No Tears for Lehman Brothers

We literally feel our readers’ pain for today’s 504 point drop in the DJIA because of Lehman Brothers’ impending collapse on the stock market, because it impacts our own investments. However, we will shed no tears for Lehman Brothers itself, and we are not particularly surprised that it is going south. Furthermore, even if Lehman Brothers disappears tomorrow, it will in no way affect the United States’ remaining ability to create genuine wealth.

Henry Ford told us long ago that there are exactly three ways to create wealth: mine it, grow it, or make it, but Lehman Brothers apparently had the idea that it could create wealth (or at least enrich itself) by trading in carbon credits–an activity about as meritorious as speculation in baseball cards, coins, comic books, or tulip bulbs (ask the Dutch about the latter). The bubble eventually bursts (as it did with the dot-com stocks), and the chickens come home to roost. Lehman Brothers is a member of the Climate Action Partnership (CAP), whose agenda is to promote legislation to cap carbon dioxide emissions and then make money by trading in “carbon credits.”

While this may not have been the direct cause of the company’s troubles, it does point to a management attitude to the effect that one can have something for nothing. Lehman Brothers was under the impression that it could receive a subsidy for the financial equivalent of breathing, and that it did not have to actually do anything to earn an organizational living. It wanted corporate welfare in the form of government-mandated caps on carbon dioxide emissions so it could take a commission on trading in carbon credits. Per “Cap and Trade” by Kimberly Strassel,

There was a time when the financial press understood that companies exist to make money. And it happens that the cap-and-trade climate program these 10 jolly green giants are now calling for is a regulatory device designed to financially reward companies that reduce CO2 emissions, and punish those that don’t.

Four of the affiliates–Duke, PG&E, FPL and PNM Resources–are utilities that have made big bets on wind, hydroelectric and nuclear power. So a Kyoto program would reward them for simply enacting their business plan, and simultaneously sock it to their competitors. Duke also owns Cinergy, which relies heavily on dirty, CO2-emitting coal plants. But Cinergy will soon have to replace those plants with cleaner equipment. Under a Kyoto, it’ll get paid for its trouble.

DuPont has been plunging into biofuels, the use of which would soar under a cap. Somebody has to cobble together all these complex trading deals, so say hello to Lehman Brothers.

…Finally, there’s General Electric, whose CEO Jeffrey Immelt these days spends as much time in Washington as Connecticut. GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE’s revenue from environmental products long ago passed the $10 billion mark, and it doesn’t take much “ecomagination” to see why Mr. Immelt is leading the pack of climate profiteers.

As shown above, Lehman Brothers apparently expected to be paid for the financial equivalent of breathing. It therefore does not come as a particular surprise that the company, to use an accounting professor’s expression, is about to “go pork” due to the forces of economic Darwinism, which weed out the unfit.

It is disappointing to see companies like BP America, Caterpillar, Duke Energy, Du Pont, FPL, and General Electric on CAP’s member list, because we would have expected them to earn money by creating energy-efficient products and services that can stand on their own economic merits without government coercion through carbon emission caps. On the other hand, the Environmental Defense Fund, World Resources Institute, and Pew Center on Global Climate Change, as far as we know, create nothing–they are “community organizers” that need some way to operate without producing anything of tangible value to society. (We do not consider bleats about global warming, in the absence of delivery of economically feasible renewable or non-carbon energy sources, as having value.)

If you are not part of the solution, you are part of the problem, and we have yet to see these entities offer a solution in the form of non-carbon energy sources that are competitive with or cheaper than carbon ones. Were they to do so, government regulation would not be necessary, just as no laws were needed to get people to switch from horses and buggies to automobiles, gas lights to incandescent lights, and manual typewriters to computers. Agitation of laws to force people to buy products or services demonstrates that said products or services cannot stand on their own merits, and this in turn says a lot about the agitators in question.


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