THE SPINE JUNE 21, 2010
My hunch is that the hemorrhaging of oil in the Gulf of Mexico won't end until...well, until it ends. By which I mean until the last drop rises to the surface and there is no more below. No, I don't know when that will be, and neither apparently do the hot shot execs at what President Obama (in another swipe at London) called British Petroleum or. for that matter, the president himself. Of course, no one really does. In fact, no one ever got the rate of daily rising correct either -the only constant being that the estimate kept rising and it still does.
They are not pleasant men, these two paladins of one of capitalism's largest combines. It is, by the way, British only in its former name and in its registration. American private investors and pension, mutual and hedge funds hold nearly 50% of the shares in BP. Still, the company's top executives exude a certain high English lordly disdain for the "small people," which is exactly how Carl-Henric Swanberg, the chairman of the board, referred to them. He led a turn-around at Ericcson from which position as CEO he retired with about 3.5 million shares of stock. Certainly not a small person.
Tony Hayward was not, as far as I can tell, well-born. But he rose in the ranks of his company to CEO, presumably by meritocratic standards. Or maybe not. In any event, he impressed no one at the congressional hearings where he testified defensively and charily. Obama commented that, if Hayward had been working at the White House, he'd now be out of a job. We'll soon see how many people and whom the president actually dumps to make it seem that someone was held responsible. By now, someone would have been pushed off the ship if this were a British affair. Anyway, one low level woman bureaucrat is now receiving unemployment compensation. I forgot her name. But the big office at Energy, now empty, is that of the director of the Minerals Managements Service. Still, in Washington, the person to watch taking the real fall is Ken Salazar.
The Times reports it this way:
Shortly before the speech, the White House announced that Mr. Salazar would be getting a powerful new deputy, Michael R. Bromwich, a veteran investigator and former prosecutor, to supervise the remaking of the minerals service. What was not mentioned was that Mr. Salazar had appointed two aides to do the same job just a month before, and that Mr. Bromwich’s new assignment essentially reversed not only that move but also perhaps Mr. Salazar’s entire overhaul plan for the minerals service.
Mr. Salazar’s job is not in immediate jeopardy, and the president values the work he has done and will continue to do at the Interior Department, said Robert Gibbs, the White House press secretary.
But a senior administration official, who spoke of a delicate personnel matter only on the condition of anonymity said, “The president and the White House are watching very, very closely the pace of reform at Interior to see that progress is being made that truly cleans it up.”
The hints to Hayward at BP have been clearer. He was taken off the big leak account, peremptorily and totally. But he is still in office. So here you have some underling pushing the firm's president around. This will not last. And it is being hastened by the fact, as the Times also tells us, that Hayward took the weekend off at the Isle of Wight to attend the JP Morgan Asset Management Round the Island Race. (I suppose that I have to report that Morgan is my broker.) The boat, named "Bob," is half-owned by Hayward. It came in fourth. It is not clear whether Hayward was on or off the yacht during the race.
There's bipartisan schadenfreude towards Hayward in D.C.: both Rahm Emanuel and Alabama Republican senator Richard Shelby seemed especially to resent his joy ride on the waters.
How has this and all of its other depredations affected BP's standing in the market and the world?
Despite kicking BP's ass, Obama has testified to the company's continuing viability. Of course, he couldn't very well command $20 billion from it if he didn't attest to its financial health. According to the Wall Street Journal, however, Dmitry Medvedev, the Russian president did not think the company's future was secure. In fact, it seemed to me reading his interview with the WSJ that he was shedding crocodile tears.
And, finally, we've heard from the rating agencies, those companies I railed against before the economy went deep into the tank. Much of the narrative is the same as it was two and three years ago. If there's bad news Moody's, Standard & Poor's and Fitch realize it too late, much too late. It took Moody's until a week ago tomorrow to realize Greece's troubles. With BP, it's a bit different, more than a bit. There's nothing like unanimity about the agencies' rating of the distressed oil giant. FT headlines to one story reported on June 16 that "Fitch sharply lowers BP's ratings/Status downgraded by six notches/Access to capital markets to be hurt/ This leaves "it just two notches above 'junk' status." On the other hand, Moody's rates BP at Aa2, the third highest investment grade. S&P calculates BP at double A minus, not as high as Moody's but seven grades above the highest non-investment ranking. Frankly, I don't understand this last notch. (I am obliged to inform you that I have an investment stake in BP falling, falling, falling. So ignore this posting if you wish.)
Given the urgency that the Obama administration has shown in the last week or two, it is clear that it simply did not grasp the seriousness of the Gulf happening in the month and a half before that. I suppose a part of the problem is that mixed economies always leave the question of responsibilities up in the air or even in dispute, certainly in a case of private capital being responsible for the deed or the event but adjusting for it being beyond its competence. This makes the BP catastrophe different from Katrina in which there could have been no assumption that corporations would or could shoulder responsibilities for the aftermath. Given the lag of Katrina five years after, society-which is to say public agencies-has not yet mastered the mechanics and ethics of physical reconstruction, of social renewal, of economic reform. Writing these words I shudder to think how spiritually unprepared the Bush administration was for the enormous task.
And, frankly, I see no evidence that the present Democrats would have behaved more energetically, imaginatively, efficiently. The fact is that the Gulf calamity left them completely flummoxed. If they left it to the company to repair and renew on the assumption that BP was responsible they were taking refuge in a formality of little practical import. Anyway, BP was completely incompetent at the well. And it had little or no experience with the social and environmental consequences of the scourge it had produced. Yes, it had scrounged for special exceptions to standard rules and it had gotten them from the Department of the Interior. But that only confused the question of responsibility. It did not nothing to add to anyone's competence. Or imagination.
It was an insipid speech because the president had no answers to the crisis at hand. And it was insipid because, delivered from the Oval Office, it augured both substance and vision. Nothing will come from this insipid speech, neither change nor inspiration for change. And the president realized this as he spoke.