Tremble, Banks, Tremble

The key to financial recovery: restoring the rule of law on Wall Street.

• James K. Galbraith
• July 9, 2010 | 12:00 am

The financial crisis in America isn't over. It's ongoing, it remains unresolved, and it stands in the way of full economic recovery. The cause, at the deepest level, was a breakdown in the rule of law. And it follows that the first step toward prosperity is to restore the rule of law in the financial sector.

First, there was a stand-down of the financial police. The legal framework for this was laid with the repeal of Glass-Steagall in 1999 and the Commodities Futures Modernization Act of 2000. Meanwhile the Basel II process relaxed international bank supervision, especially permitting the use of proprietary models to value complex assets—an open invitation to biased valuations and accounting frauds.



Key acts of de-supervision came under Bush. After 9/11 500 FBI agents assigned to financial fraud were reassigned to counter–terrorism and (what is not understandable) they were never replaced. The Director of the Office of Thrift Supervision appeared at a press conference with a stack of copies of the Code of Federal Regulations and a chainsaw—the message was not subtle. The SEC relaxed limits on leverage for investment banks and abolished the uptick rule limiting short sales to moments following a rise in price. The new order was clear: anything goes.

Disaster Capitalism Hits Europe (and the US is Next)

Eurozone governments and European authorities are using the economy to justify pushing through rightwing policy changes

by Mark Weisbrot

One thing should be made clear about the situation in the eurozone economies that is not clear at all if we rely on most of the news reports. This is not a situation where countries face a "dilemma" because they have overspent and piled up too much public debt. They do not face "tough choices" that will force them to cut spending and raise taxes while the economy is weak or in recession, in order to "satisfy financial markets".

What is really going on is that powerful interests within these countries - including Spain, Greece, Ireland and Portugal - are taking advantage of the situation to make the changes that they want. Perhaps even more importantly, the European authorities - including the European commission, the European central bank and the IMF - who are holding the purse strings of any bailout funds, are even more committed than the national governments to rightwing policy changes. And they are further removed from any accountability to any electorate.

A Way Forward: Reexamining the Pentagon's Spending Habits

by Frida Berrigan

What is a trillion? It is a big number for sure. The best explanation I have found for this mind-blowing figure is from children's book author David Schwartz. "One million seconds comes out to be about 11½ days. A billion seconds is 32 years. And a trillion seconds is 32,000 years."

What is a trillion dollars? What can you get for that much money?

The Progressive Dictionary: In Defense of "Global" Solutions

By Sara Robinson

Created 07/09/2010 - 12:40pm

What we need is a new Progressive Dictionary.

This dawned on me last week [1] when I spent 1500 words trying to explain that, no, the word "bureaucrat" was not always a swear word that carries dark connotations of suspect parentage; and that yes, once upon a time, we actually did used to hire smart people into the government and expected them to manage our public affairs in the public interest. And (even more bizarrely) we thought this was a good thing, until the conservatives came along and told us that it wasn't.

Writing that column brought home to me just how thoroughly progressives have been gagged and bound by the right wing's 30-year campaign to hijack every word Americans use to describe their political lives. For reasons George Lakoff outlines in the clearest possible terms here [2], we need to get serious about taking this language back. Until it does, we can talk about our ideas all day -- but we literally won't be heard.

In this, the second entry in our reclaimed progressive lexicon, I'd like to pick at another word that leads to all kinds of misunderstandings between left and right. The word this week is "global."

Biggest Defaulters on Mortgages Are the Rich

By DAVID STREITFELD

LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.

The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

Paul Krugman: Pity the Poor C.E.O.’s

Job creation has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Mr. Obama.

But no. All the buzz lately is that the Obama administration is “antibusiness.” And there are widespread claims that fears about taxes, regulation and budget deficits are holding down business spending and blocking economic recovery.

How much truth is there to these claims? None. Business spending is indeed low, but no lower than one would have expected given widespread overcapacity and weak consumer spending. Business leaders are feeling unloved, but giving them a group hug won’t cure what ails the economy.

