The Responses to the Gulf Oil Spill and to the Financial Crisis Are Remarkably Similar ... And Have Made Both Crises Much Worse → Washingtons Blog
The Responses to the Gulf Oil Spill and to the Financial Crisis Are Remarkably Similar ... And Have Made Both Crises Much Worse - Washingtons Blog

Tuesday, May 18, 2010

The Responses to the Gulf Oil Spill and to the Financial Crisis Are Remarkably Similar ... And Have Made Both Crises Much Worse

The Gulf oil spill and the financial crisis were both caused by excessive risk-taking by industry giants and the "capture" of politicians and regulators by the corporate behemoths.

Moreover, the response to the Gulf oil spill and the financial crisis are remarkably similar.

With regards to the financial crisis, the response has been to cover up the truth:

William K. Black - professor of economics and law, and the senior regulator during the S & L crisis - says that that the government's entire strategy now - as during the S&L crisis - is to cover up how bad things are ("the entire strategy is to keep people from getting the facts").

Indeed, as I have previously documented, 7 out of the 8 giant, money center banks went bankrupt in the 1980's during the "Latin American Crisis", and the government's response was to cover up their insolvency.

Black also says:

There has been no honest examination of the crisis because it would embarrass C.E.O.s and politicians . . .

Instead, the Treasury and the Fed are urging us not to examine the crisis and to believe that all will soon be well.

PhD economist Dean Baker made a similar point, lambasting the Federal Reserve for blowing the bubble, and pointing out that those who caused the disaster are trying to shift the focus as fast as they can:

The current craze in DC policy circles is to create a "systematic risk regulator" to make sure that the country never experiences another economic crisis like the current one. This push is part of a cover-up of what really went wrong and does absolutely nothing to address the underlying problem that led to this financial and economic collapse.
Baker also says:
"Instead of striving to uncover the truth, [Congress] may seek to conceal it" and tell banksters they're free to steal again.
Economist Thomas Palley says that Wall Street also has a vested interest in covering up how bad things are:
That rosy scenario thinking has returned to Wall Street should be no surprise. Wall Street profits from rising asset prices on which it charges a management fee, from deal-making on which it earns advisory fees, and from encouraging retail investors to buy stock, which boosts transaction fees. Such earnings are far larger when stock markets are rising, which explains Wall Street’s genetic propensity to pump the economy.
The same is true for the Gulf oil spill.

Dan Froomkin documents that the government is trying to ignore what is below the surface:

The Obama administration is actively trying to dismiss media reports that vast plumes of oil lurk beneath the surface of the Gulf of Mexico, unmeasured and uncharted.

But the National Oceanic and Atmospheric Administration, whose job it is to assess and track the damage being caused by the BP oil spill that began four weeks ago, is only monitoring what's visible -- the slick on the Gulf's surface -- and currently does not have a single research vessel taking measurements below.

The one ship associated with NOAA that had been doing such research is back in Pascagoula, Miss., having completed a week-long cruise during which scientists taking underwater samples found signs of just the kind of plume that environmentalists fear could have devastating effects on sea life of all shapes and sizes.

ABC News notes that the White House allowed BP to suppress video of the oil spill for 3 weeks. ABC also quotes a top oil spill expert as saying that BP's use of booms around the spill site now won't really do anything ... and is just an exercise in public relations so that it looks like it's doing something.

There has been tremendous underreporting of the amount of oil spilling into the Gulf. As the Houston Chronicle notes:

A prominent oceanographer, who was among the first to say official estimates understated the volume of the Gulf of Mexico oil spill, charged Tuesday that a federal agency is punishing scientists whose findings disagree with government figures.

Ian MacDonald, an oceanographer with Florida State University, who more than two weeks ago said the oil spill was likely five times as large as the 5,000 barrel-a-day estimate from the National Oceanic Atmospheric and Administration, said the agency is attacking scientists who challenged government estimates, while itself doing little to glean new information about the spill size.

