Rancher, Farmer, Fisherman by Miriam Horn – a much needed reprise on working collaboratively to address environmental issues and still make a living

The overarching theme of the book “Rancher, Farmer, Fisherman” by Miriam Horn is to accomplish lasting, impactful solutions (in this case with climate change and environmental concerns) we need to work with folks in the middle. In essence, the folks in the extremes are too strident and reluctant to compromise.

A good example comes from the Montana rancher as he combats climate change and environmental degradation caused by fracking for natural gas. He works with folks who will address the environmental issues, but permit him and his family to make a living ranching. He notes the fracking companies paint a picture that is far rosier than it is, while some extreme environmentalists want everything to stop and do nothing with the land. At personal risk, he built a coalition of ranchers, environmentalists and government officials who were willing to follow his lead to preserve the environment while permitting the ranchers to do their thing.

The Kansas farmer speaks to working in concert with the land and learning and sharing best practices with other area farmers and the agro-economics people at nearby Kansas State University. Farmers want to maximize a sustainable yield on their crops, but climate change and water concerns increase the challenges to do so. He emphasizes growing what grows naturally in the area. There is a reason wheat and alfalfa are cash crops in Kansas. He notes the farm to table concept is not necessarily ideal – it would be a waste of water and land to try to grow everything everywhere. As for climate change, they work with legislators to protect the water resources, but have to stop short of using that term with their representatives. They gain collaboration by speaking to what is happening, not identifying its lead cause.

The book focuses on five professions in total, although only three are listed in the title. The other two are Shrimper and River Captain. Skipping over the fisherman and shrimper, who are each impacted by the environmental waste and degradation worsened by climate change, let me finish up with the River Captain.

The Louisiana based river man moves frieight up and down the Mississippi River. He understands the importance of experienced teams who know the river going both ways, with high, low or medium water levels. He has seen the significant dissipation of the wetlands in the Bayou which are causing huge problems to many. Engineers tried to outsmart the river and failed. In fairly dramatic fashion, the Gulf of Mexico is absorbing land due to rising sea levels and fewer buffers, So, they are working with scientists, businesses, and even the petroleum industry to slowly rebuild the Bayou.

Note, there are pros and cons to each set of solutions, so getting to the best answer requires honest input on the costs and risks to people, environment and livelihoods. And, some of the answers are counterintuitive. For example, not sending barges down the Mississippi means more truck traffic which pollutes the environment, degrades the roads and heightens risk for other drivers. With more electric trucks, this would lessen the risk, so that is a factor in risk/ benefit trade-offs. The farmer’s comment about farm to table also deserves scrutiny as farm to table also helps to lessen these trucking risks and costs. Yet, on a large scale, the point about growing stuff that is more natural to an area is profound and will lessen the impact on water resources which are dear.

It should be noted working in collaboration is how business and government work best. Yet, collaboration is hard work. For those who block the consideration of solutions, they need to be sidelined. In our toxic tribal political environment, we must remember each side does not own all the good ideas and both sides own some bad ones. Let’s follow the lead of these folks who get their hands dirty, understand what is happening and work together.

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Desalination of sea water using renewable energy marries two issues

An important article on two of the planet’s major issues called “Egypt to build 21 desalination plants in phase 1 of scheme -sovereign fund” by Aidan Lewis appeared in Reuters this week. A few paragraphs are noted below with a link to the full article at the end of the post.

“CAIRO, Dec 1 (Reuters) – Egypt plans to award deals next year to build 21 water desalination plants in the first $3 billion phase of a programme that will draw on cheap renewable energy, the CEO of the country’s sovereign fund said on Thursday.

Egypt, which recently hosted the COP27 U.N. climate talks and is trying to boost lagging investment in renewables, also aims to start production at a series of proposed green hydrogen projects in 2025-2026, Ayman Soliman told the Reuters NEXT conference.

Egypt depends almost entirely on the Nile for fresh water, and faces rising water scarcity for its population of 104 million. The desalination programme aims to generate 3.3 million cubic metres of water daily in the first phase, and eventually reach 8.8 million cubic metres daily at a cost of $8 billion.

