Anyone for Democracy?

The following text was submitted to The Gazette as a part of one of its "Writers Circle" projects, this one focused on "voting." Portions removed from the hard copy published version are enclosed [in brackets]. The title was changed from "Anyone for Democracy?" to . . .

Let's Seize Our Opportunity, Take Responsibility Seriously

Nicholas Johnson
The Gazette, November 22, 2015, p. C3

“I am waiting for someone
to really discover America . . .”

-- Lawrence Ferlinghetti, “I Am Waiting,” A Coney Island of the Mind (1958)

On November 3 Iowa City held an election of city council members. The somewhat unique existence of two slates of candidates, whose differences over issues were clearly drawn, might have produced a massive voter turnout. It did not.

Approximately 62,000 Iowa City residents are eligible to register as voters. Of that number only 45,000 do so (72 percent). But wait; it gets worse. In the latest city council election only 15 percent of those who bothered to register also bothered to vote.

My Oxford English Dictionary (1971) defines “democracy” as “that form of government in which the sovereign power resides in the people as a whole, and is exercised either directly by them or by officers elected by them. In modern use often more vaguely denoting a social state, in which all have equal rights, without hereditary or arbitrary differences of rank or privilege.”

Has America ever had such a democracy? Does it have one now?

We believe we can bring “nation-building” to others, showing them the virtues of our democracy. But it is they who assume the risks associated with voting, including in some instances death, stand in long lines for hours, and emerge from the polls with a proud smile and a finger painted purple.

Meanwhile, many Americans stay at home with their TV sets and video games on Election Day, only to have their faces turn purple months later as they rail against the evils of [“guv-ment” (in quotes) was deleted and "government" was substituted].

Fact is, our nation began, not as a democracy, but as the plutocracy it remains today. As Noam Chomsky reminds us, it was John Jay who proclaimed that “those who own the country ought to govern it.”

To insure this result, voters were initially limited to males who were white, over 21, and owned land. This has been gradually expanded to include African Americans, those without land, women, and finally all over 18. Thus, those who own the country today have to govern it by choosing the nominees.

[William “Boss” Tweed, of New York’s 19th Century Tammany Hall, is credited with having said, “I don’t care who does the electing, so long as I get to do the nominating.” Today the nominating takes place in New York’s financial district, Wall Street, well to the south of the old Tammany Hall at 141 E. 14th Street. As Goldman Sachs’ CEO Lloyd Blankfein and his friends have said privately about Hillary Clinton and Jeb Bush, echoing Boss Tweed, "Those would be two very good choices and we’d be perfectly happy with them."]

[But if the American poor, working poor, working class, and lower middle class were well informed regarding their interests, registered, and then voted as a block, they could put their candidates in every elected position in the country, from school boards to the White House. That’s why it’s so important for the 1%, even though they do the nominating, to put every possible roadblock in the path of the poor on their way to the voting booth –- with schemes only restrained by the limits of their imagination.]

[And that is why the establishment’s two major parties make it virtually impossible for third parties to rise and survive. Proposals like instant runoff, fusion, and many more, would make it possible for us to vote with both our hearts and our heads -– better reflecting Americans’ true preferences, while leaving the two parties dominant. But the two majors generally succeed in keeping third party candidates from even being seen in the national debates.]

[Asked to delete or substitute something for the above paragraph, I proposed, and The Gazette used:] Voting reforms such as instant-runoff, ranked choice, or preferential voting would enable voters to vote for more than one candidate. Voting with both one's heart and head would better reflect Americans' true preferences. It also would breathe life into third parties, now usually excluded from participation by a Commission on Presidential Debates made up of the Democratic and Republican Parties' leadership.

Iowans are blest with laws and practices encouraging, rather than stifling, registration and voting. We are given the heady responsibility of playing a disproportionate role in the nomination of our presidential candidates. If anyone will ever “really discover America” it will probably be right here in Iowa. But only if we’ll take our responsibilities seriously and use the opportunities we have.
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Nicholas Johnson, an Iowa City native, has worked in every presidential campaign since 1948 [, was a congressional primary candidate, and participated in party organizations at the national, county and precinct level]. He is the author of Are We There Yet? (2008) and the blog FromDC2Iowa.blogspot.com. Contact: mailbox@nicholasjohnson.org

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The Gazette's online publication of the columns can be found here: "Writers Circle: Engaging Voters in Local Elections," November 23, 2015, 8:00 a.m. ("Earlier this month, members of The Gazette Writers Circle gathered to discuss this question: A fraction of eligible voters turned out to cast a ballot in this month’s municipal elections. How do we get more people engaged in local political decision making?")

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Related:

Brandon Weber, "Here Are 3 Big Reasons Millions of Americans Don't Feel Like Voting," Upworthy (online), November 16, 2015 (gerrymandering; primary voting system; electoral college)

Goldman: Too Big to Jail?

August 12, 2012, 11:50 a.m.

[For confirmation of the conclusion in this blog entry, see the discussion of CBS 60 Minutes' presentation of the issues in, "Lehman's 'Get Out of Jail Free' Card."]

"If You Can't Trust Your Banker"

Credit: "Shady Deal at Sunny Acres," Maverick, 2nd Season, 1958. The popular early television series, Maverick, "starring James Garner and Jack Kelly, remains the most famous and widely discussed episode of the Western comedy television series Maverick. Written by Roy Huggins and Douglas Heyes and directed by Leslie H. Martinson, this 1958 second season episode depicts gambler Bret Maverick (James Garner) being swindled by a crooked banker (John Dehner) after depositing the proceeds from a late-night poker game, then recruiting his brother Bart Maverick (Jack Kelly) to mount an elaborate sting operation to recover the money." It's also the source of two oft-quoted lines: "If you can't trust your banker, whom can you trust?" and "I'm working on it." See, "Shady Deal at Sunny Acres," wikipedia.org. And see "Terrorist Bankers," February 13, 2009.

Woody Guthrie (1912-1967) warned us there would be days like this, when he wrote in the story of "Pretty Boy Floyd,"

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

And as through your life you travel,
Yes, as through your life you roam,
You won't never see an outlaw
Drive a family from their home.

Woody Guthrie, "Pretty Boy Floyd," woodyguthrie.org.

If fountain pens and handguns are merely optional choices for bank robbers, why is it that those who choose handguns end up in jail, and those who choose fountain pens (as augmented with today's computers) end up living in multiple million dollar mansions? (See, e.g., "Homes: Weeks' Salisbury, Romney's Six," May 30, 2012.) Why is it those with handguns get less than $10,000, and those who use fountain pens are handed millions? Jason Koebler, "What You Should Know Before Robbing a Bank; Most bank robberies net just a few thousand dollars," US News, June 11, 2012 ("The vast majority of bank robberies are relatively unsuccessful affairs, having netted criminals just $7,500 in 2010 on average, according to the FBI.").

For our answer we must turn to a modern-day Woody Guthrie, Harry Shearer, who provides us some musical insight into the operations of Goldman Sachs. Here is a snippet from his song . . .

"Mr. Goldman and Mr. Sachs"
Harry Shearer

When Mr. Goldman met Mr. Sachs
Business ran on railroad tracks
The world was simpler, you can't forget
When Mr. Sachs and Goldman met

Said Mr. Goldman, "For years and years,
Our guys have got the most between the ears"
Said Mr. Sachs, "Let's unhook some reigns,
And find new ways to profit off our traders' brains"

Spinning gold out of flax,
Mr. Goldman and Mr. Sachs

Spinning gold out of flax,
Mr. Goldman and Mr. Sachs

"Up to the Clintons," says Sachs with glee,
"Our former chief now runs the Treasury"
Slapped Mr. Goldman to Mr. Sachs,
"Everything's OK, we can relax"

For the full lyrics and much more commentary and video clips, see "Goldman, Sachs and Shearer," August 14, 2010.

