The most despised multinational working in the United States agreed to pay $20 billion over four years into a fund defined to benefit Gulf residents impacted by the spill. Some have characterized this as a shrewd decision on the part of BP CEO Tony Hayward to contain the damage to BP’s reputation. Yet BP has received no assurances on future legal liability and it remains, quite appropriately, on the hook for environmental damages. The Justice Department has already threatened to prosecute BP, and a refusal to play ball on BP’s part would almost certainly have led to an even more aggressive campaign of public vilification, at the very least.Where, exactly, was the bad faith? BP is extremely well-represented by legal counsel and could have kept negotiating and, if it wanted, it could have stood on its legal rights and let everything be resolved in the courts. It took this deal — and do we know the real dimensions of the deal? — because that seemed to be in its best interest.
To maintain an orderly society, we should at least try to contain and manage our desire for vengeance. On closer inspection, this doesn’t look like much of a negotiation. Rather, it looks like what one would colloquially refer to as a “shakedown,” in which a stronger party, ignoring the conventions of a good-faith negotiation, all but forces a weaker party to bend to its will. But now that Rep. Joe Barton has, in fact, called the White House agreement a shakedown, he has, despite backtracking and apologizing, taken the political heat off of the president. Somewhere, Rahm Emanuel is smiling.
But I don't think there's anything really wrong with using the word "shakedown." It's strong rhetoric, and basically metaphorical.
shakedownWe encounter this colorful, figurative language all the time in political discourse. For example, Obama's BP speech last Tuesday was full of military language. He called the disaster a "siege" and talked about a "battle plan." Big ... deal. And by the way, "a big fucking deal" — as Biden would say — is not literally fucking. It's the way we talk. And most of the time, like just then, it seems silly even to point it out. So I'm unmoved by the back-and-forth over the word "shakedown." It's more politics. I'm coolly unmoved... though I do think it was lame of Barton to use it and then not defend it.
1730, "impromptu bed made upon loose straw," from shake + down. Fig. verbal sense of "blackmail, extort" is attested from 1872, noun meaning "a thorough search" is from 1914; both probably from the notion of measuring corn. The verbal phrase to shake down "cause to totter and fall" is recorded from c.1400.
What matters is whether Obama did a good job of pursuing American interests and whether, in the process of of pursuing American interests, he abused his power. Since BP could have rejected Obama's proposal and fought through the legal process, I don't see what's supposed to be the abuse of power. Salam doesn't say he thinks Obama will manipulate the federal and state courts, so what is the problem? More worrisome is the possibility that Obama's deal was too good for BP. It took the deal, and we should wonder why. Is this one of those things — like the health care reform — where we will find out what it is when it goes into operation?
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BP is represented by Jamie Gorelick.
Enough said.
"Since BP could have rejected Obama's proposal and fought through the legal process..."
Yeah, worked our real well for the creditors of GM as well. Everyone is aware that there is more going on here than meets the eye. To pretend otherwise is naive.
I'm pretty sure this deal was the only thing between BP and the pitchforks.
It helps if you have your foot on their throat.
Courts, shmorts.
The shakedown came from:
1. BP needs permits for everything--the implicit threat is no comply, no permit.
2. Financing--If the U.S. government is after you for several multiples of your liquidity (which it was until the funding agreement), your financing sources can dry up, if you are BP. (Esp, since developing your most valuable assets require permits.)
Suppose the Federal Government is threatening to sue a law professor named (say) Ann Althouse. They allege all sorts of environmental crimes on a tree farm-cherry orchard she owns in Wisconsin. Big fines and possibly jail are involved. If they are successful, she may also be disbarred and lose her professor job.
She wants to borrow some money to buy a house and fund a new business (photography, for example.) She tells her lenders that she knows the charges are bogus and--being a lawyer--she knows she has rights. In court!
Is the lender going to lend?
You make the call.
Do you have any concept of oil leases and what threats the Pres probably threw down on BP? Are you aware that if a company loses the actual lease document, that they don't have the lease at all? It reverts to the owner. And the gov't can take a lease away as easy as pie.
And this. 60% of BP's business is in the US.
