Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Guardian, Men's Journal, the American Prospect, and, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndyKroll.

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Sell Green, Buy Coal

| Mon May 10, 2010 5:49 PM EDT

May/June 2010 Issue

JPMorgan Chase, the powerful denizen of Wall Street, recently announced yet another lucrative quarter for the bank. $28.2 billion in revenue. $3.3 billion in profit, a 55 percent increase from a year ago. The results laid to rest any lingering doubts about JPMorgan's health and rebound from the financial crisis, and when considered alongside the resurgent profitability at, say, Goldman Sachs, showed that the Street has in many cases come full circle since the Crash of 2008.

All but forgotten in the banks' fight to scramble back into the black was an agreement forged earlier in 2008, a pact among big banks to shine a light on their financial deals involving dirty investments and to potentially move that money into greener, sustainable projects. The agreement was called the "Carbon Principles," and it has essentially fallen by the wayside in the past two years. Whether these banks renew their pledges to shift financing to renewable projects remains to be seen, but in the interim, as I report below, lucrative financing for dirty energy projects throughout the world continues unabated.

(Equator Principles)
MOUTH: "Among the achievements of the Equator Principles is the demonstration that competitors are willing, able, and happy to collaborate for the health of the planet." Huibert Boumeester, managing board member (2006).
MONEY: After signing Equator Principles, became lead arranger for a $2 billion loan to Russian energy giant Gazprom's vast Sakhalin II oil and gas project; later, helped finance a $1 billion loan for a new coal plant in Chile, built by American power company AES.

Bank of America
(Carbon and Equator Principles)
MOUTH: "Helping our nation reduce greenhouse gas emissions is not only the right thing for our planet, but it is also smart business—and Bank of America is proud to be at the forefront." Kenneth Lewis, chairman and CEO (2008).
MONEY: A leading lender for Australia's giant Hazelwood coal plant, which the World Wildlife Fund called "one of the dirtiest power stations in the world," and key financier to coal giant Massey Energy.

(Carbon and Equator Principles)
MOUTH: "Our success will be measured not only by our financial results, but also by the impact we have on the communities we serve." Charles Prince, chairman and CEO (2006).
MONEY: In 2006, the same year it helped produce an update of the Equator Principles, Citigroup financed more coal projects than anyone else in the world. After signing the Carbon Principles, opened a $62 million line of credit for Arch Coal, the nation's second-largest coal producer and a major funder of the lobbying battle against climate legislation.

JPMorgan Chase
(Carbon and Equator Principles)
MOUTH: "What is earthshakingly different between now and two years ago is the focus on CO2." Eric Fornell, vice chairman, natural resources banking division (2008).
MONEY: Has continued to fund 5 of the top 10 mountaintop-removal companies in Appalachia; in 2009 underwrote more than $1 billion in financing for Massey Energy, which mined more than 21 million tons of coal in 2008 via mountaintop removal.

Morgan Stanley
(Carbon Principles)
MOUTH: "I don't think [the Carbon Principles] will inhibit the financing of new coal-fired projects." David Albert, managing director, project and structured finance (2008).
MONEY: Indeed. Morgan Stanley joined with Citigroup last year to underwrite $700 million in debt for NRG Energy, which owns all or part of nine coal plants. Also part of a consortium financing $4.5 billion in loans for TXU, a Texas power company that tried to build 11 new coal-fired power plants (eight were ultimately scrapped due to public pressure).

This piece was produced by Mother Jones as part of the Climate Desk collaboration.

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Dems Try to Beef Up Finance Bill

| Mon May 10, 2010 2:13 PM EDT

In Washington, usually the longer lawmakers haggle and debate and offer amendments to a piece of legislation, the weaker the bill gets. On financial regulatory reform, a group of Senate Democrats today touted plans to buck that trend and improve the Senate's bill that would reimagine the guidelines and regulations of our financial markets.

