Category Archives: Regulatory failure

Volkswagen the best?

When Volkswagen was caught cheating on its emissions tests in USA, the vilification was widespread, not to mention expensive.  At the time, I was sure that VW was not the only one cheating.  What I didn't predict was that VW was building the cleanest diesels being sold.  Well, according to the Europeans, that is exactly the case.  Which doesn't surprise me at all.  Nor does it surprise me that Fiat and Suzuki are the worst.

Volkswagen least polluting diesel car brand in Europe, study shows

RT 19 Sep, 2016

New research from campaign group Transport & Environment (T&E) has revealed that all major diesel car brands in Europe are selling vehicles that do not comply with air-pollution limits. The study shows Germany’s Volkswagen produces some of the cleanest cars.

According to the report which comes in the wake of Volkswagen ‘Dieselgate’ scandal, there are 29 million 'dirty' diesel cars and vans driving on Europe's roads today, and that number is growing. The report classifies a car as ‘dirty’ if emissions are more than three times the relevant NOx (Nitrogen oxides) limit.

“One year after the US caught Volkswagen cheating; all carmakers keep selling grossly polluting diesel cars with the connivance of European governments... Only a recall of all harmful diesel cars will clean up our air and restore credibility in Europe’s legal system,” said Greg Archer, clean vehicles director at T&E.

The researchers analyzed emissions test data from around 230 diesel car models. They found that Fiat and Suzuki diesel cars on average pollute 15 times more than the legal NOx limit while Renault-Nissan vehicles exceed the limit more than 14 times. General Motors’ brands Opel-Vauxhall emissions were found to be ten times higher than permitted levels.

The report revealed that under the new European exhaust emissions standard called Euro 6 rules, German manufacturer Volkswagen was selling among the cleanest diesel vehicles.

T&A, however, said that the better performance of Volkswagen Euro 6 cars had nothing to do with Dieselgate, but with better technology choices made before the scandal erupted.

“Volkswagen is not the carmaker producing the diesel cars with highest nitrogen oxides emissions and the failure to investigate other companies brings disgrace on the European regulatory system,” says Greg Archer.

The Euro 6 emissions standard has a limit of 0.08g per kilometer; it is a significant reduction from the previous Euro 5 standard which allowed 0.18g per kilometer.

According to the European Environment Agency, NOx pollution from diesel engines is considered a serious public health risk. It is responsible for an estimated 72,000 premature deaths in Europe in 2015.

Under the EU’s new emissions regulations, diesel cars that emit more than double the lab limit for NOx on the road will be banned from sale, starting September 2017. more

12/6/16: Few Thoughts on Anglo Trial Verdicts

A friend recently did me a small service by summing up my comments on twitter on the Anglo Irish Bank - Irish Life & Permanent roundabout loans verdict:

I have provided an expert testimony on the matter in April in a court case involving the Central Bank, the Department of Finance and the Attorney General of Ireland, focusing precisely on the nature of the relationship between the Irish Financial Regulation authorities and the misconduct by banks and banks boards prior to 2008 Global Financial Crisis.  Quoting from my expert opinion:

"Part 4: Regulatory enforcement effectiveness and efficiency

46. In my opinion, and based on literature referenced herein, objectives of the function of enforcement in financial regulation are best served by structuring enforcement processes and taking robust actions so as to:
1. Target first and foremost the core breaches of regulatory and supervisory regimes, starting with systemic-level breaches prior to proceeding to specific institutional or individual level infringements [Targeting];
2. Timely execute enforcement actions, both in the context of market participants’ timing and timing relevant to the efficiency and effectiveness of uncovering the actual facts of specific alleged infringements [Timely execution];
3. Prevent or at the very least reduce, monitor and address any potential conflicts of interest in enforcement-related actions [Conflict of interest minimisation];
4. Assure that enforcement actions are taken within the constraints of the regulatory regime applicable at the time of alleged committing of regulatory breaches, while following well-defined and ex ante transparent processes [Applicability and quality of regulation and enforcement];
5. Assure that regulatory enforcement actions do not contradict or duplicate other forms of enforcement and remedial measures, including legal settlements [Consistency of legal and administrative frameworks]."

In simple terms, systemic lack of imposition of meaningful sanctions on senior policy, regulatory and supervisory decision-makers active in the Irish financial services in the period prior to the Global Financial Crisis severely undermines the signalling and deterrence functions of regulatory enforcements. Convicting bankers for mis-deeds is fine, but not sanctioning regulatory and supervisory officials is not conducive to establishing any tangible credibility to the regulatory enforcement regime. Worse, it establishes a false sense of security that the system has been repaired and strengthened by convictions achieved, whilst in reality, the system remains vulnerable to exactly the same dynamics and risks of collusion between regulators and supervisors and the new financial services executives.

It is, perhaps, telling that my counterparts providing expert opinions in the case on behalf of the Central Bank, Department of Finance and the Attorney General of Ireland have based their analysis on the axiomatic assumption that no regulatory, supervisory and enforcement staff can ever be held liable for their actions or inactions in the events and processes that led to the Global Financial Crisis. No matter what they have done or refused to do. Full impunity must apply.

The invisible poverty of America’s working class

Is the political backlash of poor whites this election the outcome of the decades-long war on the USA Producer classes?

