The Corpus Callosum

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:

Banks Sell 'Toxic Waste' CDOs to Calpers, Texas Teachers Fund

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 Financial Institutions.

``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 their own:

Receding Waters Leave Toxic Mix
By IAN URBINA and THAYER EVANS
Published: September 15, 2008

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 officials said.

The only good news is that the Center for Biodefense and Emerging Infectious Diseases Biocontainment BSL-4 (Biosafety Level 4) lab, while damaged, did not release any of their highly infectious material.  The building was 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 here is an article about it, in case you are interested.  If you care to see the post-hurricane 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 paid off.  

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 a couple of months ago:

Galveston 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.

More information from another site, pertaining to Galveston Bay and surrounding areas:

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 activity):

Report 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 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.