Regulating Big Oil. Right.

Last night Rachel asked Rep. Ed Markey (D-MA) whether he believed that a well-established regulatory program that was dedicated to real regulation would have had actual functional regulations in place that could have prevented the BP Gusher from happening. Markey said sure enough, no doubt, the real problem was a lax regulatory environment at the Mineral Management Service that dates back to it’s establishment and a better regulatory structure would have done the job. I have to call more than half bullshit on that. Prior to the recent Disaster in the Deep, it would have been next to impossible to impose the kind of regulations that would ensure a quick and effective plugging of the leak and clean-up. Washington D.C. is still the place where money talks and bullshit walks, and without a massive public disaster to build your regulations around, you will never get reality to prevail over bullshit. .. if at all.

This is nothing new. In the 1950s, Lyndon Johnson, at the behest of the gas barons who owned him, destroyed the regulatory capacity of the Federal Power Commission by accusing the chief regulator of being a commie and having him run out of town. The gas companies got their way in Washington ever after, and made millions while the public paid ever higher gas prices.

In the 1970s, a well-funded funeral home industry not only derailed an effort by the Federal Trade Commission to curtail sleazy sales practices in the death industry, it also striped the FTC of most of its regulatory clout.

Back in the 1980s the lawyers and examiners at the Federal Home Loan Bank Board provided ample warning to their bosses that the duct tape and chewing gum that held the savings and loan system together would come undone. Savings and loan barons, well connected on both sides of Capitol Hill and in the White House, convinced the leadership that the staff was full of crap. Real regulation gave way to conventional wisdom and it cost the taxpayers than $!50 billion (that’s just direct payments to the Resolution Trust Corporation) at a time when a billion was real money.

In the 1990s, regulators were fully aware that the bubble was fueled by outrageous valuations placed on IPOs by underwriters and analysts who knew that most of the stocks being offered could not demonstrate an income stream, let alone a profit-making model. Wall Street’s big money lobbyists pumped millions into the campaign chests of Congress to stave off any serious regulatory scrutiny until after the bubble burst. And still, it should be noted, no lessons learned from the bubble were ever applied to the far more disastrous housing bubble that followed.

In the face of clear and convincing evidence of the health hazards of cigarettes, the tobacco lobby held off efforts to regulate cigarettes in the interests of public health for years.

Ten years ago the regulators of FreddieMac and FannieMae provided fair warning to the Congress that capital was too thin and accounting too creative at the giant secondary market agencies. Fannie and Freddie, awash in cash, bought the most expensive lobbyists in town and a fist full of Congresspersons, on both sides of the isle, and nothing was done until the system collapsed. We might add that it is not yet clear that the financial institutions reform package still being tinkered with in a House-Senate conference committee will address the egregious regulatory short comings that directly contributed to the current financial crisis.

Oil is the richest industry on earth. It can outspend any lobby in Washington if it wishes. It has suppressed environmental efforts to regulate auto emissions and auto mileage standards. It owns many of the most important people in Washington. I will concede that with current oil disaster on our southern coast, it may be possible… as it was after the Santa Barbara oil spill of 40 years ago… to obtain some serious and effective regulatory limits on off-shhore drilling. Absent this event, it would never have happend.

At the same time. I think it is a good bet that the oil companies will be drilling again long before they demonstrate that they actually have 21st Century technology that can close off a well and clean up the mess.

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