Well, that's one way putting it.  Since the Carter administration, there has been a war on the productive middle of the country.  Some pirate would show up with some hot money, loot a local factory of any loose assets, ship the jobs to China or Vietnam, and escape with his ill-gotten gains.  This often took less than a year.  The folks who worked in that factory faced a slow-motion death sentence.  It doesn't take long before they have lost homes, transportation, spouses and families.  Then they start to lose their health.  In the meantime, they have tried everything they could think of to arrest their falls.  They may have retrained to become a computer repair person or an energy rater.  They drew food stamps or unemployment for as long as that lasted.  Of course nothing that lame can possibly replace the job they recently did so well.

The descent into non-personhood is quite obvious.  When the unemployment benefits run out, they are no longer counted as unemployed.  If they lose their banking services, they are not counted by the world of credit and finance.   Society is sending a VERY strong message—your life is worthless.  So these worthless nobodies are rendered so invisible, not even academics are interested in counting them.

The white males who have been victimized by the deindustrialization of USA face one more sinister attack on their personhood—the accepted party line which claims that white males are privileged and the root cause of the most serious social problems.  That critique may apply to the latest member of Skull and Bones, but it most certainly does NOT apply to someone whose means of existence has been snuffed out by Predators.  It does serve to silence any possible valid complaints in the minds of our august defenders of political correctness, however.  "Your town was destroyed and your life destroyed," argue the lefties who would have once championed the cause of these dispossessed people, "but it was so obviously your fault.  Critical theory says so"

It happens that the invisible people have not just died as planned, but their miserable lives have now shown up in the health and mortality statistics.  This hardly means that our academics and state statisticians are suddenly going to see these people again.  My bet it that this health study will be swept under the institutional rugs.  Can't have anyone questioning why it was OK to destroy the lives of innocent people who only wanted to do a good job, now can we?  The Predator Classes have been hiding the damage their atrocities have caused for a millennia—why would they stop now?

All Hollowed Out

The lonely poverty of America’s white working class


For the last several months, social scientists have been debating the striking findings of a study by the economists Anne Case and Angus Deaton.* Between 1998 and 2013, Case and Deaton argue, white Americans across multiple age groups experienced large spikes in suicide and fatalities related to alcohol and drug abuse—spikes that were so large that, for whites aged 45 to 54, they overwhelmed the dependable modern trend of steadily improving life expectancy. While critics have challenged the magnitude and timing of the rise in middle-age deaths (particularly for men), they and the study’s authors alike seem to agree on some basic points: Problems of mental health and addiction have taken a terrible toll on whites in America—though seemingly not in other wealthy nations—and the least educated among them have fared the worst.

Meanwhile, other recent research has piled on the bad news for those without college degrees. A Pew study released last month found that the size of the middle class—defined by a consistent income range across generations—has shrunk over the last several decades. In part, this is because high-paying jobs for the less educated are vanishing. The study builds on other recent research that finds that almost all the good jobs created since the recession have gone to college graduates.

The workers I interviewed after the recession for my book on unemployment—less-educated factory workers—offer some tentative clues about what might be driving the disquieting trends described by the Case and Deaton study. This is one of the groups hit hardest by the rising inequality and greater risk of unemployment and financial insecurity that have become features of today’s economy, and their experiences put in concrete terms how the economy and culture have become more hostile to workers not lucky enough to be working in posh offices on Wall Street or in Silicon Valley.

One man I talked to was 47 years old, the son of a Detroit factory worker who headed into the plants himself. (As is standard in sociology, my interviewees were promised confidentiality.) He told me how he recently lost his $11-an-hour job: He was driving a forklift at his company’s plant when he accidentally crashed into a ladder. No one was hurt and nothing was damaged—but he was an at-will worker at a company with no union, and he was fired. Shortly afterward, his wife, who was making $8 an hour at a cleaning company, decided to leave him. The stress of failing to find a job and being alone made him too depressed to eat, and he started taking antidepressants.

When it comes to explaining American economic trends, it is important to remember how critical a role manufacturing and unions have played in the building—and now dismantling—of a strong middle class. For generations, factories provided good jobs to people who never went to college, allowing families—first white ethnic immigrants, and then others—to be upwardly mobile. Bringing together large numbers of people under a single roof, factory jobs were also relatively easy to organize. As the sociologists Bruce Western and Jake Rosenfeld have argued, unions at their prime helped create a “moral economy” in which wages rose both in firms with unions and those without them, and in which the average worker had a notable voice—however compromised back then by nativism and other exclusionary tendencies—lobbying on their behalf in Washington.

But in the late ’90s—the beginning of the crisis period that Case and Deaton identify—the number of manufacturing jobs in the U.S. dropped dramatically. Intensified by free-trade deals such as NAFTA, the hollowing-out of American industry then was much greater, in terms of the absolute number of jobs lost, than what the country experienced during its first wave of deindustrialization.

Twenty years ago, union membership—in decline since the ’60s—fell to a level not seen since the Great Depression. For various reasons, it became much harder to pursue the sorts of collective action that unions once cultivated throughout the economy—that is, banding together to convince companies and governments to treat employees better. Free trade and automation undercut the bargaining positions of the working class. Political leaders, bankrolled by the wealthy, rolled back the interventionist policies of the New Deal and postwar period. Corporations, once relatively tolerant of unions, tapped a cottage industry of anti-union consultants and adopted unseemly tactics to crush any organizing drives in their workplaces.

