How They’re Covering It In the U.K.

Today President Obama met with the Chairman of BP for 20 minutes, and emerged with the announcement that BP will contribute $20 billion to a fund to pay claims by those damaged by the Deepwater Horizon spill. Presumably the deal had already been struck, and the meeting today was a photo-op. Is this a good thing or a bad thing? It’s hard to say. Some have questioned Obama’s constitutional authority to demand that a foreign corporation (or a domestic one, for that matter) defer paying dividends and instead use its resources to create a fund that may vastly exceed its actual legal liabilities, as yet unknown. Certainly the President has no constitutional authority to force any such thing, but there is no law that prevents him from arm-twisting.
It’s interesting to read how the British papers are covering the story. Today’s announcement and related developments dominate the news at the London Times: “BP bows to Obama and cancels its dividends.”

BP capitulated to the White House yesterday, cancelling dividend payments to its shareholders for the rest of the year and promising $20 billion (£14 billion) for an independently run compensation fund for victims of the Deepwater Horizon catastrophe.
After a poorly received speech to the nation and a dramatic morning of negotiations in the White House, President Obama emerged to announce that the massive fund was not a cap on BP’s liability. Minutes later the company’s chairman offered his first full apology.
“I would like to apologise to the American people on behalf of all the employees of BP. We hope we will regain the trust you had in us,” Carl-Henric Svanberg said. …
The decision to bow to White House pressure on compensation payments and dividends avoids the prospect of a vicious legal battle. But legal experts said it raised the spectre of bankruptcy. …
In a concession to BP and remarks in its defence by David Cameron, Mr Obama insisted that Washington had no interest in seeing the company fail.

It is perhaps noteworthy, in that regard, that around 40% of BP stock is owned by the British, and around 40% by Americans. It is also being reported that BP has twice as many American as British employees.
Svanberg_4_23556c.jpg
The Telegraph highlighted Prime Minister David Cameron’s effort to defend BP: “Oil spill: David Cameron confronts Barack Obama in battle to protect BP.”

The Prime Minister called for the company to be protected from excessive compensation claims as President Barack Obama made it agree to potentially unlimited damages. BP provisionally agreed the biggest compensation payment in corporate history, setting up a fund worth at least £13.5 billion to cover the damage caused by its leaking oil pipe in the Gulf of Mexico.
But the US president last night made it clear that BP’s payments could be just the start, warning that the company could still face lawsuits from individuals and American states. On Wednesday, in his strongest show of support since the oil began leaking two months ago, Mr Cameron said the company should not be exposed to a string of future damages claims.
“BP is an important company,” he said. “It is an important company for people’s pensions, it employs thousands of people in the UK, it pays a lot of tax. “It’s important to try to give some level of clarity and certainty so that the company can actually continue and be financially stable,” he said.
“They do need a level of certainty, and this is BP’s worry, that there won’t be claims entertained that are three or four times removed from the oil spill. This shouldn’t be about going after BP for the sake of it.”

Cameron makes a good point, actually. Damage to the Gulf economy will affect just about everyone, directly or indirectly, and it is vitally important to determine where the line is drawn that defines compensable losses.
The Daily Mail took a predictably more aggressive tone: “BP to set up huge compensation fund for U.S. oil spill victims – and British pensioners will pick up the bill.”

The crisis engulfing BP plumbed new depths last night as President Obama bullied the company into depositing £13.5billion into a fund to settle compensation claims for the calamitous Gulf of Mexico oil spill.
After a face-to-face showdown with the President at the White House, BP chairman Carl-Henric Svanberg revealed the payment meant the oil giant would be forced to suspend dividends to its shareholders until at least next year.
The news sent BP shares plunging to a 14-year low of £3.37, and is a major blow for Britain’s pension funds, which rely on BP’s dividend income to provide £1 in every £6 they receive each year.
Since the fatal explosion in April, the value of the company – formerly Britain’s biggest – has halved to £63billion. …
Yesterday’s dramatic capitulation came as U.S. officials and lawmakers escalated the ugly rhetoric over the disaster.
Yesterday’s four-hour meeting ended with the company capitulating to Mr Obama’s rescue-fund ultimatum and offering an apology to the American people. Mr Svanberg and chief executive Tony Hayward were told that either they agreed to set up the multi-billion pound escrow account – or the Americans would rush through laws to force them.

The Sun, which is, I believe, England’s largest-circulation newspaper, took time out from its coverage of soccer and “Big Brother”–does anyone know what that is?–to headline: “BP ‘Lied’ to US.”

BATTERED BP was ripped to shreds in the US last night.
Politicians claimed the company had “deceived” Americans over the amount of oil spewing into the Gulf of Mexico.
And they savaged the firm’s American chief Lamar McKay, who appeared before them.
The US politicians tore into BP during a marathon Congressional hearing in Washington. …
US politicians are demanding BP put £14BILLION in a compensation pot for thousands of American fishermen, hotel owners and small firms affected.
The huge bill facing BP triggered a savage downgrade by credit rating agency Fitch yesterday. It slashed the rating on BP’s debt by six notches to little more than JUNK status.
BP’s shares dropped by another four per cent – wiping a further £2.5BILLION from its value.

I can’t help taking some pleasure in seeing foreign newspapers refer to President Obama’s “ugly rhetoric,” but at the same time, I guess it’s good to know that Obama can be tough on occasion–and not only toward Israel. Now if only he could figure out how to be tough on Iran, al Qaeda, Hamas et al.

Responses

Books to read from Power Line