Zombie K Street Project: The GOP Turns To Lobbyists To Draft Policy Agenda

John Boehner twisted himself into a pretzel this week when he told the Washington Post he had "no idea" whether Republicans would once again attempt to privatize Social Security if they retake the House in November. He couldn't just say "no" -- he followed up with the explanation that he couldn't say because he didn't want to prejudge the outcome of the GOP's voter survey.

"We're not going to prejudge what's going to come out of this listening project," he said.

Turns out that the project also includes soliciting recommendations from representatives of the most powerful business and trade groups in the country -- in other words, it's a "House Republican efforts to produce a new policy agenda with a small group of trade association leaders." Call it the Zombie K Street Project.

Kabuki Democracy: Why a Progressive Presidency Is Impossible, for Now

Eric Alterman | July 7, 2010

Few progressives would take issue with the argument that, significant accomplishments notwithstanding, the Obama presidency has been a big disappointment. As Mario Cuomo famously observed, candidates campaign in poetry but govern in prose. Still, Obama supporters have been asked to swallow some painfully "prosaic" compromises. In order to pass his healthcare legislation, for instance, Obama was required to specifically repudiate his pledge to prochoice voters to "make preserving women's rights under Roe v. Wade a priority as president." That promise apparently was lost in the same drawer as his insistence that "Any plan I sign must include an insurance exchange...including a public option." Labor unions were among his most fervent and dedicated foot soldiers, as well as the key to any likely progressive political renaissance, and many were no doubt inspired by his pledge "to fight for the passage of the Employee Free Choice Act." Yet that act appears deader than Jimmy Hoffa. Environmentalists were no doubt steeled through the frigid days of New Hampshire canvassing by Obama's promise that "As president, I will set a hard cap on all carbon emissions at a level that scientists say is necessary to curb global warming—an 80 percent reduction by 2050." That goal appears to have gone up the chimney in thick black smoke. And remember when Obama promised, right before the election, to "put in place the common-sense regulations and rules of the road I've been calling for since March—rules that will keep our market free, fair and honest; rules that will restore accountability and responsibility in our corporate boardrooms"? Neither, apparently, does he… Indeed, if one examines the gamut of legislation passed and executive orders issued that relate to the promises made by candidate Obama, one can only wince at the slightly hyperbolic joke made by late night comedian Jimmy Fallon, who quipped that the president's goal appeared to be to "finally deliver on the campaign promises made by John McCain."

None of us know what lies inside the president's heart. It's possible that he fooled gullible progressives during the election into believing he was a left-liberal partisan when in fact he is much closer to a conservative corporate shill. An awful lot of progressives, including two I happen to know who sport Nobel Prizes on their shelves, feel this way, and their perspective cannot be completely discounted. The Beltway view of Obama, meanwhile, posits just the opposite. That view—insistently repeated, for instance, by the Wall Street Journal's nonpartisan, non-ideological news columnist, Gerald Seib—is that the president's problem is that he and his allies in the Democratic Party "just overplayed their hand in the last year and a half, moving policy too far left, sparking an equal and opposite reaction in the rightward direction." And Newt Gingrich, speaking from what is actually considered by these same Beltway types as the responsible center of the Republican Party, calls him "the most radical president in American history" and "potentially, the most dangerous" as he urges his minions to resist the president's "secular, socialist machine."

State Banking, Globally

By Simon Johnson

A standard refrain from U.S. banking industry lobbyists is “you cannot put us at a disadvantage relative to our overseas competitors.” The Obama administration has largely bought into this line and cites it in public and private as one reason for opposing size caps on our largest banks and preventing Congress from raising capital requirements.

The US Treasury puts its faith instead in the Basel Committee on Banking Supervision process, a somewhat murky convocation of bank regulators from various countries that has a weak track record in terms of setting sufficient prudential standards (also the assessment of Dan Tarullo, now an influential Federal Reserve governor; disclosure, I have a part-time position at the Peterson Institute, which published his book). But, the official US reasoning goes, the crisis of 2007-08 was so traumatic, our European counterparts will now want to be more careful.