When Goldman Sachs folks were successful in persuading the House, Senate, Treasury, Fed and President that Wall Street banks were "too big to fail," I responded that those banks were "too big to bail" -- no entity should be permitted to become too big to fail, to merge and monopolize itself into such size that taxpayers are offered no other option than to privatize their profits and socialize their losses. They should be split into entities of such size that, like other American businesses, they can be permitted to fail.

Now, it turns out, they are also "too big to jail."

And so it is that we came to read this last week:

The Justice Department said Thursday it won't prosecute Wall Street firm Goldman Sachs or its employees in a financial fraud probe. . . .

"The department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time," the department said. . . .

A Senate subcommittee chaired by Sen. Carl Levin, D-Mich., in April 2011 found that Goldman marketed four sets of complex mortgage securities to banks and other investors but that the firm failed to tell clients that the securities were very risky. The Senate panel said Goldman secretly bet against the investors' positions and deceived the investors about its own positions to shift risk from its balance sheet to theirs.

The Justice Department's decision capped a good day for Goldman as the Securities and Exchange Commission decided not to file charges against the firm over a $1.3 billion subprime mortgage portfolio. . . . The Senate panel probe turned up company emails showing Goldman employees deriding complex mortgage securities sold to banks and other investors as "junk" and "crap." Levin said . . . Goldman "gained at the expense of their clients and they used abusive practices to do it." . . . In 2010, Goldman agreed to pay $550 million to settle civil fraud charges by the SEC of misleading buyers of mortgage-related securities. The agreement applied to one of the four deals cited by the Senate subcommittee.

Pete Yost, "Government won't prosecute Goldman Sachs in probe," Associated Press/Google, August 10, 2012.

In other words, two years ago Goldman Sachs agreed they were sufficiently guilty of something to be willing to pay a $550-million-dollar fine, A year later the Senate committee sure thought they had engaged in "abusive practices" that made them guilty of something. And now the Department of Justice finds that "the burden of proof to bring a criminal case could not be met"?! So it's "case dismissed," even though Goldman Sachs has already confessed to the need for them to pay a fine in excess of one-half billion dollars for one of the four offenses that would make up that "criminal case."

Jill Treanor, "Goldman Sachs handed record $550m fine over Abacus transaction; Securities and Exchange Commission punishes bank over collateralised debt obligation," The Guardian, July 15, 2010 ("The [Goldman Sachs] Abacus case had called into question the integrity of Wall Street after the commission alleged Goldman had packaged up mortgages into Abacus and then sold the CDO [collateralized debt obligation] to investors without telling them one of its powerful clients, the hedge fund Paulson, had been taking a trading position intended to profit from a fall in the value of US house prices.").

It sounds to me like the "burden of proof" ought to be on those elected officials in Washington, and the Department of Justice, to justify this decision to those American, and global, citizens who have borne the burdens of the global economic collapse from which Goldman and others have profited.

It's also noteworthy, it seems to me, how little attention the mainstream media gave to this story. The Associated Press ran the story quoted, and linked to, above. But I didn't see any fragment of it in any of the local papers I read. The New York Times offered a short piece, but put it back on page B-5. Ben Protess and Azam Ahmed, "S.E.C. and Justice Dept. End Mortgage Investigations Into Goldman,", New York Times, August 10, 2012, p. B5.

But the Times is to be credited with informing us in the very same story of what may or may not be the coincidental fact that, on the very same day the Department of Justice dropped all charges, the U.S. Securities and Exchange Commission also did so:

Separately, Goldman Sachs announced early Thursday that the Securities and Exchange Commission had ended an investigation into a $1.3 billion subprime mortgage deal, taking no action. The move was an about-face for the commission, which notified the bank in February that it planned to pursue a civil action.

In other words, the U.S. Senate asks the Justice Department to investigate and prosecute what it considers very serious charges against Goldman Sachs. The SEC announces that it's going to go after Goldman in a civil action. And then, on Goldman's glorious day, both the DOJ and the SEC do what the Times calls "an about-face."

Of course, "a correlation is not a cause," but it's fair to note that this year, so far, Open Secrets reports that Goldman Sachs has made total political campaign contributions of roughly $5 million, plus $4.5 million on "lobbying," plus another roughly $1 million in "soft money." "Goldman Sachs Totals," OpenSecrets.org.

It may have been a good day for Goldman Sachs, but it has not otherwise been a good year for all the other banks.

This hasn’t been a good year for Bank of America.

In February, the bank paid a $1 billion dollar fine to the Feds for defrauding the FHA by underwriting loans to unqualified buyers. Just last month Bank of America joined Visa, MasterCard and other large banks to settle a price fixing case brought by retailers over credit card swipe fees. The bank’s portion of that fine: $738 million. . . .

Mortgage investors, claiming that they were misled about the quality of the mortgages and mortgage-backed bonds the bank sold them, have filed claims that have cost the bank over $13 billion so far. The bank lost over $19 billion on their consumer real estate division last year. . . .

Part of Bank of America’s $2.46 billion dollar profit came from cutting their bad loans reserve, a rather neat accounting sleight of hand.

Most recently, Bank of America was the recipient of a subpoena and Request for Information from the U.S. Department of Justice regarding their role in the Libor benchmark interest rate scandal. Berkshire Bank likewise named Bank of America, Citigroup, and Barclays as some of the defendants in their lawsuit for damages, alleging that Libor fraud lowered the . . . interest payments . . . received from customers.

-- Karen Rogers, "Can Bank of America Survive Libor?" Motley Fool, August 8, 2012.


ING Bank has agreed to pay a $619 million penalty for moving billions of dollars through the U.S. financial system at the behest of Cuban and Iranian clients, acts that violated economic sanctions [and] falsifying the records of New York financial institutions . . .. "These cases . . . ultimately contribute to the fight against money laundering and terror financing," Manhattan District Attorney Cyrus Vance said . . ..

-- Charles Riley, "ING to pay $619 million for Cuba, Iran dealings," CNN/Money/Fortune, June 12, 2012


Barclays [Bank]’s record $451 million fines for interest rate manipulation sent bank shares plunging . . . amid speculation that lenders could face billions of dollars in lawsuits. . .. Traders at the U.K.’s second-biggest bank by assets routinely coordinated with counterparts from at least four other banks in an attempt to move interest rate benchmarks [including] the London interbank offered rate, or Libor, and Euribor . . . to generate profits on derivatives held by the banks, the agencies said. . . . Citigroup Inc., Royal Bank of Scotland Group, UBS, ICAP, Lloyds Banking Group and Deutsche Bank are among the firms regulators are investigating.

-- Joshua Gallu, Silla Brush and Lindsay Fortado, "Barclays Libor Fine Sends Stocks Lower as Probes Widen," Bloomberg, June 28, 2012.

If you can't trust your banker, whom can you trust?

It's reminiscent of the story of the father who places his young son on the mantlepiece of their fireplace, holds out his arms, and tells the son to jump. The father steps back, and lets his son fall on the tiles below. When the bewildered and bawling boy looks up and asks why his father did that, the father replies, "Son, that's to teach you the lesson that you should never trust anyone, not even your own father."

The sad conclusion: (1) No, you can't trust your banker. (2) Nor can you trust your elected officials to regulate banks effectively. (3) No matter how you vote this next November those truths will not change. Bank executives are just too big to jail.

Have a nice day. # # #

Goldman, Sachs and Shearer

August 14, 2010, 7:45 a.m.

Given the recent exceptional popularity of "Living Outside the Box; From Thoreau to Ferentz," August 9, 2010, if that's the blog entry you're looking for you can find it here.

Entertainment, Social Commentary and Public Policy
(bought to you by FromDC2Iowa.blogspot.com*)
Harry Shearer is one of those guys in Hollywood who has excelled at virtually every form of creative endeavor -- with the possible exception of re-painting the Sistine Chapel.

