June, 2010

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Obama wants to create FreddieSpill, FDR would be proud

Wednesday, June 16th, 2010

In the fine FDR tradition of creating an extra-legal agency to “address” every problem, the Obama administration (and their many friends wanting high-paying, low stress jobs in Washington) now want BP to pay billions of dollars into an escrow account AND have disbursement of the funds from this account administered by a third party. Anyone want to guess what this third party will look like.

OK, I’m no fan of BP. Their safety and deferred-maintenance record has not been very good in North America in the last decade or so and the continuing mess in the Gulf of Mexico is just the largest and latest.

The White House and the Dems on the Hill are behaving predictably – “Something must be done!” – even if it has little or no effect on the real problem. Not ones to let an opportunity pass, they now propose to have BP escrow billions of dollars in funds and then set up a “third party” to administer the claims on these funds.

I can only imagine how this “claim processor” will be constituted. First we’ll need a big name chief for the Wesley Mouch role, and a blue-ribbon panel of former office-holders, technical experts, legal experts, financial experts, then lots of administrative paper-pushers to build and monitor “process.” This “FreddieSpill” will almost certainly set new records for overhead eating up the available funds.

No doubt Congress will pass some special enabling legislation for FreddieSpill that puts it beyond the normal legal-judicial process so no one will be able to appeal or contest the rulings of this “third party.”

Once an entity like this is created, it will never die, so this will become the de facto liability oversight agency for the oil and gas industry in the U.S. Since this agency will be outside the normal legal process, its determinations will be impossible to predict since it is essentially a political animal, thereby dramatically cranking up the risk for US exploration and production at the very time we desperately need to find and produce energy here.

So, the net result will be lots of jobs for friends of those in the administration, a rapid whittling away of the escrow funds, arbitrary and capricious disbursement decisions that cannot be appealed in courts and a frightening risk variable on the domestic oil and gas industry.

Wow, do these people know how to make lemonade or what?