Identifying Suspicious Short Selling, But Not Who’s Behind the Trades

Last weekend, The Wall Street Journal highlighted new academic research [1] showing that investors may be trading on insider information after companies approach hedge funds for loans.

Researchers found that on average, in the five days before companies announce a loan from a hedge fund, the volume of short sales increases by 75 percent as compared with the 60 days before a deal is announced. There was no comparable uptick in betting against companies that borrowed money from commercial banks instead.

Disaster Messaging by the Democrats: It Could be Fatal to America's Future -- By George Lakoff

By BuzzFlash

Created 07/08/2010 - 8:35am

GEORGE LAKOFF FOR BUZZFLASH

Here’s a description the typical situation.

• The Republicans outmessage the Democrats. The Democrats, having no effective response, face disaster: They lose politically, either in electoral support or failure on crucial legislation.

• The Democrats then take polls and do focus groups. The pollsters discover that extremist Republicans control the most common ("mainstream") way of thinking and talking about the given issue.

• The pollsters recommend that Democrats move to the right: adopt conservative Republican language and a less extreme version of conservative policy, along with weakened versions of some Democratic ideas.

Two More Candidates for the McChrystal Treatment

Posted on Jul 6, 2010

By Robert Scheer

It’s not working. Time for the president to concede that the economy is at best stagnating and at worst about to take another steep nose dive. I don’t know if we are headed for another Great Depression, as Nobel Prize economist Paul Krugman dared suggest recently, but it is amply clear that the Obama strategy, inherited from George W. Bush, of bailing out Wall Street in the forlorn hope that it would repair the economic damage the fat cats inflicted on the rest of us has not worked.

The housing market remains in dire shape, and with it the nest eggs of Americans who are responding by squelching their appetite for consumption. The Wall Street hustlers were made whole, but not so the people whose home mortgages the banks are foreclosing, or businesses and their customers looking for the credit that the banks had promised to free up.

The president conceded last week that our economy is 8 million jobs in the hole despite his bailout and stimulus program. With deficits running wild, heartless Republicans get to claim that six months more of unemployment insurance to 1.7 million out-of-work people whose benefits have ended is more than we can afford.

Republicans And Democrats Lining Up Behind Major Changes To Social Security

Is there a new, bipartisan consensus forming on Capitol Hill about whether (and how) to scale back Social Security benefits? A surprising number of signs point to "yes" -- and that has many progressives looking ahead a few months to what they believe could become a serious fight.

Several of the most powerful members of the House -- Republicans and Democrats -- have recently voiced real support for the idea of raising the retirement age for people middle-aged and younger as part of a larger plan to reduce long-term deficits, inching closer to what not too long ago was the third rail of American politics.

Police probe death hoaxes

By: Jonathan Allen and Jake Sherman
July 6, 2010 04:55 PM EDT

At least three Democratic senators have been subjects of false reports of their deaths in the past two days, prompting the U.S. Capitol Police to open an investigation into the matter.

Several news outlets received a hoax e-mail news release, announcing the death of Sen. Patrick Leahy (D-Vt.) on Tuesday. Leahy, 70, who participated in July 4 events, is alive and well, according to spokesman David Carle.

Unjust Spoils

Robert Reich | June 30, 2010

Wall Street's banditry was the proximate cause of the Great Recession, not its underlying cause. Even if the Street is better controlled in the future (and I have my doubts), the structural reason for the Great Recession still haunts America. That reason is America's surging inequality.

Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation's total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America's total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928—with 23.5 percent of the total.

Each of America's two biggest economic crashes occurred in the year immediately following these twin peaks—in 1929 and 2008. This is no mere coincidence. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don't have enough purchasing power to buy what the economy is capable of producing. America's median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class can boost its purchasing power is to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn't pay their bills, and banks couldn't collect.

