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

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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.

As ABC News notes,
the White House allowed BP to suppress video of the oil spill for 3
weeks; and a top oil spill expert says 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.

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.

 

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Tue, 05/18/2010 - 11:14 | 358100 doublethink
doublethink's picture

 

 

The only way all this crap will end is for the shit to hit the fan. And it will...

 

Richard Russell, the famous writer of the Dow Theory Letters, has a chilling line in today's note:

Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.

Read more: http://www.businessinsider.com/dow-theorist-richard-russell-sell-everything-liquid-you-wont-recognize-america-by-the-end-of-the-year-2010-5#ixzz0oIIZVFXf

 

 

 

Tue, 05/18/2010 - 11:32 | 358166 Gully Foyle
Gully Foyle's picture

doublethink

Shit gets propped up until after the 2012 election. The next guy, or maybe TPTB decide Barky stays, will batten down the hatches on the US. I'm leaning toward an authoritarian figure like  Bush taking office.

Here is the thing, bad shit will only happen to the rioting middle class and the poor hangers on who jump in because they can. You got money the POlice will be taken your back. A little kickback won't hurt there.

 

Tue, 05/18/2010 - 11:59 | 358234 Oh regional Indian
Oh regional Indian's picture

Gully, How about Schwarzenegger And Palin.

Yoicks!

They'll make him eligible. Someone put up something in the senate to make folks like him eligible, just prior to the last POTUS election cycle, as I recall.

If you can, check out:

goroadachi.com

Fascinating stuff and well worth the small subscription he asks for.

Tue, 05/18/2010 - 11:33 | 358164 RockyRacoon
RockyRacoon's picture

Just as for years I asked, cajoled, insisted, threatened, demanded,
that my subscribers buy gold, I am now insisting, demanding, begging
my subscribers to get OUT of stocks (including C and BYD, but not
including golds) and get into cash or gold (bullion if possible). If
the two Averages violate their May 7 lows, I see a major crash as the
outcome. Pul - leeze, get out of stocks now, and I don't give a damn
whether you have paper losses or paper profits!

...and if Richard Russell is wrong?  What can you lose?

Tue, 05/18/2010 - 11:34 | 358173 Gully Foyle
Gully Foyle's picture

Buy land or rental properties.

Both are relatively cheep if you have cash.

Tue, 05/18/2010 - 11:09 | 358090 WaterWings
WaterWings's picture

GW,

Excellent as usual. You are rounding out our needs here on ZH!

A comment yesterday on another post has some frightening details concerning the air quality in the region:

http://www.zerohedge.com/article/katla-earthquake-may-presage-next-volca...

Tue, 05/18/2010 - 22:52 | 358058 wyosteven
wyosteven's picture

 

Tue, 05/18/2010 - 10:54 | 358047 Ripped Chunk
Ripped Chunk's picture

x

Tue, 05/18/2010 - 10:53 | 358043 w a l k - a w a y
w a l k - a w a y's picture

forgot to mention this in previous post, and not allowed to edit.

from comments in the Oil Drum:

http://www.theoildrum.com/node/6464

Story circulating in New Orleans

With appropriate caveats:

    BP contracted Schlumberger (SLB) to run the Cement Bond Log (CBL) test that was the final test on the plug that was skipped. The people testifying have been very coy about mentioning this, and you'll see why.

    SLB is an extremely highly regarded (and incredibly expensive) service company. They place a high standard on safety and train their workers to shut down unsafe operations.

    SLB gets out to the Deepwater Horizon to run the CBL, and they find the well still kicking heavily, which it should not be that late in the operation. SLB orders the "company man" (BP's man on the scene that runs the operation) to dump kill fluid down the well and shut-in the well.

   The company man refuses. SLB in the very next sentence asks for a helo to take all SLB personel back to shore. The company man says there are no more helo's scheduled for the rest of the week (translation: you're here to do a job, now do it).

   SLB gets on the horn to shore, calls SLB's corporate HQ, and gets a helo flown out there at SLB's expense and takes all SLB personel to shore.

