Category: Business & Capitalism

Carbon trading omen: Goldman Sachs’ legalized cheating

If Congress enacts carbon trading through a cap-and-trade scheme, look for Goldman Sachs to figure out how to game the market at our expense.

Today’s New York Times features a front-page, above-the-fold article about how Goldman Sachs and other trading firms are allowed a 30-millisecond peek at incoming stock market orders before the rest of the the public, allowing Goldman to buy or sell ahead of the incoming trades.

When I was an SEC lawyer, we called this “trading ahead” or “frontrunning” and it was illegal. But apparently, Goldman Sachs and some other traders with powerful computers have obtained special permission to engage in so-called “high-frequency trading” — which can only be considered a euphemism for frontrunning.

This is outrageous in so far as it gives Goldman and the other frontrunners an unfair advantage in the market — no wonder Goldman Sachs is set to have record profits this year.

So what’s this got to do with carbon trading?

Energy and Environment Daily reported today:

Diverging views about how to regulate trillion-dollar carbon trading markets that would grow under a cap-and-trade law have emerged as a major hurdle for Democrats trying to pass a climate bill this year.

Some prominent senators on energy issues say the House-passed climate bill would not prevent a repeat of alleged speculation or manipulation in oil markets in recent years…

The discussions about how to regulate carbon allowance and derivative markets are unfolding at a time when lawmakers want to show they are not enabling Wall Street banks to launch another complex financial trading system that could spin out of control.

“The last kind of headline that members of Congress will want is billions in bonuses for Wall Street because of the way they have manipulated the cap-and-trade market,” said Norm Ornstein, a congressional expert with the American Enterprise Institute. “That is not something they can tolerate.”

Add all this to the recent report by Rolling Stone‘s Matt Taibbi that Goldman secretly received permission from the Commodity Future Trading Commission to take greater positions in the futures market than other traders — thereby helping to cause last year’s oil bubble and $4-gasoline — and you’ve got a recipe for ill-gotten profits from carbon trading for Goldman and disaster for the rest of us.

Manufacturers go Judas: 1.5% of allowances is the new ’30 pieces of silver’

American manufacturers are ready to sell America down the river if they can get an extra 1.5 percent of the CO2 emission allowances allocated in the Waxman-Markey bill.

In a July 15 letter, the American Materials Manufacturing Alliance (comprised of the Aluminum Association, American Chemistry Council, American Forest & Paper Association and the American Iron and Steel Institute) asked Sen.  Sheldon Whitehouse (D-RI) to increase the free allowances allocated to energy-intensive manufacturers from 13.5% to 15% percent — a modification “valued at billions of dollars over the life of the program.”

Beyond the “30 pieces of silver” nature of the manufacturers’ request, granting it would mean that some other special interests would have to lose 1.5% of free allowances — so look for an intensified struggle among  the rent-seeking thieves for the free taxpayer money that free allowances represent. Over the life of Waxman-Markey, Congress would issue $9 trillion worth of allowances.

Here are the Judases that are willing to betray America to the Marxist-Socialists for an extra 1.5% of Waxman-Markey’s free allowances:

Steel's Tom Gibson
Steel's Tom Gibson
Aluminum's Steve Larkin
Aluminum's Steve Larkin
AFPA's Donna Harman
AFPA's Donna Harman
Chemical's Cal Dooley
Cal Dooley: Willing to screw America for Waxman-markey lite

Wal-Mart cons customers with green labeling

If you need a new or, perhaps, a first reason to detest Wal-Mart, consider this.

Wal-Mart will require its suppliers to calculate the environmental impact of their products, according to a report in Greenwire (July 15).

According to the report,

“I envision the day that you look at a piece of apparel, you flip a tag over, and learn about how sustainable it really is,” said John Fleming, Wal-Mart’s chief merchandising officer. The tags would work similarly to nutritional labeling today, though some standardization needs to take place, he said.

Interesting… since the greens don’t think that modern agriculture (cotton and wool) or the chemical and petroleum industries (synthetic fibers) are sustainable, what exactly will Wal-Mart apparel be made of?

Last year, former Wal-Mart CEO Lee Scott told a Wall Street Journal conference audience that the company didn’t have any scientists and didn’t know anything about science — yet Wal-Mart will now start harassing suppliers over, and deceiving customers with the dubious concept of “sustainability.”

Attention Wal-Mart shoppers — go to Target.

Insurers re-open debate on climate disclosure

Now that the U.S. Securities and Exchange Commission is looking at increasing corporate disclosure requirements concerning the much-dreaded global warming, the insurance industry is ironically rethinking the wisdom of its own disclosure rules that were just passed this spring, according to a report in ClimateWire.

