Given some borderline demands from the US Administration, we want to know how far you think BP's liability extends. So, what is BP's liability?
The outrage of our nation and fervor of our president at the alleged negligence of BP (NYSE: BP) have all kinds of creative ideas coming out of the White House regarding the degree of responsibility BP has and its liability. BP shares have tanked, as imaginative and aggressive statements couple with logical demands emanating out of the White House - we believe at least partly to appease an enraged populace. This, in turn, has long-term purpose, to keep voters on board by positioning the President clearly on the right side of the argument (with the people against the evil oil company). Of course though, all elected officials carry the responsibility to do what their constituents want, to a reasonable degree, since the crowd should never dictate action (or else riots and massacres would increase).
Certainly, BP should have been better prepared for this catastrophic possibility, and should have resolved it sooner. Definitely, it is responsible for clean-up and retribution to business and local economies destroyed in Louisiana, Florida, Mississippi, Alabama, Texas and wherever the ugly mess extends. That means the shrimpers, fishermen and the tourism industry need to be made whole. There's no doubt about this!
However, some have issued demands around BP that are simply not constitutional, and some of these statements have come out of a White House that has raised my unibrow more than once already (talking about the Financial Crisis Responsibility Fee). The White House has no right, for instance, to demand any privately held institution kill its dividend. The Administration has increasingly insisted BP act to do so. Perhaps the government has no intention of breaking the constitutional line at all, but simply to put public pressure on BP to keep its capital in place. This would ensure it will be available in the future to meet rising damage claims.
The line is also drawn somewhere closer to BP, and farther from the White House, with regard to who pays unemployment insurance for job losses across the Gulf states. It is one thing to require a company to compensate businesses, including sole proprietorships, for the business the perpetrator destroys, and another for it to demand a private institution pay unemployment benefits. Employees and companies already pay for employment insurance as part of their ongoing operations costs; these are the reductions to employee salaries and the related indirect upward adjustment to compensation costs for businesses that must pay employees adequately to meet cost of living demands and competitive landscapes.
To our government's defense, the Administration seems to be mostly acting responsibly. It has formed a commission to review what went wrong in terms of BPs operations, government oversight and/or general regulations. As part of an official White House statement found here, the White House declared:
"We've ordered BP to pay economic injury claims, and we will make sure they deliver. The Small Business Administration has stepped in to help businesses by approving loans and allowing deferrals of existing loan payments... And we will absolutely continue to hold BP and any other responsible parties accountable for financial losses borne by the people in the region."
It's the extent of this "responsibility" that troubles me. So I demand our government be careful not to step on constitutional rights in order to serve the angry crowd. If it fails to do so, hopefully the Supreme Court will not also falter, should it be asked to review decisions made in haste in the future.
Wall Street Greek wants to know what you think about this issue.
What is BP's Liability?
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