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Tag Archives: Rolling Stone

Peeling Back the Layers of the Deepwater Horizon Onion

10 Thursday Jun 2010

Posted by Craig in BP, Deepwater Horizon, Energy, Environment, Gulf Oil Spill, Obama administration, oil exploration, Politics

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Atlantis, BP, Deepwater Horizon, Gulf of Mexico, Ken Salazar, MMS, Obama administration, Rolling Stone, Texas City explosion, The Spill The Scandal and the President, Tim Dickinson

Being a long-time fan of Seinfeld, I kind of relate things and events to memorable episodes and lines from that show. As more light continues to be shed on the ongoing  Deepwater Horizon catastrophe in Gulf of Mexico, it brings to mind the episode where George leaves the running tape recorder inside the brief case after he exits the board room. The quote is, “this thing is like an onion, the more layers you peel back the more it stinks.”

A lengthy piece  in Rolling Stone by Tim Dickinson entitled, “The Spill, The Scandal, and the President” peels back several layers of this onion. And it stinks to high heaven. It’s the kind of investigative journalism we used to get from the Washington Post during the Watergate era but is rarely seen in major news sources any more. Here are a few excerpts, but please read the entire article:

“…the disaster in the Gulf was preceded by ample warnings – yet the [Obama] administration had ignored them. Instead of cracking down on MMS, as he had vowed to do even before taking office, Obama left in place many of the top officials who oversaw the agency’s culture of corruption. He permitted it to rubber-stamp dangerous drilling operations by BP – a firm with the worst safety record of any oil company – with virtually no environmental safeguards, using industry-friendly regulations drafted during the Bush years.

[…]

Most troubling of all, the government has allowed BP to continue deep-sea production at its Atlantis rig – one of the world’s largest oil platforms. Capable of drawing 200,000 barrels a day from the seafloor, Atlantis is located only 150 miles off the coast of Louisiana, in waters nearly 2,000 feet deeper than BP drilled at Deepwater Horizon.

According to congressional documents, the platform lacks required engineering certification for as much as 90 percent of its subsea components – a flaw that internal BP documents reveal could lead to “catastrophic” errors. In a May 19th letter to [Interior Secretary Ken] Salazar, 26 congressmen called for the rig to be shut down immediately. “We are very concerned,” they wrote, “that the tragedy at Deepwater Horizon could foreshadow an accident at BP Atlantis.”

The administration’s response to the looming threat? According to an e-mail to a congressional aide from a staff member at MMS, the agency has had “zero contact” with Atlantis about its safety risks since the Deepwater rig went down.

[…]

The tale of the Deepwater Horizon disaster is, at its core, the tale of two blowout preventers: one mechanical, one regulatory. The regulatory blowout preventer failed long before BP ever started to drill – precisely because Salazar kept in place the crooked environmental guidelines the Bush administration implemented to favor the oil industry.

[…]

Nowhere was the absurdity of the policy more evident than in the application that BP submitted for its Deepwater Horizon well only two months after Obama took office. BP claims that a spill is “unlikely” and states that it anticipates “no adverse impacts” to endangered wildlife or fisheries. Should a spill occur, it says, “no significant adverse impacts are expected” for the region’s beaches, wetlands and coastal nesting birds. The company, noting that such elements are “not required” as part of the application, contains no scenario for a potential blowout, and no site-specific plan to respond to a spill.

Instead, it cites an Oil Spill Response Plan that it had prepared for the entire Gulf region. Among the sensitive species BP anticipates protecting in the semitropical Gulf? “Walruses” and other cold-water mammals, including sea otters and sea lions. The mistake appears to be the result of a sloppy cut-and-paste job from BP’s drilling plans for the Arctic.

Even worse: Among the “primary equipment providers” for “rapid deployment of spill response resources,” BP inexplicably provides the Web address of a Japanese home-shopping network. Such glaring errors expose the 582-page response “plan” as nothing more than a paperwork exercise. “It was clear that nobody read it,” says Ruch, who represents government scientists.

“This response plan is not worth the paper it is written on,” said Rick Steiner, a retired professor of marine science at the University of Alaska who helped lead the scientific response to the Valdez disaster. “Incredibly, this voluminous document never once discusses how to stop a deepwater blowout.”

The article goes on to expose the incompetence at every level of the government bureaucracy and the money-saving, corner-cutting practices of BP which put profits over people, like this about the Texas City explosion (emphasis added) :

“In 2005, 15 workers were killed and 170 injured after a tower filled with gasoline exploded at a BP refinery in Texas. Investigators found that the company had flouted its own safety procedures and illegally shut off a warning system before the blast.

An internal cost-benefit analysis conducted by BP – explicitly based on the children’s tale The Three Little Pigs – revealed that the oil giant had considered making buildings at the refinery blast-resistant to protect its workers (the pigs) from an explosion (the wolf). BP knew lives were on the line: “If the wolf blows down the house, the piggy is gobbled.” But the company determined it would be cheaper to simply pay off the families of dead pigs.”

Despicable. I need a shower.