The fulsome coverage of his career in Wikipedia describes him as "an American actor, comedian, writer, voice artist, musician, author and radio host." That scarcely does his creative and prolific career justice, but it does give you a simplistic sense of its variety and reach. "Harry Shearer," wikipedia.org. And see his Web site.

Among other things, he is a sensitive observer, and critic, of the American scene. As such, he is a contributor to the hundreds of years of involvement of entertainment in general, and music in particular, in the cause of social commentary and "activism" -- which is just another word for "democracy." The Sixties -- both the 1860s and the 1960s have been such times, with the hidden messages in Spirituals, and less well-disguised approach of the "Smothers Brothers Comedy Hour" in the 1960s, John Stewart's "Daily Show" today, and Pete Seeger seemingly having been singing forever.

Another example, provided by Harry Shearer, and all too effectively hidden within his creative outpouring in my view, is a little song he wrote, recorded and released October 6, 2009, about the financial collapse in general and Goldman Sachs in particular. In it, he succeeds in explaining both what was going on, and the attitudes of those engaged in it -- which seem to me to bear at least some similarity to those exhibited in the ten year old movie "Boiler Room" (2000) and 1987 film "Wall Street" (from which the video clip, above, of the Gordon Gekko (Michael Douglas) "greed is good" speech is taken).

The song is not exactly today's news, "more's the pity," and that's a part of my concern. Goldman Sachs' role in the global financial collapse from which we have yet to emerge -- like the BP's pollution of the Gulf of Mexico -- are seen by the corporations involved, as well as the media, as a "public relations" challenge. The solution? (1) Produce and televise some slick commercials proclaiming your sincerity and sorrow, and perhaps pay to underwrite some CPB programming. (I once proposed the best way to fund public broadcasting would be for the Department of Justice Antitrust Division to file more law suits, because every time it filed one the corporate defendant inevitably got its face out there as a "good guy" by funding a PBS or NPR program.) (2) Just wait it out; ultimately the public (and their representatives) will forget about it, having shifted their focus to a more current crisis.

Music, humor, films, and other forms of entertainment can stand and fight that tendency. (I recently watched a "Boiler Room" DVD again.) And Harry Shearer's "Mr. Goldman and Mr. Sachs" lively tune and lyrics keep running through my mind long after I've forgotten exactly what it was the New York Times' stories and editorials detailed about the firm's abuses.

The song is available from YouTube.com, iTunes and Amazon for 99 cents, and I recommend you give it a listen.

Its energized beat and bouncy and irreverent delivery can't be communicated by the lyrics alone. But here they are anyway, to give you a sense of the message. [If Harry Shearer wants me to remove them from this blog entry I will, of course, do so. But with no advertising on my blog, I have nothing to gain by making them available, and anyone who was a potential purchaser of the song before should be more, rather than less, likely to be so now. And if you find, and can correct, any errors in my transcription please put them in a comment on this blog entry.]

So here it is, . . .

"Mr. Goldman and Mr. Sachs"
Harry Shearer

When Mr. Goldman met Mr. Sachs
Business ran on railroad tracks
The world was simpler, you can't forget
When Mr. Sachs and Goldman met

Said Mr. Goldman, "For years and years,
Our guys have got the most between the ears"
Said Mr. Sachs, "Let's unhook some reigns,
And find new ways to profit off our traders' brains"

Spinning gold out of flax,
Mr. Goldman and Mr. Sachs

Spinning gold out of flax,
Mr. Goldman and Mr. Sachs

"Up to the Clintons," says Sachs with glee,
"Our former chief now runs the Treasury"
Slapped Mr. Goldman to Mr. Sachs,
"Everything's OK, we can relax"

"We're blowing bubbles," Mr. Goldman crowed,
"We making money out of money owed"
"On Wall Street our names should be up on plaques,"
Bubbled Mr. Goldman to Mr. Sachs

Balls so big they stretched the slacks
Of Mr. Goldman and Mr. Sachs

Balls so big they stretched the slacks
Of Mr. Goldman and Mr. Sachs

"The century's turning," Mr. Sachs opined,
"Our new kind of trains boggle the mind"
Bragged Mr. Goldman with a toss of his head,
"One of our guys runs the New York Fed"

Noted Mr. Sachs as the market soared,
"We're totally wired in each department and board"
"We regulate ourselves, the wind's at our backs,"
Said the jolly Mr. Goldman to a blithe Mr. Sachs

Their regulators are really claques,
For Mr. Goldman and Mr. Sachs

Their regulators are really claques,
For Mr. Goldman and Mr. Sachs

Said Mr. Goldman to Mr. Sachs,
"This sly little system is showing some cracks"
Mr. Sachs to Mr. Goldman said,
"We got it covered, go back to bed"

The hustle’s urbane Mr. Sachs recalled,
"We may get a haircut, but we won't go bald"
"Any bailout move will be comfy and lax,"
Mr. Goldman was reassured by Mr. Sachs

"Bear Stearns went down," Mr. Sachs told his friend,
"And Lehman Brothers met a harsher end"
"Merrill Lynch was sold off by a fax,"
A dour Mr. Goldman told Mr. Sachs

"It's time," Mr. Goldman said, "to pull some rank"
So presto, said Mr. Sachs, "We'll become a bank"
"We'll be covered by the payers of tax,"
Exhaulted Mr. Goldman to Mr. Sachs

Mr. Sachs explained, "We're insured by AIG"
Mr. Goldman responded, "That's fine with me"
"Our risky bets will be paid off in full,"
Said Mr. Goldman, more than ever a raging bull

"Unemployment is rising," Mr. Goldman observes
But their partnership is still riding on nerves
"Profits in the billions, ignore the attacks,"
Says a flush Mr. Goldman to a flush Mr. Sachs

Spinning gold out of flax
Mr. Goldman and Mr. Sachs

Spinning gold out of flax
Mr. Goldman and Mr. Sachs

Spinning gold out of flax
Mr. Goldman and Mr. Sachs

Spinning gold out of flax
Mr. Goldman and Mr. Sachs

Spinning gold out of flax
Mr. Goldman and Mr. Sachs

And now to return to what some will consider the more mundane approach to economics policy, consider these excerpts -- and the column in its entirety: Froma Harrop, "Regulation Made Canada Fat and Happy," creators.com, August 12, 2010 (copyright by the Providence Journal and reprinted in numerous newspapers around the country):

Suppose the U.S. government had posted a budget surplus in 12 of the past 13 years. Suppose not a single major American financial institution had failed or needed a government bailout. Suppose the U.S. economy grew at an annual rate of 6.1 percent in the first quarter of this year, rather than at 2.7 percent.

Wouldn't that make you happy?

These cheering economic indicators happen to be reality in Canada. They did not come about because Canadians are more virtuous or they don't have subprime mortgages (they do) or they didn't keep interest rates very low (their rates were much like ours). What Canada had was a civic culture that wanted government to regulate financial activity.

What we have is an elite willing to risk everyone else's economic security to enable a few hotshots to win big at the casino of recklessness and fraud — while maintaining a variety of taxpayer backstops to reduce their risks. The joint never gets closed, also thanks to the large numbers of ordinary citizens trained to holler "socialism" every time the government tries to set a ground rule. A satanic belief in the rightness of free markets to punish the unsophisticated almost halted the creation of a Consumer Financial Protection Bureau. . . .

So how are Canadian businesses doing these days relative to ours? It's true that the Standard & Poor's index of 500 large U.S. companies has done pretty well this year. But the Toronto exchange's index of large-cap Canadian stocks did 27 percent better.

Periodic booms and busts don't have to be Americans' fate. Some people get very rich off them. But for ordinary folk, slow and steady wins the race. Support for letting government install some speed bumps to enhance their financial stability has left Canadians fat and happy. We could live the same way.

