What do the Fukushima Daichi (Fukushima) nuclear meltdown and the Wall Street meltdown have in common? They both demonstrate how really bad decisions are made when politics and emergencies co-occur. The Fukushima meltdown was one of the worst disasters of the late 20th century. The utility operating the plant went bankrupt as soon as the disaster hit. Temporary decisions were made sporadically to thwart the intensity of the event. These temporary decisions include: storing all water on site, filtering out radioactive material to a safe level, shutting the plant down and removing the nuclear rods for safely shut down. These containment practices were similar to the actions in Three Mile Island Pennsylvania (TMI) and Chernobyl (Chernobyl) Soviet Union.
When the earthquake and Tsunami hit, the government decided not to interfere and did little more than watch the managers operating the plant make timid and indecisive actions when confronted by the worst nuclear accident to confront Japan. Poor decision making originated from Tokyo Electric Power Company (TEPCO), the utility that ran the facility. The damage at Fukushima was so severe that TEPCO management knew immediately that the company was insolvent. The managers at TEPCO reacted to this certainty by expecting the Japanese government to take over the cleanup. Not wanting to be criticized for making the wrong decision, the emergency decisions by TEPCO managers were temporary bare bones to prevent a nuclear meltdown. The Japanese government realized the party in power would be seen responsible for failing to secure the Fukushima site and the damage would be severe and could last many years; so the government did not step in – hoping that public anger would be limited to TEPCO. The ploy did not work and two governments have failed in Japan since the nuclear accident.
Two years later, no progress has been made to remove the nuclear rods which continue to contaminate millions of gallons of water regularly. Water that is safe to be discharged (per every international group that monitors nuclear energy) continues to be stored at a cost exceeding $1 billion; and the real risk, this site being contaminated for several millennia, has not been addressed. TMI was contained and the fuel removed before two years had passed. Chernobyl was no longer a threat for additional contamination by the two year mark. In Fukushima, the containment building continues to deteriorate. Most money is being spent on containing water that is safe to discharge while the regulatory agencies and the government waffle over site management due to Politics.
After more than two years, the government has agreed to spend $500 billion to freeze the site to prevent water leakage. It has yet to take over the site or run the company. As a result, no plan has been activated to stabilize the fuel rods; and there is a real danger that by the time the government and/or TEPCO faces this situation (rather than contain water that meets international standards for discharge) the structure will be so damaged that the fuel rods will not be removable. This means that the site will be contaminated for many millennia. This dire and somewhat silent situation is moving to a calamity of epic proportions due to government cowardice (in other words, politics is trumping common sense). So, the bottom line is that the government is spending exorbitant funds and attention to keep water out of the ocean that almost every nuclear regulatory group in the world believes is harmless, while at the same time allowing the nuclear fuel rods and the main containment vessel to deteriorate.
You may ask what this situation has to do with the US handling of the banking crisis in the US. Unfortunately the parallels are sickeningly similar. We, the United States, had a system in place to handle the banking crisis. The US had a system in place to address the collapse of large banks; we followed that protocol after the Savings and Loan Crisis of the 1980s. The US government took over the bank, fired the management, and protected deposits (some at 100% of deposits others up to the FDIC insured limit).
In 2007, it seemed that the government would follow the same protocol. As the liquidity crisis progressed and began to dry up, the government began to disband banks. The Treasury Department encouraged strong banks to buy weaker entities, such as Bank of America’s purchase of Countrywide and Merrill Lynch. Rather than the government taking over Fannie Mae and Freddie Mac, the government increased the line of credit to Fannie Mae and Freddie Mac as these two financial institutions began to crumble under their decision to target 50% of all new mortgage purchases as subprime! Fannie Mae and Freddie Mac had very strong political ties and lobbies in Washington which shielded the executives from prosecution. The government did not close them down but rather provided more funds to the same poor management. Then Bear Stearns collapsed and Hank Paulson announced that the government would spearhead the rescue of that entity because it was “too big to fail”. Politics got involved and Paulson was heavily criticized by Tea Party members in Congress for the rescue. A half a year later, Lehman Brothers (a firm twice the size as Bear Stearns) also collapsed, the same Hank Paulson, who apparently despised Lehman Brother’s CEO, allowed the firm to crumble and took the world economy with it!
On July 21st, 2010, the federal government enacted the Dodd-Frank Act. At that time the current administration and Congress stated this law would “fix” all of our banking issues. It is three years since that piece of legislation was enacted into law and there is no legislation! The Act itself spans 3,200 pages. Over 400 industry rules remain to be written via regulations per the act; a paltry 39% has been written as of its third anniversary date. Not one banker went to jail for the collapse that occurred in 2008. President Obama stated that his administration could not uncover any laws finding criminal activity. This response came even after the 2001 collapse and Sarbanes-Oxley Act was passed to criminalize the behavior of inflating profits to hide losses. The cost of Sarbanes-Oxley is estimated to be a loss of about 2 million jobs a year and according to the president it cannot even meet its main purpose: to jail executives who filed forms with the SEC stating their institutions were solid when they were not. After the collapse, law professors had a field day writing about how Sarbanes-Oxley would be tested because everyone knew the chief executives and chief financial officers at Countrywide, Lehman Brothers and Bear Sterns should be prosecuted under Sarbanes-Oxley. However, the US Attorney General, The SEC and Federal Reserve’s legal team could find no criminal wrongdoing yet prior to enacting Sarbanes-Oxley the US was able to find criminal activity in the 1987 Savings & Loan crisis and the 2001 dot.com collapse. Politics and emergencies coinciding are not so pretty.
Today, most of the bankers involved in the 2008 collapse are still plying their trade and running their financial institutions even though the federal government spent an estimated $15 trillion bailing them out due to the financial collapse and their poor leadership running their financial institutions (at best) and their greed and narcissism (at worst). Doesn’t this sound similar to the Japanese response to Fukushima? Our leaders are not the ones who are funding the mistakes made by these executives – the taxpayers, you and me, are bankrolling their “gambling”. It was the federal government (financed by the taxpayers) who closed Fannie Mae and Freddie Mac, drafted the regulations that were enacted by Dodd Frank and prosecuted the executives who created the crisis in the first place. Our regulations to deal with Banks too big to fail, unregulated hedge funds and financial executives able to break the law without being prosecuted remain incomplete. Hiring a few more lawyers to draft regulations we already enacted is a much smaller price than allowing another collapse like 2008; yet, unfortunately, that is exactly what our elected officials are doing. If this situation is not similar to the Japanese in Fukushima – than nothing is!