Time to Put the Deficit Commission Out of Our Misery

Tuesday 06 July 2010

by: Dean Baker, t r u t h o u t | Op-Ed

It's time to stop wasting the taxpayers' money and shut down President Obama's deficit commission. It is now clear that it has become a national joke.

One of the co-chairs of the commission is former Wyoming Sen. Alan Simpson. Simpson is often touted in the media for his plain-spoken man of the people ways. The media version doesn't quite fit the facts. Simpson worked his way up to the Senate from being the son of a former Wyoming senator.

Republicans Incite Class Warfare—Within the Middle Class

by Matthew Rothschild

The Republicans have found a new scapegoat for the economy, in addition to illegal immigrants.

The new scapegoat is public sector workers.

Unwilling to blame Bush for the budget deficit, unable to blame Wall Street for wrecking the economy, and incapable of blaming a lack of regulation or capitalism itself for the morass we're in, Republicans are pointing their fingers now at public sector workers.

The teachers, police officers, fire fighters, and other government employees are just making too much money, the Republicans say, regardless of the fact that public sector workers in state after state have been laid off or put on unpaid furloughs.

US climate scientists receive hate mail barrage in wake of UEA scandal

Vitriolic campaign targets American scientists following leak of climate unit emails

• Read the hate emails sent to climate scientists
• Hacked email climate scientists receive death threats

• Leo Hickman
• guardian.co.uk, Monday 5 July 2010 17.25 BST

Climate scientists in the US say police inaction has left them defenceless in the face of a torrent of death threats and hate mail, leaving them fearing for their lives and one to contemplate arming himself with a handgun.

The scientists say the threats have increased since the furore over leaked emails from the University of East Anglia began last November, and a sample of the hate mail sent in recent months and seen by the Guardian reveals the scale and vitriolic tone of the abuse.

The scientists revealed they have been told to "go gargle razor blades" and have been described as "Nazi climate murderers". Some emails have been sent to them without any attempt by the sender to disguise their identity. Even though the scientists have received advice from the FBI, the local police say they are not able to act due to the near-total tolerance of "freedom of speech" in the US.

Republicans: A Party of Unemployment

by Dean Baker

From now until 2 November, the Republican party will be the party of unemployment. The logic is straightforward: the more people who are unemployed on election day, the better the prospects for Republicans in the fall election. They expect, with good cause, that voters will hold the Democrats responsible for the state of the economy. Therefore, anything that the Republicans can do to make the economy worse between now and then will help their election prospects.

While it may be bad taste to accuse a major national political party of deliberately wanting to throw people out of jobs, there is no other plausible explanation for the Republicans' behaviour. They have balked at supporting nearly every bill that had any serious hope of creating or keeping jobs, most recently filibustering on bills that provided aid to state and local governments and extending unemployment benefits. The result of the Republicans' actions, unless they are reversed quickly, is that hundreds of thousands more workers will be thrown out of work by the mid-terms.

Health overhaul first provisions start to kick in

By RICARDO ALONSO-ZALDIVAR

The Associated Press
Monday, July 5, 2010; 3:38 PM

WASHINGTON -- The first stage of President Barack Obama's health care overhaul is expected to provide coverage to about 1 million uninsured Americans by next year, according to government estimates.

That's a small share of the uninsured, but in a shaky economy, experts say it's notable.

Many others - more than 100 million people - are getting new benefits that improve their existing coverage.

Report: Oceans' demise near irreversible

Moving toward the tipping point

BY LES BLUMENTHAL, McClatchy Newspapers

WASHINGTON -- A sobering new report warns that oceans face a "fundamental and irreversible ecological transformation" not seen in millions of years as greenhouse gases and climate change already have affected temperature, acidity, sea and oxygen levels, the food chain and possibly major currents that could alter global weather.

The report, in Science magazine, doesn't break a lot of new ground, but it brings together dozens of studies that collectively paint a dismal picture of deteriorating ocean health.

Paul Krugman: Punishing the Jobless

By PAUL KRUGMAN

There was a time when everyone took it for granted that unemployment insurance, which normally terminates after 26 weeks, would be extended in times of persistent joblessness. It was, most people agreed, the decent thing to do.