As we reflect upon Wall Street's role in our global economic collapse we have options: we can sing about it, laugh about it, cry about it, or read and write public policy analyses and essays. Unfortunately (to return to singing about it), as in "you can't win, you can't break even, and you can't get out of the game," Simon and Garfunkel clarified our situation in "Mrs. Robinson,"

Sitting on a sofa on a Sunday afternoon
Going to the candidates debate
Laugh about it, shout about it
When you've got to choose
Ev'ry way you look at it, you lose

"And that's," as Walter Cronkite used to say, "the way it is, Saturday morning, August 14, 2010" (unless, as Ms. Harrop informs us, you move to Canada). ["Walter Cronkite," wikipedia.org ("Cronkite is well known for his departing catchphrase 'And that's the way it is,' followed by the date on which the appearance is aired.")]
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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The Oxymoron of "Corporate Responsibility"

July 16, 2010, 9:00 a.m.

[For BP disaster see, "Uncanny Prediction of BP Disaster & Response," June 10, 2010; "BP's Commercial: Shame on Media," June 9; "Big Oil: Calling Shots, Corrupting Government," May 26, 2010; "Obama As Finger-Pointer-In-Chief," May 18, 2010; "Big Oil + Big Corruption = Big Mess," May 10, 2010; "P&L: Public Loss From Private Profit," May 3, 2010.]

Corporate Risk Assessment and Inevitable Disaster
(bought to you by FromDC2Iowa.blogspot.com*)
Sat next to a business consultant on a recent flight. Got to talking about Massey and BP. His contention: It's all just about risk assessment. However conscious and precise we may be about the process (whether we're driving a car or drilling miles beneath the ocean's surface), it goes something like this: What are the potential rewards from our risky behavior? What are those risks? How serious would it be if the worst occurred? What is the likelihood it will occur? (Perception of risk -- or more often mis-perception -- is another matter, as when someone fears flying (despite the relatively slight risk) but continues smoking (despite its almost inevitable risks).) Anyone in business is under enormous pressure to both increase profits and decrease costs; in other words to gradually assume ever increasing risks of harm -- to employees, customers, the environment, or the global economy -- until the inevitable disaster occurs.

Goldman Sachs. "Goldman Sachs has agreed to pay $550 million to settle federal claims that it misled investors in a subprime mortgage product as the housing market began to collapse . . .." Notwithstanding the payment, "Goldman did not formally admit to the S.E.C.’s allegations . . .." Now, how credible is that stance? You don't admit to any wrongdoing, but you pay the $550 million fine anyway? Even if you earned over $13 billion, $550 million is a little more than one normally pays to settle a nuisance suit. Moreover, Goldman Sachs "agreed to a judicial order barring it from committing intentional fraud in the future . . .." What a concession from a Wall Street firm! That really stings, and should substantially cut into their future profits. Wow, agreeing to forgo the ability to engage in "intentional fraud." Sewell Chan and Louise Story, "S.E.C. Settling Its Complaints With Goldman," New York Times, January 16, 2010, p. A1.

When grief or anger become seemingly unbearable, we sometimes redirect it into humor. So it is with Harry Shearer's catchy, bouncy, "Mr. Goldman and Mr. Sachs" ("spinning gold out of flax, Mr. Goldman and Mr. Sachs"). Give it a listen; available from Amazon and iTunes.

Massey Coal. It's now come to light that Massey Coal (in whose mine 29 miners died last April) has deliberately applied its risk assessment analysis to miners' safety.

An NPR News investigation has documented a dangerous and potentially illegal act at the Upper Big Branch mine in West Virginia two months before a massive April explosion killed 29 mine workers.

On Feb. 13, an electrician deliberately disabled a methane gas monitor on a continuous mining machine because the monitor repeatedly shut down the machine.

Three witnesses say the electrician was ordered by a mine supervisor to "bridge" the automatic shutoff mechanism in the monitor.

Methane monitors are mounted on the massive, 30-foot-long continuous miners because explosive gas can collect in pockets near the roofs of mines. Methane can be released as the machine cuts into rock and coal. The spinning carbide teeth that do the cutting send sparks flying when they cut into rock. The sparks and the gas are an explosive mix, so the methane monitor is designed to signal a warning and automatically shut down the machine when gas approaches dangerous concentrations.

Howard Berkes, "Massey Mine Workers Disabled Safety Monitor," NPR, July 15, 2010.

There was a risk. But it would result in greater production -- and profits. A worst case scenario was possible, but not inevitable. Sometimes they got away with it. This time they didn't.

BP. BP didn't get away with its cost-saving risk either. By now, everyone's familiar with BP's risk assessment process. The prior blog entries on that one are linked at the top of this blog entry. That company has so often weighted potential cost savings over risks to worker safety and environmental disaster that it amasses hundreds of safety violations (including the Artic spill and Texas City) when other oil companies have less than a handful.

GlaxoSmithKline's Avandia (rosiglitazone). Public Citizen's Health Research Group reports,

3.1 million prescriptions [for Avandia] were filled in 2008. But Avandia is associated with heart failure, heart attacks, liver toxicity, bone fractures, low red blood cell count and macular (retinal) edema with vision loss.

Public Citizen petitioned the FDA to revise the labeling for Avandia due to multiple safety issues in 2000. In 2007 a study published in the New England Journal of Medicine associated the drug with a 43 percent increase in the risk of heart attacks.

"Avandia," Public Citizen Health Research Group.

As an indication of the ties between the FDA and the pharmaceutical industry, as well as the complexities of risk assessment, an FDA advisory panel recently voted 20 to 12 to recommend that GlaxoSmithKline should be permitted to continue to profit from the millions of pills. A vote of 20-12 on such a death risk reminds me of my days on the seven-person FCC, when we would vote 4 to 3 to send a colleague a get-well card. Bear in mind, this same FDA committee, by a vote of 21 to 4, agreed not only that Avandia carries a risk of death from heart attack, but that the risk is much higher from Avandia than from alternative medicines that could be used instead. Matthew Perrone, "FDA Panel Votes to Keep Avandia On the Market," AP/MSNBC, July 14, 2010.

Have you seen the latest commercial for Avandia? The list of side effects goes on seemingly forever. I don't think a diabetic should "ask your doctor if Avandia is right for you," I think if a doctor recommends it diabetics should "ask yourself if your doctor is right for you."

Other examples. These are only the most recent examples. There are hundreds of others. A couple that spring immediately to mind are Bhopal (Union Carbide chemical spill; 500,000 exposed, 15,000 killed) and Three Mile Island (partial core meltdown of Babcock & Wilcox nuclear reactor).

That the U.S. electric utilities chose to save money by managing the nation's electric grid through the Internet, rather than a more secure system, is a monumental calamity just waiting to happen. Siobahn Gorman, "Electricity Grid in U.S. Penetrated by Spies," Wall Street Journal, April 8, 2009, ("Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national-security officials.").

And see generally, Nicholas Johnson, "'The Corporation' and the Search for Agreement," October 1, 2004 (a commentary prompted by the film "The Corporation").

Obama as "socialist."

Meanwhile, the Tea Party has TPed a Mason City billboard as the organization's own Mount Rushmore, likening President Obama to Hitler and Lenin and indicting the three of them as socialists. Jennifer Jacobs, "Iowa Politics Insider: More Fallout From Obama/Hitler Tea Party Billboard," Des Moines Register, July 15, 2010.

As for "Leaders Prey on the Fearful & Naive" slug at the bottom of their billboard, I'd suggest the TP folks take a look in the mirror, and a second look at those they follow on radio and TV, and as speakers at their rallies.

I won't write at length about the TP's choice and characterization of Hitler and Lenin. Obviously, they have been chosen as characters to despise, in the Republican/TP's efforts to do everything they can to make Obama fail (as they have openly acknowledged). Never mind that if he fails, America fails.

