BP's $20B Shakedown/Bailout

There's been a lot of criticism of the $20B oil spill fund that President Obama extracted from BP. Some people say "The President doesn't have the legal authority to demand an administer such a fund! It circumvents the legal process; BP shouldn't have to pay until a court rules against BP."

My reaction was "$20B! BP got off cheaply!" Negotiating the $20B fund was a brilliant PR move. This creates the impression that the total liability is only $20B. It also creates the impression that BP executives are acting responsibly.

Also, it isn't an immediate $20B payment. Some contributions are deferred a few years. Due to inflation, $20B in five years is worth less than $20B right now. The victims won't receive compensation for years, but the losses are calculated based on current dollars.

This is a defect in the legal system. BP isn't legally required to make a payment until a court finds them responsible. Any trial will take years. Justice delayed is justice denied!

In a free market legal system, BP's assets would have been nearly immediately seized. They would be sold and used to pay for compensatory damages and punitive damages for the victims. There would be no damage caps, making it very likely that BP's assets were insufficient to pay claims. If there were leftovers (unlikely), bondholders and shareholders would get the remainder. There would be no "limited liability incorporation". Some shareholders might be forced to pay extra to pay for the spill! It wouldn't make sense for someone owning only 100 shares of BP to forfeit their life savings. Their liability wouldn't be $0 either!

A slow and cumbersome legal system favors insiders with deep pockets. BP's executives can afford to spend millions in legal fees; that's still cheaper than building safe oil wells! An individual has to pay legal expenses and his mortgage, while waiting years for a payout.

I noticed another quirk of the cleanup. Most cleanup workers are employed directly by BP. They are given restrictive employment contracts. For example, they are barred from wearing masks to protect themselves from oil fumes, because the masks would look bad on cameras and in the news. Why are cleanup workers BP employees, rather than government employees? In other instances, Federal State thugs, at the urging of BP executives, have blocked the cleanup efforts of local governments.

Also, if BP does file for bankruptcy, that $20B was effectively stolen from BP's other creditors. Victims will probably be required to waive their right to file a lawsuit, when they make a claim against the fund.

Does the President have the legal authority to demand a $20B claim settlement fund? The $20B fund was a great PR and legal move by BP's executives. As usual, it's better to spend money on lobbyists than on safe working conditions!

The real problem is that, under the State legal system, any claims will be drawn out for years/decades. It only was necessary for President Obama to "circumvent the legal process" because the legal system is broken.