Obama's Boot On BP Will Be "Blowback" for U.S. Firms

In recent years the concept of "blowback" has a gained a great deal of currency among commentators. The basic idea seems to be that there's a negative tradeoff to every allegedly good deed on the part of government officials, and in modern times the U.S. has been victimized by those tradeoffs.

While our funding of the Afghan rebels (along with Saudi expat Osama Bin Laden) surely helped hasten the demise of the Soviet Union, blowback materialized years later in the rise of a terrorist movement that brought us great harm on 9/11. The Reagan administration's bailout of banking giant Continental Illinois in the early ‘80s created the presumption of a governmental safety net that resulted in the disastrous imposition of TARP in 2008. Though the role of Fannie Mae and Freddie Mac in the recessionary rush to housing in the decade just passed is vastly overrated, many suggest that the greater empowerment of the two GSEs in the late ‘90s helped author a mortgage and banking crises ten years later.

Fast forward to the present, and it's fair to suggest that President Obama's placement of the proverbial and weighty "boot" of the federal government on oil giant British Petroleum (BP) promises to eventually deliver blowback to the myriad U.S. companies with operations overseas. Reduced investment stateside thanks to the Obama administration's nonchalant attitude toward contracts and law similarly looms large in our future.

Considering laws, the Obama administration arguably opened the barn door initially with its treatment of senior Chrysler creditors during the aforementioned firm's bailout. In the process of essentially nationalizing the once prominent carmaker, the Obama administration loudly told creditors that their contractual claims on Chrysler's assets were irrelevant, thus calling into question loans made to any U.S. company deemed by our federal minders "too big to fail."

Much the same applies to BP. While rational minds might credibly say that neither BP nor any oil company should enjoy liability caps when they err, the facts are that BP and others chose to drill for oil in difficult places with full knowledge that their liability would have limits. Absent the caps, it's not unrealistic to suggest that BP would never have sunk a well far off the Louisiana coast, and it's also likely that its shareholders wouldn't have allowed the firm to do so.

But with the Obama administration indifferent to rules, BP stands to suffer liability well beyond what its shareholders ever imagined. Indeed, as Obama made plain in his Tuesday speech, "I will meet with the Chairman of BP and inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company's recklessness."

Rules and the legality of Obama's proclamation don't seem to count when politics get in the way, but whatever one's opinion of his punitive actions toward BP, this will have a jobs and investment body count that all Americans will suffer. To put it simply, investors will think twice before committing capital to both foreign and U.S. companies with stateside operations, and when companies consider where to drill for oil or put factories in the future, it's not unrealistic to assume that for some, the U.S. will be too risky.

Considering multi-national firms with a U.S. address, the future looks even more uncertain. Many U.S. oil companies have oil interests outside these fifty states, and if bad luck strikes them at some point, they'll pay for the Obama administration's stridency with similarly difficult penalties that will that will threaten their viability just as our government has threatened that of BP.

As for U.S. manufacturers seeking efficiency through the accession of foreign labor, one can only hope that their internal regulations concerning safety are more than solid. If a factory fire or shoddy equipment leads to foreign death within U.S. assets, what's to say that foreign governments won't treat our businesses the way that that Obama administration sees fit to treat the prominent firms of other countries?

With BP having lost $90 billion in market capitalization, this share-price decline signals the possibility that the force of the Obama administration might send BP into bankruptcy, and its assets into the hands of other companies, including those with a U.S. provenance. If so, what's to keep foreign governments from doing the same to our companies as a way of improving the economic chances of foreign firms?

What this all boils down to is that the Obama administration is engaging in a protectionist act like any other. And when we seek to weaken foreign firms, we surely weaken ours. 

And when our federal minders place a bull's eye on foreign companies - particularly ones that made mistakes without malicious intent - retaliation from foreign governments is inevitable. This should be remembered in the future. No successful business operates with the intent of hurting others or causing environmental catastrophes, but accidents do happen.

Thanks to the Obama administration's congenital need to politicize everything, future investment stateside is imperiled, along with the health of our greatest companies that might err overseas. And when foreign leaders choose to follow the Obama administration's lead in terms of putting the boot on our most prominent firms, we'll come to understand the notion of "blowback" once again.