Whether it actually was a "shakedown" may be debated, but Obama certainly made it appear to be.
Obama publically demanded that BP pay into this 20 Billion Dollar fund. He must realize that he had no legal authority to make such a demand.
One would think that a man given a lot of power would be careful about sounding like a tyrant. Unless he really doesn't care.
Hagar said...
Whether it actually was a "shakedown" may be debated, but Obama certainly made it appear to be.
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I understand.
We may never know.
Althouse's idea that it can't be a shakedown because firms have lawyers and access to courts is incredibly naive, though.
(See past Jesse Jackson, Al Sharpton shakedowns of firms with great legal resources and powerful counsel)
I do know that BP has been for years, a strong advocate of cap and tax, since they will profit as the middleman. So a promise to use the crisis to slip cap and tax through might be a sweetener for BP.
No one knows what deals BP's super-connected lawyer Jamie Gorelick worked out behind closed doors for BP, if any. You don't put out big money though, without assurances you get something..
Doesn't it depend on what threat against BP was? I'm sure Al Capone "negotiated" many successful settlements.
The fact that only conservatives really care about the means as well as the ends here allows the administration to go pretty deep into the extortion tool bag with little political cost. The political heat so far has come from suggesting extortion is wrong here.
This all could have been handled by the courts, but Obama wanted this money up front under his control to mitigate the local economic damage done by his moratorium. Then having $20 billion that you can direct to buy support with is pretty nice, even if it is fixing problems you caused.
Is anything ever what it appears to be on the surface when the government is involved, regardless of which administration is in power? Does anybody believe anything any of these crooks says any more? You know there was more going on with this deal.
Obama's the one that decides what line to prosecute.
As to American interests, Obama just shut off all investment in the US.
I always thought shakedown had to do with money falling from pockets.
That's the Sharpton sense.
What's the difference between a negotiated settlement and a shakedown?
Shakedown has no end in sight?
Contries around the world have long been willing to invest in the US due to its stability, and its adherence to the rule of law. The recent tendency to coerce companies to "do the right thing" surely undermines both beliefs, as least so far as commerical law goes.
Shakedown - harvesting fruits or nuts by violently shaking the tree trunks or branches.
While this has the appearances of a shakedown, I don't think it qualifies since BP likely expects a quid-pro-quo for their "good faith"--in other words, that the administration will find a way to limit their liability and/or send funds and/or favorable tax laws their way. I'm sure BP believes their payoffs to the president and members of congress will be as effective as their bribery of UK politicians.
At the very least, they are betting that this $20 billion fund will become their sole liability.
Another point that even if this was a shakedown, it wasn't a very good one. BP agrees to pay $5 billion a year over four years. I predict it will never be fully funded since BP will be bankrupt within four years (and more than one executive will be a fugitive.)
(And for all those who say we don't know what happened; we don't know everything, but we know that BP refused to do certain tests and ignored the advise of Schlumberger and Haliburton. These tests would have delayed production a few days. So why refuse them unless BP knew they were going to fail?)
U.S. banks, investors and businesses are currently holding record high amounts of cash, refusing to put it to work because they do not trust this political environment. This recession should be well over and recovering with vigorous job growth instead of the looming fears of stagnation and double dip. Real opportunities lost in pursuit of political ones that will ultimately fail, IMHO and that of history.
Anytime the chief consigliero of the capo di capi leans across the table and tells the people on the other side that said capo will "do it to them" if they don't co-operate, it's a shakedown.
Also, when said capo's chief accountant is in charge of the lock box holding the money.
"but we know that BP refused to do certain tests and ignored the advise of Schlumberger and Haliburton."
Now being compounded by Obama's refusal to follow the advise of his team of environmental experts who recommended against a moratorium. Seems to be a epidemic of not following recommendations in favor of short term gain.
Are the lawyers all finished with this? It's not over until the lawyers are all finished.
The rest is just talk.
No penny will be transferred until the lawyers are all done, right?
Without the signed document, we have no idea what's going to happen. Verbal agreements mean nothing, I assume.
At the very least, they are betting that this $20 billion fund will become their sole liability.
