Republicans on the Hill have calculated that President Obama's successful demand that BP set up a $20 billion escrow account to pay out claims is ripe for political attack. In the wake of Wednesday's White House announcement, a host of GOP officials are raising questions about both the process by which the deal was made and the deal itself -- going so far as to apologize to BP on America's behalf.Louisiana Governor Bobby Jindal said of the escrow announcement, "We think it will help ensure that BP is taking ownership." But Mississippi Governor Haley Barbour expressed reservations and concern that the move may backfire. From Fox News:
"I'm ashamed of what happened in the White House yesterday," said Rep. Joe Barton (R-Tex.) during a hearing on Thursday morning with BP's CEO Tony Hayward." I think it is a tragedy in the first proportion that a private corporation can be subjected to what I would characterize as a shakedown -- in this case a $20 billion shakedown -- with the attorney general of the United States, who is legitimately conducting a criminal investigation and has every right to do so to protect the American people, participating in what amounts to a $20 billion slush fund that's unprecedented in our nation's history, which has no legal standing, which I think sets a terrible precedent for our nation's future."
"I'm only speaking for myself. I'm not speaking for anyone else, but I apologize," Barton added. "I do not want to live in a county where anytime a citizen or a corporation does something that is legitimately wrong, [it is] subject to some sort of political pressure that, again, in my words, amounts to a shakedown."
Mississippi's governor said Wednesday he's not sure the federal government should have made BP put $20 billion into escrow to compensate victims of the Gulf of Mexico oil spill because the company needs it to drill more wells and make money so it can pay up.I think both criticisms have merit, but Barbour suggests that the escrow burden has the very real potential of reducing BP's ability to pay damage claims for this historic disaster. A quick look at the company balance sheet seems to bear that out. Democrats like to rail about the obscene profits of the oil industry, and, in fact, BP did earn a $16.7 billion profit in 2009. But anyone with a modicum of knowledge about business, knows that companies prosper and fail on cash flow. In 2009, BP's year-end working capital was just over $8 billion. In 2008 it was a negative $3.4 billion. Removing $5 billion a year for four years from BP's current assets will seriously impede its ability to operate and grow its core business activities. The Obama drilling moratorium certainly will not help. If BP declares bankruptcy, who will pay for the cleanup? We all know the answer to that question. The taxpayer.
President Barack Obama insisted BP set the money aside, and the company agreed to put $5 billion a year into the fund for the next four years.
"If they take a huge amount of money and put it in an escrow account so they can't use it to drill oil wells and produce revenue, are they going to be able to pay us?" Gov. Haley Barbour told The Associated Press in a telephone interview Wednesday.
Millions of gallons of oil have gushed into the Gulf since a BP well ruptured eight weeks ago off the Louisiana coast.
"We need them to generate revenue to be able to pay us," said Barbour, a Republican. "I worry that this escrow account reduces the chance of that rather than increasing the chances of that."
Aesop's fable about the goose that laid the golden eggs taught us, "Much wants more and loses all."
Update: Rep. Barton apologizes for his apology.
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