The government holds a company’s stock price hostage.
BP’s share price collapse, at least until its renewed slide this week, was not the worst inflicted on a major international company lately because of government action. Australia’s big ore miners didn’t spill anything but their share prices were slammed overnight when their government floated a new windfall tax on minerals.
In this country too, you might have gotten a neck sprain watching the share prices of health insurers, pharmaceutical makers and medical device companies yo-yo during the health-care debate.
Sooner or later, it was inevitable politicians would find an occasion to use this power deliberately, calculatedly. In BP’s case this week, the company’s stock price hasn’t just been taken hostage by Washington, it has been wrapped around management’s neck and progressively tightened. The sight hasn’t been an edifying one, not least because the target isn’t just BP.
President Obama may not be instinctively a man of the market, but he does understand its vulnerability to the manipulation of symbols. He called last year’s bull market, remember, saying in March of 2009, “What you’re now seeing is profit-and-earning ratios are starting to get to the point where buying stocks is a potentially good deal,” whereupon stocks promptly embarked on one of the great rallies in history.
Mr. Obama is no Warren Buffett. Punters recognized a sign that the president wanted higher stock prices, that his foot (to borrow a phrase) wasn’t on the neck of business.
The foot is now on the neck of BP, whose share price is down by half, costing shareholders $90 billion in lost wealth.
In choosing to address the nation last night before today’s meeting with BP execs, Mr. Obama signalled plainly that he’s not interested in anything they have to say. The inverted two-step was a pure show of power. BP Chief Tony Hayward will testify tomorrow under oath in front of Henry Waxman’s committee, with ransom note already in hand. Three days earlier, Senate Majority Leader Harry Reid and Democratic colleagues presented a letter demanding that BP cough up an astounding $20 billion and give it, no strings attached, to a body under control of politicians to dole out as they see fit.
Mr. Obama, Mr. Waxman, the senators—none were so gauche as actually to have a ticker of BP’s stock price running in the background. That would have been overkill. The message got through.
BP has authored one of the country’s great industrial accidents and expects fully to pay through the nose. You could wish, in this light, Washington’s politicians didn’t seem quite so much like muggers standing on a street corner waiting for a vulnerable passerby. For one thing, it doesn’t benefit the victims, who will continue to line up for years to come, if BP can’t reinvest to sustain and grow its business.
Even more so because the $20 billion is rapidly becoming secondary. Notice that this week’s passion play began with all the major oil execs (not just BP’s) hauled before Ed Markey’s House subcommittee, in a guilt-by-association exercise designed to advance the cause of anticarbon legislation. From trying to distance itself from the spill the White House is turning on a dime to hype the Gulf disaster beyond its already alarming proportions. The goal: to steamroll into law a new climate-and-energy bill the public has said again and again it doesn’t want.
Government is the greatest of blessings, without which many other blessings are not possible, such as freedom from fraud and extortion and violence. The problem, and irony, is that government, in clearing the field of other fraudsters and extortionists, is ever tempted by those roles itself.
A policeman kicks out your taillight and then writes you a ticket for a faulty taillight. A president announces a moratorium on offshore drilling as a sop to a section of his public that always opposes drilling, and to be seen “doing something.” Then he turns around and demands that BP compensate those injured by the president’s own careless action.
Mr. Obama may not quite have committed the miracle of converting Tony Hayward into a sympathetic character, but voters who aren’t keen on higher energy prices should be watching closely. Their taillight is ripe to be kicked out next.
Holman W. Jenkins, Jr., Wall Street Journal