Tuesday, June 15, 2010

The Road To Receivership

I've been leery of the calls to put BP's north American operations into temporary receivership. To me, the people demanding it are guilty of BPThought themselves: They're thinking in terms of advantages without giving serious consideration to difficulties and risks. When I speak with others who, like me, had a corporate career but have no ideological objection to receivership, the responses range from skeptical to incredulous.

Each comes from the same place: It's unprecedented for the government to take over part of a corporation that doesn't want to be taken over, so the best guess as to what might happen is no better than a guess. Internal reorganizations and mergers that both parties want are difficult for an organization to absorb. What will happen when what amounts to a hostile takeover places two cultures that neither understand nor respect one another in opposition? This is particularly the case in the oil business, where there's a reflexive view of government as a plodding bureaucracy that impedes profit-making for no good reason.

What does receivership look like? Does it mean placing a new layer of top management in charge of BP America's 33,000 employees? If that's the case, it will fail because the BP employees will come up with a thousand ways to undermine the new management via tactics that verge on insubordination but that never quite cross the line. These will include delays; reports that don't give complete information or that slant it so subtly that the new management will have a hard time detecting the bias; giving a low priority to requests for action or information; and -- trust me -- many, many, many more.

Does receivership mean inserting government managers at lower levels? Will these managers replace existing BP managers, work in tandem with them, or operate between them and the new top management? In any case, it will take the new managers months to figure out who is good at their job, who can be trusted, who will be forthcoming, and whose respect they can earn. Plus, some of the new managers will be ineffective. 

How long is "temporary"? Long enough to clean up the spill? That will be a long time.

How will BP respond? Vigorously, and with greater purpose than they show making payouts, stopping the leak, or controlling the spill. No $300 billion dollar firm will allow a government takeover of a third of its operation without a fight in American and international courts. Resisting them will require attention and resources. Progressives criticize conservatives for dismissing the validity of international law. Would they accept its verdicts in this case?

Nonetheless, it appears as if the Obama administration has taken steps toward putting a part of BP into receivership. Politically and diplomatically, it's a tricky task. Whatever Americans think of BP, the Brits believe that the administration's criticism of the petroleum behemoth has been unduly harsh. Were Obama to put BP America into receivership at this juncture, the British government would object strenuously and could take retaliatory steps. These might include moving against the British assets of American firms or asking for sanctions from the European Union, America's largest trading partner.

So, the administration's argument that BP is obstinate, ineffective, dishonest, and unresponsive must be detailed and unassailable. While that may be obvious to anyone here already, the Brits remain unconvinced, and must be put into a position to where they will back off if the administration decides on receivership. By setting deadlines for improved performance, demanding that BP delay dividend distribution, and establishing an independently administered escrow account for paying liability claims, the administration has already taken steps to build its case. Again, I'm talking about making a case to England and Europe, not to Americans who already hate BP.

Then there's Congress. I think it would be nuts to take this step without support in the form of congressional resolution, partly so that it has the full backing of the government and partly to get Republicans and oil state senators on record. While the oil state politicians and the DeMint/Inhofe wing of the Republican party will oppose receivership, there's evidence that establishment Republicans would support it if the case is made correctly. Even Franklin Roosevelt asked for a declaration of war.

There's more than a little speculation here. For all I know, the Brits would roll over and receivership would poll at 95% approval. The point I'm making is that putting BP America into temporary receivership is not as clear cut a matter as Robert Reich -- a man I deeply respect -- would have us believe. Nonetheless, it may come to that. If it is, it would do well to keep in mind that however much the administration plans for the event, it will be moving into uncharted waters and the plans cannot possibly anticipate all of the problems and issues that will inevitably arise...

"Who cares, it's done, end of story, will probably be fine."
Probably...

Don't forget the Kajorski amendment, which would reinforce the power of regulators to break up big banks...

Rand Paul is not a real doctor...

