As The Spill Expands, So Does Presidential Power

As the Spill Expands, So Does Presidential Power

The other day, White House press secretary Robert Gibbs was asked what will happen if the people running BP decline to go along with everything the administration demands of it. "The president," he replied with chilly menace, "has the legal authority to compel them to do so, and if they don't, he will."

As a matter of strict truth, Barack Obama may not have all the legal authority he would need. But punctilious adherence to the law is rarely the hallmark of American presidents.

When the head of the executive branch makes his desires known to a private corporation, the company defies him at its peril. Given the vast centralization of power in the Oval Office, Obama wields enough weapons to make BP come to heel or wish it had.

Lately, the administration seems more focused on meting out punishment than solving concrete problems in a measured way. Interior Secretary Ken Salazar boasted of his intention to "keep our boot on their neck," and Obama resolved to find out "whose ass to kick."

A villain as hated—and justifiably hated—as BP creates a temptation to indulge in excess, and Obama is not inclined to resist.

First there was the announcement that the Justice Department is considering criminal charges. It's entirely possible that in the fullness of time, evidence will emerge to support prosecution. But as a first resort, it discourages BP from working closely with the government to cope with the current emergency.

"Criminal prosecution kills cooperation," laments University of Chicago law professor Richard Epstein. "How do you give information to someone who will use it to indict you?" You don't. But the president seems to think catering to populist outrage is more important right now.

Members of his party also demand that the oil company stiff its shareholders by canceling its dividend, while turning over billions to the feds to distribute as they please. Not many Democrats seem to worry about BP's obligations to its investors—which, in an economy based on property rights, take priority over the whims of politicians. But that assumes we still respect property rights.

On Wednesday, Obama forced BP to set up a $20 billion fund to compensate everyone who suffers economic harm from the spill. But it's a pernicious solution to a fictitious problem.

The idea is that if BP doesn't conserve its cash, it will run out later and leave injured claimants high and dry. Not likely. Estimates of the total costs of the spill range up to $70 billion, which sounds large only if you are not a multinational petroleum company.

The oil giant had profits last year of nearly $17 billion, reports MSNBC, and its untapped reserves are worth $1.35 trillion. The quarterly dividend is just $2.6 billion. And BP won't have to bear the whole burden, since its partners on the Deepwater Horizon rig, Transocean and Halliburton, will probably be on the hook for a large portion of the damages.

About the only thing that could keep BP from paying its share is a criminal conviction, which would wreck its ability to do business. So the administration purports to worry about BP's bankruptcy while entertaining actions that would probably lead to bankruptcy.

Even if the escrow fund were justified, turning it over to the administration isn't. Instead of trying to limit payouts to the truly deserving, the people in charge would have every incentive to err on the side of generosity to anyone who claims to have been hurt.

In his Tuesday address to the nation, Obama made a point of saying that "this fund will not be controlled by BP." He didn't say how he will assure that the administrators don't fall into a jolly impersonation of Santa Claus.

David Pettit of the Natural Resources Defense Council, which is not exactly an apologist for polluters, says the pitch from Senate Democrats to BP is: "We'd like you to escrow $20 billion, with a 'b', and we'll take over claims processing. So we'll write the checks, and it will be your money that backs them up, and you're out of the loop. If I were BP, I'd have some problems with that."

Bypass longstanding legal procedures that protect everyone in favor of granting unchecked discretion to the president? BP is not the only one that should have some problems with that.

I do find it a bit insidious that in the end, the government will end up getting the credit for claims payouts - with a private corporation's money. Additionally, the U.S. government has been notoriously hoodwinked by fraudsters, especially when there's "free" money being distributed (Hurricane Katrina is but one example).

Additionally, Obama is hardly displaying leadership, rather, the behavior of a schoolyard bully: "I'm gonna KICK your BUTT", and then proceeds to take BP's "lunch money". I'd rather see him command some supertankers down there and get this stuff cleaned up rather than employ his usual tactic of redistributing wealth!. Socialism isn't going to clean this mess up but some leadership might.

