BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #17 – Mar 05, 2001
Governor Davis assures bankers, takes their money. Governor Davis went to New York last week to calm nerves on Wall Street. Apparently, it gives the financial guys real peace of mind to open up their check books for the Governor. Among Governor Davis’s events was a breakfast fund-raiser at the headquarters of the banking and financial services firm Citigroup, which brings us to a serious conflict of interest: 1) according to the OC Register, the chairman of the executive committee at Citigroup Inc., Robert E. Rubin, was appointed in January to advise Davis on various aspects of the crisis, including bond financing; 2) the two men spent 25 hours in conversation about the energy crisis, according to the New York Times; and 3) Citigroup and its investment banking unit, Salomon Smith Barney, historically have done banking work for Edison International and PG&E, including, to no one’s surprise, bond underwriting.
"Generators are my favorite people," Governor Davis joked to Wall Street analysts according to an edited transcript of a meeting with Wall Street Analysts on his East Coast swing. "If you haven’t invested in Dynegy, Alliance, Southern or Duke, you still have time. I’ve told all my buddies here, I don’t care how much you’re making, you don’t make as much as these guys…" But isn’t the joke really on California? We’d like to know who exactly was in the room, and will request that info, along with the unedited transcript.
Davis’s (not so) tough talk. Continuing on at his speech in New York, Governor Davis made his pitch about the power companies that have throttled California: "I think it’s only fair that in what amounts to a work-out, the people who have done extraordinarily well with our market participate in the solution. And I think we can do that in an amicable, negotiated context. I don’t have to compel them, but can urge them to do it. We appreciate all those who have contributed modestly to the solution." Come on! These companies have held California under the threat of blackouts unless we make daily ransom payments. How many billions of taxpayer dollars is the Governor willing to throw at these "people who have done extraordinarily well," before he realizes that amicable negotiations will not end the extortion? You don’t have to compel the generators to deal fairly, but, Governor, you should.
No beef with deregulation. Later in his Wall Street speech, Governor Davis had this to say about California’s energy policy: "I’m leaving you with a market that is still deregulated and will not collapse unto itself thereby precluding deregulation from ever working in California. …As for deregulation, I have no beef for it or against it." Despite the fact that deregulation is arguably the most egregious public policy failure in California history, Governor Davis has no reservations about protecting this skewed system, which benefits the energy industry and their investors at the direct expense of California consumers and taxpayers.