BP to raise $50 bln, sue Anadarko: reports
LONDON — BP is trying to raise 50 billion dollars to cover the cost of the Gulf of Mexico spill and is preparing to sue its partners in the oil field, British newspapers said on Sunday.
Is this one of those things — like the health care reform — where we will find out what it is when it goes into operation?
What comes out of this is secondary to the appearance that the President of the United States used the authorities granted him under the Constitution to obtain personal control of a multi- billion dollar fund, control that has no Congressional oversight.
And most people seem to be quite ecstatic about it, because, they trust him and it was for a 'good' purpose.
HA!!! Wherever Obama is involved, everything is a shakedown. Fuck that Chicago mafiaso.
Only Democratic bastions need apply for the clean-up funds.
Alderman Dick Mell, Blago's father-in-law and a power in his own right, has an annual fundraiser for tavern owners in his and neighboring wards. $1000 a pop. It is well attended. Everyone knows what an alderman can do to your liquor license. It can't be a shakedown when everyone's happy. It's the Chicago way.
wv: fiesse "I had to fiesse my chinaman down at silly hall cause my clout's gettin' hinky."
What matters is whether Obama did a good job of pursuing American interests and whether, in the process of of pursuing American interests, he abused his power. Since BP could have rejected Obama's proposal and fought through the legal process, I don't see what's supposed to be the abuse of power.
And if the next Republican administration orders, say, intense IRS audits of all Democratic and liberal institutions and organizations that criticized it or campaigned against it, will your response be:
A. The IRS is doing a good job of pursuing American interests by making sure that all of these organizations have paid the proper amount of legally-owed taxes to the American government. And since these organizations can respond to these audits through the established IRS bureaucratic process, I don't see what's supposed to be the abuse of power.
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B. What an outrage!
"Rep. Trent Franks (R-Ariz.), who was an oil and gas engineer before he started his career in politics, says President Obama is politicizing the BP escrow fund after having little to do with it being set up.
[T]he real story here is that BP had already made the decision to set aside $20 billion to compensate those harmed by this tragic disaster several days prior to the President’s speech. The true outrage is that this was never the President’s idea at all, and he should be ashamed for pretending it was for political purposes."
Can you reactionaries please get it together. Is Obama guilty of a shakedown or is he ripping off a great idea.? Can't be both. And why is the word "shakedown" only applied to black people?
On the compensation front, it may be well to remember Katrina: First the MSM ripped FEMA for not compensating "victims" fast enough, so FEMA went to passing out credit cards to all comers; the MSM waited a week, and then ripped into FEMA for waste, fraud, and mismanagement in giving out money without "adequate checks."
BTW, how come we never hear FEMA mentioned in this brouhaha? Isn't it still the Federal Emergency Management Agency? This is an emergency, right?
Shakedown is the beat noun to describe a reasonable request made by a political hydra headed mob that tells you the FIX IS IN in the courts so there can be no hope of legal justice coming out of a lawful procedure. That BP surrendered to to be shookdown so quickly tells us that they are willingly cooperating with the Obama Gang play to scam the money away from a legal review. The US Supreme Court is the only bastion not in on the game.
Damon,
The GM bondholders ended up w/ the equivalent of ten cents on the dollar:Analysts' estimates have bondholders coming out of the new deal with around 10 cents on the dollar, compared to as little as nothing under the old offer."
Considering the mountain of liabilities and dwindling assets of GM, it is shouldn't have surprised you when the bond holders signed up for this offer.
BTW, GM bonds had been trading for less than ten cents on the dollar for quite some time before this deal was agreed to. In other words, the government bailout allowed investors to make money on GM bonds when the original owners were dumping them on the market for less than ten cents on the dollar because everyone could do the math on the the extreme liability problems of GM, hence, the government over payed the bondholders.
But, they also over payed the unions.
Sans gov action the GM unions and bondholders would have been much more screwed than they were w/ gov action.
BP was going to do this anyway. It is an amazingly stupid deal given what was already planned. Poor business decision on their part. Shakedown? Nah.
The deal bought BP and Obama a few shekels of political capital. They spent them today at a regatta and on the links, respectively.
It's starting to look like Mitt has a real shot in 2012.
Ann says: "It took the deal, and we should wonder why."
