Sunday, August 03, 2008

Yet More Disaster Capitalism?

The thought of government using natural and economic catastrophes to enact laws that favor corporations is disturbing, to say the least. Naomi Klein writes of this pattern, and evidence of it emerged this week.

1) Private equity is trumped as the savior for failing banks. Only it requires fewer regulations, itself a major reason for the subprime crisis which sent financial institutions into a tail spin. Will the Treasury and Federal Reserve open up national banks for major investment by private equity underwriters (PEU's)? Ask SemGroup unitholders, Blue Wave Partners' investors, or Carlyle Capital Corporation shareholders, what they think of The Carlyle Group owning 25% or more of a bank, as opined by Carlyle financial chiefs in a Wall Street Journal editorial?

2) An advisory committee recommended the SEC only require earnings restatements for recent periods. They didn't address causes of the 9% restatement rate by American firms. Final accounting re-do's are much lower worldwide. Historically, they ran 2% in the U.S. After 1998, what happened? Corporate executives cheated to beat the band by backdating their stock option compensation. CEO malfeasance required massive multi-year restatements. What better way to hide the negative impact of long term unethical executive behavior, than not have it come out at all? Disaster capitalism, home of the free pass?

3) "Drill Now, Pay Less." Consumers paying $4 a gallon for gasoline became the motivation to open up large areas for oil company drilling. Never mind, those same oil companies reached record profits once again, continuing their three year run. The 2005 Energy Bill provided $6 billion in giveaways to big oil. It looks like Bush & company want to continue the trend. That 2005 bill laid the foundation for the second quarter of 2008, experienced by customers as "Drive Less, Pay More."

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