As organized labor in this country has withered, an extreme individualism has stepped in as the alternative—a go-it-alone perspective narrowly focused on getting an education and becoming successful on one’s own merit. This works well for some, but for others—especially the two-thirds of Americans over the age of 25 who don’t have a bachelor’s degree—it often means getting mired in an economy of contract work, low pay, and few, if any, benefits. These prospects suggest that this is an age of diminished expectations for the working class.

Certainly, it cannot be said enough that African Americans and Latinos continue to fare significantly worse than whites in terms of their overall rates of death and disease, even if the racial gap has narrowed. Indeed, the broader story that many commentators seem to have neglected in recent months is the decline of the working class as a whole. In the decades after World War II, racial minorities were denied many of the jobs, loans, and other resources that allowed the white majority to buy homes and accrue wealth. If the gains of economic growth have gone largely to the rich in recent years, in that earlier period the white working class could count on hefty rises in living standards from generation to generation, and they grew accustomed to that upward trajectory of growing prosperity. When the labor market turned against them, they had the hardest fall. Many in the working class are going without marriage—a form of social support.

Any explanation of the ominous trends in the Case and Deaton study is, at the moment, speculative. More research is needed, as social scientists like to say, and there are numerous caveats. For example, while the disappearance of high-paying jobs for those with little education is a large part of the overall story of a shrinking middle class, it can’t wholly account for the uptick of mortality identified in the Case and Deaton study. After all, other countries have not seen similar hikes in deaths, even though manufacturing and (to a lesser extent) union membership have crumbled abroad as well.

Likewise, the groups that have been affected most viciously by these market trends in the U.S., African Americans and Latinos, have not suffered the dramatic increases in death by suicide or substance abuse that whites have. It may be that changes in the economy have affected these workers in different ways. For instance, whites are more likely to be employed in the declining manufacturing sector than African Americans or Hispanics—and for that matter, they’re morelikely to live in the rural communities devastated by this most recent, post-NAFTA era of deindustrialization. Furthermore, whites are less likely to be union members than African Americans (though not Asians or Hispanics).

Yet there is clearly more to the despair of the working class than empty wallets and purses. Patches of the social fabric that once supported them, in good times and bad, have frayed. When asked in national surveys about the people with whom they discussed “important matters” in the past six months, those with just a high-school education or less are likelier to say no one (this percentage has risen over the years for college graduates, too). This trend is troubling, given that social isolation is linked to depression and, in turn, suicide and substance abuse.

One form of social support that many in the working class are going without is marriage. I’m reminded of another worker I interviewed, a jobless 54-year-old white woman who used to work at a Ford plant. Her husband left her, she says, when the paychecks stopped coming. “Jesus Christ,” she told him once. “I didn’t think that our relationship was based on the amount of money that I brought in.” Unable to pay her mortgage, she lost her home and had to move in, as she puts it, with a “man friend.” She is depressed, unable to sleep at night, and constantly worried about falling into poverty. “I’m a loser,” she says.

As scholars of family life as politically distinct as Andrew Cherlin and Charles Murray have stressed, college graduates and the less educated have greatly diverged in terms of when and how they partner up and have kids. Nowadays, well-educated couples are much more likely to marry, stay married, and have children within marriage than those with less schooling. The white working class in particular is seeing sharp drops in these indicators—again, not to the levels of nonwhites, but a drastic reversal all the same, and one that has intensified over the last few decades.

A large part of the explanation for this must be that society’s attitudes about the sanctity and permanence of marriage have changed. But it’s important to note that there is an economic dimension to these trends, too—as the frequent separations and divorces I saw among the long-term unemployed made plain to me. Those struggling financially are less likely to follow the traditional path of first comes marriage, then comes a baby. And if they do choose to get married, there is little room for unemployment. As the Detroit man who lost his job told me, he and his wife split up “because she’s working, and … I don’t have any money coming in.” They had been fighting over finances even before he lost his job, he points out, but the arguments grew more heated afterward. In a lone-wolf economy, as sociologists Kathryn Edin and Maria Kefalas have argued, why take a chance on a partner down on his luck when you’re just barely surviving yourself?

The waning of religious belief may be another trend aggravating the modern malaise of the white working class. Since the ’90s, the number of Americans who declare no religious preference on surveys has almost tripled—from 8 percent at the beginning of that decade, to 21 percent in 2014. Whites fall disproportionately into this camp. The religiously unaffiliated are not necessarily secular in their outlook. Many of them are spiritually inclined but skeptical of organized religion—especially its intrusion into politics. However, in the absence of any other source of social support and collective meaning (say, unions), there’s less in the way of psychological protection from the slings and arrows of American society.

This sort of isolation was common among the people I talked to. Many said their faith was helping them get through their ongoing troubles, yet they rarely or never went to church. Some felt ashamed to be around people because they were out of work. For others, their religious belief was somewhat a source of self-help, rather than a source of community. For example, one of the workers I interviewed said that being out of work for so long had filled him with a constant rage. To calm his mind, every night he would pick up his Bible and read a dozen verses. He had given up on the church and what he described as its superficial ways. “I want to go to hear the Word—I don’t want to go to see what you’re wearing,” says the man, 53 and from Flint, Michigan. The other way he copes is going outside for a smoke.