So-called green or clean hydrogen is produced using electrolysers powered by renewable energy to split water from oxygen. It is seen as a potential future power source that could reduce emissions, though to date it is largely limited to experimental projects. Analysts say challenges facing its growth include high costs and energy inputs, as well as safety concerns.”

This fund is set to pump money into two needed concerns – the worsening water crisis and the needed use of renewable energy to power the effort. The global water crisis matches climate change in terms of risk to our planet and has for several years. Climate change actually makes the water crisis worse through evaporation. Duke Energy noted in a report that its projections of water evaporation from its water sources to power the Charlotte metropolitan area will be 11% worse with climate change. When water levels get to low, Duke has to cut power production or use more water from the river sources which exacerbates the water crisis.

Marrying these two crises, we have too much salt water and too little fresh water. Efforts to use the former to replace the latter may start out as more expensive, which is why it has not been used as much before, but has to be part of our equation to help our planet and people. As with other efforts, over time the process will get more cost effective.

https://www.reuters.com/markets/commodities/egypt-build-21-desalination-plants-phase-1-scheme-sovereign-fund-2022-12-01/

To little hype, several climate change initiatives passed in last week’s elections

In an article by Frida Garza of The Guardian called “Voters pass historic climate initiatives in ‘silent surprise’ of US midterms,” some very good news occurred while we weren’t paying too much attention.

The full article can be linked to below, but here are a few paragraphs that summarize the story:

“While the economy and abortion rights drove momentum behind the midterm election this year, voters in cities and states across the US also turned out to pass a number of climate ballot initiatives .

Among the measures passed were a historic multibillion-dollar investment into environmental improvement projects in New York state, including up to $1.5bn in funding for climate change mitigation. This election also saw a $50m green bond act pass in Rhode Island, and in Colorado, the city of Boulder approved a climate tax as well as a ballot measure that will allow the city to borrow against that tax to fund climate projects.

‘Climate voters were the silent surprise of election night,’ said Nathaniel Stinnett, the founder of the Environmental Voter Project. ‘We weren’t loud, and nobody saw us coming, but we showed up to vote in huge numbers.

The electoral support at the state and local levels for more climate action comes at a time when world leaders meet in Sharm el-Sheikh, Egypt, to discuss the climate crisis at Cop27. Joe Biden and the House speaker, Nancy Pelosi, were both in attendance last week, urging leaders at home and abroad to meet the moment and take action against the climate crisis now. Because of the timing of the global summit and the US midterms, the Biden administration also had the pressure of a political shift that could mean stagnation of any further climate action after the president’s signature Inflation Reduction Act.

It is nice to see such movement, as we need a lot more of the same. With a split Congress, we will have to rely on the states and the implementation of the Inflation Reduction Act which has climate change mitigation in its midst. To this independent voter, we lost twelve years with the Bush and Trump White Houses to fight climate change, years we will never get back. So, we must act now. I am encouraged by offshore wind projects that are gaining footing, to catch up to the great strides in onshore wind projects in the plains’ states and elsewhere as well as the solar energy development keeps on going strong.

Please push our lawmakers at all levels to move forward. If someone is a naysayer, move on to those who share your concern. We are already late to the party and we unfortunately still must combat a mountain of money being put in some folks pockets by the fossil fuel industry to deter the fight and keep their profit margins.

https://www.theguardian.com/us-news/2022/nov/18/climate-initiatives-passed-us-midterm-elections

A revisit to Paul O’Neill and his leadership at Alcoa and in the US Treasury (Liz Truss should have taken notice a few months ago)

The following is from an older post, but highlights what true leadership looks like in a man named Paul O’Neill when he was CEO of Alcoa. It also shows what a man of integrity looks like when, as Secretary of the Treasury, he cautioned President George W. Bush against a tax cut to stimulate the economy, a lesson Liz Truss could have used.

I am in the middle of a fascinating book by Charles Duhigg called “The Power of Habit – Why We Do What We Do In Life and Business” and a very useful example appears involving Paul O’Neill. The name rang a bell for another reason, but more on that later. Who is Paul O’Neill? O’Neill was the CEO who turned Alcoa around during his tenure from 1987 – 2000. He joined a company in turmoil, and under his leadership, the value of the company doubled and the annual revenue went from $1.5 Billion in 1987 to $23 Billion. How did he help Alcoa achieve these results?

