OBE: overcome by events. That’s the story of the nation’s energy policy agenda in the wake of the credit collapse of the past several weeks. In short, there likely will be no new major energy investments in the coming months or years, whether Congress enacts energy legislation or not, or if executive branch agencies implement the authorities in the 2005 Energy Policy Act. The money isn’t there.
Big money for infrastructure projects won’t materialize until the nation – the federal government, including the executive branch and Congress – figures out how to get new liquidity into credit markets. The traditional financial approach of the past 30-plus years no longer exists. Independent investment bankers are gone.
What will replace them as the middle-folk in putting major deals together? That’s not at all clear. Figuring out how to structure large finance deals to get infrastructure projects – power plants, pipelines, electric transmission, coal plants, and LNG terminals – underway will be months, possibly years, away.
Given the recent reductions in crude oil, and resulting gasoline, prices, it’s not likely that Congress will focus on energy in the few days ahead before the solons head home to campaign for reelection. Instead, the final days of the current Congress likely will be dominated by the credit collapse and what to do about it.
There will be wrangling about the shape of the bailout. I suspect it won’t be partisan, but will reflect tensions between the legislative and executive branch over authority and oversight. Institutional, not partisan.
Congressional Democrats and Republicans are expressing qualms over giving the White House a blank check – that’s what Treasury Secretary Henry Paulson’s proposal amounts to – for restructuring financial markets. He’s already being skewered in the press as “King Henry.”
There’s also an inherent incentive in Congress to delay the decision until a new administration is in place. After all, Hank Paulson is unlikely to be Treasury Secretary after January 20, regardless of whether McCain or Obama is the new president. The Senate will have to confirm a replacement, and is likely to want to extract promises about performance before approving a new secretary, particularly one with unprecedented financial powers.
In the meantime, markets are demonstrating panicky uncertainty. Wall Street stock market indices are up today, down tomorrow, up the next day. Investors are likely to seek protection in bond markets, which will drive bond yields down. It’s not a pretty picture by any means.
So the final result of the disastrous Bush administration appears to be two expensive and inconclusive wars, a foreign policy in disarray, a bankrupt federal government, and an economy in freefall. It’s hard to imagine a worse eight years of governance, and difficult to see how the next president, whoever he is, can dig his way out of the hole the Bush has dug for the nation.
Best wishes, Barack and John.