Within the past few days, I’ve noticed quite a few bloggers and news
writers make comparisons between the hurricanes and the financial
meltdown. It just occurred to be that there is another facet
to this analogy. This has to do with a very real problem that
has been stirred up, literally.
In addition to the analogy noted above, another analogy that I’ve been
seeing is to liken innovative financial products to toxic waste, as in
this Bloomberg article:
June 1 (Bloomberg) — Bear Stearns Cos., the fifth-largest U.S.
securities firm, is hawking the riskiest portions of collateralized
debt obligations to public pension funds.
At a sales presentation of the bank’s CDOs to 50 public pension fund
managers in a Las Vegas hotel ballroom, Jean Fleischhacker, Bear
Stearns senior managing director, tells fund managers they can get a 20
percent annual return from the bottom level of a CDO…
…The California Public Employees’ Retirement System, the nation’s
largest public pension fund, has invested $140 million in such unrated
CDO portions, according to data Calpers provided in response to a
public records request. Citigroup Inc., the largest U.S. bank, sold the
tranches to Calpers.
“I have trouble understanding public pension funds’ delving into
equity tranches, unless they know something the market doesn’t know,”
says Edward Altman, director of the Fixed Income and Credit Markets
program at New York University’s Salomon Center for the Study of
“That’s obviously a very risky play,” he says. “If there’s a
meltdown, which I expect, it will hit those tranches first.”
Obviously, that meltdown did occur. There is a lot
to say about that, pertaining to potential malfeasance on the part of
Citigroup and Bear Sterns, but I won’t get into that now.
What I will get into is this: Galveston now has a toxic problem of
GALVESTON, Tex. — As the search continued here for people
killed or stranded by Hurricane Ike, the authorities said Monday that
they were faced with much larger challenges than simply clearing
roadways and restoring electricity before they could let residents back
onto this debris-strewn island.
The sludge left in homes and on roads as floodwaters recede represents
a “toxic soup” of mud, human waste, asbestos, lead
and gasoline that poses serious health risks and must be removed before
people return, they said…
…The Environmental Protection Agency will begin taking samples of the
sludge and floodwater this week to check for contaminants, city
The only good news is that the Center for Biodefense and Emerging
Infectious Diseases Biocontainment BSL-4 ( href="http://bmbl.od.nih.gov/sect3bsl4.htm">Biosafety Level 4)
lab, while damaged, href="http://www.kxan.com/global/story.asp?s=9021947">did
not release any of their highly infectious
material. The building was href="http://www.epa.gov/fedrgstr/EPA-IMPACT/2005/April/Day-11/i7249.htm">designed
to “resist 140 mile- per-hour hurricane force winds.” The
BSL-4 lab was intentionally placed “above the extreme 25-foot storm
surge that might occur during a category 4 or 5 hurricane.”
Only the first floor was flooded; the BSL-4 lab was two stories higher.
The lab’s website
is down, as of 16 Sept 2008, but href="http://www.semp.us/publications/biot_reader.php?BiotID=322">here
is an article about it, in case you are interested. If you
care to see the post-hurricane href="http://ngs.woc.noaa.gov/ike/IMAGES/ike_c25885918.htm">satellite
photo of the lab, NOAA has it. Follow the link to
see the full-size image, which is very big.
Like I said, that is the good news. The building was hit and
flooded, but the most dangerous material was contained. The
designers knew about the risk of a hurricane, planned for it, and it
Even so, I must admit, I am still a little nervous about it.
Some hazards are not contained so easily.
What I am wondering about is: What happened to all the toxins in the
Galveston Bay and in the shipping channels? From a news item
of months ago:
Bay Fish Consumption Warning And Ship Channel Dredging For Bayport
Heedless practices of Texas industry and DREDGING OF SHIP CHANNEL, now
poisoning sport fishing industry, AND IT’S CONSUMERS
News Release July 8, 2008 DSHS Issues Fish Consumption Advisory for
Galveston Bay The Texas Department of State Health Services (DSHS) has
issued an advisory warning people to limit their consumption of spotted
seatrout and catfish from Galveston Bay. The advisory, which includes
Chocolate Bay, East Bay, West Bay, Trinity Bay and contiguous waters,
was issued after a two-year study showed elevated levels of dioxins and
polychlorinated biphenyls, or PCBs, in the two fish…
…Long-term consumption of PCBs may cause cancer and reproductive,
immune system, developmental and liver problems. Dioxins can cause skin
rashes, liver damage, weight loss, reproductive damage and may increase
the risk of cancer.
Recent investigations of contaminant impacts on
sediments have documented that some maintenance dredged material
disposal and produced water (oil and gas drilling by-product)
discharges from oil and gas separators have environmentally degraded
certain areas of Galveston Bay. Sites sampled in the upper Houston Ship
Channel, Tabbs Bay, and selected dredged material disposal areas show
high levels of some heavy metals and polycyclic aromatic hydrocarbons
(toxic organic compounds derived from fossil fuels and their
combustion), reduced benthic diversity, and increased sediment toxicity
(poisonous, or toxic quality).
Other studies demonstrated that metals, polycyclic aromatic
hydrocarbons (PAHs), polychlorinated biphenyls, or PCBs (toxic volatile
organic compounds released by plastics and electrical equipment), and
dioxins (highly toxic manufacturing by-products) have contaminated
crabs, oysters, fish, and fish-eating birds from selected sites in the
Galveston Bay system.
Just like the financial hurricane has stirred up and exposed the toxic
financial byproducts of the rent-to-ownership society, the
meteorological hurricane has stirred up the toxic byproducts of the
petroleum society. How much of the estuarial sediment was
stirred up? I can’t say. Surely the idea was that
it could just sit there on the bottom, never to bother anyone.
The thing is, the area already was known as a “toxic hot spot.”
This article is from the Galveston County Daily News, (from
Google Cache, as the areas newspaper servers are overwhelmed by all the
says region a toxic hot spot
By Mark Collette
The Daily News
Published May 2, 2008
Four environmental groups released a report Thursday saying governments
at all levels haven’t done enough to enforce existing
pollution laws or to create new standards to curb smog in highly
industrial areas such as Harris and Galveston counties.
The U.S. Environmental Protection Agency’s program for
dealing with these “toxic hot spots” is underfunded
and has failed to meet congressional deadlines for implementing
pollution controls, according to the report authored by clean air
attorney Kelly Haragan of Austin.
I will be curious to see what the EPA finds, when they do their survey
in the hurricane-damaged areas. Perhaps this time, they will
be more honest than they were about the href="http://www.cbsnews.com/stories/2006/02/02/health/main1276366.shtml">ground-zero
pollution in New York City.
We know that Ike hit the BSL-4 lab in Galveston, and it survived.
But there are plenty of other hazards around, and it remains
to be see what the consequences will be. The picture with the
financial markets is similar.
What I realized about this, is that the causes of the hazards are
similar, too: lack of restraint, unchecked development, indifference to
risk, perilous greed, an assumption that the worst will not happen.
They are storing deadly bacteria and viruses in a hurricane
and flood zone. They are selling high-risk securities to
pension funds. They are putting hazardous waste in the water,
in the country’s fourth-most populated area. They are backing
reckless companies with taxpayer funds. And they are telling
us it’s all going to be OK.