    6 hours later, the platform explodes.

    Pick your jaw up off the floor now. No CBL was run after the pressure tests because the contractor high-tailed it out of there. If this story is true, the company man (who survived) should go to jail for 11 counts of negligent homicide.

Tue, 05/18/2010 - 11:24 | 358142 Apostate
Apostate's picture

Indeed... terrorism through sheer incompetence. 

Tue, 05/18/2010 - 11:12 | 358097 WaterWings
WaterWings's picture

+1

Takes the wind out of my NK torpedo/suicide submarine theory. Dang it.

Tue, 05/18/2010 - 10:46 | 358023 Oh regional Indian
Oh regional Indian's picture

Something I believe very very strongly and an apt descriptor for why we are where we are today.

Six Sigma is commonly understood as far out in the realm of impossibility, lying at the trailing edge of the tail of the normal distribution.

At the center of said "normal" distribution curve lies average height, average rainfall, average this and normal that.

Look around us and it is clear to tell that we are in a new normal. What was a six sigma even 10 years ago is not so distant anymore. Take 2008 to now.

Most headline catching stuff would have been spread out over 3 decades in the past. Major bank failure, major financial crisis, major weather anomalies, major earthquakes (waaaay off on the scale), not one, but two, volcanic eruption, war here, war there,....... I"m sure you get the point.

The old six sigma is the new one sigma (one standard distribution).

What I'm trying to say is that the "world" at large cannot see because they are still living under the assumption set of the old normal.

And from this standpoint, we know, those with eyes that actually see, that the tipping point is upon us. When old and long held assumptions do not work any more you should understand that the rules of the game are about to change, probably suddenly, if you don't SEE, HEAR and In-durstand.

Tue, 05/18/2010 - 12:02 | 358246 Oh regional Indian
Oh regional Indian's picture

Errata!

Make that one standard deviation above!

Tue, 05/18/2010 - 11:36 | 358183 Gully Foyle
Gully Foyle's picture

Oh regional Indian

Singularity?

Ever read Accelerando?

Tue, 05/18/2010 - 11:53 | 358219 Oh regional Indian
Oh regional Indian's picture

Gully, yes very familiar with the singularity concept in multiple dimensions and not read the novel (looked it up on Wiki, interesting thesis),.

So.... exactly!

:-)

Tue, 05/18/2010 - 10:39 | 358004 Wyndtunnel
Wyndtunnel's picture

Why doesn't Oprah instigate the "50 million Unemployed" march for perp walks...

25 million in Washington and 25 million on Wall Street, on the same day... calling for "no stone unturned" criminal investigations and perp walks for the guilty in both industries...

Tue, 05/18/2010 - 11:42 | 358200 Gully Foyle
Gully Foyle's picture

Wyndtunnel

I couldn't find the long version which included Oprah.

 

http://www.abovetopsecret.com/forum/thread187248/pg1

February 5, 2003
Robert L. Johnson, alerted by the rumblings coming from the Cosby, Farrakhan, and Sharpton camps, decided to tune into this show to see what Chappelle had been doing that was getting so many black leaders rankled. After watching the show, Johnson reportedly thought to himself, "Bill, Al and Louis may be right — if this really blows up, it sets us up to be minstrels again." Just as Cosby and Farrakhan did, Johnson decided to get involved as well.

April 9, 2003
Louis Farrakhan, most likely under the direction of Cosby, sought out the opportunity to speak with Chappelle. Farrakhan, who had advised Chappelle on his conversion to Islam in 1998, visited Chappelle on location days after the episode aired. His concerns fall on deaf ears, as Chappelle was resistant to pressure to tone down the show's content.

April 20, 2003
With Chapelle's Show on hiatus before production for season two commences, Chappelle took some down time at his Ohio area farm. It was here that he received a strange package.

As told by Dave himself, at around noon, in the middle of an early season Cincinnati Reds game, there was a knock at his door. Chappelle was a bit concerned, as no one except his close family and friends were aware of where he was.

When he opened the door, all he found was a crudely wrapped package, with the inscription "For Chappelle" on it.