According to the report,

There’s debate, however, about whether insurers are seeing their risks increase from climate change. Their emissions are low compared to electric utilities and other industrial emitters. And many of the large insurance companies have been dealing with fluctuating weather for centuries, said Robert Hartwig, president of the Insurance Information Institute, an industry group.

“The reality is, insurers have been aware of climate risk before most people talking about it today were born,” he said. “There is no evidence today, last year, a decade ago, a century ago — ever — that variability and volatility in climate is something that should lead to greater oversight of insurance companies.“

In a related insurance industry story, today, Carbon Control News reports,

The insurance industry is raising concerns that companies facing likely greenhouse gas (GHG) limits will file claims against years-old insurance policies to pay for compliance costs by arguing their liability stems from releases that occurred during the coverage term, before policies excluded pollution coverage.

With climate compliance costs projected to be in the hundreds of billions or even trillions of dollars, policyholders are going to seek third parties such as insurers to pay those costs, one informed source says. “The costs that you are going to talk about are going to be enormous,” the source says.

If the insurance industry had only followed Robert Hartwig’s advice to start with…

GE’s green credit cards fail

General Electric has pulled the plug on its Earth Rewards MasterCard program due to lack of interest, ClimateWire reports.

A first-of-its-kind program, card users could set aside 1 percent of the value of their purchases for carbon offset projects.

GE had no comment on whether more carbon was actually stored in the plastic cards themselves than by dubious offset projects. 🙂

Waxman-Markey cuts steeper than thought

Waxman-Markey’s emissions reductions goals will be more difficult to meet than previously thought, warned the electric utility industry in a July 6 letter to Senate Majority Leader Harry Reid (R-NV).

Edison Electric Institute chief Tom Kuhn wrote,

“H.R. 2454 would require a reduction of GHG emissions of 3 percent below 2005 levels by 2012–only three years from now. In reality, accounting for growth in electricity demand since 2005, the 2012 requirement is closer to a 10 percent reduction in projected GHG emissions. Achieving this near-term reduction would impose an abrupt and significant price increase on electricity consumers. The House bill also would require a very aggressive 17 percent reduction in GHG emissions below 2005 levels by 2020. Again, we support a more reasonable and achievable 2020 target that will help cushion the cost impact on our consumers.”

So does EEI oppose Waxman-Markey? Amazingly, the answer is no. Instead EEI suggests: (1) price collars,

“We also strongly support inclusion of a price ‘collar,’ consisting of both a floor and a ceiling on emissions allowance prices, in climate legislation. This critical consumer protection measure would help limit economic harm to energy consumers, U.S. workers, and the economy, while discouraging market manipulation and encouraging technological development.”

(2) more free carbon allowances,

“Under H.R. 2454, allowances would sharply decline from 35 percent to zero over a five-year period from 2025 to 2029. Such a swift phase-out will lead to abruptly higher energy prices for consumers. Instead, we recommend a longer phase-out period of at least 15 years to help protect consumers from sudden energy price shocks.”

and (3) greater ability to participate in the fraudulent carbon offsets market,

“In addition, a number of improvements are needed in the offsets provisions. In the early years, offsets will be one of the few tools utilities will have for meeting targets. Quantitative restrictions, such as the 20 percent discount for international offsets, should be eliminated both to bolster the supply and to lower the price of domestic and international offsets. Moreover, a number of severe qualitative restrictions should be either eliminated or eased in order to assure a full and affordable supply of offsets.”

Like the American Chemistry Council’s Cal Dooley, EEI’s Tom Kuhn is ready to sell-out America to get a deal that he naively thinks will work for his industry.

EEI's Tom Kuhn: Trying to buff the Waxman-Markey turd into a popsicle.
EEI's Tom Kuhn: Trying to buff the Waxman-Markey turd into a popsicle.

Waxman-Markey pays: Exelon expects billions

Chicago-based utility Exelon Corp. expects that Waxman-Markey will boost its profits by $1.1 billion (39 percent), according to a report in Restructuring Today (July 13).

Because of its nuclear fleet, the largest in the U.S., Exelon will have plenty of carbon credits to sell to other emitters.

Exelon is trying to exploit its potential Waxman-Markey boon in its efforts to acquire Princeton, NJ-based NRG Energy, which is expected to spend $1.3-2.3 billion to reduce its carbon emissions under Waxman-Markey and which opposes the takeover.

In a letter to NRG shareholders, Exelon said:

We are offering you securities in a company… whose value rises rather than declines as carbon is priced into the marketplace…

Ironically, both Exelon and NRG are members of USCAP, the industry-environmentalist coalition lobbying for greenhouse gas regulation.