“The scientific community in the Gulf of Mexico is fairly small ... and we've been very dedicated for a long time and not only is nobody listening to us in this, but it seems like they really want us to shut up,” MacDonald said. “It's very, very punitive and anybody who is doing this is getting attacked by NOAA.”

In addition, Coast Guard and BP officials threatened CBS reporters with arrest for filming oil sludge on a Louisiana Beach.

BP is also using dispersants to hide the extent of the oil spill. Specifically, as many commentators note, the dispersants cause much of the oil to sink, so that it appears that the spill isn't that big. But the dispersants are not only highly toxic, but will also probably make the damage from the oil itself even worse.

Moreover, just as the cover-up about the severity of the financial crisis has allowed Larry Summers, Tim Geithner, Ben Bernanke and most of Congress to kill real financial reform, BP and the government's drastic underplaying of the size of the spill has allowed BP to skate by without taking emergency actions, such as bringing in booms on an emergency basis, or to undertake more pro-active and creative responses.

And just as nothing has changed going forward with regard to the economy since the 2008 meltdown, nothing has changed with regard to offshore drilling.

For example, since the Deepwater Horizon oil drilling rig exploded on April 20th, the Obama administration has granted oil and gas companies at least 27 exemptions from doing in-depth environmental studies of oil exploration and production in the Gulf of Mexico. And a whistleblower who survived the Gulf oil explosion claims in a lawsuit filed today that BP's operations at another oil platform risk another catastrophic accident that could "dwarf" the Gulf oil spill, partly because BP never even reviewed critical engineering designs for the operation.

Indeed, the industry and government spokespeople have used the exact same word as each crisis - financial and environmental - unfolded. They said the problem was "contained".

In both cases, we the people are left holding the bag because the giant companies and their campaign-contribution-buddies in DC are trying to sweep the severity of the problem under the rug, to manage the crisis as p.r. campaigns to protect those who let it happen ... instead of actually taking steps necessary to solve the problems, and to make sure they won't happen again.


  1. I see that CBS News reports that only three senators showed up at a hearing to question BPs president, McKay, yesterday and that the only notable thing about the hearing was the praise lavished on him by "Israel First" Joe Leiberman. And you wonder why some have called for the boycott of elections and the use of the general strike and mass demonstrations to confront the regime.

    Andrei Vyshinsky

  2. That ass-wipe Kudlow was again spouting off on CNBC that criminal investigations into Wall Street fraud was an attack on Wall Street and an attack on investors.

    Using similar illogic, an investigation into the Gulf Oil Spill is an attack on Big Oil and an attack on automobile drivers.

    And investigations of E. Coli tainted food is an attack on the food industry and an attack on food consumers.

    Kudlow - what a buffoon! CNBC - please someone take this piece of fetid slime off the air already.

  3. So much nonsense is talked about oil spill response and this is an example of retailing other peoples comments without first checking what. Which "Top Expert" says that booms are only for window dressing. If that is the case, how is it that many thousands of gallons of oil have been recovered from the sea? I agree that once the oil has spread, the success of booms at containment and recovery at sea will be limited, but close to the spill source they can be very effective. They can also be effective in protecting sensitive areas. However, there and in the open sea, they can be overcome by wind driven waves .

    Now lets look at dispersant. Probably more ill informed nonsense is talked about this than any other subject in spill response. The purpose of dispersant is not to hide the oil, but to break it into billions of tiny droplets that are too small to resurface, but remain suspended in the top 3 metres of the sea. It does not sink to the bottom. In the open ocean this will rapidly dilute down to background levels. The tiny droplets cause a massive increase in total surface area and the oil then becomes more accessible to the oil eating bacteria present in seawater, breaking down to carbon dioxide and water.

