Can Corporations Survive Their Own Malfeasance?

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It was good while it lasted, but...

Two current examples come to mind that may telegraph corporate liability so massive that questions are being asked about whether the corporations in question can survive.

First there is BP. You know, that’s British Petroleum, the corporation that operated the offshore oil rig now polluting the Gulf. President Obama has called upon everyone damaged by the spreading oil slick to go after this corporation to pay for the clean-up and damages. With the oil still flowing from its wellhead 5,000 feet below the ocean surface, and the oily waters spreading and leading to talk it could wind up in the Atlantic and pollute the U.S. east coast it seems there might be no limit to the extent and associated costs of this BP well. Already the news reported one brokerage house was recommending people short sale BP bonds, telegraphing an expected significant drop in their value.

Second, there are Wall Street firms that we are finding out were involved in marketing high risk investments without telling the potential buyers just how high the risk. In some cases the risk was so high that companies like Goldman Sachs were apparently telling some customers to sell these investments short while at the same time urging other customers to buy them. When the house of cards of these and other so called exotic investments crumbled, investors suffered major losses.

In many cases that is you and me folks. Your deferred compensation or IRA invested in mutual funds, or if you have an employer provided retirement program the funds set aside for it undoubtedly took a major hit. We know that public sector retirement funds have suffered from 30% to 50% losses as the investment market collapsed – much of the so called unfunded liability of pension funds may lie at the doorstep of Wall Street and its less than full disclosure market manipulations. It may be just a matter of time before major mutual funds, pension funds, insurance companies and others who suffered big losses decide to seek financial damages from these Wall Street corporations. Some say that such action is overdue.

Can big corporations like BP and Goldman Sachs survive an onslaught of lawsuits that result in big dollar awards? Will they be forced to seek bankruptcy to escape their obligations, much like the City of Vallejo is apparently trying to do? It is looking like it’s not going to be pretty.

About Over But Not Out

A retired Orange County employee, and moderate Republican. The editor seriously does not know OBNO's identity as did not the former editor, but his point of view is obviously interesting and valued.