Sunday, December 16, 2007

Sen. Landrieu (R-Big Oil)

You couldn't help but notice that it was Democrat Mary Landrieu of Louisiana who broke ranks and gave President Bush and the Republican leadership the one-vote margin they needed to defeat the Democratic version of the energy bill last week. Landrieu's problem was with a provision eliminating a $1 billion-a-year tax break now enjoyed by five giant oil companies; the money would have be redirected to subsidize cleaner alternative fuels. As Landrieu saw it, that was "one-sided policymaking" that left "Louisiana industry footing the bill."

Landrieu's attempt to gussy up her cave-in to back-home special interests was laughable. There was nothing one-sided about the bill -- it was a comprehensive approach to energy supply and demand with bipartisan support that had been watered down at several stages to accommodate business concerns. And does anyone really believe that Louisiana -- which, thanks to sky-high energy prices, has been fleecing the rest of the country -- would suffer grievous economic harm because of a puny tax increase on five multinationals that do the bulk of their business elsewhere?

Landrieu's defection caused more damage than simply putting her own and her state's selfish interests before the national interest. By refusing to stick with her party's leadership on what amounted to a confidence vote, she also snuffed out whatever remaining glimmer of hope there was for getting an up-or-down vote in the Senate on a range of Democratic initiatives. Her Democratic colleagues might want to remember her craven parochialism the next time the senator asks the rest of the country to "foot the bill" for the hopelessly mismanaged Katrina relief effort in her state, or a farm bill that requires all consumers to "foot the bill" for trade barriers that protect Louisiana sugar producers from lower-cost competition.

You certainly can't accuse the editors at the Wall Street Journal of kowtowing to their new owner.

On the day Dow Jones shareholders voted officially to sell the paper to Rupert Murdoch's News Corp., the Journal's daily commentary by breakingviews.com focused on Murdoch's ill-fated investment in Gemstar-TV Guide. Not only has News Corp. lost nearly $7 billion from the investment, wrote Lauren Silva and Rob Cox, but in a complicated stock swap aimed at getting full control of Gemstar, Murdoch had to hand an uncomfortably large chunk of News Corp. stock to John Malone, another wily media pirate. By later threatening to challenge Murdoch's unquestioned control of News Corp., Malone's Liberty Media walked away with control of DirecTV, the booming satellite broadcaster.

It's hard to believe that this wasn't an early test by the Journal newsroom of Murdoch's solemn promise to honor its editorial independence. It's also hard to believe that Murdoch much appreciated the gesture and won't find some way, in time, to respond in kind.

The great benefit of securitization -- packaging loans and selling off pieces of the entire package to investors -- was that it was supposed to spread risk widely rather than concentrating it in banks.

But now that the big banks are in the process of taking tens of billions of dollars in write-offs and markdowns associated with asset-backed paper, you have to wonder what happened.

The answer: Banks don't really spread the risk if they loan the money to buy these securities and guarantee to buy them back when nobody else wants them. In that case, all they've really done is hide the risk from auditors, ratings agencies, regulators and their own shareholders.