So not only will Waxman-Markey cut into fossil fuel-based NRG’s profits, it may very well mean the end of the company.

It makes you wonder what NRG CEO David Crane was thinking when he joined USCAP. If he thought that it’s better-to-be-at-the-table-than-on-the-menu, he was wrong since now he has two problems (carbon regulation and takeover) instead of one or even none.

BTW, if you want to see which regions of the country will be paying more for electricity thanks to David Crane’s bad judgment, click here for a list of NRG’s generation facilities in Texas, the Northeast, South and Southern California.

Chemical industry sells out America?

American Chemistry Council head Cal Dooley has been tasked to appease the Senate climate gods by suggesting that the Waxman-Markey greenhouse gas emission reduction schedule be scaled back from 17% by 2020 to 14% by 2020, reports Carbon Control News (July 9). In return for that concession and more free emissions credits, the chemical industry is apparently willing to sell the rest of us down the river.

Maybe Dooley’s group should just change its name to the Death-to-America Chemistry Council?

ACC's Cal Dooley: Willing to screw America for Waxman-markey lite
Cal Dooley: Willing to screw America for Waxman-Markey lite

Pickens scraps wind scam

“In a sign of the difficulties facing the development of wind energy, T. Boone Pickens, the legendary Texas oilman, is suspending plans to build the world’s largest wind farm,” reports reports the New York Times.

We are proud to have helped expose the Pickens Plan for the scam that it was.

This is quite the embarrassing legacy for the “legendary Texas oilman.”

Goldman Sachs to be carbon regulator?

Sens. Dianne Feinstein (D-CA) and Olympia Snow (RINO-ME) have introduced a bill to make the Commodity Futures Trading Commission the sole regulator of the carbon market created by cap-and-trade legislation.

So does this mean that freebooting Goldman Sachs could be the de facto regulator of the carbon market?

Consider that:

  • The current chairman of the CFTC is Gary Gensler, formerly of Goldman Sachs.
  • Goldman Sachs is a part owner of the exchanges where carbon allowances would be traded.
  • Goldman Sachs has spent millions of dollars lobbying for cap-and-trade legislation in anticipation of making billions of dollars at the expense taxpayers and consumers.
  • Goldman has a special exemption from the CFTC to exceed the trading limits normally placed on commodity speculators. Not only was this exemption secret for 17 years, the CFTC recently had to ask Goldman for permission to release the letter to Congress!
  • Goldman Sachs employees are heavy contributors to the Democratic Party giving it over $4.4. million in the last election. Barack Obama received more than $997,000, Feinstein received $24,250, and Snowe received $17,000 from Goldman. All-in-all, this could result in a pretty decent return-on-investment for Goldman.

As the global warming bubble inflates and then bursts, will Goldman Sachs self-regulate all the way to the bank… making record profits at the expense and misery of taxpayers and consumers?

Can you tell the difference between the CFTC and Goldman Sachs?

Gary Gensler, CFTC Chairman
Gary Gensler, CFTC Chairman
Lloyd Blankfein, Goldman Sachs Chairman
Lloyd Blankfein, Goldman Sachs Chairman

More GE Welfare Queen…

“Unable to Unload Limping Divisions, GE Invests in Propping Them Up” is the headline of this article in today’s Wall Street Journal.

If you the read the article, however, you’ll find that it is actually taxpayers that are doing the propping:

In the appliance division [which GE tried unsuccessfully to sell], GE’s union of 2,100 hourly workers in Louisville voted in May to freeze wages as part of GE’s agreement to build energy-efficient hot-water heaters in Louisville. GE also is getting $17 million in government incentives. It hopes the products will open markets and inject new life into GE’s appliance business.

[The chief of GE’s lighting-and-applicance group] believes there is still an outside chance GE might decide to hang on to the units, especially in light of the subsidies and tax breaks the Obama administration is doling out for energy efficiency.

More on GE’s Welfare Queen business strategy:

Rolling Stone spots ‘global warming bubble’

Rolling Stone reporter Matt Taibbi does a terrific job of exposing Goldman Sachs in his article “The Great American Bubble Machine.”

Particularly relevant here, Taibbi spotlights the “global warming bubble” as Goldman’s current pump-and-dump scheme. He’s not the first to write about this ongoing phenomena, but it is nice to see that Rolling Stone raises at least some questions about the rush to global warming.

I don’t believe Taibbi’s full article is available on the web yet, so you’ll have to get a hold of a print copy of Rolling Stone — it’s a very worthwhile read.