Inside the package was a voodoo-doll style replica of Chappelle dressed as Clayton Bigsby — the African American Klansman from his first show. The doll was riddled with safety pins, and had a noose tied sharply around his neck. Accompanying the doll was a message in a childlike scrawl that read, "what you're doing is hurting the African American community — it needs to stop."

 

http://www.nypost.com/p/pagesix/item_sj0LG74vyfHqAfV55ig68J;jsessionid=1...

THE secret is out on a clandestine billionaires' summit held in Manhattan earlier this month, when some of the wealthiest Americans met behind closed doors to plot strategies for weathering the economic downturn and coordinating their global philanthropic efforts.

Bill Gates and Warren Buffett organized the hush-hush huddle held in a Rockefeller University conference room on the Upper East Side with Mayor Bloomberg, George Soros, Oprah Winfrey, Eli Broad, Ted Turner, David Rockefeller Sr. and David Rockefeller Jr., among others.

Topic No. 1 during the May 5 conclave was which of the moguls' favorite causes -- such as disease control or government reform -- needed extra help during the downturn. They also sought ways to encourage the common man to keep making small-change donations, an aide to one participant said. IrishCentral.com, which first reported on the powwow, said Gates and Buffett also solicited views on how the group should respond to the global economic climate.

 

Tue, 05/18/2010 - 13:34 | 358501 Wyndtunnel
Wyndtunnel's picture

Thanks for the Bitch Slap!  OF COURSE Oprah is one of THEM...of course... How could I be so blind?

Tue, 05/18/2010 - 11:26 | 358147 RockyRacoon
RockyRacoon's picture

That would divide her audience and dilute the earnings of her various and sordid empires.

Tue, 05/18/2010 - 10:25 | 357980 w a l k - a w a y
w a l k - a w a y's picture

also related:

http://crooksandliars.com/susie-madrak/wsj-deepwater-horizon-crew-argued...

 

About 11 hours before the Deepwater Horizon exploded, a disagreement took place between the top manager for oil giant BP PLC on the drilling rig and his counterpart for the rig's owner, Transocean Ltd., concerning the final steps in shutting down the nearly completed well, according to a worker's sworn statement.

 

Michael Williams, a Transocean employee who was chief electronics technician on the rig, said there was "confusion" between those high-ranking officials in an 11 a.m. meeting on the day of the rig blast, according to a sworn statement from Mr. Williams reviewed by The Wall Street Journal. Mr. Williams himself attended the meeting.

 

The confusion over the drilling plan in the final hours leading up to the explosion could be key to understanding the causes of the blowout and ultimately who was responsible.


What is known from drilling records and congressional testimony is that after the morning meeting, the crew began preparations to remove from the drill pipe heavy drilling "mud" that provides pressure to keep down any gas, and to replace this mud with lighter seawater.


Ultimately, the crew removed the mud before setting a final 300-foot cement plug that is typically poured as a last safeguard to prevent combustible gas from rising to the surface. Indeed, they never got the opportunity to set the plug.


[...] Typically well owner BP would have final say, since it was paying roughly $1 million a day to lease the rig and pay for services from 12 companies that had people on the rig.


What is clear is that workers soon began displacing the mud. Later that afternoon a pressure test provided ambiguous readings, a possible sign of gas seeping in, according to what Rep. Henry Waxman says a BP executive told House investigators. Eventually, in the evening, after further tests, BP made a decision to carry forth in removing more drilling mud. The rig blew about 10 p.m.

 

 

Tue, 05/18/2010 - 10:48 | 358031 hangemhigh
hangemhigh's picture

Yo, Walk:

this may or may not be related but i read somewhere, and i cannot remember or cite the source, that part of the problem occurred with the actual depth of the well. 

according to the article, as i remember it, BP's 'permit' was for a drilling depth of 18K feet; the actual well went to 25K feet.  the difference in depth would affect/determine the size/weight of the plug to be installed.

could have had something to do with the 'argument' ????

again, this is conjecture on my part as i cannot cite sources......................