In an afternoon press conference, Sens. Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) introduced an amendment to break off banks' proprietary trading desks—the riskier operations where traders bet for their own company's gain, not for a client. The Levin-Merkley amendment draws on the "Volcker Rule," a provision popular with the Obama administration that would redivide investment and commercial banking. The Levin-Merkley amendment would ban banks from making high-risk investments involving bonds, stocks, derivatives, and other financial products; it would also block them from sponsoring or investing in hedge and private equity funds, both riskier operations that lie outside the purview of federal regulators. Levin-Merkley would also try to eliminate the conflict of interest inherent in a firm like Goldman Sachs, which both advises on and executes trades for clients while also investing to pad its own bottom line. The conflict of interest is at the heart of SEC's ongoing securities fraud suit against Goldman. "Maybe we can’t stop the extreme greed that lies behind these conflicts, but we can act to end the conflicts which have allowed big payoffs," said Levin.

Meanwhile, Sen. Jack Reed (D-RI) is another Democrat looking to beef up the financial reform bill. Reed said that an amendment he introduced today will crack down on the hedge, private equity, and venture capital funds that operate almost entirely unregulated. In Reed's amendment, all private funds will be required to register with the Securities and Exchange Commission. (The existing Senate bill requires funds larger than $100 million to register, with exemptions for certain types of funds.) Reid told Politico, "This amendment will shut down loopholes and provide the SEC with long-overdue authority to examine and collect data from this key industry."

While both amendments boast Democratic support, it's unclear whether they can garner 60 votes. Last week, an amendment from Sen. Ted Kaufman (D-Del.) and Sherrod Brown (D-Ohio) that would've capped the size of banks and the leverage they use, seen by many as an improvement to the bill, fell considerably short, 60-33. The Senate resumes talks on the financial bill tomorrow, and soon enough we'll see whether these amendments have the support or not.

Goldman CEO Safe—For Now

| Fri May 7, 2010 9:47 AM EDT

[UPDATE]: Earlier, I wrote about rumblings that Goldman Sachs CEO and chairman Lloyd Blankfein could be on his way out if Goldman decides to settle the Securities and Exchange Commission's fraud suit against the firm. Blankfein, however, isn't going down without a fight. Today, in a massive vote of confidence, Goldman's shareholders voted against splitting the firm's CEO and board chairman roles; for now, Blankfein remains the undisputed leader of the firm. "I have no current plan to step down," Blankfein told shareholders. Today's vote is sure to boost Blankfein's, um, stock, and should dampen calls for his ouster.

The Wall Street Journal reports today that besieged investment firm Goldman Sachs and the Securities and Exchange Commission have held early settlement talks to end the SEC's blockbuster civil suit. That's a big step away from the firm's initial reaction to the suit, saying it was completely false. The securities regulator filed suit against Goldman for allegedly misleading its clients about a complicated financial product that the SEC says was designed to fail. Moreover, the SEC claims Goldman failed to disclose that a trader betting against that product, a synthetic collateralized debt obligation named Abacus, played a large role in designing the product and ensuring its demise. Kind of like allowing a guy help build a house out of pure kindling, then letting him buy fire insurance against the sure-to-burn house and wait to collect his payout. Ultimately, the trader "shorting," or betting against, Goldman's Abacus, a hedge fund guru named John Paulson, made $1 billion in the deal, while investors who thought Abacus would succeed lost around $1 billion.

The settlement talks are in the very early stages, the Journal reports, and right now there's a sizeable gulf between the two parties' positions. One fund manager, Michael Mayo, suggested that if Goldman did indeed settle, the settlement figure could reach $1 billion—not much compared to the firm's $850 billion balance sheet, but a symbolic blow nonetheless. Even more jarring would be the forced departure of Goldman CEO and chairman Lloyd Blankfein. There've been rumblings that any settlement agreement would involve ousting Blankfein, the man at the helm during the go-go subprime years, the firm's decision to short the housing markets, and the 2008 collapse. Blankfein was also running the firm when the Abacus deal went down, in 2007.

It would undoubtedly be a blow to Goldman to lose Blankfein, a long-time trader and executive in the firm and the man who's lead Goldman through arguably the bleakest period in its history. But if the firm is to move past the tumult of the last two or three years, odds are you'll see Blankfein packing his bags.

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