Thursday, June 17, 2010

How is Turning Over Less Than Half of What You Owe a Shakedown?

BP and the Obama Administration came to an agreement that BP would put $20 billion in an escrow account as partial payment for the damages this Gulf oil spill caused – and certain Republicans have screamed “shakedown”. But given the following:

BP and the Republicans have reluctantly agreed to the proposition that BP should pay for all of the damages.

Initial estimates of the damages are around $40 billion.

These estimates were based on evaluation of the amount of oil leaking into the Gulf that have been subsequently shown to be far below reasonable estimates of the amount of oil leaking into the Gulf.

If we take the decline in BP equity value since the oil spill began as the market’s best guess of how much BP will ultimately pay, then the market’s price tag is closer to $100 billion.

Let’s say that you and I have a disagreement as to how much I owe you with you claiming the amount is $100 and me claiming the amount is only $40. If I choose to hand you a twenty dollar bill today with the agreement that we’d settle on the rest tomorrow, could I then scream to the police that you shook me down? Probably not – but that is what certain Republicans are effectively claiming.

5 comments: said...

Congressman Barton of the House Energy Committee has publicly apologized to BP for them being forced to set up this fund, poor things. Well, it's the most that they could do for all the "small people." said...

Oh, I just saw that he retracted his apology, duuuuuh.

Suffern AC said...

Actually if I thought you owed me $100, I would have you hand me $100 and I'd promise to give some of it back to you if we decided that splitting the difference at $70 was fair.

Since you wouldn't like that idea, as I might not come back to the table then, we probably would have someone else hold your $100 until we settled. But even if we agree to a $20 escrow, there is no way I am letting you say that the token good faith amount is 1/2 of what you owe. It is 1/5 of what you owe, and I am about to lawyer up if you keep insisting publicly that what we negotiated is a cap of $40 on your final liability. You said you'd pay for everything and now you're being a little wishy-washy on what "everything" means.

The reporting on this "escrow fund" has been very shoddy to say the least. Regardless, if I am actually not a private person, but instead am the President, and you are the head of a large oil company, I think the legal issues are a bit more complicated. I am not certain what this agreement actually entails or even if it is a binding agreement. But then I only read and watch TV.

What Barton seemed to be implying is that this fund is really more of a fine or a settlement, or that the payments were to be made to the government, and in that case, it would be a shake down.

Eubulides said...

The damage BP has done to the Gulf and, possibly, to the Atlantic, makes a mockery of price theories.

Jack said...

Why would there even be a discussion of the absurd comments of those several politicians who seem to owe some allegiance to the oil industry? Disregard their motives. Disregard their intnetions and their actual comments. Keep the video cameras rolling and capture every stupid, pro BP comment they utter. As election day comes close again break out the instant replay and try hard to accompany their anti-American commentary in defense of the perpetrators with a rational depiction therein.