For this man and many like him, there is no one to talk to, no one to rely on. “Nowadays, you got people you really can’t trust, man,” he says. “You can’t call everybody your friend.” As the ties that bind them to others have unraveled, the working class has become an ever lonelier crowd.Policies to keep people from sinking into poverty and long-term unemployment could make a huge difference.

The larger context of this isolation and alienation is America’s culture of individualism. It, too, can worsen the despair. Taken to an extreme, self-reliance becomes a cudgel: Those who falter and fail have only themselves to blame. They should have gotten more education. They should have been more prepared. On this score, too, the U.S. deviates from other wealthy nations. America’s frontier spirit of rugged individualism is strong, and it manifests itself differently by race and education level, too. White Americans, for instance, are more likely to see success as the result of individual effort than African Americans are (though not Hispanics). The less educated, particularly less-educated whites, also share this view to a disproportionate degree.

In Stayin’ Alive, his powerful history of the “last days” of the working class, the historian Jefferson Cowie describes how the proud blue-collar identity of previous generations disintegrated during the ’70s. “Liberty has largely been reduced to an ideology that promises economic and cultural refuge from the long arm of the state,” he writes, “while seemingly lost to history is the logic that culminated under the New Deal: that genuine freedom could only happen within a context of economic security.” As working-class solidarity receded, an identity built on racial tribalism often swept in.

With that in mind, it’s interesting that Americans tout the importance of getting an education—an inherently individualistic strategy—as the pathway to success. This view was the ideological backbone of the Clinton administration policies put forth in the ’90s, with their individual training accounts and lifetime-learning credits. To this day, the supreme value of education remains one of the few things that Americans of all persuasions (presidential candidates included) can agree on. But this sort of zeal can lead to the view that those who have less education—the working class—are truly to blame for their dire straits. While many of them will go on to obtain more education, many others will not—because they can’t afford it, aren’t good students, or just (as some of my workers said) prefer working with their hands. But if they don’t collect the educational degrees needed for today’s good jobs, they are made to feel that they have failed in a fundamental way.

Some of the analysis of the Case and Deaton article has focused rightly on recent developments in this country’s drug crisis—namely, the surge in abuse of prescription opioids, and the resurgence in heroin use, notably among whites. There is clearly a pressing need to deal more vigorously with this drug problem and the epidemic of fatal overdoses and liver disease that has affected the poor and working class in particular.

At the same time, it should be said that risky individual behaviors are shaped by broader social conditions. As the researchers Bruce Link and Jo Phelan have argued, effective health interventions need to consider the underlying factors that put people “at risk of risks”—specifically, socioeconomic status and social support. Seeing this big picture is important because blocking one pathway to disease or death—say, opioid abuse—may just lead to people to opt for another deadly means of coping with the pain of their poor life prospects.

One parting observation, then, is that policies to keep people from sinking into poverty and long-term unemployment can make a huge difference. In advanced industrial nations that have stronger social safety nets, the working class is not experiencing the rising death rates that Case and Deaton identified. Abroad, many of the working-class unemployed benefit from a financial backstop of sorts that keeps them from hurtling into the deepest forms of desperation. Here in the U.S. they would too, if only there were such a thing. more

Climate change and Big Oil

The stories about what the oil industry knew about climate change just get juicer.  Probably the main reason I am so hooked on these tales is because Institutional Analysis could have predicted (and probably did somewhere) exactly the behavior of the oil companies.

Start with Institutional assumption #1: The oil companies always know.  They have to know everything possible about the crude they will turn into gasoline and jet fuel—including which oil fields it comes from.  These people build and maintain infrastructure so complex, massive, and expensive that most folks find it incomprehensible.  Their work is not only difficult, it is very dangerous so getting the answer right is often a matter of life and death.

Because this basic assumption is true beyond rational debate, it follows that the oil industry employs the best scientists on earth.  They have the most money to pay for top talent and plenty of good reasons to employ them.  The science of climate change has been pretty much settled since the early 20th century and is simple enough to explain to a reasonably alert 7th-grader.  OF COURSE the oil scientists understood climate change.  And now we see that they relied on their calculations to makes design changes in their infrastructure.  That's called putting your money where your mouth is.

What Big Oil chose to do with all this leading-edge understanding of climate change was not so predictable but in retrospect, quite understandable.  Because it is quite obvious that they looked at the climate change problem and concluded that even with all their massive scientific expertise, they didn't know what to do about it.  And so they chose to make the environmental pests go away.  They concluded that the environmentalists didn't know how to fix things either but they did know how to write regulations off-loading the fix on someone else—such as the oil companies.  So the environmental scientists had to be neutralized, and for an astonishingly small amount of money, they were.  Turns out it isn't hard to confuse the general public about matters they already find confusing.

The real lesson here is not about the power of Big Oil, but their self-defined powerlessness.  It's easy to sit on the sidelines and wonder why the oil companies didn't just turn their immense scientific and technological skills towards the problem of building the new green energy infrastructure.  But having stared into that abyss, they chose to muddy the academic debate while corrupting the processes of democracy.  Turns out that was a whole lot easier.