Frankly, each of the disasters noted above have involved not socialism -- government ownership of means of production -- but a form of fascism, fascist corporatism, or more simply put, political corruption, the domination of political and regulatory institutions by large corporations. "Agency capture," to a lesser or greater degree, was a factor in each of the noted disasters.

Indeed, if only Obama were a socialist we would have long since clawed our way out of the global economic collapse brought on by Goldman Sachs and others. When 80 percent of our economy is driven by consumer spending, unemployment (including that which is not reported) runs closer to 20 than 10 percent, and consumers are, not irrationally, saving rather than spending, you can't create an economic turn-around by giving money to corporate executives and calling it a "jobs program."

Darkening consumer confidence and plunging prices combined with a generally dismal outlook to dampen hopes for a quick economic recovery. . . . "Consumers are facing three major hurdles," Art Hogan, chief market strategist at Jefferies & Co., said in an interview. "They are paying down their debt, their houses are not worth as much as they were two years ago and they're staring down the barrel of 10 percent unemployment." . . . Taken together, the week's economic data suggest that a global recovery will be staggered and sluggish in getting off the ground. Consumers -- the engine of the U.S. economy -- are catching few breaks.

Frank Ahrens, "Drops in Consumer Confidence, Prices Temper Recovery," Washington Post, July 15, 2010.

Businesses won't provide additional employment until they see a reason to increse production. There's no reason to increase production unless consumers are going to spend. Consumers aren't going to spend if they're concerned they, too, may soon be unemployed.

"Trickle down" never works, but especially not at this time. What we need is trickle up.

If Obama were a socialist he would have created a federal, employer-of-last-resort, jobs program that would have immediately (FDR's programs were in place in a month) put everyone on a payroll. Give the unemployed a job, the confidence they won't be fired, and the money that goes with it, and they'll use the money to buy stuff they need, not increase their savings accounts. Their purchases will require increased production; increased production will increase private sector employment. Gradually those on the federal payroll will be picked up by private employers.

Now that's a real jobs program. Recession reversed; global economic collapse averted. Corporations profiting from their business sense, not their political dollars -- and our taxpayer bailouts of the wealthy. See generally, "Unemployment Answer is Jobs Not Bailouts," February 6, 2010.

What the TPers ought to get angry about (and, in fairness, to some extent do) is a "capitalism" in which successful businesses keep all of their profits, and unsuccessful businesses pass their losses on to the taxpayer. "Heads I win, tails you lose."

"Socialism" is the Interstate highway system, public schools, libraries, museums, local police and fire protection, the military, and a national, state and local system of parks. I kind of like that socialism, and feel that it often provides me a greater return on my investment of taxes than what I sometimes end up with from the capitalists.

How ironic that the TPers would choose "socialist" as one of their favorite pejoratives for Obama, when he is, apparently, one of the few Americans who appears to be even more frightened of the word than they are.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
# # #

Big Oil + Big Corruption = Big Mess

May 10, 2010, 8:45 a.m.

[If you're looking for the 12 prior blog entries about the ICCSD superintendent search see, "The Beat Goes On, But Music's Out of Tune," May 1, 2010, and 11 items linked from "Superintendent Murley's Calm Seas, Smooth Sailing," April 29, 2010. If you're interested in the ICCSD redrawing school boundary lines fiasco see, "School Boundaries: There Are Better Ways," April 16, 2010, with links to 23 related, prior blog entries and other writing.]

Connecting Those Slippery, Oily Dots
(brought to you by FromDC2Iowa.blogspot.com*)
Update: May 14: A couple of the most shocking stories yet (corporate-government silencing scientists, suppressing data): Justin Gillis, "Size of Oil Spill Underestimated, Scientists Say," New York Times, May 14, 2010, p. A1; Ian Urbina, "U.S. Said to Allow Drilling Without Needed Permits," New York Times, May 14, 2010, p. A1 ("The [MMS] gave permission to BP and dozens of other oil companies to drill in the Gulf of Mexico without first getting required permits . . . despite strong warnings . . . about the impact the drilling was likely to have . . . [and] routinely overruled its staff biologists and engineers who raised concerns . . ..").

Update: May 12: Editorial, "The Oil Industry Doesn't Step Up," New York Times, May 12, 2010, p. A24; John M. Broder, "U.S. to Split Up Agency Policing the Oil Industry," New York Times, May 12, 2010, p. A1; Editorial, "Raise Liability Cap for Oil Companies," Des Moines Register, May 12, 2010; Matthew L. Wald, "Live-Blogging the Senate Hearing on Offshore Drilling," New York Times/Green, May 11, 2010.

Update, May 11: "MMS Approved 27 Gulf Drilling Operations After BP Disaster; 26 Were Exempted From Environmental Review, Including Two to BP; Salazar's "Moratorium" on New Drilling Permits Allows Continuation of the Same Flawed Environmental Exemption Process that Allowed the BP Catastrophe," Center for Biological Diversity, May 7, 2010 ("Even as the BP drilling explosion which killed eleven people continues to gush hundreds of thousands of gallons of oil per day into the Gulf of Mexico, the U.S. Department of Interior’s Minerals Management Service (MMS) has continued to exempt dangerous new drilling operations from environmental review. Twenty-seven new offshore drilling projects have been approved since April 20, 2010; twenty-six under the same environmental review exemption used to approve the disastrous BP drilling that is fouling the Gulf and its wildlife. “The MMS has learned absolutely nothing from this national catastrophe,” said Kierán Suckling, executive director of the Center for Biological Diversity, “It is still illegally exempting dangerous offshore drilling projects in the Gulf of Mexico from all environmental review. It is outrageous and unacceptable.”).

And see the recent, related, "P&L: Public Loss From Private Profit," May 3, 2010.
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The details of one of the most devastating environmental disasters in American history on fish, wildlife and beaches is not the most important story.

The details of the technology that permits drilling for oil a mile beneath the ocean's surface -- and that fails us when that drilling goes awry -- is not the most important story.

The tragic sacrifice of workers' lives -- 11 on the Deepwater Horizon (plus 29 in the Massey Coal mine) -- to the profits of their corporate employers with "cost savings" on inadequate and malfunctioning safety technology is not the most important story.

The response of suddenly get-tough-on-oil senators and members of Congress, and what the investigations may ultimately reveal (or conceal), is not the most important story.

The newspaper and television coverage of the oil disaster is not the most important story.

All of the above are mere diversions from the most important story.

The most important story? The extent to which America's officials -- and the public, let it be noted -- have permitted major corporations' campaign contributions, lobbying, public relations, advertising, and other influence to corrupt our nation's ability to formulate, and enforce, policies that would best serve "the national interest."

We're generally aware of the extent to which Goldman Sachs alums have infiltrated the government, from the Fed to the Treasury to the White House itself, and how they influence Congress. See, e.g., the summary in Alex Floum, "Goldman Sachs alumni hold many of the top government positions," Economic Policy Examiner, May 6, 2010; Albert R. Hunt, "Scarlet Letter for the Greed Generation," New York Times, April 25, 2010 ("Goldman’s political action committee gave $290,500 to congressional candidates last month as Congress weighed the financial-regulation overhaul. Mr. Obama shook the Goldman Sachs money tree for almost $1 million in his presidential campaign.").

We are perhaps less well informed and aware of the extent to which many industries exert similar influence over governmental decision making as well.

So let us consider the case study of BP.

From the West Coast to the Gulf Coast
This picture is so revealing. [Photo credit: UC Berkeley Media Relations] The caption reads, "Backstage before the announcement, UC President Robert Dynes (right) flashes 'thumbs up' to BP America chairman Robert Malone . . .."

"The announcement." "What announcement?" I hear you ask. The announcement that BP is going to give UC Berkeley (my first post-clerkship employer) $500 million.

