This afternoon, I debated Steve Ellis of Taxpayers for Common Sense on Obama’s plan to establish a $20 billion escrow fund for BP oil disaster victims, along with CNBC hosts are Mandy Drury, Sue Herera and Tyler Mathison. Here’s a transcript:
Amanda (Mandy) Drury: A new poll shows the majority of Americans disapprove of how President Barack Obama has handled the Gulf oil spill, though far more blame BP for what people call a sluggish two month response. The Administration now wants BP to place billions in escrow to pay for damage claims in the wake of the Gulf oil spill – good policy or politics as usual? Well Steve Ellis, of Taxpayers for Common Sense says the plan is a smart move that will save years of legal battles. But Peter Flaherty, President of the National Legal and Policy Center thinks that the government has no legal right to make such a demand – instead calling the move political posturing by opportunistic lawmakers. Pete can you explain why you think that?
Peter Flaherty: Mandy, last week I predicted that if the politicians stampeded BP into suspending their dividend, that it was only the start. It would in no way diffuse the anger against BP and the politicians would come up with new and creative ways to dismember the company. Look, yesterday BP lost ten billion dollars in market capitalization. Last Wednesday when a group of House members sent a letter on the dividend, the company shed fourteen point six billion dollars in market capitalization. This company has plenty of money to pay the claims. The only way they will not do that…
Mandy Drury: It does? Do we even know how much he claims are going to amount to at the end of the day? Wouldn’t it be safe to put the money in a bank to make sure that they do get paid?
Peter Flaherty: Even if they are substantially more than they appear now, this is still a very rich company. They have two hundred and fifty billion dollars in annual revenues. I don’t see the point in taking twenty billion dollars of working capital and putting it in some account off limits so they have to go out into the credit markets and borrow money and raise their costs.
Mandy Drury: Steve, don’t you feel that it would actually speed up the compensation process, if they had a pre fund if you like. Essentially it can take up to two decades from the experience of Exxon Valdez, a lot of the claims there took a long time to process and eventually get out to those who needed the money. Would this speed up this process, having an escrow fund?
Steve Ellis: Certainly it has that potential, just because we can start paying the claims today and we can start moving that forward. From our perspective as a budget watchdog, we are concerned that some of the tab gets shifted to the federal taxpayer. So this will start accelerating that. We will start paying the claims. Let’s face it, the fishermen are not able to go out there and fish. Their boats are idle. The people that used to have guests in their hotels along the shores are not coming. So the economic impacts are very real and are happening right now.
Tyler Mathisen: What about the criticism, Steve, however that whenever you put a special government trustee in charge of a big honey pot of money, the money ends up going not where it probably should go but rather into places where political favors can be repaid. It has been a history of that hasn’t it?
Steve Ellis: No, there is absolutely, there is that challenge. The oversight and the accountability are going to have to be very tightly measured and monitored and that is something we are looking at just out of Katrina. For example we had the same sort of issues.
Tyler Mathisen: That got a rise out of you Pete.
Peter Flaherty: Well, why design a new institution on the fly when we have two hundred years of settled tort law? We had superfund. That worked out real great. It turned into a big boondoggle. What about the concert for Bangladesh? Is it going to be like that? The money sat in an escrow account at the IRS for eleven years. I don’t see how this necessarily enhances the rights of claimants. In fact, if people go up to this fund and they are asked to give up their private right of action, it could actually be quite damaging to their rights. Is it going to pit claimants against claimants? Right now, claimants have rights to approach BP and be made whole. Are those rights going to be compromised because now the government is involved?
Steve Ellis: Well I think the thing is, though, I would say is that we are in an extraordinary situation. I mean this is something that is certainly out of the ordinary not expected so we need some extraordinary response. I think that part of the concern here is that BP will delay on paying claims and that some of this going to end up being borne by the federal taxpayer.
Peter Flaherty: Well Steve, the bigger danger is that with this pot of money, in the hands of politicians, is that it will be distributed in a political way. We saw it with TARP. We saw that with the auto bail out. We saw it with the stimulus. Your particular group Taxpayers for Common Sense has done very good work on earmarks and how public money is used for private purposes and that could happen here.
Mandy Drury: There are lots of sides to this coin. Thanks gentlemen, we will leave it there. Thank you very much.