Ironically, when he made his first speech to investors and stock analysts, they came away unimpressed. He was not a well-known quantity having served as a in the VA Administration, Office of Management and Budget and as a Vice President and President of International Paper. Yet, what he said in that speech gave everyone pause. He said “I want to talk about worker safety.” He went on to discuss how Alcoa had a horrible safety record and his goal was “to go for zero injuries.” Many stock analysts were stunned by this focus as he did not use any of the typical words around synergy or rightsizing, etc. Several told their clients to divest of Alcoa stock after that meeting. One analyst later said “It was the worst piece of advice I gave in my entire career.”

Why the focus? The purpose of the book is to understand the role habits play in everything we do. If you can find a keystone habit and get someone to change it, then other better habits will follow. Companies were no different. O’Neill recognized before he took the job, he needed to help Alcoa change, but the unions did not trust management, communication was poor and processes needed changing. So, he decided to focus on the one thing everyone could agree on – worker safety. By focusing on worker safety, he would help change that habit and watch it spillover.

O’Neill instituted a policy that his managers had to notify him of an accident in the company within 24 hours along with a plan on how we learned from it and how we could avoid it happening again. Many thought it was just window dressing, but two weeks into his tenure, a young man acted rashly to fix a machine and was killed. O’Neill took this to heart and said “I killed this man. All of us in this room killed this man.” Everyone saw this was meaningful and things started to change. But, it was more than safety improving. To receive a report within 24 hours with a plan, a leader needed to know about the accident, what happened and how it could be avoided. Communication up and down the ranks improved, so the safety improvements could be conveyed and understood.

To improve safety, though, you had to improve processes. You had to make things easier to work with and provide the equipment to be safe. Not only did safety improve, but so did productivity. And, with these better communications, ideas from the manufacturing floor started to flow up. Some of the ideas had been bottled up for years, but now people felt empowered to share them. And, before the internet got up and running, they were using an intranet to communicate these ideas which kept them ahead of the competition and let information pass quickly. So, the company took off, because of O’Neill’s purposeful focus on one keystone habit – let’s make our jobs safer.

Where the name sounded familiar is O’Neill became President George W. Bush’s first Secretary of the Treasury in January, 2001. However, with all of his success and track record, he was fired by December 31, 2002. Why? O’Neill was very outspoken in his criticism over the now famous “Bush Tax Cuts” and our going to war with Iraq. As Secretary of the Treasury, he had seen a report that said the US had a looming deficit problem that would require tax increases and spending cuts. That report was suppressed by Bush and we went ahead with the Bush Tax Cuts that unbalanced our surplus budget left by President Bill Clinton aided by his Chief of Staff, Erskine Bowles.

Quoting a footnote in the book, Duhigg notes “However, O’Neill’s politics did not line up with those of the President Bush, and he launched an internal fight opposing Bush’s proposed tax cuts. He was asked to resign at the end of 2002. ‘What I thought was the right thing for economic policy was the opposite of what the White House wanted,’ O’Neill told me. ‘That’s not good for a treasury secretary, so I got fired.’”

I put O’Neill’s quotes in bold for effect. I would add that Warren Buffett, another pretty smart cookie, largely said the same thing at the time. Buffett said “You are giving me a tax cut I do not need.” So, just to state the obvious:

– we had a balanced budget, even a small surplus;

– President Bush wanted to push tax cuts to stimulate the economy;

– his Secretary of Treasury, a pretty competent leader, reads a report that forewarns of deficits down the road and tells the President and Vice President Dick Cheney (by the way, he recommended Cheney to Bush’s father for Secretary of Defense), that tax cuts are not the right answer for the economy and we need increases and spending cuts;

– the President and Vice President (who wielded more power than many VPs) ignores his advice and asks him to resign;

– we now have budget deficits heightened by the Bush Tax Cuts and two unfunded wars; and

– we continue to fight over these Bush Tax Cuts and need to raise revenue as well as cut spending to address the deficit, two ideas the suppressed report and fired Secretary of the Treasury espoused in 2002, eleven years ago.