But that was then. Today, American workers face the worst job market since the Great Depression, with five job seekers for every job opening, with the average spell of unemployment now at 35 weeks. Yet the Senate went home for the holiday weekend without extending benefits. How was that possible?

The answer is that we’re facing a coalition of the heartless, the clueless and the confused. Nothing can be done about the first group, and probably not much about the second. But maybe it’s possible to clear up some of the confusion.

America's First Spymaster

By Robert Parry
July 4, 2010

Having grown up in eastern Massachusetts not far from Lexington and Concord, I always found the Revolutionary War’s heroes familiar and fascinating, including some whose names are little remembered except by historians.

And my later interest in intelligence activities caused me to focus on one extraordinary patriot in particular, Dr. Joseph Warren, a man who could be viewed as America’s first spymaster, although he was much more than that, a leader as influential in the war’s early days – and as selfless – as any figure to follow him in that long historic struggle.

Though involved with the Sons of Liberty and a member of the Boston Committee of Correspondence, a key body in organizing the revolution, Warren also moved within Boston’s respected society as a physician and surgeon. Indeed, that may have put him in place to recruit one of the most important and still mysterious spies in American history.

In the years leading up to the start of hostilities on April 19, 1775, Warren worked with fellow patriot Paul Revere in constructing a remarkable intelligence network for its time, a loosely knit collection of sympathetic citizens who uncovered information about the British garrisoned in Boston. The network also included riders who could spread alarms quickly through the countryside.

Companies Find Ways to Bypass Ban on Earmarks

By ERIC LIPTON and RON NIXON

TOLEDO, Ohio — Just one day after leaders of the House of Representatives announced a ban on earmarks to profit-making companies, Victoria Kurtz, the vice president for marketing of a small Ohio defense contracting firm, hit on a creative way around it.

To keep the taxpayer money flowing, Ms. Kurtz incorporated what she called the Great Lakes Research Center, a nonprofit organization that just happened to specialize in the same kind of work performed by her own company — and at the same address.

Now, the center — which intends to sell the Pentagon small hollow metal spheres for body armor that the Defense Department has so far declined to buy in large quantities and may never use — has $10.4 million in new earmark requests from Representative Marcy Kaptur, Democrat of Ohio.

The congresswoman, who has received tens of thousands of dollars in campaign contributions from Ms. Kurtz’s family and her business’s lobbyists, thought the quickly hatched nonprofit organization was a convenient solution.

A Radicalized GOP Might Take Over Our Government: Do Voters Realize What's at Stake?

By Steve Benen, Washington Monthly
Posted on July 4, 2010, Printed on July 5, 2010
http://www.alternet.org/story/147423/

Evidence of an "enthusiasm gap" between Democratic and Republican voters is hardly new, though it may prove to be one of the year's most important campaign dynamics. Recently, the trend became even more evident.

Gallup's latest poll measuring partisan enthusiasm not only showed Republicans with a sizable advantage, but found that excitement among GOP voters has reached a level with no modern precedent.

This week's report from the Pew Research Center found a similar partisan landscape: "Fully 56 percent of Republican voters say they are more enthusiastic about voting this year than in previous elections -- the highest percentage of GOP voters expressing increased enthusiasm about voting in midterms dating back to 1994.... The Republican Party now holds about the same advantage in enthusiasm among its party's voters that the Democratic Party held in June 2006 and the GOP had late in the 1994 campaign."

Red State Families vs. Blue State Families: The Family-Values Divide

By Naomi Cahn and June Carbone, Oxford University Press
Posted on July 1, 2010, Printed on July 5, 2010
http://www.alternet.org/story/147399/

Adapted with permission from Red Families vs. Blue Families: Legal Polarization and the Creation of Culture by Naomi Cahn and June Carbone, published by Oxford University Press, Inc. (c) 2010 Oxford University Press.

