BP's Shock Waves

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The Oil Pollution Act of 1990 caps the firm's post-cleanup liability at $75 million — a number that BP insists it can afford. But according to that same act, the cap is rendered meaningless if BP is found criminally negligible in a court of law. Given its negligence in the Gulf, that's a very real possibility — meaning that the total costs could run to more than $100 billion, a number that would kill the firm for sure.

In either case, however, expecting BP to do all it can to avoid bankruptcy just for the pleasure of avoiding a crash in the derivatives market and paying out lawsuit awards to oil-stained hicks — that runs completely counter to everything we've come to learn about this company. If BP's executive swine think they'll get off more cheaply filing for bankruptcy, they'll do it in a minute. "They want to pay out as little as possible," says Kaufman, the bankruptcy expert. "Why would they want to pay out more than they have to? Because they're great humanitarians?"

To prevent BP from ducking its responsibilities, Rep. John Conyers of Michigan has introduced a bill that would bar the company from declaring bankruptcy without the OK of at least half of all potential victim-plaintiffs. That bill passed the House and is now headed for the Senate. If it winds up being signed into law, the potential exists for a dramatic confrontation between England and the United States over whether a British-based corporate gangster should be allowed to slash his own wrists to avoid paying claims to pissed-off fishermen and other NASCAR-loving plaintiffs along the Gulf Coast.

In any case, since Obama made his fateful "the limeys will pay" speech, the markets have calmed down a little on BP. The current price of a five-year CDS on the firm's debt has plunged to 240, where it has been holding steady for weeks. But in a betting age, bet on this: The world's reigning corporate villain is still considering a bankruptcy move that could have dire consequences not only for U.S. taxpayers but for the entire global economy. "Unless they're being completely negligent," says Kaufman, "they've got teams of people going over various strategies. And I guarantee they've got a team on bankruptcy."

It may very well be that BP won't go bust — or that, even if it does, it won't cause a financial catastrophe. Any analysis of derivatives is by its very nature inexact, full of maybe's and could be's and possibly's, and that's precisely the problem; we continue to operate a massive alternative economy of unrestrained gambling that keeps everyone in the dark. AIG should have been the wake-up call that got us to shine a light on this dark market, but Wall Street has fought hard to preserve its deregulated betting parlor. Which leaves us right where we were two summers ago: wondering if BP or some other corporate fiasco is going to cause the next global panic — and wondering why we still permit this derivatives-fueled casino to remain open.

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Matt Taibbi

Matt Taibbi is a contributing editor for Rolling Stone. He’s the author of five books and a winner of the National Magazine Award for commentary. Please direct all media requests to taibbimedia@yahoo.com.