Taxpayers will pay much of BP "Settlement"

Another example of a government “solution” that represents no solution at all. Are our politicians so stupid or are they in bed with all corporations? Come to think of it, I believe that one of Obama’s biggest contributors was BP, all legally done.

Look at the missive below regarding the BP settlement. We sure punished them properly. Once again, taxpayers get hit with the burden.

Via email, source unknown:

When I first learned of the “settlement” BP agreed to this morning at the
White House, I couldn’t believe any Company would agreed to the terms,
particularly the agreement to compensate rig workers laid off because of
Obama ban on drilling. But then I learned that the $20 billion escrow
fund will be funded over 4 years with only $7 billion paid out in 2010.
Since Oil Companies focus principally on cash flow, I started analyzing
the cash flow aspects of the settlement. I feel quite certain the BP’s  US
operations are conducted through a US subsidiary which files a US tax
return for operations conducted under this legal umbrella.First of all, based on the announcement, BP’s funding of the escrow
account is voluntary. As I understand it, there is no legal basis for
enforcement. However, in my opinion, generally accepted accounting
principles (GAP) will require BP to book the $20 billion accepted
liability in the year it was incurred – 2010. As such BP can claim a $20
billion deduction on its US 2010 tax return and collect refunds from the
Federal government of some $7 billion in 2011, either on its 2010 tax
return or through loss carry backs to 2005 through 2009, obtaining
refunds of taxes paid in those years.

BP has agreed to pay no quarterly dividends for the last three quarters
of 2010 saving some $7.5 billion in cash flow. As an aside, I understand
that 40% of these dividends are paid to US residents or some $3 billion.
To the extent this income is distributed to taxpayers, the US government
revenues will be reduced by at least 15 to 35% of the taxable amount.

So let’s analyze the cash flow impact on BP in 2010:

Escrow funding ( $ 7,000,000,000)
Dividend savings 7,500,000,000
Tax savings/refunds 7,000,000,000

Net BP favorable 2010 cash flow $ 7,500,000,000

Meanwhile the US government’s cash flow will look like this:

Reduced tax receipts:

From BP Corporation ( $ 7,000,000,000)
From BP shareholders as much as ( 1,000,000,000)

Net unfavorable cash flow ( 8,000,000,000)

So now BP is going to be in a net favorable cash flow position until
sometime in 2012 when it should be clearer what its exposure is, putting
it in a good position (i.e. without any net cash outflow) to decide
whether to fold its US operations through a bankruptcy if it appears that
its liabilities from the incident are going to exceed the net realizable
present value of its US operations at the time. The liability for the
balance of the escrow will be unsecured with no preference over other
creditors, so the balance of the $20 billion may never be paid. In the
interim you can believe that there will be no advances to or investment
in the US operations by its parent and every opportunity will be taken to
repay any amounts owed to the parent. In the meantime, BP can claim
credit for being a responsible Corporate citizen and will have put a
stop, albeit perhaps only temporarily, to the daily pillorying by the
“lame stream” media and politicians.

In the meantime, our politicians can crow about how tough they have been
with BP and how the $20 billion is just the start. You can believe from
BP’s standpoint, it has capped its liability and, unless it makes major
new discoveries by the US subsidiary in the interim, that the cap is no
more than $20 billion and quite possibly something less than that amount.
I wonder how long it will take the politicians to realize they haven’t
even been kissed but that won’t matter to them because it will be the US
taxpayer who is getting screwed and they will be re-elected because” they
were so tough in standing up for the taxpayers”.