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The Responses to the Gulf Oil Spill and to the Financial Crisis Are Remarkably Similar … And Have Made Both Crises Much Worse

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Washington’s Blog
May 18, 2010

The Gulf oil spill and the financial crisis were both caused by excessive risk-taking by industry giants and the “capture” of politicians and regulators by the corporate behemoths.

Moreover, the response to the Gulf oil spill and the financial crisis are remarkably similar.

With regards to the financial crisis, the response has been to cover up the truth:

William K. Black – professor of economics and law, and the senior regulator during the S & L crisis – says that that the government’s entire strategy now – as during the S&L crisis – is to cover up how bad things are (“the entire strategy is to keep people from getting the facts”).

Indeed, as I have previously documented, 7 out of the 8 giant, money center banks went bankrupt in the 1980′s during the “Latin American Crisis”, and the government’s response was to cover up their insolvency.

Black also says:

There has been no honest examination of the crisis because it would embarrass C.E.O.s and politicians . . .

Instead, the Treasury and the Fed are urging us not to examine the crisis and to believe that all will soon be well.

The Responses to the Gulf Oil Spill and to the Financial Crisis Are Remarkably Similar ... And Have Made Both Crises Much Worse 150410banner7

PhD economist Dean Baker made a similar point, lambasting the Federal Reserve for blowing the bubble, and pointing out that those who caused the disaster are trying to shift the focus as fast as they can:

The current craze in DC policy circles is to create a “systematic risk regulator” to make sure that the country never experiences another economic crisis like the current one. This push is part of a cover-up of what really went wrong and does absolutely nothing to address the underlying problem that led to this financial and economic collapse.

Baker also says:

“Instead of striving to uncover the truth, [Congress] may seek to conceal it” and tell banksters they’re free to steal again.

Economist Thomas Palley says that Wall Street also has a vested interest in covering up how bad things are:

That rosy scenario thinking has returned to Wall Street should be no surprise. Wall Street profits from rising asset prices on which it charges a management fee, from deal-making on which it earns advisory fees, and from encouraging retail investors to buy stock, which boosts transaction fees. Such earnings are far larger when stock markets are rising, which explains Wall Street’s genetic propensity to pump the economy.

The same is true for the Gulf oil spill.
As ABC News notes, the White House allowed BP to suppress video of the oil spill for 3 weeks; and a top oil spill expert says that BP’s use of booms around the spill site now won’t really do anything … and is just an exercise in public relations so that it looks like it’s doing something.

BP is also using dispersants to hide the extent of the oil spill. Specifically, as many commentators note, the dispersants cause much of the oil to sink, so that it appears that the spill isn’t that big. But the dispersants are not only highly toxic, but will also probably make the damage from the oil itself even worse.

Moreover, just as the cover-up about the severity of the financial crisis has allowed Larry Summers, Tim Geithner, Ben Bernanke and most of Congress to kill real financial reform, BP and the government’s drastic underplaying of the size of the spill has allowed BP to skate by without taking emergency actions, such as bringing in booms on an emergency basis, or to undertake more pro-active and creative responses.

And just as nothing has changed going forward with regard to the economy since the 2008 meltdown, nothing has changed with regard to offshore drilling.

For example, since the Deepwater Horizon oil drilling rig exploded on April 20th, the Obama administration has granted oil and gas companies at least 27 exemptions from doing in-depth environmental studies of oil exploration and production in the Gulf of Mexico. And a whistleblower who survived the Gulf oil explosion claims in a lawsuit filed today that BP’s operations at another oil platform risk another catastrophic accident that could “dwarf” the Gulf oil spill, partly because BP never even reviewed critical engineering designs for the operation.

Indeed, the industry and government spokespeople have used the exact same word as each crisis – financial and environmental – unfolded. They said the problem was “contained”.

In both cases, we the people are left holding the bag because the giant companies and their campaign-contribution-buddies in DC are trying to sweep the severity of the problem under the rug, to manage the crisis as p.r. campaigns to protect those who let it happen … instead of actually taking steps necessary to solve the problems, and to make sure they won’t happen again.

This article was posted: Tuesday, May 18, 2010 at 4:08 am





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