Hindsight is usually 20/20, but the last bullet is very important. We have leaders who refuse to see that we must increase tax revenue and cut spending. No greater authorities than Alan Simpson and Erskine Bowles reached that same conclusion in the Simpson-Bowles Deficit Reduction Commission report. O’Neill, a very successful and competent CEO told his bosses, Bush and Cheney, this very thing and got fired. He also told them this before it would happen and before Bush actually threw gasoline in the fire and made it worse. Not to beat a dead horse, but Presidential historians have also noted President Bush as one of the worst presidents we have ever had and contrary to what his brother Jeb said last week, history will not judge him any better looking back from a future date.

So, to recap. Paul O’Neill, Warren Buffett, Alan Simpson and Erskine Bowles, all pretty capable people, said we need tax increases and spending cuts to address our deficits.However, O’Neill said it in official capacity as Secretary of Treasury and got fired. And, now we are living with not only the failure to act, but actions taken by Bush that are perpetuated today. I think O’Neill and these other people’s opinions matter and we should listen to them.

Twenty-five seconds showers

Regardless of whether elected officials want to talk about this, we have a global water crisis that has been building for some time. Here in the states, it manifests itself in three ways: more severe droughts in drier areas, evaporating and depleting water sources, and too many lead pipes still being used to provide water to cities.

And, this is before climate change has made the situation worse. I have cited before a statistic from a Duke Energy report that said climate change will cause evaporation from their water sources by 11% more than before. The folks out in the western part of the US are seeing major river sources at risk with so many competing users and states. The same is true in other parts of the world such as Cape Town, South Africa and in Chile, eg.

So, there are many things we must do combat these problems. The first one is to get elected officials to stop their discussions around exaggerated and contrived topics and to start discussing real problems. Politicians are often too late to the game as they get little credit for actually thinking ahead to avoid a problem getting worse. That is unfortunate, as that is precisely what we need them to do.

The possible solutions are many, but none may be a panacea. With climate change, our water crisis can be boiled down to one sentence – too much sea water and too little fresh water. So, one solution would be to convert sea water into potable water. It is expensive and earlier attempts do not taste as well, but that may be the best option for us. This is more evident in places like Miami and surrounding areas where the Biscayne aquifer is protected by porous limestone which will not hold back encroaching sea water. But, I have not heard either of the two senators or governor mention this.

One approach that would help a great deal is to use less water to generate power. What gets talked about so little in renewable energy is many of the approaches do not need water. Solar energy with photovoltaic panels and wind energy do not need water. Fossil fuel and nuclear energy must use water to boil into steam and turn the turbines. Granted the water gets release after its used back into the source, but a portion evaporates each time. And, fracking to retrieve natural gas takes a huge amount of water that cannot be reused.

Another partial solution is cut down on usage, hence the title of this post. The twenty-five seconds showers come from those who served in the Navy on a ship. That is how much fresh water a sailor had to bathe. So, the sailor would rinse off for five seconds. Stop the water and bathe with soap. Then, turn the water back on and rinse off for twenty seconds. 25 seconds. I know most folks shower much longer than that, but just think of the impact if everyone just halved their shower time, even more so if they decreased it to something measurable in seconds.

The above is a good metaphor for cutting usage of fresh water along many lines. We need to plant more indigenous plants that grow better in an area. There is a reason alfalfa and wheat are grown in the midwest – they grow in the wild. We could also use more rain barrels for watering or build gardens and water gathering devices on the roof of buildings. And, there plumbing approaches that reuse shower water to flush toilets, etc. Finally, some locations have had success in significantly filtering sewage water into fresh drinking water.

Then, there is that lead pipe thing. Which is its own animal. Unless we want to keep on poisoning people, we need to do something about changing the pipes. The Flint, Michigan pipe issue is not an anomaly. I read where Chicago is having issues as well, but these places are only the tip of the icebergs.

I kept this piece short with intention. It deserves greater scrutiny and discussion, but we need to discuss them rather than some of the things that we do discuss. I feel like our elected officials are a bunch of Nero’s fiddling away. But, in this case, we don’t have the water to put out the fire.