 

Tue, 05/18/2010 - 10:16 | 357968 lins216
lins216's picture

Did anyone catch the post on Naked Cap?  Yves asked what the libertarian response to this mess would be.

Tue, 05/18/2010 - 08:59 | 357856 litoralkey
litoralkey's picture

Ilargi at the AutomaticEarth blog has similar line of thought today, as she has in the past quoted ZH and GW with attribution, I will quote her here, I also highly recommend her blog be added to your daily readings list...

http://theautomaticearth.blogspot.com/2010/05/may-17-2010-katie-bar-door...

Excerpt:

Ilargi: Some things are more equal than others. Always have been. Just maybe not always the same things. Which makes me think of Marie-Antoinette fleeing the cake-eaters in her stagecoach. It also makes me think of this:
If this well keeps leaking for three or four months, it's Katie bar the door
[Stuart] Smith, [a lawyer in New Orleans, who's suing BP] on behalf of fishermen, the Louisiana Environmental Action Network and four large hotels, alleges that BP and others were "grossly negligent" in allowing the blowout to occur. [..] Because the spill has been lingering offshore, the plaintiffs who can claim damages so far are mostly out-of-work fishermen and tourist resorts that are getting cancellations. As rich as BP is, "if this well keeps leaking for three or four months, it's Katie bar the door," Smith said. "I don't think they have enough money."

BP has been shown off late to be a crummy crappy sort of organization, which -with the full faith and credit of the UK and US government- has cut all corners it could find, and then made some more to cut. And now BP has been exposed, and people like Mr. Smith are dead-set to make BP pay, while the company itself is frantically trying to mitigaste its losses through lawyers it couldn't even really afford anymore if it were to pay full damages to all parties.

Which in turn makes my warped brain wonder what the difference is between BP and, say, Goldman Sachs. Environmental disaster, financial disaster, what’s the difference? Is it just that the latter is harder to prove? I don’t know, for one thing you’d think the reward, hence the incentive, would be greater too. Yes, BP has destroyed the livelihood of fishermen and "hospitality workers". So they should be sued for that. But the Wall Street cabal has destroyed the entire economies of entire countries, as well as countless building blocks that formed the foundation of these economies. Towns, pension funds, you name it. No matter how bad Deepwater Horizon will turn out to be, the Vampire Squid disaster will be many times worse, even if it takes longer for it to trickle down to people's conscious brains.

Tue, 05/18/2010 - 10:18 | 357937 hangemhigh
hangemhigh's picture

there are a couple of trifecta's in play here.  the first is the sequence from 9/11 to september 2008 to katrina (2005), and now this oil spill.  in all of those instances, massive, bloated, malfeasant, publically funded political infrastructures proved to be simultaneously inefficient, corrupt and incompetent.

the second trifecta is perhaps the most threatening.  i refer to the sequence of earthquakes, volcanoes and now this oil spill that have occurred this spring.

people whose opinions that i trust, people in positions to know, have told me that vast areas of the gulf eco system are now essentially 'dead zones'.  the silence from the MSM on that issue is deafening as is any assessment of this series of disasters on the people of the gulf coast.

GW is right.  the first reaction of everyone involved on an official level was, not to correctly identify the cause, magnitude and scale of what occurred, but instead, to evade and avoid disclosure and responsibility.

i am  old enough to rememebr when things actually worked and there was some credibility to the system.

those days are long gone. while BP tells us about the billions they've spent to make things right, check out an alternative, 'country boy' solution  in the URL below.

http://northwestflorida.com/?q=node/25

Tue, 05/18/2010 - 08:45 | 357834 Miramanee
Miramanee's picture

Agreed w/above comments. GW's blog is excellent.

I've been thinking a lot these days about the idea of TERM LIMITS for our "leaders" in D.C. I actually have a different thought.

Let's examine, for a moment, what draws people to seek public office (federal). These men and women---many of whom may in fact be good people---are probably a tad low in the self-esteem category. They gain their esteem through the approbation of others. They are very charismatic people. They are able to engage people by the sheer power of their personalities. BUT, they are ALSO fairly vacant and lost without the attention that they garner from their vocation.