Families are on the front lines of the culture wars. Controversies over abortion, same-sex marriage, teen pregnancy, singleparenthood, and divorce have all challenged our images of the American family. Some Americans seek a return to the “mom, dad, and apple pie” family of the 1950s, while others embrace all of our families, including single mothers, gay and lesbian parents, and cohabiting couples. These conflicting perspectives on life’s basic choices affect us all—at the national level, in state courts and legislatures, in drafting local ordinances, and in our own families.

In our new book, Red Families vs. Blue Families: Legal Polarization and the Creation of Culture, we go behind the overblown rhetoric and political posturing of the family values conflict. What we have found is that the new information economy is transforming the family—and doing so in ways that create a crisis for marriage-based communities across the country.

Frank Rich: Fourth of July 1776, 1964, 2010

By Frank Rich

ALL men may be created equal, but slavery, America’s original sin of inequality, was left unaddressed in the Declaration of Independence signed 234 years ago today. Of all the countless attempts to dispel that shadow over the nation’s birth, few were more ambitious than the hard-fought bill Lyndon B. Johnson signed into law just in time for another Fourth of July, 46 summers ago.

With the holiday weekend approaching, Johnson summoned the television networks for the signing ceremony on Thursday evening, July 2. The Civil Rights Act of 1964, first proposed more than a year earlier by John F. Kennedy, banished the Jim Crow laws that denied black Americans access to voting booths, public schools and public accommodations. Johnson told the nation we could “eliminate the last vestiges of injustice in our beloved country” with the help of a newly formed “Community Relations Service” and its “advisory committee of distinguished Americans.” Talk about an age of innocence!

4 July, Independence Day: a rum business

Nations' founding myths are just that. The US is no exception, with commerce and corruption alongside highminded heroics

All countries have their special founding myths and legends. And all of them are eminently challengeable. 4 July no less than others. Independence Day is, of course, the special day for the Tea Partyers and Tea Baggers, when they can re-declare independence from their elected president and government, and maybe even free their Medicare from alien government control.

This Sunday, I will be at Tea Party-free barbecue, drinking and watching the fireworks. (The Third Benedict Arnold Appreciation Society annual barbecue is not until the Saturday after.) I used to love Guy Fawkes' night, (known in Boston before the Irish immigration as "Pope's Day") even though I deplore capital punishment and occasionally toast Mr Fawkes as the only man to enter parliament with honourable intentions.

In fact, Congress actually declared independence on 2 July, and then took two days to draw up an explanation of why they did it. And, says William Hogeland, author of the deliciously subversive book Declaration, it was not actually signed until later; while, indeed, many of those who did eventually sign had not even been at the meeting that declared independence, nor drew up the declaration. And showing a spirit that American politicians have shown ever since, some of those who did sign had, in fact, vigorously opposed the whole process.

They Did Their Homework (800 Years of It)

By CATHERINE RAMPELL

THE advertisement warns of speculative financial bubbles. It mocks a group of gullible Frenchmen seduced into a silly, 18th-century investment scheme, noting that the modern shareholder, armed with superior information, can avoid the pitfalls of the past. “How different the position of the investor today!” the ad enthuses.

It ran in The Saturday Evening Post on Sept. 14, 1929. A month later, the stock market crashed.

“Everyone wants to think they’re smarter than the poor souls in developing countries, and smarter than their predecessors,” says Carmen M. Reinhart, an economist at the University of Maryland. “They’re wrong. And we can prove it.”

Like a pair of financial sleuths, Ms. Reinhart and her collaborator from Harvard, Kenneth S. Rogoff, have spent years investigating wreckage scattered across documents from nearly a millennium of economic crises and collapses. They have wandered the basements of rare-book libraries, riffled through monks’ yellowed journals and begged central banks worldwide for centuries-old debt records. And they have manually entered their findings, digit by digit, into one of the biggest spreadsheets you’ve ever seen.

As Oil Industry Fights a Tax, It Reaps Billions From Subsidies

By DAVID KOCIENIEWSKI

When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes.

The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes.

At the same time, BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began.