Global energy firm BP announced today (Thursday, Feb. 1 [2007]) that it has selected the University of California, Berkeley, in partnership with Lawrence Berkeley National Laboratory (LBNL) . . . to lead an unprecedented $500 million research effort to develop new sources of energy and reduce the impact of energy consumption on the environment. . . .

"This partnership with BP will develop new, sustainable energy technologies that can transform the landscape," said Nobel Laureate Steven Chu, director of LBNL — a U.S. Department of Energy-funded lab — and UC Berkeley professor of physics and of molecular and cell biology.

Robert Sanders, "BP Selects UC Berkeley to Lead $500 Million Energy Research Consortium," UC Berkeley News, February 1, 2007.

Why is this story relevant? Well, for starters it is an illustration of the fact that the tentacles of a multi-billion-dollar corporation like BP extend into far more major American institutions than just the federal government -- especially the large, prestigious, research universities.

It also makes the point that when you're in a position to hand out money in $500 million bundles you tend to get a thumbs up from everyone you meet -- including presidents and members of Congress.

How can a company afford to make $500 million contributions? BP's first quarter profits were $5.6 billion; that's profits, not revenue, which is of course much greater; and not annual profits, but three months' worth of profits.

But there's more. Just as occasionally when you drill you strike oil, so occasionally when you pay $500 million for favorable public relations (BP was trying to sell the public on the idea that BP no longer stands for "British Petroleum," it now stands for "Beyond Petroleum") you strike another kind of oil.

And so it was with their beneficence spread upon Professor Chu. Do you know where he is now? That's right, President Obama decided he would make a great Secretary of Energy -- the guy who's supposed to be helping us overcome our oil addiction.

And what did he have to say recently about the BP oil spill disaster?

"U.S. Energy Secretary Steven Chu said Wednesday it was not a mistake for the administration to support more offshore drilling as part of comprehensive energy reform, despite the oil rig spill in the Gulf of Mexico that continues to threaten coastal areas." John Wihbey, "Energy Sec. Steven Chu: More Drilling Proposal 'Not a Mistake,'” "On Point with Tom Ashbrook"/WBUR/NPR, May 5, 2010.

Spreading Money Like Oil
But it's BP's generosity with members of Congress that may have even more to do with its disaster in the Gulf than its generosity with Energy Secretary Chu. After all, the pollution of the Gulf is primarily the responsibility of the Secretary of the Interior, not the Secretary of Energy.

Oil behemoth BP poured millions of dollars into lobbying and campaign contributions over the past two decades, courting allies in Congress and the White House. . . . BP paid $6.2 million in campaign contributions since 1990, landing on the list of 107 "heavy hitters" compiled by the Center for Responsive Politics.

The company's political action committee has helped the re-election efforts of many . . ..

And that's just part of BP's political spending.

Just in the past year, BP doled out nearly $16 million for influence efforts, using both its own lobbyists and those with eight other firms . . ..

Anne C. Mulkern, "Big Contributor BP Finds Itself Without a Friend on the Hill," New York Times/Greenwire, May 4, 2010; and see Bara Vaida, "K Street Paradox; Special Report: President Obama's fight against special interests boomerangs as lobbying firms just get richer," National Journal, March 13, 2010 (subscription service) ("President Obama continues to campaign against Washington's special interests, but to what effect? The more he tries to rein in lobbyists, the more K Street rakes in.").

OK, but what does that have to do with Interior Secretary Ken Salazar? Well, before he was a cabinet secretary it happens that he was a U.S. Senator -- a senator who served just shy of one term.

Having not yet been a senator for a full term, Ken Salazar (D-Colo.) [who] hasn't had much time to collect money from the industries that will take a special interest in him as Secretary of the Interior . . . . has collected a total of $321,800 from the energy and natural resources sector during his short time in the Senate . . ..

Lindsay Renick Mayer, "Interior Motives," Open Secrets, December 16, 2008.

And what was his record as a Senator? His Wikipedia entry reports that,

In 2005, Salazar voted against increasing fuel-efficiency standards (CAFE) for cars and trucks . . . [and] against an amendment to repeal tax breaks for ExxonMobil and other major petroleum companies. . . .

In 2006, Salazar voted to end protections that limit offshore oil drilling in Florida's Gulf Coast.

In 2007, Salazar was one of only a handful of Democrats to vote against a bill that would require the United States Army Corps of Engineers to consider global warming when planning water projects.

"Ken Salazar," Wikipedia.

So we shouldn't be surprised with Paul Krugman's reminder this morning that "environmentalists were bitterly disappointed when Mr. Obama chose Ken Salazar as secretary of the interior. They feared that he would be too friendly to mineral and agricultural interests, that his appointment meant that there wouldn’t be a sharp break with Bush-era policies — and in this one instance at least, they seem to have been right." Paul Krugman, "Sex and Drugs and the Spill," New York Times, May 10, 2010, p. A23.

Regulators Make Strange Bedfellows
And so what role did President Obama's Secretary of the Interior play in bringing on this Gulf disaster?

The Interior Department exempted BP's calamitous Gulf of Mexico drilling operation from a detailed environmental impact analysis last year, according to government documents . . . [as a result of] [t]he decision by the department's Minerals Management Service (MMS) to give BP's lease at Deepwater Horizon a "categorical exclusion" from the National Environmental Policy Act (NEPA) on April 6, 2009 -- and BP's lobbying efforts just 11 days before the explosion to expand those exemptions . . ..

"I'm of the opinion that boosterism breeds complacency and complacency breeds disaster," said Rep. Edward J. Markey (D-Mass.) on Tuesday. "That, in my opinion, is what happened." . . .

While the MMS assessed the environmental impact of drilling in the central and western Gulf of Mexico on three occasions in 2007 -- including a specific evaluation of BP's Lease 206 at Deepwater Horizon -- in each case it played down the prospect of a major blowout.

In one assessment, the agency estimated that "a large oil spill" from a platform would not exceed a total of 1,500 barrels and that a "deepwater spill," occurring "offshore of the inner Continental shelf," would not reach the coast. In another assessment, it defined the most likely large spill as totaling 4,600 barrels and forecast that it would largely dissipate within 10 days and would be unlikely to make landfall.

"They never did an analysis that took into account what turns out to be the very real possibility of a serious spill," said Holly Doremus, a law professor at the University of California at Berkeley who has reviewed the documents.

The MMS mandates that companies drilling in some areas identify under NEPA what could reduce a project's environmental impact. But Interior Department spokesman Matt Lee-Ashley said the service grants between 250 and 400 waivers a year for Gulf of Mexico projects. He added that Interior has now established the "first ever" board to examine safety procedures for offshore drilling. It will report back within 30 days on BP's oil spill and will conduct "a broader review of safety issues," Lee-Ashley said.

BP's exploration plan for Lease 206 [Deepwater Horizon], which calls the prospect of an oil spill "unlikely," stated that "no mitigation measures other than those required by regulation and BP policy will be employed to avoid, diminish or eliminate potential impacts on environmental resources."

[T]he plan . . . minimized the prospect of any serious damage associated with a spill, saying there would be only "sub-lethal" effects on fish and marine mammals, and "birds could become oiled. However it is unlikely that an accidental oil spill would occur from the proposed activities."

Kierán Suckling, executive director of the environmental group Center for Biological Diversity, said the federal waiver "put BP entirely in control" of the way it conducted its drilling.

Agency a 'rubber stamp'

"The agency's oversight role has devolved to little more than rubber-stamping British Petroleum's self-serving drilling plans," Suckling said.

BP has lobbied the White House Council on Environmental Quality -- which provides NEPA guidance for all federal agencies -- to provide categorical exemptions more often. In an April 9 letter, BP America's senior federal affairs director, Margaret D. Laney, wrote to the council that such exemptions should be used in situations where environmental damage is likely to be "minimal or non-existent." An expansion in these waivers would help "avoid unnecessary paperwork and time delays," she added.