Gulf of Mexico pelicans have met the enemy, and he is us...

At Least She Has Her Priorities Straight: While her state succumbs to an ecological catastrophe, Mary Landrieu (DINO-LA) expresses grave concern that the escrow account will drive BP to bankruptcy. With leadership like that, no wonder Louisiana ranks 49th in life expectancy, 2nd in poverty, 48th in education, 4th in child poverty, and 44th in median family income. And her colleague, David Vitter (LACKEY-BP) is even more solicitous of BP, having introduced legislation after the spill to limit oil company liability...

Add Mississippi governor and would-be Republican presidential nominee Haley Barbour to the list of oil state politicians who know what's what: "I think it is very reasonable to continue to drill," says Barbour, and he's going to tell President Obama just that. After all, what could possibly be a higher priority? Anyway, according to the man whose state coast line has largely escaped damage, the spill just isn't that big of a deal: "The people of the United States have the impression the whole Gulf of Mexico is ankle-deep in oil, which is simply not the case." Hay-man, we have the impression that the BP/Halliburton Catastrophe killed eleven human beings and annihilated portions of the Gulf's ecosystem. Silly us. Barbour is a 21st Century version of those faux southern "cunnels" that Mark Twain despised. No wonder...

Whatever happened to Halliburton?...

"Every time we used to go outta town for them jive jobs they give us, they always say ‘black folks: late, can’t be on time,’ now look at the White Trash!"...

BP Cares Dept: "No information. Just blah, blah, blah." This, no doubt, the same number that BP trumpets on its web site as the number if "you have ideas to help us."


Jamaicans for Justice: Searching for justice at the Tivoli Gardens Community Center in West Kingston:

7 comments:

Jerry Critter said...

I think the administration has to move very carefully with any takeover of BP. They need to keep this gusher BP's responsibility. And if the republicans are pushing for a takeover, it is only so that they can bash Obama over the head with it in the next election. They could care less about the people or the country.

Roy said...

I'd really hate to see the government take the receivership route with BP America; it'll be playing right into the hands of the Republicans who call the President and his cabinet "socialists". It's a bad PR move and I don't think it'll have the effect Reich thinks it will, and I think your list of questions and the answers to them is spot on. This is a tricky move with far too much potential to blow up in the President's face.

K. said...

People on the left are pushing for some sort of takeover. My belief is that, in general, they should be careful of what they're asking for because they might get it. Personally, I'm inherently suspicious of easy solutions to hard problems; that's what Republicans have been offering for years, and look where it's gotten us.

Whether any of my speculations prove correct or not, I'm positive about one thing: A takeover will mean exchanging one set of problems for another, and there's the risk of actually making things worse. No one should be under any illusion about that.

And you're quite right: Why let BP off the hook? It's their ox in the ditch.

K. said...

The only way I can see doing receivership is with the country behind it and with the backing of enough Republican politicians to offer credible bipartisan support. And of course the Brits at minimum have to stand aside.

I respect Reich, but he has no corporate experience or expertise in corporate culture. That really shows in his essay. He should have thought twice about writing it.

Renegade Eye said...

Even Mao compensated business owners, when expropriated.

Castro offered to pay expropriated business their worth, based on their tax form claims.

If there is a way to stop the leak, and BP won't comply, than there is a basis for takeover politically.

-daj said...

It's altogether proper for President Obama (and the Congress) to sanction BP not only for their actions leading up to the gulf catastrophe, but also for their slow, inept, and arrogant response. But should the government take a piece of BP as part of the bargain?

C'mon now, that's crazy talk.

Natural market forces will bring BP's chickens home to roost, and we all know how brutal the forces of capitalism can be. In the end, BP will pay in ways that will make them wish that all that happened to them was a government takeover.

K. said...

The thing that might force something like receivership is cleanup. I don't believe that BP has either the ability or the desire to do it in the right way. But if it comes to that, no one should think that it's easy or without risk.