    Now toxicity. No one will dispute that there is a toxicity issue. However, dispersant testing has two principal criteria. Firstly the dispersant must be no more toxic than the oil it is treating and the dispersed oil mixture must be no more toxic than the original oil. This is tested in the laboratory against common marine animals, such as shrimp before approval for use is given.

    The billions of small droplets do release the oil toxicity rapidly after the application of dispersant and so its use if forbidden in shallow water and where the main threat is to marine creatures in the shallow areas such as crab and shrimp. But in deeper water with plenty of mixing this toxicity rapidly disperses. If the main threat is to birds, then dispersant also is useful, as the oil is below the surface and the surfactants in the dispersant inhibit the oil from sticking to the birds feathers.

    So many of the vociferous critics have no idea what they are talking about and are just riding a wave of emotion and very understandable and justifiable public anger.

    I am not commenting on why this incident happened or maybe should not have happened, but only on the spill response, because I am also a "top expert" with over 25 years experience.

  4. Didn't the Soviet Union behave the same way until their entire system came apart and collapsed? They were highly centralized and isolated, and thus, the central government became disconnected from important bases of support and from the political functions that allowed their system to exist.

    Bob Spencer

  5. "Now toxicity. No one will dispute that there is a toxicity issue. However, dispersant testing has two principal criteria. Firstly the dispersant must be no more toxic than the oil it is treating and the dispersed oil mixture must be no more toxic than the original oil. This is tested in the laboratory against common marine animals, such as shrimp before approval for use is given."

    Such a forcefully given assertion should not go un-respected for its zeal, nor un-criticized for what has clearly been over-looked.

    The assumption of this post (#3) is that gauging scientifically the toxicity of dispersants in our infinitely complex environment IS NOT an impossible task, -when gauging the impact of dispersant use entirely CLEARLY IS AN IMPOSSIBLE TASK.

    The key concept here, and the crux of the issue at hand is -how to handle what is clearly -infinitely complex- the ecosystem of the Gulf.

    These are GROSS APPROXIMATIONS made by these scientists who would have us all think they are coming to the rescue, that THEY are the good guys, -almost as if sent by GOD and the common catechism and divinity of science.

    I am skeptical.

    It is the common catechism and the very divinity of science that has unleashed upon a gullible humanity -so many of our modern day perils and pitfalls. It all seems more something to be overcome, to me.

    Scientific approximations are NOT -and never should be- the sort of approximations we would allow to hazard our children -by these scientists or anyone other scientists.

    And yet, this is exactly what is being described by this scientific process of putting in place -supposed best practices-.

    The -best practice- is perhaps not to do it, and to never trust the scientists again -period.

    Matters ARE being made worse with the disperant approach. There is more of a problem, which is being more widely dispersed.

    These dispersants ARE being released into an infinitely complex marine environment, on the advice of these scientists -who call themselves "expert" as Robin has above.

    These dispersants are being used to mask the problem, which remains originally as a problem given to us by OTHER marine and oil scientists.

    The whole problem perhaps can be best viewed as a moral problem.

    These scientists, whether they are the scientists who said they could drill oil in the Gulf without this spill-problem arising, or the scientists that now are saying dispersant-use is now unfortunately justified and the best practice available; -THESE SCIENTISTS- have claimed a super-natural moral license.

    They are not GODS. Robin is seeking, even demanding, your approval.

    I refuse to give it.

    They are right now, and they continue again, ALL OF THEM, to immorally gamble with the future.

    Their wager is an impossibly risky one.

    They are wagering they can comprehend well enough to divine some future result, and in fact ALL FUTURE RESULTS THAT ARISE FROM DISPSERSANT USE, as they tinker and experiment with an infinitely complex reality that has defeated THESE VERY SAME SCIENTISTS on every previous occasion in which they have tried to beat the odds.

    In other words, folks, SCIENTISTS ARE LITTLE MORE THAN BOASTFUL LIARS. They are good liars. But -they are lying just the same.

    They said, this spill -would not- happen.

    And now Robin is here saying, the end result is going to be better for having dumped dispersants into the Gulf of Mexico.

