November 25, 2019PA WIRE / GARETH FULLERBailout
recipients
should be
subject to a
strict carbon
audit that
examines
the lifetime
emissions of
projects they
finance.T
he us government’s response to the 2008
financial crash was this century’s great-
est missed opportunity. On the one hand,
$700 billion in bailout money went to prop
up banks, insurers, and automakers through
the Troubled Asset Relief Program, or TARP. On the
other, the Obama administration’s stimulus program—
formally, the American Recovery and Reinvestment
Act—spent an estimated $831 billion to create jobs, spur
buying, and in the process deliver the closest thing that
we’ve seen thus far to a Green New Deal.
Among other things, the Recovery Act enabled tens of
billions of dollars’ worth of investment in climate-related
infrastructure as well as loan guarantees and cash grants to
clean-energy companies. It was a turning point in making
wind and solar cost-competitive. The stimulus program
invested $90 billion in these technologies, and renewable
power generation doubled over the course of Barack
Obama’s first term.
Despite these successes, the investment was far too
small. True, the administration conceded some ground to
the idea that governments should spend their way out of
a recession, thereby avoiding the full-blown austerity trap
that continues to plague Europe. But by 2010, Obama re-
turned to an attempt to cut the federal deficit, keeping the
greatest accomplishments of the stimulus quiet.
What’s more, the banks helped to undermine whatever
progress the Recovery Act might have made in curbing
emissions through its proto–Green New Deal. Since
2016, JPMorgan Chase—which received $25 billion inTARP funds—has poured $196 billion into coal, oil, and
gas projects around the world. Wells Fargo was given the
same amount and has invested in new fossil fuel infrastruc-
ture to the tune of $152 billion, and together, major banks
financed $1.9 trillion worth of fossil fuel investment over
the same period. Combined with relatively high oil prices
and cheap postcrash credit, the bailout’s infusion of cash
into the financial system helped spur the natural gas boom.
Bailouts tend to get presented as a binary. Either let
flailing firms fail or save them to prevent economic disrup-
tion. That’s a false choice. “The key thing to remember,”
economist J.W. Mason says, “is that bailouts are not just
handouts.... They are also moments when the govern-
ment has maximum leverage over the private sector. If
we are going to be paying the piper in the next crisis, we
should be thinking now about what tunes we want to call.”
In this view, the Obama administration’s response to the
2008 financial crisis offers a cautionary lesson: It was too
heavy on carrots and too light on sticks.
The next crash will be a once-in-a-lifetime chance to
decarbonize the economy, so the next recovery cannot aim
to just blindly increase output and demand. An industrial
mobilization on the scale of a Green New Deal could cause
a short-term spike in emissions, but it will need to trans-
form consumption qualitatively by giving more people
access to real prosperity, not just the ability to buy more
cheap junk. Sociologist Daniel Aldana Cohen has aptly
called for a “last stimulus” that would dramatically shrink
those parts of the economy we don’t need (fossil fuels,
speculative finance, building more McMansions) while in-
creasing those we do (renewable energy, public transit, care
work, affordable housing, education, the arts, and more).
We can’t know for certain what sectors will falter when
the next crash hits. But as in the past, Wall Street will likely
come begging. Should that happen, the next administra-
tion could finally bring it under democratic control and in
line with the planet’s limits. Any bank that wants a check
from the federal government, for example, should have to
stop financing the companies wrecking the earth. Bailout
recipients should be subject to a strict carbon audit that
examines the lifetime emissions of projects they finance.
Another good starting point might be a blacklist for
investments in the 20 fossil fuel producers that research-
ers have found are responsible for one-third of all carbon
emissions since 1965. While that number includes private
and state-owned firms, such a list could keep major banks
from assisting with deals like the IPO for Aramco, Saudi
Arabia’s state-owned oil company and a notorious pollut-
er. Similar standards should be applied to insurance com-
panies. As of 2018, the 10 largest insurers in the United
States were holding just over $50 billion in fossil fuel in-
vestments. Just two of those disclosed that they considered
climate change when making investment strategies.
The auto bailout was another wasted opportunity.
When the federal government took out multibillion-dollar
stakes in Chrysler and General Motors in 2008, it im-
posed some terms: requiring mergers and consolidations
within the companies, firing GM chief executive Rick
Wagoner, and setting new auto efficiency standards. But
the administration largely squandered its leverage. As
Obama proudly proclaimed, “The federal governmentKate Aronoff is
a writer cover-
ing climate and
American politics.