[THS] !!!!! What Does The BP Escrow Deal Really Mean?

[The Harder Stuff in news and commentary]

http://www.informationclearinghouse.info/article25751.htm


What Does The BP "Escrow" Deal Really Mean?

By Seize BP

June 16, 2010 "Information Clearing House" --  People all around the country have
put so much pressure on the Obama administration that it had to “do something” to
look like it was standing up to BP. The announcement today of a so-called $20 billion
escrow fund from BP would never have happened without mass pressure. But does
this fund truly respond to the needs of the people in the Gulf Coast states?

Too much is at stake for people to let down their guard and accept the “feel good”
sound-bite version of what took place today in the meeting between President
Obama and BP’s executives.

The White House and BP are creating a mythology, or "spin," on what the tentative
agreement signifies.

It is noteworthy that BP's executives are very happy with the new agreement. Their
necessary goal as a corporation is to maximize profits, and not to pay damages to all
of those who have been harmed. As the Washington Post reported after the
meetings, "Behind the scenes, the company had signaled what it expected from
Wednesday's meeting—and the company appears to have gotten exactly what it
wanted."

It is quite clear to us, even though much more will be revealed in the coming days
and weeks, that we have to accelerate the movement for justice. This agreement is
not only inadequate but attempts to shield BP from paying all the damages and
compensation for lost work, ruined small businesses, and a devastated ecosystem.

At first glance, one would believe, based on the headlines that the Obama
Administration compelled BP to set aside $20 billion dollars in an escrow account to
meet the needs of people and communities harmed by BP's criminal negligence.

But this is actually a great deal for BP.

The facts on the "escrow" account

The "escrow account" in 2010 is not $20 billion dollars. BP will put in $3 billion dollars
in the third quarter of 2010 (ending September 30) and another $2 billion in the
fourth quarter (ending December 31). Thereafter, it will have to make installments of
$1.25 billion each quarter for the next three years.

This means that the necessary money will not be available to pay the tens of billions
in losses that are real and immediate. It also means that people and businesses will
have to get in line.

The real number for the escrow account in 2010 is $5 billion—six months from now at
the earliest. To put this in perspective, BP has been bringing in between $26 billion
and $36 billion annually in profits on revenue of $250 billion, and pays out more than
$10 billion in dividends yearly.

According to a report in Forbes, BP could absorb $35 billion in spill costs before it
would have a "material impact" on its operations. But instead, it will be allowed a
paltry $5 billion a year, in an installment plan over four years.

Another measure of perspective can be had by comparison of this $5 billion per year
voluntary set-aside to the accumulated potential fines and penalties under the Clean
Water Act. BP can be fined $4,300 per barrel of oil spilled as a consequence of gross
negligence. With the recent acknowledgment that the spill volume is 60,000 barrels
per day, that is a potential penalty of over $250 million per day. Put another way,
every 60 days accumulates a potential $15 billion fine under the Act. The voluntary
arrangement to set aside $5 billion per year is meager in comparison.

This, of course, reflects Obama’s unwillingness to exercise legal authority against BP.
Department of Justice lawyers could be initiating prosecutions for the accumulated
fines, but aside from the announcement of potential investigations, this has not
occurred.

Obama denies that his deal with BP will function as a cap on its liability, but this
remains to be determined. The deal appears to functionally provide a shield for BP.
As one investment advisor told the Wall Street Journal, the agreement puts "an end
to the financial bleeding," and allows investors to assess what BP's total liabilities
might be. So while President Obama stresses that the plan is not a cap on liability, it
certainly appears as one. The installment terms of the payments themselves limit the
amounts that will be made available while people are seeking claims.

Mr. Feinberg to the rescue—again

President Obama announced that the fund will be administered by Kenneth
Feinberg, a Washington lawyer who made $5.7 million in his law practice in 2008. Mr.
Feinberg has played a particular role in Washington at the time of virtual uprising
against the banks and bankers' bonuses. He was appointed to be the “pay czar” by
Obama reviewing and approving many of the obscene bonuses doled out to AIG and
other executives after they were bailed out with hundreds of billions of dollars of
taxpayers’ money. As Reuters wrote today, "He has been hailed for soothing the egos
of Wall Street executives clutching on to big paychecks, while still looking tough to a
general public shocked by massive payouts to firms on a government lifeline."

There is very little other information about how claims will be processed. There will
have to be determinations made as to what, in the parlance of both BP and President
Obama, is a "legitimate" claim. While Obama stated that anyone can file a claim, that
doesn’t  mean that the claim will be accepted or paid. Nor does it appear that the
decision-making process will include any of the affected Gulf coast residents or their
representatives from the fishers, shrimpers, crabbers, unions, small business people
and workers in the tourism and recreation industry, local elected officials, clergy, and
independent scientists and environmentalists.

Details must be forthcoming about claims payments and standards. Can we expect
tens of thousands of people to receive checks by the end of the month? One thing is
clear: The limited level of the fund necessarily means that claims cannot be paid
equivalent to the damages incurred right now.

The creation of the so-called escrow fund was the result of a nationwide mass
movement. Now is the time to step up our organizing to make sure that we have the
kind of escrow fund that can really meet the needs of the people and repair the vast
environmental damage caused by BP.