Big Oil braced for global warming while it fought regulations


A few weeks before seminal climate change talks in Kyoto back in 1997, Mobil Oil took out a bluntly worded advertisement in the New York Times and Washington Post.

“Let’s face it: The science of climate change is too uncertain to mandate a plan of action that could plunge economies into turmoil,” the ad said. “Scientists cannot predict with certainty if temperatures will increase, by how much and where changes will occur.”

One year earlier, though, engineers at Mobil Oil were concerned enough about climate change to design and build a collection of exploration and production facilities along the Nova Scotia coast that made structural allowances for rising temperatures and sea levels.

“An estimated rise in water level, due to global warming, of 0.5 meters may be assumed” for the 25-year life of the Sable gas field project, Mobil engineers wrote in their design specifications. The project, owned jointly by Mobil, Shell and Imperial Oil (a Canadian subsidiary of Exxon), went online in 1999; it is expected to close in 2017.

The United States has never ratified the 1997 Kyoto Protocol to reduce greenhouse emissions.

A joint investigation by the Columbia University Graduate School of Journalism’s Energy and Environmental Reporting Project and the Los Angeles Times earlier detailed how one company, Exxon, made a strategic decision in the late 1980s to publicly emphasize doubt and uncertainty regarding climate change science even as its internal research embraced the growing scientific consensus.

An examination of oil industry records and interviews with current and former executives shows that Exxon’s two-pronged strategy was widespread within the industry during the 1990s and early 2000s.

As many of the world’s major oil companies — including Exxon, Mobil and Shell — joined a multimillion-dollar industry effort to stave off new regulations to address climate change, they were quietly safeguarding billion-dollar infrastructure projects from rising sea levels, warming temperatures and increasing storm severity.

From the North Sea to the Canadian Arctic, the companies were raising the decks of offshore platforms, protecting pipelines from increasing coastal erosion, and designing helipads, pipelines and roads in a warming and buckling Arctic.

The industry contends that the difference between its public relations effort and its internal decision-making was not a contradiction, but a strategy to protect its business from misguided federal regulations while taking into account the possibility that the climate change predictions were valid.

“During planning and construction of major engineering and infrastructure projects, it is standard practice to take into account many types of risks both short-term and long-term, likely and unlikely,” said Alan Jeffers, a spokesman for Exxon Mobil, which merged in 1999. “These risks would naturally include a range of environmental conditions, some of which could be associated with climate change.”

By the late 1980s, calls by scientists and environmentalists to limit fossil fuel emissions were gaining traction. A growing scientific consensus was emerging, suggesting a link between climate change and carbon dioxide emissions, and a concern that those changes could cause global upheaval — from warming temperatures to rising sea levels and melting glaciers.

Governments across the globe took heed.

In 1988, Democratic Sen. Timothy Wirth of Colorado called a congressional hearing on the topic, and James Hansen, a NASA scientist, asserted “with 99% confidence” that global warming was occurring. That same year, the United Nations formed the Intergovernmental Panel on Climate Change to examine its future impact.

Facing a growing environmental and political movement, a collection of energy companies, primarily from the coal sector, created the Global Climate Coalition to fight impending climate change regulations.

The group approached the American Petroleum Institute for funding and support in the early 1990s.

William O’Keefe, executive vice president of the Petroleum Institute at the time, delivered. The major oil companies, he recalled, decided “something has to be done.”

By 1993, he was sitting on the board, and within a few years, he was chairman. He brought with him support from the trade group, as well as individual trade group members, including Exxon, Mobil, Shell and others.

For the next 10 years, the coalition, whose annual revenue peaked at about $1.5 million before Kyoto, spent heavily on lobbying and public relations campaigns. As part of the effort, it distributed a video to hundreds of journalists, the White House and several Middle Eastern oil-producing countries suggesting that higher levels of carbon dioxide in the atmosphere were beneficial for crop production, and could be the solution to world hunger.

The coalition’s campaign emphasized the uncertainty surrounding climate change science, and warned of dire economic consequences for consumers should regulations on the industry be enacted.

Two recent papers published in the journal Nature Climate Change and in the Proceedings of the National Academy of Sciences suggest that the coalition effort helped polarize public discourse on climate change.

“The ramifications of this multiyear effort by these funders are immensely important,” said Justin Farrell, a sociologist at Yale University and author of the studies, which looked at how the industry’s messaging affected the public debate. Their influence explains, he added, why the issue went from being bipartisan to polarizing.

O’Keefe said no one in the coalition denied the existence of global warming, but there was uncertainty about how well the models could project its future impact.

What coalition members felt certain about, he said, was that any government-mandated emission reductions would have “a clear negative impact,” including unemployment, higher energy prices and a drop in the U.S. standard of living.

When it came to their own investments, though, coalition members relied on scientific projections — from rising sea levels to thawing permafrost — to design and protect multibillion-dollar investments in pipelines, gas developments and offshore oil rigs.

O’Keefe, who is now chief executive of the George C. Marshall Institute, a conservative think tank that focuses on science and policy issues, contends that there was nothing inconsistent in the industry’s actions. “Companies always take into account a range of possible outcomes” before making billion-dollar investments, he said, and they didn’t “dismiss the potential of increased warming.”

In 1989, before Shell Oil joined the Global Climate Coalition, the company announced it was redesigning a $3-billion North Sea natural gas platform that it had been developing for years.