SO...off to Washington they go, and all of a sudden not only are they constantly in the public eye, but now they find that they are in demand. They are "wined and dined" by the rich-and famous...and they LOVE it! Remember, these are people of low self-esteem, and they only feel whole and alive when they are being pampered and coddled by OTHERS.

I have heard many stories about John McCain (from people who have vacationed w/him) and how he is SO self-centered, that at breakfasts at hotels he actually reads poetry and stories to the people in the restaurant---and expects them to applaud and dote on him!

ANYWAY...these men and women on Capitol Hill are damaged goods. They are empty inside, and being in the spotlight, and being catered to by lobbyists and the rich-and-famous makes them feel alive and important.

I say, screw term limits. The answer to our woes in Washington lies not in limiting the TIME of service of legislators, but instead lies in changing the RULES of how service by lawmakers is carried out. Here are my thoughts:

1. Cut pay to $50K/year
2. During their terms of office, sequester Congressmen and women from ANY contact with lobbyists and other influential individuals.
3. Make paid public-speaking engagements by legislators illegal and punishable by immediate loss of office, or worse.

In other words, do not allow public service to fill a need for the narcissistic needs of the character flawed men and women of this nation. Make public service an onerous, crappy job that no one in their right-mind would want.
4.

Tue, 05/18/2010 - 11:30 | 358155 WaterWings
WaterWings's picture

Very interesting. Obama, one of the most secretive president's in our history in regards to the press, makes an ironic remark:

http://www.cbsnews.com/8301-503544_162-20005146-503544.html?tag=contentM...

Here is the video of O signing the "Freedom of Press Act" (LOL):

http://www.youtube.com/watch?v=tyVPhZ3DrcY

Tue, 05/18/2010 - 08:26 | 357803 Kina
Kina's picture

Sadly nobody expects Govt, regulator, Whitehouse and Big business to behave in an honest way.

 

Nobody is surprised to what depths the system will plumb. Another sign of end of empire.

Tue, 05/18/2010 - 07:59 | 357780 Sudden Debt
Sudden Debt's picture

I also seems to me that governments are finding it easier and easier to spread lies and keep a lit on crucial information.

Way to go democrazy...

Tue, 05/18/2010 - 11:11 | 358093 whatsinaname
whatsinaname's picture

Fish fried in light sweet crude sprinkled with some light grey ash.

thats all we will soon get to eat.

Tue, 05/18/2010 - 07:57 | 357778 JohnKing
JohnKing's picture

Both crises were also caused by a "bubble".

Tue, 05/18/2010 - 08:51 | 357845 Marvin_M
Marvin_M's picture

+10 Mr. King, a good one indeed!

Tue, 05/18/2010 - 07:53 | 357776 jt
jt's picture

There is a saying "In war, truth is the first casualty."  It appears that for the present economic/political machine SOP is:  Truth is always the casualty. Thank you GW for your always thoughtful input.

Tue, 05/18/2010 - 07:58 | 357779 William Wallace
William Wallace's picture

There is also a saying, "If all you have is a hammer, every problem looks like a nail.

Our government has only one skill:  lying.

They apply it to every problem, but deception is not really that great of a super-power.  And if you use it all the time, people get really, really sick of it.

 

 

Tue, 05/18/2010 - 10:59 | 358061 Ripped Chunk
Ripped Chunk's picture

+1000 Thanks Braveheart.

You can feel it in the air. People are really sick of the lying.

November 2010 incumbent bloodbath. Make it happen.

Tue, 05/18/2010 - 10:07 | 357951 macfly
macfly's picture

Indeed, since 9/11 all we have had is lies and more lies. 

Isn't it time for the second American Revolution?

Tue, 05/18/2010 - 07:46 | 357766 umop episdn
umop episdn's picture

Speakin' truth to power...thank you very much!

Tue, 05/18/2010 - 06:37 | 357739 Ruth
Ruth's picture

Thank You George..for always tellin it like it is!

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