Tuesday tidbits (in mid-September, 2022)

Being in an alliterative state of mind, here are a few Tuesday tidbits for tasting. In no particular order:

  • I read where Wisconsin Republican Senator Ron Johnson is having trouble with his reelection campaign, as well he should. Apparently, independents like myself have soured on the guy, and he is in a toss-up with Lt. Governor Mandela Barnes. To be frank, many Republicans did not want Johnson to run again (his age), but for a different reason than I have. He is such an overt supporter of the former president, many Republicans on committees he chaired have openly disagreed with his inane assertions.
  • I continue to read some folks are voting Republican for economic reasons, but they should look at historical data. Here is an easy example to find – under which White Houses have more jobs been created, Democrat or Republicans (note there have been 13 terms apiece)? The answer is under Democrats, and it is not even close. Even Democrats tend to miss this question. The economy and stock market have done better as well. Those who say the last former president did great with the economy, should note that he inherited an economy in its 91st consecutive month of economic growth, a more than doubled stock market and six consecutive years of 2+ million per annum job growth. Note Obama inherited a recession from George W. Bush.
  • I should note that presidents and legislators get too much credit and blame for the economy. They do provide some headwinds and tailwinds, but the economy is bigger than their jobs. The inflation we are seeing today has a lot to do with an inadequate supply chain. If you remember your economic graphs, when supply is low, prices go up. The pandemic hurt a great deal. To me, the tariffs imposed by the previous president and continued under the current one have upset our supply chains, where businesses had to find other sources of goods that they likely continued. I would add the Russian invasion of Ukraine has fueled fossil fuel price increases along with the continued disruption of a poorly planned and executed Brexit which has an echo effect.
  • I should also caution my British friends they are in for an even rockier road with new Prime Minister Liz Truss’ infatuation with trickle-down economics, which has been proven in five studies to have failed. The state of Kansas recently had a huge failure with this theory and almost went bankrupt before it was overturned. Per Mother Jones, “After years of budgetary ruin, Kansas’ experiment in trickle-down economics is finally coming to a close. Late Tuesday night, the state Legislature voted overwhelmingly to override a veto from Gov. Sam Brownback and increase a slew of taxes in the state.” Trickle-down economics is not the best of names, but it is better than what it was called in the late 1890s – the “Horse and sparrow theory,” meaning what you feed the horse (the wealthy) is excreted to feed the sparrows (everyone else).

Oil companies’ internal documents confirm gaslighting the public

An article in The Guardian yesterday by Oliver Milman called “Criticism intensifies after big oil admits ‘gaslighting’ public over green aims” does not paint the fossil fuel industry in a good light. Here are a few paragraphs, but I encourage you to link the article below.

“Criticism in the US of the oil industry’s obfuscation over the climate crisis is intensifying after internal documents showed companies attempted to distance themselves from agreed climate goals, admitted ‘gaslighting’ the public over purported efforts to go green, and even wished critical activists be infested by bedbugs.

The communications were unveiled as part of a congressional hearing held in Washington DC, where an investigation into the role of fossil fuels in driving the climate crisis produced documents obtained from the oil giants ExxonMobil, Chevron, Shell and BP…

The new documents are ‘the latest evidence that oil giants keep lying about their commitments to help solve the climate crisis and should never be trusted by policymakers,’ said Richard Wiles, president of the Center for Climate Integrity.

‘If there is one thing consistent about the oil and gas majors’ position on climate, it’s their utter inability to tell the truth,’ Wiles added.

Ro Khanna, co-chair of the committee, said the new documents are ‘explosive’ and show a ‘culture of intense disrespect’ to climate activists. The oil giants’ ‘climate pledges rely on unproven technology, accounting gimmicks and misleading language to hide the reality,’ he added. ‘Big oil executives are laughing at the people trying to protect our planet while they knowingly work to destroy it.'”

These revelations are not surprising but are alarming. It should be noted shareholders of Exxon Mobil voted to require management to inform them on the progress toward fighting climate change, the vote occurring the day before the former president pulled the US out of the Paris Climate Change Accord. The proof though is in the pudding. To me it is a culture of window dressing – making it look like management is doing something but really not as much as it seems.

