Obama stumbled into aiding BP

[Timothy W.]

Ok, I'm going to admit that my first thought was the 20 billion dollar escrow fund was a load of crap. I thought it was a shakedown without any due process. I was thinking, like any conservative republican would think, that this was the executive branch dictating orders that were held by the powers of the judicial branch. I think it still is and is still wrong.

Then I started thinking like an adjuster again.

Transocean is covered by a stupid 1890s law that limits their liability to under 30 million. It's stupid, but it's law.

BP has the deeper pockets, but this 20 billion is a cap on payouts (if not legally, at least politically)....and the loss isn't even done yet. I actually got on WLSAM Sat. morning in Chicago to talk about this with Dan Proft. BP owns it's own insurance company, Jupiter insurance. Jupiter insurance insures all of BP's activities. Previously I was talking about reinsurance in another thread - where insurance companies buy their own insurance polices to cover their losses in cases of catastrophic events that would bankrupt the insurance company. Jupiter insurance has no reinsurance. This is a monumentally stupid move on Jupiter/BP's part.

So anyway, BP is caught with this liability with no insurance and before the loss is even done, Obama has essentially put a cap on the amount of payouts BP will incur (at least in public perception which, let's face it, is where this drama is being played out). This is like going into a pileup caused by a taco bell semi truck and while cars are still piling up, announcing a limit on payouts taco bell will be forced to pay out. This is why BP's stock price went up after the announcement of this 20 billion escrow fund. The total incurred loss suddenly became a fixed, known number.

We don't know if this is going to be a 20 Billion dollar loss, a 50 Billion dollar loss, a 100 Billion dollar loss. They aren't even done stopping the gusher. This was really a dumb move that we won't realize until a couple years from now when everyone at the back of the line on claims payouts has to start fighting for what's left. Had it been left, judges and juries would have been able to award amounts based on the individual circumstances of each case rather than a perception of a fixed amount of money that each person has to take a piece of. In fact, this may even have skewed jury perception when it comes time to decide award amounts.... This is really screwed up.

I'm sure it can be argued that this 20 billion is just the start of payouts but that tends not to play out well politically over the long term. If you keep beating up on a company for too long, you eventually tire public opinion and create more sympathizers. By the time presidential election time rolls around, no one is going to be impressed by an "I'm looking for an *** to kick" speech.