The reason it gave: Sea levels were going to rise as a result of global warming.

The original design called for the platform to sit 30 meters above the ocean’s surface, but the company decided to raise it by a meter or two.

The company’s then-chief offshore engineer, Chris Graham, said rising sea levels and increasing wave heights were “really showing” during the late 1980s and early 1990s, and the company was taking them seriously. A rash of storms and monster waves that had battered the North Atlantic and Gulf of Mexico during those years was particularly concerning, and engineers wondered whether climate change might be behind it.

“The tipoff to there being changes came from hurricanes,” said Bob Bea, another Shell offshore engineer at the time who also worked for the global engineering firm Bechtel. “Even back in those days ... hurricane intensities were changing.”

In 1994, representatives from the oil industry, insurance companies and several North American and European governments formed a quasi-governmental organization called Waves and Storms of the North Atlantic Group to determine whether climate change was behind the worsening weather.

The group concluded that if carbon dioxide levels continued to climb, there’d be “moderate increases of surges along the North Sea coast and of wave heights in the North Atlantic.”“Even back in those days ... hurricane intensities were changing.”— Bob Bea, former director of Shell research

That same year, industry engineers submitted a document to European authorities on the construction of the Europipe, a natural gas pipeline leading from a North Sea offshore platform to the German coastline, via the ecologically fragile Wadden Sea.

In it, the engineers noted that sea levels had risen over the last century, and suggested there could be a “considerable increase of the frequency of storms as a result of a climate change.” They concluded that although climate change was a “most uncertain parameter,” their pipeline designs should include protections against its impact.

The Europipe was jointly operated and owned by a group of companies, including Shell, Exxon, Conoco, Total and the biggest investor, Norway’s Statoil. They included climate change protections in their design specifications in part to convince German authorities to give them the go-ahead, according to Romke Bijker, a Dutch engineer who co-wrote the design specifications.

“We had to think at the time, what are the most important aspects we have to include if we look 50 years ahead,” he said.

By the mid-1990s, though, Shell had joined the Global Climate Coalition, and with its partners was publicly questioning the science behind climate change and casting doubt on its projected impact.

“There has been a great deal of speculation about a potential sea level rise,” the coalition said in a 1995 mission statement obtained by Greenpeace. But, the statement continued, “most scientists question the predictions of a dangerous melting of Greenland or Antarctic ice caps.”

In a section on the science of sea level projections, the document concluded that warmer air temperatures could actually “increase snowfall, decreasing the likelihood of sea level rise due to polar ice cap melting.”

Curtis Smith, a spokesman for Shell, declined recently to comment on the company’s actions two decades ago. However, he said Shell recognized the “importance of the climate challenge and the critical role energy has in determining quality of life for people across the world.”

Shell left the Global Climate Coalition in 1998 after the Kyoto agreement had been effectively derailed.

During this period, Mobil Oil (now part of Exxon Mobil) considered climate change when designing its Sable gas development off Nova Scotia.

Big storms, monster waves and sea level rise were “all part of the discussion,” said Bassem Eid, author of the report. Eid’s firm, Maclaren Plansearch, was hired by Mobil to conduct the company’s environmental assessment for the Canadian government.

“I used the engineering standards of the day to incorporate potential impacts of Global Warming on sea-level rise,” Eid said in an email. “It was a hot topic in the early 1990s.”

Regulators and engineers at the time were beginning to incorporate such planning into other large infrastructure projects, including a bridge designed to span Northumberland Strait from New Brunswick to Prince Edward Island. Climate change was discussed as project plans were assembled, according to regulators and contractors who worked on the project.

In public, though, the coalition partners, including Exxon’s CEO, Lee Raymond, said that the impact of climate change was uncertain, and that even if the models did prove to be accurate, the effects from warming were not imminent.

“It is highly unlikely that the temperature in the middle of the next century will be affected whether policies are enacted now or 20 years from now,” Raymond told a 1997 gathering of energy executives at the World Petroleum Congress in Beijing.

By the early 2000s, the Canadian government explicitly required companies to consider climate change in their operations.

Exxon Mobil’s Canadian affiliate, Imperial, addressed the effect that climate warming could have on its plan to build pipelines, gas processing and separation facilities, airstrips, helipads and barge landings in the Northwest Territory’s Mackenzie Delta. Its conclusion: very little.

In a 28-page report examining the effects of climate change on the project, Imperial concluded that although “uncertainty exists” and “climate change could affect the northern environment,” those changes were unlikely to have any meaningful impact.

However, at a public hearing on the project, an Imperial engineer told an audience that “the project generally accepts that climate warming is occurring and that’s generally included in the design calculations.” At other hearings, company engineers noted that Imperial had incorporated climate change projections into its plans.

During this same period, Exxon Mobil provided money to organizations questioning that science, including more than $200,000 in 2004 to the Frontiers of Freedom Institute, which supported the work of Willie Soon, a well-known climate change skeptic. Between 1998 and 2005, Exxon Mobil’s foundation provided more than $15 million to similar organizations.

“There is nothing inconsistent about Exxon Mobil managing potential environmental risks while speaking publicly about the limits of scientific knowledge and advocating for effective public policy approaches,” said Exxon Mobil’s spokesman, Jeffers, referring to all of the company’s projects at the time, including those in Canada. “Any suggestion to the contrary would be inaccurate and a distortion of the company’s position.”