Youll get your "leadership" when they declare marshal law....
The longer this goes on the greater the likelyhood of it becomming nessessary.
It certainly apears as if the fed goverment is content to let things escalate.

reply to post by traditionaldrummer


The President also may use this as I posted in another thread:

Misc. Information :

"Federal law allows agencies to suspend or bar from government contracts companies that engage in fraudulent, reckless or criminal conduct. The sanctions can be applied to a single facility or an entire corporation. Government agencies have the power to forbid a company to collect any benefit from the federal government in the forms of contracts, land leases, drilling rights, or loans.

The most serious, sweeping kind of suspension is called "discretionary debarment" and it is applied to an entire company. If this were imposed on BP, it would cancel not only the company's contracts to sell fuel to the military but prohibit BP from leasing or renewing drilling leases on federal land. In the worst case, it could also lead to the cancellation of BP's existing federal leases, worth billions of dollars."

Source: gcaptain.com...

Originally posted by manta78
The President also may use this as I posted in another thread:

Misc. Information :

"Federal law allows agencies to suspend or bar from government contracts companies that engage in fraudulent, reckless or criminal conduct.

Except the government just entered a contract with BP concerning their "escrow account".

I have a feeling this is another Chrysler-like ploy. Remember, in that deal Obama determined that unions get paid out assets before secured lenders (in violation of law). Since government contracts override all other obligations, should BP go belly up, government will theoretically be able to acquire their assets before the BP shareholders would.

reply to post by traditionaldrummer


True. But then it would fall under the category of a "freeze" of existing monies in the account, and then a cancellation of all contracts. (in a worse case scenario)

[edit on 17-6-2010 by manta78]

Originally posted by manta78
reply to post by traditionaldrummer

 

True. But then it would fall under the category of a "freeze" of existing monies in the account, and then a cancellation of all contracts. (in a worse case scenario)

[edit on 17-6-2010 by manta78]

I doubt that as a possibility considering the revenue BP generates for America. I have the sneaking suspicion Obama is getting his foot in the door for BP asset seizure if, and possibly when, this disaster bankrupts them.

well it sure doesn't seem as if he's using his power to...actually do anything? i finally found the time to watch his speech the other night...what a weird experience that was. no real points. weird religious stuff. i left baffled to be honest.

and i'm not even sure what it is i want him to BE doing...protecting the people who live in the affected area, and comtaining and mitigating the damage to our waters and shores, and keeping an eye out for our financial burden as taxpayers are three things that comes immediately to mind, but aside from that, what?

what can he do that he hasn't already done? call in people who actually know things? accept help from other nations who have faced the same? i mean there seems to me to be a real lack of activity surrounding the rig but maybe i'm missing something.

Originally posted by ~Lucidity
what can he do that he hasn't already done?

Well, he could lift the Jones Act for one. He could call in and pay for supertankers and even private area boats for cleanup. He could lift the red tape which has proven to be problematic during this disaster. There are many proactive steps that could still be taken. But the unfortunate stance of "I'm gonna kick your --- and take your money" doesn't serve anybody's needs but his own.

I was wondering if the President has the legal right to force any private company to do this. My guess was no, but no one cares anymore. BP is bad and the government is good, right?

Everybody is all gung-ho about it when it helps them, but it could be setting a dangerous precedent.

reply to post by traditionaldrummer


This Jones Act? I rbink I'm missing something.' And yeah I agree about the part of allowing others to help with the cleanup. That's what I was alluding to when I said accepting help from others and that I was kinda stricken by the lack of activity in the area. I guess you're saying the Jones Act is partly responsible for that lack of effort?

As for the rest...I'm not sure it's for his own benefit unless by his own you mean the plutocracy's? His idealistic self found out very quickly just who is in charge of this country/world I imagine.

Originally posted by ~Lucidity
reply to post by traditionaldrummer

 

This Jones Act? I rbink I'm missing something.'

It's being widely reported that this act has caused major problems in the cleanup effort. And that nobody has asked for it to be lifted. I haven't done huge amounts of research into this area.

I'd like to see something other than an Obama money grab in this instance.