And I agree. I'm not commenting until I read the indemnification clause that BP got in exchange for the $20B.
Have you noticed that absolutely no one has suggested that there is a piece of paper involved and that perhaps we should read it?
"Indemnity" strikes me as an appropriate concept to ponder, especially in its etymological sense (its more modern one has been at work almost from day one, it seems clear).
Regardless of what it was, it was illegal.
BP is likely criminally liable, if some of the oil experts are worth listening to.
They still should have played their hand out through the courts, and used the opportunity for honest PR.
They are handling this thing as badly as the government.
Depends: did Obama include, say, threats of individual criminal prosecution of executives if BP didn't come across with the money? Or threaten (as sopme people had already proposed) to put NP into receivership, effectively nationalizing it as it did GM?
And why is the word "shakedown" only applied to black people?
That is very possibly the dumbest argument ever.
I'm certain there is probably a reason somewhere why we should be nice to BP and work this out as drinking buddies should - somehow it eludes me as to why.
This is like calling the Nazi's thee agrieved party.
I'm certain there is probably a reason somewhere why we should be nice to BP and work this out as drinking buddies should - somehow it eludes me as to why.
Operating within the bounds of the law and being nice to BP are two different things. People are, I think, concerned about the exercise of coercive government authority in the absence of actual authorizing statutes. Because that's, you know, lawless, almost tautologically. I don't know what the law here is -- maybe the government is authorized to compel this kind of remedy -- but that's the concern I've been hearing. It goes along with the Democratic efforts to retroactively rewrite the law on BP's potential liability for the spill. We may not like BP, but the principle that we're supposed to avoid writing ex post facto laws is not exactly unimportant.
The issue of a shakedown here stems from the perception of the Obama Administration's willingness to act outside the law - illegally. Because the perception is very high, anything they [Obama Admin] say or do as a threat can be viewed as a shakedown. The upside for Obama is that it makes him a more powerful president, in that he can get more out of private citizens. The downside, is that it reduces economic activity, which increases unemployment, since everyone will put in place preparations for their eventual shakedown.
The other downside is a much larger potential for corruption. If the administration is acting outside the law in one area, it is most likely doing so in another. Chances are, the corruption is going on as we speak. If it gets discovered, Obama is cooked.
If it was just a negiated settlement of claims, yeah, not a biggie. But this is president bully here, who says he is the only person separating companies from the pitchforks, or demanding that contracts be abrogated for a political point. Not to mention the thuggery the dems have shown in general toward catepiller, etc.
at this point, its merely suspicious, but we have very good cause to be suspicious.
"What's the difference between a negotiated settlement and a shakedown?"
The answer will be evident in the next 5 years, by the level of new business investment in the US.
Arbitrary and capricious governments do not attract business investment.
If foreign and domestic corporations see this as a shakedown, their interest in the US will fall, regardless of what we think this is.
Ann: "What matters is whether Obama did a good job of pursuing American interests and whether, in the process of of pursuing American interests, he abused his power. Since BP could have rejected Obama's proposal and fought through the legal process, I don't see what's supposed to be the abuse of power."
Many above object that the feds have different ways of putting a chokehold on BP, and in all events have complete discretion in pursuing criminal charges. Those are not matters likely to have escaped the notice of a law professor.
One of the pleasures of this blog (and its active community of commenters) is in watching (occasionally participating in) the dissection of the subtext of things. If you assume (as I do) that Ann did not miss the obvious objections, soemthing else must be the point.
Here's my suggestion. The negotiation/shakedown meme takes as its framework the idea of a deal -- each side is engaging in a trade to get something from the other party, and the trade is either voluntary (a negotiation) or involuntary (a shakedown). But what did BP get here? It doesn't sound like they got a promise from Team Obama about anything. Even if they did, any such promise is just so much air.
So it wasn't a deal in any normal sense. It was instead a political dance, where BP needed PR cover in a toxic environment (in every sense) that threatened its economic viability, and Obama needed PR cover to address the incompetence/ineffectiveness meme that threatened his political viability. Both sides got something, but the 'deal' framework doesn't help in understanding that dance. It's more a case of each side using the other for its own objectives.
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