When Shell left the Global Climate Coalition in 1998, it was followed by Ford Motor Co., Daimler Chrysler, Texaco, Southern Co. and General Motors. The organization disbanded in 2002.

O’Keefe, the coalition’s former chairman, said he had recommended it be shut down because members were “taking a lot of heat” for a job they had already accomplished — effectively quashing any regulation that would have limited fossil fuel use.

Today, all of the major oil companies publicly acknowledge the risks of climate change.

In the mid-2000s, the American Petroleum Industry began funding a project by the National Center for Atmospheric Research to better understand the relationship between climate change and hurricanes in the Gulf of Mexico.

In 2007, Exxon Mobil disclosed to shareholders — for the first time — the potential risks that climate change posed to its bottom line.

“What is most unfortunate,” said Farrell, the Yale sociologist, “is that polarization around climate change ... was manufactured by those whose financial and political interests were most threatened.” Even today, he added, that polarization has crippled any hopes for bipartisan policy solutions.

Meanwhile, the sea level along the Nova Scotia coast, as Mobil Oil’s engineers originally forecast, is indeed rising — and at rates higher than the global average.

Michael Phillis, Melissa Masako Hirsch, Elah Feder and Asaf Shalev contributed to this report.
About this story:

Over the last year, the Energy and Environmental Reporting Project at Columbia University’s Graduate School of Journalism, with the Los Angeles Times, has been researching the gap between Exxon Mobil’s public position and its internal planning on the issue of climate change. As part of that effort, reporters reviewed hundreds of documents housed in archives in Calgary’s Glenbow Museum and at the University of Texas. They also reviewed scientific journals and interviewed dozens of experts, including former Exxon Mobil employees. This is the third in a series of occasional articles.

The Energy and Environmental Reporting Project is supported by the Energy Foundation, Open Society Foundations, Rockefeller Brothers Fund, Rockefeller Family Fund, Lorana Sullivan Foundation and the Tellus Mater Foundation. The funders have no involvement in or influence over the articles produced by project fellows in collaboration with The Times. more

Greider on Clinton and Wall Street

Probably nothing demonstrates so vividly the dramatic shift to the right in USA politics as the story of Hillary Clinton and her role in the Democratic Party.  I sort of understand her bellicose hawkishness because I got to know some amazingly militaristic "liberals" during my experience with the anti-war movement in the 1960s and 1970s.  I was living in Minnesota which had an anti-war candidate in Eugene McCarthy and a serious Cold Warrior in Hubert Humphrey.  The Humphrey people could not believe we could part company with him over Vietnam.  I was once asked, "Are you really going to turn your back on the man who almost single-handedly gave us Medicare?  Over Vietnam?"  So while I do not like it, I understand the Democratic Party selecting as its standard-bearer someone who at least half of the world's population considers a war criminal for her actions as Obama's Secretary of State.

But when it comes to economics, I am still shocked at how reactionary a Democrat can be.  Not long ago, I heard Ms. Clinton defend the 1999 repeal of Glass-Steagall, the 1933 banking reform act that drew a sharp legal divide between commercial and investment banking.  This repeal happened on Bill Clinton's watch and many of us blame that misbegotten legislation for the banking meltdown of 2007-8.  Here's something to keep in mind.  Carter Glass (VA) and Henry Steagall (AL) were very conservative southern Democrats who were vitally important in creating the Federal Reserve System.  These were not a couple of radical bomb-throwers.  In fact, such conservatives from the South are usually Republicans these days.  By defending the repeal of Glass-Steagall, Hillary Clinton was placing herself to the reactionary right of those two.  In fact, it's hard to believe there is any space to the right of those two but our Hillary has found it.

Personally, I believe that the election of Ms. Clinton would be an unmitigated disaster.  Climate change is on track to destroy the biosphere for human habitation.  The ONLY way we can get off that track is to invest a lot of money in a new greener society.  And the only way we can ever get the necessary money is to radically reform the global financial system.  We don't need someone who can be convinced that something like Glass-Steagall needs to be repealed—we need visionaries to pass a couple dozen pieces of Glass-Steagall-like legislation that will take the financial system out of the hands of criminal greedheads and put it into the control of people who want to nurture the real economy.

Hillary Clinton Is Whitewashing the Financial Catastrophe

She has a plan that she claims will reform Wall Street — but she’s deflecting responsibility from old friends and donors in the industry.


This post originally appeared at The Nation.

Hillary Clinton’s recent op-ed in The New York Times, “How I’d Rein In Wall Street,” was intended to reassure nervous Democrats who fear she is still in thrall to those mega-bankers of New York who crashed the American economy. Clinton’s brisk recital of plausible reform ideas might convince wishful thinkers who are not familiar with the complexities of banking. But informed skeptics, myself included, see a disturbing message in her argument that ought to alarm innocent supporters.

Candidate Clinton is essentially whitewashing the financial catastrophe. She has produced a clumsy rewrite of what caused the 2008 collapse, one that conveniently leaves her husband out of the story. He was the president who legislated the predicate for Wall Street’s meltdown. Hillary Clinton’s redefinition of the reform problem deflects the blame from Wall Street’s most powerful institutions, like JPMorgan Chase and Goldman Sachs and instead fingers less celebrated players that failed. In roundabout fashion, Hillary Clinton sounds like she is assuring old friends and donors in the financial sector that, if she becomes president, she will not come after them.