    I somehow doubt it.

  6. Mr Perry,
    How much is BP paying you to comment on blogs? Is this part of your consulting package?

  7. BP and Obama are lying. To add further insult they suggest that the American public is so stupid that we can not estimate the flow of oil and are helpless in stopping it. Of course, scientist and engineers need to see video of the TOTAL damage before we can do that! How about “Transparency Now” by releasing All of the video of the leaking wellhead, preventer and pipe string. TODAY!
    We need a STOP THE Oil FLOW TASK FORCE today that is independent of BP command to stop the flow of oil tomorrow. This ecological and economic genocide should be responded to as a terrorist attack against the American people and our Democracy.

  8. Part of the PR campaign is to give us cheap gasoline for the summer. CBSNews just reported that little "gift" to the American people, citing problems in Europe as the reason. Could that actually be the deal made in exchange for letting BP cover up the visual impact of this disaster (and, probably causing a worse ACTUAL disaster) After all, a picture is worth a thousand words, and we have had little of either.

    Oil in the Gulf is then out of sight and out of mind in a sound bite world and they can contest the dead wildlife as not oil related. In the meantime, Americans get to spend the summer thinking that the gas guzzler party will never end and chant "drill, baby drill" along with Sara Palin.

    And, with the ripple effect of cheap fuel, the government gets to say that there is no inflation, And, that there are no inflationary ramifications from the FED printing another bunch of dollars. Summer is short, but they may figure that it could carry them through the election cycle. I guarantee that it won't carry "we, the people" beyond that.

    We should all take a moment and ponder that old saying,"don't take any wooden nickels..."

  9. It is interesting to note that the Obama campaign in 2008 recieved more political contribution from BP than they have given to any other campaign in over 20 years. It is also interesting to note that his administration simply waived the environmental process for this BP rig, very shortly after taking office in 2009.

    I understand that environmental process frequently take way too long and they need to be streamlined, but they have their place. Why would they simply waive the deal?

    One of the major lesons we should take from this is to ask why we are making oil explorers drill so far out in the first place. There are tens of millions of proven reserves much closer inland in shallower waters, where the drilling is FAR less of a hazardous process, but we as a nation have blocked off the ability of companies to extract that oil. Why?

    Forcing companies to drill in such deep water is inherently more hazardous than in shallower areas. Let us get serious about energy independence and unlock the proven reserves in the safer waters. The problem with "foreign oil" as they say is the word "foreign" not "oil".

    Even Patrick Moore, co-founder of Greenpeace (he left the organization years ago after it became less about the environment and more about leftism) who is one of the pre-eminent thinkers on ecology today is on board with it.

    The worst possible scenario from this is for people who dont understand why companies are having to drill so far out in the first place while our proven reserves lie unused in safer waters to try to use this accident as some kind of justification to further commit energy suicide nationally by restricting oil extraction domstically even further than it is already.

    My two cents.

  10. Spill Projection Maps:

  11. If the hurricane katrina response haunted George W Bush for years then this will haunt obama and his cronies forever. What a botched job they are doing! This cover up of the spill is appalling. I bet BP contributed funds to the DNC or obama's campaign.

  12. Well said Perry...especially,

    "So many of the vociferous critics have no idea what they are talking about and are just riding a wave of emotion and very understandable and justifiable public anger."

    Seems like many spectators are playing "Name that Conspiracy".

  13. I am no rocket scientist but we can go into space...why can't this pipe be compressed so tightly together that the leak would be minimized to a much smaller amount than is what is gushing at the present time? This would give more time to drill relief wells or get someone that can come up with an answer to cap this thing. Could it be that BP doesn't want it capped? Are they afraid that it might be impossible to reopen it and have to drill for it again? This is getting to such a serious amount now that maybe the simple solution maybe not what BP wants. What would Britain do if it were gushing off their shores? This is just my two cents too........


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