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Archive for September, 2016

Coal-fired Power

Coal-fired Power

While the Hillary v. Donald Rumble on Monday night garnered all the media attention, the D.C. Circuit Court of Appeals heard a far more substantive discussion the following morning. An en banc panel of ten federal appellate judges heard oral argument on the Obama Administration’s Clean Power Plan.

It was a “hot bench,” with lots of questions from the judges. And while Hillary and The Donald put down their swords after 90 minutes, the oral argument on the CPP went on for more than seven hours.

West Virginia’s Solicitor General opened with an artillery barrage in the putative war on coal. The CPP sets target emission rates for fossil fuel generators such as coal, and prohibits them from operating if they exceed those limits unless they purchase carbon credits from generators whose emissions are below their assigned limits. He argued that the CPP thus forces coal plant owners into an impossible choice: they either subsidize their renewable energy competitors or shut down prematurely. In his view, that would affect not just West Virginia but the nation as a whole. W. Va. and other opponents argued that the Clean Air Act does not allow the EPA to require plant owners to invest in different generation resources.

The question of the scope of the EPA’s authority got a lot of attention. The EPA and other proponents of the plan countered that this type of regulation is already commonplace in the power industry. They argued that the emissions trading contemplated by the CPP would be the least expensive method of pollution control, especially when compared to setting emissions caps for each plant. EPA argued that the Clean Air Act mandates that it devise the best system of reductions for any particular pollution type, and that’s what the CPP does. They pointed to the Supreme Court’s 2007 ruling in Massachusetts v. EPA, which mandates that the agency act to regulate carbon. And, they continued, the high court’s 2011 ruling in AEP v. Connecticut affirmed the EPA’s regulation of carbon, declaring that because climate change damages were within the EPA’s jurisdiciton, individual states could not sue power companies for climate change harms.

Their opponents argued that other language in AEP casts doubt on the scope of that holding.

Other CPP opponents claimed that because CPP requires major changes to the power grid, that the EPA is infringing on states’ rights because each state is responsible for the reliability of its own electric power system. Numerous shut-downs of coal-fired plants that would follow implementation of the CPP would adversely affect grid reliability.

Once again, it comes down to the Third Branch Default Setting that we’ve seen before in litigation interpreting laws that are both complex and unclear. The almost endless adventures of the 8th Circuit Court of Appeals with the Telecommunications Act of 1996, now forgotten like some long-ago war over an equally forgotten issue, comes to mind. Yet the problem is essentially the same. Congress enacts a law, but because of its own inability to agree on what that law should really say, it gets passed with provisions that don’t add up, or are even contradictory. But those problems are down the road, and it’s more important for legislators to get some earned media at the signing ceremony and have some accomplishment to write home to constituents about. Thus it falls the judiciary, sooner or later, to sort things out. C’est la vie, c’est la guerre.

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"Morning Joe" Scarborough

“Morning Joe” Scarborough

As far as TV talking heads go, Joe Scarborough is not the best, but he’s far from the worst. Still, every once in a while Joe makes a comment, apparently off-the-cuff, that makes no sense at all, as he did during his discussion of the Devolution of the GOP in his August 29, 2016 broadcast.

Scarborough’s jumping off point was a comparison between the demeanor of Bush the Elder (a/k/a, Bush 41, a/k/a George H.W.) and that of the GOP’s current presidential nominee, Prima Donald Trump.

Scarborough discussed his visit to the Bush compound in Kennebunkport, Maine, which retains its beauty as a quaint New England coastal town, so long as you can forget who the current Maine governor is. Of Bush 41 Scarborough said:

They make others around them feel special despite the fact that they have lived the most remarkable of lives, serving in Congress, running the Republican National Committee, heading up the CIA, being the U.N. Ambassador as well as the U.S. Ambassador to China, serving as Ronald Reagan’s vice president and then leading America as the 41st president of the United States.

But good luck getting George or Barbara Bush talking about themselves. They just don’t do it and they never will. First of all, their parents didn’t allow it. And besides, that kind of thing wasn’t done in the world from which they came. It is just one small way that the ethos of Walker’s Point is so radically different from the mindset that infects Donald Trump’s garish corner office high above 5th Avenue in Trump Towers.

As [Jon] Meacham and I walked down the driveway after saying goodbye to the Bushes, Jon lamented the fact that the same Republican Party that nominated a man like Bush, who rarely spoke about himself, would a quarter century later select a reality TV showman who obsessively talked about little else. Meacham paraphrased Henry Adams in saying that the historical devolvement from Bush to Trump proves that Darwin’s theory of evolution was less compelling when applied to American politics.

Bush the Elder has a lot to be proud of. He served his country both in uniform and in government. He was a fighter pilot in WWII and was shot down in combat with Japanese forces. (As Trump might say,  he only likes fighter pilots who weren’t shot down, he’s gotta tellya.). I don’t take any of that away from Bush 41.

But Scarborough’s notion that not talking about yourself, or not tooting your own horn to say it more directly, is a virtue in and of itself that we all should strive for is absolute nonsense.

Of course Bush 41 never talked about himself. He never had to. He is a walking, breathing pillar of the Republican Establishment, and when the word “establishment” is used in connection with anyone in Clan Bush it is always spelled with a capital “E.”