The seminal event that sowed financial disaster was the repeal of the New Deal’s Glass-Steagall Act of 1933, which had separated banking into different realms: investment banks, which organize capital investors for risk-taking ventures; and deposit-holding banks, which serve people as borrowers and lenders. That law’s repeal, a great victory for Wall Street, was delivered by Bill Clinton in 1999, assisted by the Federal Reserve and the financial sector’s armies of lobbyists. The “universal banking model” was saluted as a modernizing reform that liberated traditional banks to participate directly and indirectly in long-prohibited and vastly more profitable risk-taking.

Exotic financial instruments like derivatives and credit-default swaps flourished, enabling old-line bankers to share in the fun and profit on an awesome scale. The banks invented “guarantees” against loss and sold them to both companies and market players. The fast-expanding financial sector claimed a larger and larger share of the economy (and still does) at the expense of the real economy of producers and consumers. The interconnectedness across market sectors created the illusion of safety. When illusions failed, these connected guarantees became the dragnet that drove panic in every direction. Ultimately, the federal government had to rescue everyone, foreign and domestic, to stop the bleeding.

Yet Hillary Clinton asserts in her Times op-ed that repeal of Glass-Steagall had nothing to do with it. She claims that Glass-Steagall would not have limited the reckless behavior of institutions like Lehman Brothers or insurance giant AIG, which were not traditional banks. Her argument amounts to facile evasion that ignores the interconnected exposures. The Federal Reserve spent $180 billion bailing out AIG so AIG could pay back Goldman Sachs and other banks. If the Fed hadn’t acted and had allowed AIG to fail, the banks would have gone down too.

These sound like esoteric questions of bank regulation (and they are), but the consequences of pretending they do not matter are enormous. The federal government and Federal Reserve would remain on the hook for rescuing losers in a future crisis. The largest and most adventurous banks would remain free to experiment, inventing fictitious guarantees and selling them to eager suckers. If things go wrong, Uncle Sam cleans up the mess.

That’s a hard sell in politics, given the banking sector’s bear hug of Congress and the White House, its callous manipulation of both political parties. Of course, it is more complicated than that. But recreating a safe, stable banking system — a place where ordinary people can keep their money — ought to be the first benchmark for Democrats who claim to be reformers.
“As I have reflected about the years since 1999, I think the lessons of Glass-Steagall and its repeal suggest that the universal banking model is inherently unstable and unworkable. No amount of restructuring, management change or regulation is ever likely to change that.”
Actually, the most compelling witnesses for Senator Warren’s argument are the two bankers who introduced this adventure in “universal banking” back in the 1990s. They used their political savvy and relentless muscle to seduce Bill Clinton and his so-called New Democrats. John Reed was CEO of Citicorp and led the charge. He has since apologized to the nation. Sandy Weill was chairman of the board and a brilliant financier who envisioned the possibilities of a single, all-purpose financial house, freed of government’s narrow-minded regulations. They won politically, but at staggering cost to the country.

Weill confessed error back in 2012: “What we should probably do is go and split up investment banking from banking. Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”

John Reed’s confession explained explicitly why their modernizing crusade failed for two fundamental business reasons. “One was the belief that combining all types of finance into one institution would drive costs down — and the larger the institution the more efficient it would be,” Reed wrote in the Financial Times in November. Reed said, “We now know that there are very few cost efficiencies that come from the merger of functions — indeed, there may be none at all. It is possible that combining so much in a single bank makes services more expensive than if they were instead offered by smaller, specialised players.”

The second grave error, Reed said, was trying to mix the two conflicting cultures in banking — bankers who are pulling in opposite directions. That tension helps explain the competitive greed displayed by the modernized banking system. This disorder speaks to the current political crisis in ways that neither Dems nor Republicans wish to confront. It would require the politicians to critique the bankers (often their funders) in terms of human failure.

“Mixing incompatible cultures is a problem all by itself,” Reed wrote. “It makes the entire finance industry more fragile…. As is now clear, traditional banking attracts one kind of talent, which is entirely different from the kinds drawn towards investment banking and trading. Traditional bankers tend to be extroverts, sociable people who are focused on longer term relationships. They are, in many important respects, risk averse. Investment bankers and their traders are more short termist. They are comfortable with, and many even seek out, risk and are more focused on immediate reward.”

Reed concludes, “As I have reflected about the years since 1999, I think the lessons of Glass-Steagall and its repeal suggest that the universal banking model is inherently unstable and unworkable. No amount of restructuring, management change or regulation is ever likely to change that.”

This might sound hopelessly naive, but the Democratic Party might do better in politics if it told more of the truth more often: what they tried do and why it failed, and what they think they may have gotten wrong. People already know they haven’t gotten a straight story from politicians. They might be favorably impressed by a little more candor in the plain-spoken manner of John Reed.

Of course it’s unfair to pick on the Dems. Republicans have been lying about their big stuff for so long and so relentlessly that their voters are now staging a wrathful rebellion. Who knows, maybe a little honest talk might lead to honest debate. Think about it. Do the people want to hear the truth about our national condition? Could they stand it? more