand for failure to regulate properly?

  8. I have been arguing this same point for a week.

    BP made a solid business decision. They can’t forsake the USA – the #3 producer of crude oil in the world and by far the #1 consumer. BP needs to only sacrifice a few quarters of dividends.

    There was no “shakedown” like the BartonPigs cried foul for – BP made the best rational fiduciary decision for their stockholders.

    $20 billion ($5 billion x 4 over 4 years) puts them into forgiveness territory via the corporate loaded Bushpig SCOTUS.

    I would go long BP at $25.

    1. Oh. not to pick solely on Barton.

      Fat Rush, the idiot Michelle Bachmann, and my personal US Rep, Tom Price (Moron from Atlanta) spread the same stupid shit around.

      1. Would you like Limbaugh’s opinions if he were svelte?

        1. No, but I’d suck Ed Schultz off just because I love him so much.

    2. I have always argued that BP should have to pay for all of the damages. Now you are defending a move that shelters BP from many of those damages. Who is in the pocket of big business again?

      1. That being said, the escrow fund isn’t a terrible idea. It actually makes a lot of sense, as the victims will be able to receive their money sooner rather than later. It just sucks that this issue couldn’t be handled through better channels. I think that we should move to make the judiciary more effective concerning the rate damages are paid out at rather than seeking to make the executive branch stronger.

    3. It was still a shakedown. Chicago politicians do that kind of shit.

  9. BP isn’t paying big bucks to Tony Podesta’s lobbying firm for anything less.

  10. So, as I see it, the whole $20BB trust fund is either

    (1) An illegal extortion of property via threats and intimidation by the executive branch, or

    (2) An extralegal favor done by the executive branch for a big political donor.

    I think that about covers the options, yes?

    1. Yup. I’ve also asked where, exactly, the President derived the authority to impose a moratorium on drilling and nobody can answer that question.

      1. When the US Govt owns the right to E&P then they also have the right to restrict such.

        If I, my modest backyard, find oil deposits don’t I get to dictate to the oil producers who wish to exploit such the terms I desire?

        1. First off, I would be startled if you owned the mineral rights to your property. Most people don’t, for a variety of reasons.

          Secondly, once I have complied with all extant regulations on my offshore activity the .gov doesn’t get to tell me to stop if I am not violating any of those regulations. I don’t have to stop what I’m doing because BP fucked up as long as all my paperwork is in order. That’s why we have these funny rules and regulations. They bind both parties, not just one. There’s this odd concept called “ex post facto” you’re probably unfamiliar with.

          1. Oh, come on. Stop with the patronizing.

            I am a full-time investor in E&P.

            I worked on a project for MMR and Jim Bob. These clowns here at Reason.com don’t know what exploration is.

            1. How do you do shit like that, and still be a liberal douchebag?

    2. (3) As usual, you don’t know what the fuck you are talking about.

      1. Don’t you have something productive to do with your time? Like storing dead insects on thornbushes or something? Next week’s lunch ain’t kill itself while you’re all acting the fool on the internet, you know.

        1. I posted above here a lengthy long position for BP going forward.

          RC Dean is a proven rabid nutcase anti-labor type.

          But! It is interesting you say I am “storing dead insects on thornbushes” as does my namesake.

          That is either an incredible accident or more probably – a recognition of the great warrior bird a SHRIKE is.

          I thank you in the case of the latter.

          1. I always considered shrikes as little avian Gacys, keeping the remains and mementos on a bush instead of under the floorboards.

            1. I like you now.

              We may disagree, but you have a brain of real substance.

              1. Yuck, Shrike is going all creepy uncle on us!

    3. It’s actually (2) while appearing to the gullible public to be (1). Perfect for the pres.

      1. Exactly. When the press repeats something enough you know it’s false. I heard “gun on the table” too many times to believe it.

        1. As evidence to my theory, may I present the Obama’s brilliant montages circulating the web today?

    4. But probably not both, as some people are trying to have it — unless Obama was actually trying to behave like a tyrant and got played by BP. Seems unlikely, since he wouldn’t lose much face by ramping up the punishment later.

  11. I also question the assertion BP is liable after fund payouts. I was under the impression from other readings that if you take a check from the fund, you waive any further lawsuits. If that’s the case, then BP most assuredly did the smart thing.

    1. Aside from that, it is not terribly helpful to have every bit of payout go to a trial in civil court.

      The court system could not handle it if no voluntary payout fund was not setup.

  12. I’m not sure which bothers me more, the phony White House meeting or the grandstanding session on Capitol Hill.

  13. Come to think of it. Barton’s statement wasn’t genuine. He’s in BP’s pocket too and he is covering for the fraud.

  14. Leave BP alooooone!

    1. Trust Obama!

  15. I’m all for making BP pay for its sins, even to the point of bankruptcy. But it would be nice for that to happen through constitutional means, governed by the rule of law.

    1. Not good enough. Obama must have complete control, if not to the point of taking BP by force. Or maybe go that extra step. He should have that much power.

      1. Oooh, shrike, you know how to get me wet.
        Wanna do some Larry Craig stuff?

  16. I’ve also asked where, exactly, the President derived the authority to impose a moratorium on drilling and nobody can answer that question.

    Let me be clear.

    Okay, okay, you got me! Therefore, I am having Interior Secretary Ken Salazar issue a new order within the next few days imposing a moratorium that eliminates any doubt it is needed and appropriate.

  17. BP made a solid business decision.

    If you consider “Pay the fucking ransom” to be a solid business decision.

    I’m not sure *anybody* at BP is capable of making a solid business decision.

  18. I read the whole thing, and I’m not convinced there’s much in the way of substance there.

  19. Dear Urkobold;

    Your website sucks. Have a day.

    1. Hey!

  20. SO, ONE DAY, THIS MAN INSULTED THE URKOBOLD. SIX YEARS LATER, THE MAN’S TAINT WAS REMOVED BY A TRAINED PYTHON THAT CAME UP THROUGH THE MAN’S TOILET. THE MAN MADE NO CONNECTION BETWEEN THE HORRIFIC EXPERIENCE AND HIS IMPRUDENT AFFRONT.

  21. You’ll pay Urkobold. Oh you’ll pay.

  22. “Taint.” Har. It never gets old.

    1. You can say that again!

      I’m going to punch you in the taint!

      Of all my great contributions to civilization the addition of ‘taint’ may be my most enduring.

      [kicking air like Elvis] HiYA! Kick you in the taint!

      1. Hate to break it to you, but “taint” has been around a lot longer than the utterly talentless Dane Cook.

        1. I may have borrowed it like everything else, but taint didn’t taint the big time until I tainted it up. You can thank me!

  23. But Jesse, it used to be the heart of town!

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