Wow–three big headlines today:
(1) BP supposedly manages to cap the Deepwater Horizon well–for now, at least–after 87 days of oil gushing into the Gulf of Mexico. It is clearly far from over. Not only are we not really sure whether the well will stop spewing oil (as indicated by this article posted to the NYT website today), the environmental, economic, and legal fallout from the spill will last for decades. Consider the Exxon Valdez spill. That one happened on March 24th, 1989; more than twenty years later, oil is still bubbling up in Prince William Sound. As Antonia Juhasz points out in our current issue, the legal case against Exxon took almost that long to unwind:
In 2008, after nearly 20 years during which time more than 3,000 of the claimants died, the U.S. Supreme Court ruled in Exxon’s favor and imposed a highly restrictive limit on putative damages–a one-to-one ratio–yielding damages for Exxon of a measly $507.5 million. Exxon’s total Valdez payouts were therefore less than $3.5 billion (about $4.5 billion in today’s dollars).
Click here to read the whole article, which points to lessons from the Valdez spill for the current situation with BP. (We haven’t publicized this article yet on our home page, so blog subscribers and readers are getting a first peek (after subscribers, who got to read it two weeks ago).
(2) Congress finally passes the financial reform law, with the Senate passing the bill by a vote of 60 to 39. (The missing vote was Robert Byrd’s, I am guessing. The governor of West Virginia, Joe Manchin, apparently just said who Byrd’s interim replacement will be; apparently a 36-year-old pretty boy named Carte Goodwin, the governor’s general counsel, will hold the seat until a special election in November, when Manchin will run. Trivia: the website of the family law firm where Goodwin works, lists something called “the Order of the Coif” under the “Education” section of his resume–an honorary society for law school grads, nothing to do with his Scott-Brown-perfect hairdo.)
Anyhow, we posted earlier on the mixed merit of the new regulation, and we will continue to report on it. For now, check out this article in today’s NYT about how banks have already been figuring out how to accommodate the new law’s provisions. Jamie Dimon’s arrogant remarks about how the banks will keep profits up by passing increased costs on to consumers:
“If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger,” said Jamie Dimon, the chairman and chief executive of JPMorgan Chase, after his bank reported a $4.8 billion profit for the second quarter on Thursday. “Over time, it will all be repriced into the business.”
One example the article gave was increased fees on checking accounts, fees for using tellers vs. ATMs, incentives to do online banking, monthly charges unless you have a (high) minimum balance, etc. Sounds to me like an opportunity for credit unions to push to compete against banks. Who on earth would have an account at BoA these days? There are other interesting–and disturbing–bits about how they plan to get around the restrictions on derivatives trading, proprietary trading, etc. Read the full article.
(3) Goldman settles with the S.E.C., agreeing to pay a fine of $550 million, which I read (I think in this article) is equivalent to nineteen day’s profit for Goldman (going by their 2009 profits).