Juliet Eilperin, "U.S. exempted BP's Gulf of Mexico drilling from environmental impact study," Washington Post, May 5, 2010.

The disaster was predictable. Why predictable? Consider the record:

The 2005 explosion at a refinery in Texas City, Tex., killed 15 workers and injured hundreds more. The Occupational Safety and Health Administration fined BP a record $87 million for neglecting to correct safety violations.

Only a year later, a leaky BP oil pipeline in Alaska forced the shutdown of one of the nation’s biggest oil fields. BP was fined $20 million in criminal penalties after prosecutors said the company had neglected corroding pipelines. . . .

Last year, when the federal Minerals Management Service proposed a rule that would have required companies to have their safety and environmental management programs audited once every three years, BP and other companies objected. The agency is also investigating charges by a whistle-blower that the company discarded important records from its Atlantis Gulf platform.

Clifford Krauss, "Oil Spill’s Blow to BP’s Image May Eclipse Costs," New York Times, April 30, 2010; and see additional details and comparisons with other companies in Jad Mouawad, "BP Has a Record of Blasts and Oil Spills," New York Times, May 9, 2010, p. A22 ("BP, the nation’s biggest oil and gas producer, has a worse health, environment and safety record than many other major oil companies, according to Yulia Reuter, the head of the energy research team at RiskMetrics . . ..").

There are no simple answers to how an agency becomes "captured" by the industry it is supposed to regulate. But here are a couple of insights.

Regulators make strange bedfellows. You do recall the Minerals Management Service don't you? "Government officials in charge of collecting billions of dollars worth of royalties from oil and gas companies accepted gifts, steered contracts to favored clients and engaged in drug use and illicit sex with employees of the energy firms, federal investigators reported yesterday." Derek Kravitz and Mary Pat Flaherty, "Report Says Oil Agency Ran Amok; Interior Dept. Inquiry Finds Sex, Corruption," Washington Post, September 11, 2008. Noelle Straub, "GAO Audit: MMS Withheld Offshore Drilling Data, Hindered Risk Analyses in Alaska," New York Times/Greenwire, April 7, 2010 -- roughly three weeks before the current disaster.

So what? So, "The [Department of the Interior] inspector general said that these relationships have cost taxpayers $4.4 million in lapsed collection fees, but due to the sloppy administration at MMS, the real cost may go undiscovered. In a separate report, the Government Accountability Office (GAO) found that MMS is plagued by inefficiency in collecting royalties, and that there is no way to backtrack and figure out how much has actually been lost. Currently, oil companies submit their own data and MMS simply takes them at their word, rather than independently confirming that the numbers are correct — what the inspector general has referred to in a letter to Secretary Dirk Kempthorne as a “Band-Aid approach to holding together one of the federal government's largest revenue producing operations.” A separate GAO report found that the United States is not collecting fair market price for royalties on public resources — which may be seriously limiting the amount of money taken in by MMS, and hence, the taxpayers." "Broken Government," Center for Public Integrity.

These consequences are reinforced as a result of what has come to be called the "revolving door."

In trying to understand why M.M.S. fails in its fiduciary and regulatory responsibilities to taxpayers, it’s impossible to ignore the revolving door between the agency and the industry that it oversees. Since leaving government service, Gale Norton, secretary of Interior under President Bush, became Shell’s general counsel, and J. Steven Griles, a deputy secretary of Interior, lobbied for numerous oil and gas industries — including BP — before he went to jail for obstructing a Senate investigation. Randall Luthi, the most recent director of M.M.S., is now president of the National Oceans Industries Association, whose mission is to secure a “favorable regulatory and economic environment for the companies that develop the nation’s valuable offshore energy resources.” . . .

Longstanding cozy ties with industry may help explain why M.M.S. failed to bolster safety requirements for equipment and processes used on the Deepwater Horizon rig — despite internal reports giving clear warnings about the risks of these devices and techniques.

At the end of the day, this spill should show Congress that there are real harms when government regulators consider the industry they oversee to be a partner or client (or future employer) rather than an entity that they should hold accountable.

Danielle Brian and Mandy Smithberger, "Our Government, Serving the Energy Business," in Editors, "Rules, Revolving Doors and the Oil Industry," New York Times, May 5, 2010.

Oil Seepage Into the White House
In fairness to the Obama Administration, it should be noted that this "self-regulation" of offshore drilling actually began during the Clinton Administration.

"We are not supportive of the extensive, prescriptive regulations as proposed in this rule," wrote Richard Morrison, BP's vice president for Gulf of Mexico production. "We believe industry's current safety and environmental statistics demonstrate that the voluntary programs implemented since the adoption of [voluntary standards] have been and continue to be very successful." . . . The voluntary approach was adopted in 1994 during the Clinton administration.

Mike Soraghan, "BP, Other Oil Companies Opposed Effort to Stiffen Environmental, Safety Rules for Offshore Drilling," Greenwire/New York Times, April 27, 2010.

Because ultimately this rot from within government, like an under-ocean oil spill, makes its way up to the White House and the President himself. President Obama is, from all indications, a bright guy, well informed, a quick study, not easily bamboozled. So when he starts mouthing oil industry propaganda it's hard to make excuses for him -- much as I'd like to believe he was simply relying too heavily on staff members, or industry spokespersons, he thought he could trust.

And yet, there he was on March 31, announcing from Andrews Air Force Base,

[A]s we transition to cleaner energy sources, we’ve still got to make some tough decisions about opening new offshore areas for oil and gas development in ways that protect communities and protect coastlines. . . .

[T]he bottom line is this: Given our energy needs, in order to sustain economic growth and produce jobs, and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable, homegrown energy.

So today we’re announcing the expansion of offshore oil and gas exploration, but in ways that balance the need to harness domestic energy resources and the need to protect America’s natural resources. Under the leadership of Secretary Salazar, we’ll employ new technologies that reduce the impact of oil exploration. We’ll protect areas that are vital to tourism, the environment, and our national security. And we’ll be guided not by political ideology, but by scientific evidence.

"Remarks by The President on Energy Security at Andrews Air Force Base," March 21, 2010.

On April 2, 2010 -- 18 days before the BP disaster -- here is what the President had to say in Charlotte, North Carolina:

[Photo credit: White House] [W]e’ve got to look at our traditional energy sources and figure out how can we use those most effectively and in the most environmentally sound way. . . .

The decision around drilling -- same approach. What we did was we said we’re not going to have drilling a mile off the North Carolina coast or two miles off. But 50 miles off, 100 miles off, where it is appropriate and environmentally sound and not risky, we should allow exploration to begin taking place to see if there’s certain reserves. . . .

But what we did was we tried to look at the scientific evidence and figure out where are areas where low risk environmentally and a high potential upside. . . .

I don’t agree with the notion that we shouldn’t do anything. It turns out, by the way, that oil rigs today generally don’t cause spills. They are technologically very advanced. Even during Katrina, the spills didn’t come from the oil rigs, they came from the refineries onshore.

"Remarks by the President in a Discussion on Jobs and the Economy," Charlotte, North Carolina, April 2, 2010.

"Protect communities and protect coastlines"; "protect America's natural resources -- tourism, the environment -- guided by scientific evidence"; "environmentally sound and not risky"; "low risk environmentally"; "technologically advanced -- oil rigs today don't cause spills." It sounds as if it was written by a BP publicist. Hopefully, it was not -- but the result is just the same.

Wrapping Up With Democracy Now:
How is the Environmental Impact of Offshore Drilling Like a Forest Trail?
To wrap it up, here is the "Democracy Now" interview of Kieran Suckling, executive director of the Center for Biological Diversity:

SECRETARY KEN SALAZAR: Minerals Management Service will not be issuing any permits for the construction of new offshore wells [after] May the 28th. . . . But today is not really the day to deal with those issues. . . .