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Quote of the Day: Taibbi’s Goldman–Roethlisberger Analogy

06 Thursday May 2010

Posted by Craig in bailout, economy, Financial Crisis, Goldman Sachs, Politics, too big to fail, Wall Street

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Ben Roethlisberger, Goldman Sachs, Matt Taibbi, Rolling Stone, The Fed vs. Goldman

From Matt Taibbi’s latest at Rolling Stone, The Feds vs. Goldman:

“The bank will try and – who knows – might even succeed in defending itself in a court of law against these charges. But in the court of public opinion it was doomed the instant the SEC decided to put this ghastly black comedy of a fraud case on the street for everyone to see. Just as Pittsburgh Steeler Ben Roethlisberger will never recover from the image of him (allegedly) waving his dick at a scared 20-year-old coed in the darkened hallway of a Georgia nightclub, Goldman may never bounce back from the SEC’s brutal blow-by-blow account of how the bank conspired with a hedge-fund magnate to bend one gullible business partner after another over the edge of the subprime housing market.

Priceless.

The Case of JPMorgan and Jefferson County, Alabama

02 Friday Apr 2010

Posted by Craig in bailout, economy, Financial Crisis, financial reform, financial regulation, Goldman Sachs, Politics, Wall Street

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Alabama, Jamie Dimon, Jefferson County, JPMorgan Chase, Looting Main Street, Matt Taibbi, Rolling Stone

In a March 26 letter to shareholders Jamie Dimon, CEO of JPMorgan Chase, wrote:

“The crisis of the past couple of years has had far-reaching consequences, among them the declining public image of banks and bankers…[W]hen we vilify whole industries…we are denigrating ourselves and much of what made this country successful…We also should refrain from indiscriminate blame of any whole group of people…While JPMorgan Chase certainly made its share of mistakes in this tumultuous time, our firm always has remained focused on the fundamentals of banking and the part we can play to support our clients and communities.”

One example of JPMorgan’s “support” for their “clients and communities” and a reason for the “declining public image of banks and bankers” can be found in another in a long line of excellent pieces by Matt Taibbi at Rolling Stone, entitled “Looting Main Street: How the nation’s biggest banks are ripping off American cities with the same predatory deals that brought down Greece”

The article is lengthy, but a must-read, in my opinion. It’s the story of bribery, corruption, and fraud in Jefferson County, Alabama. Briefly (or maybe not so briefly), it goes like this.

In the early 90’s the EPA sued the county in order to bring its antiquated sewer system into compliance with the Clean Water Act. In 1996 county commissioners decided to build the “Taj Mahal of sewage treatment plants” with cost estimates of $250 million. Taibbi:

“But in a wondrous demonstration of the possibilities of small-town graft and contract-padding, the price tag quickly swelled to more than $3 billion. County commissioners were literally pocketing wads of cash from builders and engineers and other contractors eager to get in on the project, while the county was forced to borrow obscene sums to pay for the rapidly spiraling costs.”

Originally the plan was to pay for the project by increasing sewer rates. But as costs continued to escalate county commissioners knew that sooner or later customers would revolt over the ever-increasing rates, so they started looking for “creative financing.” That’s music to the banksters ears and, true to form, they came riding to the rescue with their gobbledegook of variable rate refinancing and “swaps.”

Here’s where local JPMorgan rep Charles LeCroy meets crooked politician, with local “wheeler-dealer” Bill Blount as the middle man:

“LeCroy paid Blount millions of dollars, and Blount turned around and used the money to buy lavish gifts for his close friend Larry Langford, who at the time had just been elected president of the county commission…Langford then signed off on one after another of the deadly swap deals being pushed by LeCroy. Every time the county refinanced its sewer debt, JP Morgan made millions of dollars in fees.

Even more lucrative, each of the swap contracts contained clauses that mandated all sorts of penalties and payments in the event that something went wrong with the deal. In the mortgage business, this process is known as churning: You keep coming back over and over to refinance, and they keep “churning” you for more and more fees.”

But unbeknownst to LeCroy, Blount had a another suitor, Goldman Sachs. So:

“JP Morgan cut a separate deal with Goldman, paying the bank $3 million to [go away], with Blount taking a $300,000 cut of the side deal.”

The payoff for JPMorgan?:

“The deals wound up being the largest swap agreements in JP Morgan’s history. Making matters worse, the payoffs didn’t even wind up costing the bank a dime. As the SEC explained in a statement on the scam, JP Morgan “passed on the cost of the unlawful payments by charging the county higher interest rates on the swap transactions.”

In other words, not only did the bank bribe local politicians to take the [lousy] deal, they got local taxpayers to pay for the bribes. And because Jefferson County had no idea what kind of deal it was getting on the swaps, JP Morgan could basically charge whatever it wanted. According to an analysis of the swap deals commissioned by the county in 2007, taxpayers had been overcharged at least $93 million on the transactions.”

As happens  sooner or later with all Wall Street scams, the whole thing collapsed in early 2008. And as also happens with Wall Street scams, the banksters got the gold mine and the taxpayers of Jefferson County got the shaft.

But don’t think this is an isolated incident. Taibbi concludes:

“The destruction of Jefferson County reveals the basic battle plan of these modern barbarians, the way that banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens. These guys aren’t number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money.”

Any questions about that “declining public image” of banks and bankers, Mr. Dimon?

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