Bush 41’s father was Prescott S. Bush, a former U.S. Senator for Connecticut, who was a Skull & Bones guy at Yale undergrad (as were Bush 41 and Bush 43), the secret frat where the scions of the Elite of the most elite Elites quaff alcoholic beverages prior to attaining a legal, if not responsible, drinking age and perform pranks that would look very different in 2016 than when they were supposedly performed (e.g., in 1918, when Prescott Bush allegedly led a nocturnal mission to exhume Geronimo’s skull).

(Oh, those kids!)

H.W.’s Wikipedia entry states that he started his business career as a sales clerk with Dresser Industries. Sounds like a humble beginning. But the entry goes on to state that Dresser was a subsidiary of Brown Brothers Harriman, where his father, Prescott Bush, had served as a director for 22 years.

So, Joe Scarborough, please think about that for a minute. I’ll bet H.W. didn’t need to talk much about himself when he got that sales clerk job at Dresser. Suppose, Joe, that you were the supervisor of this new young sales clerk from the Northeast who likes to go by his dual middle initials “H.W.” What are the odds that you’d treat him a bit differently than some other poor schmoe sales clerk? Would you give H.W. a bad performance review, even if he deserved it?

Not if you wanted to keep your job.

Mind, I’m not saying H.W. didn’t do a terrific job as sales clerk. But when your pop sits on the Board of Directors of your employer’s corporate parent,  the reality of who’s the boss and who’s the new hire undergoes a fundamental alteration.

Prescott Bush, Bush 41 and Bush 43 all lived in a rarefied world of great oil wealth and Republican Establishment connections. Bush 43 is a case history all by himself, so I’ll leave that alone, but it’s obvious that, political campaigns aside, not one of them ever had to sell his abilities or his name to anyone to land a job.

I agree that Prima Donald Trump never stops running his mouth, and that’s bad for him and for anyone who’s forced to listen. But for ordinary mortals who have to hustle their butts to make a living, you’d better toot your own horn if you want to eat and keep a roof over your head.

bush-sheldon-p

Samuel Prescott Bush (1863-1948), grandfather of Bush 41

So Joe, before you go off on another tilt about praising modesty and silence as saintly virtues, maybe you should look into Samuel Prescott Bush’s life. He’s the guy who started the Bush family bankroll rolling. I’ll bet old Samuel P. Bush had substantial “book smarts” (he had an engineering degree from Stevens Institute) as well as “street smarts,” some business acumen (given where he started and where he wound up), plus a bit of luck.

I’m sure old Sam P. Bush had to brag a little bit about himself to get hired for his first job, and maybe for a few others.

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Guillotine

Artist’s conception of a traditional annual performance review at a French investment bank

Even Willie Mays missed a fly ball every once in a while.

Reuters reports that investment banking firm Lazard Ltd, which advised SolarCity on its $2.6 billion sale to Tesla Motors Inc, made an error in its calculations that discounted the value of Solar City by $400 million.

But the headline is worse than the actual story, so one might question whether there’s some “clickbait” sensationalism involved. There was a miscalculation according to a regulatory filing made by Solar City, but the miscalculation related to a range of minimum-maximum share prices, rather than to a definite acquisition price.

Using its discounted cash flow model, Lazard came up with an equity value range of between $14.75 and $34.00 per share for Solar City. After closing, Lazard realized that it had double-counted some of Solar City’s projected debt. After corrections to the DCF calculations, the valuation range was adjusted to $18.75 to $37.75 per share.

The $400 million figure sounds bad, and of course it is. But the purchase price the parties ultimately agreed to, which was paid in Tesla stock, came out to $25.37 per share. So regardless of the error, the price paid was still within the range originally provided by Lazard.

I’m sure there are lawyers out there who would, if asked, take the case and file against Lazard, but I would not count myself among them. Lazard and Tesla will probably dust themselves off and move on. No harm, no foul.

What’s really interesting about this case is not that an error was made, but rather how Lazard might handle its repercussions internally. Who made the error? Who checked the figures? While I wouldn’t take the suit, I would certainly place money on heads rolling across the office floors at Lazard’s headquarters.

[Attention carpet cleaning companies: send your brochures to Lazard now.]

Lazard, originally a French merchant company that grew into a major investment banking house in the New World via New Orleans, might just keep an old Rasoir National (see artist’s conception, above) in storage somewhere in a New Jersey warehouse for just this type of occasion.

When the Great Recession occurred, the Wall Street chorus was that it was nobody’s fault, they never saw it coming, and nobody could have seen it coming.

Right.

The rapidity with which Wall Street bankers transitioned from omniscient Masters of the Universe to a collection of Sargent Schultz clones was the closest mankind has yet come to attaining the speed of light. Despite precipitating the worst financial crisis since the Great Depression and imposing on the U.S. taxpayer bailout costs rivaling those of a world war, no one was held accountable. Wall Street was grateful for Bernie Madoff because his Ponzi scheme story was simpler and took the spotlight off them.

But if you are the unfortunate person at Lazard on the Solar City-Tesla deal who’s tagged with responsibility for this DCF error, whether you’re a first-year analyst or a managing director, you can expect a career ending scene such as that depicted above.

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