[Democracy Now reporter] JUAN GONZALEZ: Secretary Salazar added that the existing offshore oil and natural gas drilling will continue, . . ..

[Democracy Now anchor] AMY GOODMAN: Salazar’s announcement comes on the heels of a Washington Post exposé revealing that the Minerals Management Service had approved BP’s drilling plan in the Gulf of Mexico without any environmental review. The article notes that the agency under Secretary Salazar had quote “categorically excluded” BP’s drilling as well as hundreds of other offshore drilling permits from environmental review. The agency was able to do this using a loophole in the National Environmental Policy Act created for minimally intrusive actions like building outhouses and hiking trails. Well, for more on this story, we’re joined now from Tucson, Arizona by Kieran Suckling, executive director of the Center for Biological Diversity. Welcome to DEMOCRACY NOW!, Kieran. Explain this loophole, how you found it, and what it means for the Gulf.

KIERAN SUCKLING: Well, when a federal government is going to approve a project, it has to go through an environmental review. But for projects that have very, very little impact like building an outhouse or a hiking trail, they can use something called a categorical exclusion and say there’s no impact here at all so we don’t need to spend energy or time doing a review. Well, we looked at the oil drilling permits being issued by the Minerals Management Service in the Gulf, and we were shocked to find out that they were approving hundreds of massive oil drilling permits using this categorical exclusion instead of doing a full environmental impact study. And then, we found out that BP’s drilling permit—the very one that exploded—was done under this loophole and so it was never reviewed by the federal government at all. It was just rubber-stamped.

JUAN GONZALEZ: Well, according to the Washington Post article, in one of its assessments of the agency “estimated that a large oil spill from a deep platform like the Deepwater Horizon would not exceed a total of 1,500 barrels and that a deepwater spill occurring off the Intercontinental shelf would not reach the coast.” Obviously, both of those—both of those assessments have proven dramatically off the mark. As many as 250-400 waivers a year for drilling in the Gulf?

KIERAN SUCKLING: Yeah, yeah, absolutely. It’s also important to note that when the government says it’s very unlikely this spill will occur, it’s unlikely the spill will reach shore, those aren’t even the government’s own assessments. They’re just repeating what BP, Exxon, and other oil companies put in their drilling applications. And since there’s no environmental impact study, the government never actually does an independent review. So everyone is just repeating the industry’s statements as they rubber-stamp the approvals.

AMY GOODMAN: Reporters questioned White House press secretary Robert Gibbs on Wednesday about why BP’s Gulf of Mexico drilling operation was exempted from the detailed environmental impact analysis last year. . . .

KIERAN SUCKLING: The White House and the Department of Interior are really sort of ducking their heads on this issue right now because it’s an enormous problem. Especially since just a few months ago the Government Accountability Office came out with the report on MMS’s operations in Alaska, where they also have offshore drilling, and specifically said the agency is not doing these environmental studies properly. They’re avoiding doing them at all. And then they went ahead knowing that the GAO had just done this study and continued to put them out. So, this is not something new. MMS knew they had a problem. In fact, when Interior Secretary Salazar first came into office, he announced ‘There’s a new Sheriff in town, I’m going to clean up this corrupt agency,’ and instead of doing that, he’s pushed them to put out more offshore oil drilling permits while not cleaning up what is clearly a broken process of doing any environmental review at all.

JUAN GONZALEZ: I want to play a clip of President Obama where he says that oil spills don’t come from rigs, but from refineries. He was speaking on April 2nd, just over two weeks before the explosion of the Deepwater Horizon rig.

PRESIDENT BARACK OBAMA: I want to point out, by the way, that oil rigs today generally don’t cause spills. They are technologically very advanced. Even during Katrina, the spills didn’t come from the oil rigs, they came from the refineries onshore. . . .

KIERAN SUCKLING: Yeah, I mean, I think what the President has said here is actually just very, very critical, because he is repeating, and I suspect without even knowing it, the big lie of offshore oil drilling. For decades, the oil companies and the Minerals Management Service have told us, ‘Oil drilling is safe, it’s fine, that’s not where oil spills come from.’ In fact, that’s the basis of not doing any environmental review is, you simply assert it will never be a problem, therefore, you don’t even have to study it. While it’s true that they don’t leak often, but when they do leak, it’s absolutely catastrophic. It’s very similar to nuclear power plants. They don’t often fail, but when they fail it’s catastrophic. And, therefore, you have to plan for catastrophe. You have to do very intensive environmental analysis, not simply say, ’It’s rare, so we can ignore it.’

AMY GOODMAN: Kieran Suckling, what do think has to happen right now?

KIERAN SUCKLING: Well, first off, I think that the President should announce a complete moratorium on all new offshore oil drilling. This three-week time-out is really too little, too late. And it’s very important to do that now because the president, under the urging of Secretary of Interior Ken Salazar, has planned to open up new offshore oil drilling in Alaska, in the eastern Gulf of Mexico, and on the Atlantic coast. And that just needs to end. It’s not safe anywhere, anytime.

Secondly, the president should immediately revoke existing oil permits and especially in Alaska. Shell Oil, this July, . . . is going to start doing offshore oil drilling in the Chukchi Sea of Alaska. And if you think it’s difficult to clean up oil in the relatively warm, calm Gulf of Mexico, imagine trying to do this with icebergs and sea ice, twenty hours of darkness, in the Arctic oceans. It just cannot be done. If this spill had happened in Alaska, its magnitude would have been ten times worse than has happened in the Gulf.

Then, thirdly, the President should start an initiation of an investigation of Ken Salazar and his role in allowing this to happen.

Salazar has been a major proponent of the offshore oil drilling industry. He passed legislation as a senator in 2006 to open up the Gulf of Mexico in the first place to offshore oil drilling. He gets campaign contributions by British Petroleum. And then he walks into this agency he is supposed to reform, and instead of reforming it, pushes it to do even more offshore oil drilling. So Ken Salazar is part of the problem here, not the solution. He should not be doing the investigation of MMS. He should be under investigation for helping to cause this crisis.

"Government Exempted BP From Environmental Review," Democracy Now, May 7, 2010 (video and transcript).

Most institutions only respond to internal problems when they become serious or dramatic enough to create significant adverse media coverage. The response may be helpful, or may be counterproductive -- even to the institution's self-interest.

But even after the public relations disaster there's no assurance meaningful reform will ensue. Consider our financial collapse. As I pointed out in a recent blog entry, the first thing to do if the problem is "too big to fail" is to make the institutions smaller. And yet, when the Senate tried it was the Senate that was "too" something; it failed. The Goldman Sachs alums won again.

A move to break up major Wall Street banks failed Thursday night by a vote of 61 to 33.

Three Republicans, Richard Shelby of Alabama, Tom Coburn of Oklahoma and John Ensign of Nevada, voted with 30 Democrats, including Senate Majority Leader Harry Reid of Nevada, in support of the provision. The author of the pending overall financial reform bill in the Senate, Banking Committee Chairman Christopher Dodd, voted against it.

The amendment . . . would have required megabanks to be broken down in size and capped so that their individual failure would not bring down the entire system. . . .

In practice, the amendment required the six biggest banks -- Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley -- to significantly scale down their size. It was touted as a way to end Too Big To Fail.

Though top Obama administration officials have not publicly opposed the amendment, its leading economists have opposed ending Too Big To Fail simply by breaking up the nation's financial behemoths. Austan Goolsbee and Larry Summers have both fought back against this idea, as has Treasury Secretary Timothy Geithner.

"Senate Votes For Wall Street; Megabanks To Remain Behemoths," Huffington Post, May 6, 2010.

It remains to be seen whether even America's worst environmental disaster, getting worse by the day, will be enough to change the culture of Washington anymore than our financial collapse was able to do.

But now at least we can see how to connect those slippery, oily dots; now we understand "the rest of the story."

Will we do anything about it -- you and me? That also remains to be seen.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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