Yet, for those who simply cannot believe Big Oil would do this, let me remind that eight CEOs of the tobacco industry sat in a panel in front of a Congressional Committee and lied to a direct question. The lie they covered up is they all knew nicotine was addictive dating back thirty years. Let me remind that per the movie “Dark Waters,” Dupont knew that making Teflon was harmful to people, including their own workers, and hid that fact. And, after losing a data-centric arbitration case, they reneged on paying restitution to people. They then lost successive lawsuits to individuals for multiple millions of dollars before settling all the cases.

It amazes me that leadership of these (and other) organizations are so protective of their brand, they avoid doing the right thing. They would rather hide it and hope their secret is never discovered. In the end, they are more harmful to their brand than coming out and admitting the truth. Compare what these companies did to what Johnson and Johnson did when someone was poisoning Tylenol capsules in the grocery stores. They admitted their own failure and acted quickly to make protective seals, setting off a larger trend in industry.

Gaslighting is not a flattering word. When we see these feel good commercials on TV put forth by the oil companies, we need to take them with a large grain of salt. They may just what it seems – window dressing.

https://www.theguardian.com/environment/2022/sep/17/oil-companies-exxonmobil-chevron-shell-bp-climate-crisis

A four-year old post showed clean energy progress is happening

The passage of the Inflation Reduction Act which includes very significant renewable energy funding is a huge step forward. Even Republican legislators who were told not to vote for it, are silently celebrating the needed investment in their states that will be forthcoming.

Four years ago, I wrote the following post which sheds progress at the same time the former president was pulling the US away from the adult table on fighting climate change. President Joe Biden has gotten us back to that table and helped pass the Inflation Reduction Act. Please note the invasion of Ukraine by Russia has caused some hiccups to the progress with Russia punishing its critics with fossil-fuel restrictions, but the progress continues.

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“Global citizens are rightfully concerned the US President Donald Trump is pulling the US out of the Paris Climate Change Accord, but progress continues as “we are passed the tipping point on renewable energy.” Even the US pullout cannot stop the train, as states, cities, businesses and other countries continue the push. It just means the President and his team will not be at the adult table on this issue and may not be invited at all.

Here are a few miscellaneous energy tidbits that should offer encouragement.

Per the UK Based organization Carbon Tracker, here are a few highlights from the past year:

  • more than 1/2 of the US coal plants in existence in 2010 have been closed;
  • more than 1/2 of the remaining coal plants in Europe are losing money;
  • the UK has slashed electricity from coal usage from 40% to 2% in the last five years; and
  • there have been big strides in China and Australia on reducing coal usage.

Per the Federal Energy Regulatory Commission, the five member, Republican dominated agency denied the request by Department of Energy Secretary Rick Perry to fund the building of more coal-fired and nuclear plants. This was a surprise move given the make-up of the committee. I would call this decision as not wanting to throw good money after bad.

It should be noted, it is not just coal that is giving the FERC commissioners pause. The US division of Westinghouse Electric Company had to declare bankruptcy for cost overruns on a new nuclear power plant for SCANA, the South Carolina utility. As a result, the new plant is being shuttered and SCANA is being sold to Dominion Resources, so as not to overburden SC citizens with the cost of the lost investment.

The International Energy Agency in their 2017 Energy Outlook notes the cost of new solar photovoltaic electricity has declined by 70% and wind energy has fallen 25% since 2010. It should be noted the IEA has tended to favor fossil fuel energy in past releases. China, the new country leader in the climate change fight, will be investing US$360 billion more in renewable energy by 2020. Plus, the price of solar has fallen so much in places like Zambia, Saudi Arabia and Mexico, it has won bidding contests against fossil fuel energy sources for projects.

Finally, any discussion on future energy cannot exclude the declining cost and increasing capacity in battery storage. Per Bloomberg New Energy Financials, energy storage will double six times between 2016 and 2030. Elon Musk just helped southern Australia go live with a major battery installation and 21 states in the US have planned projects on energy storage.

All of the above stories are important because it has always been a financial argument to combat the environmental concerns, whose long term costs have been undervalued. Now, the financials are favoring the renewable energy engine, so market forces will continue to force the ultimate demise of coal-fired energy, which started with the lower cost of natural gas. If a company can find a clean energy source which is cheaper and more predictable long term, that is easily the better path forward. If you don’t believe me, just ask companies like Google, Facebook, Walmart and IKEA to name only a few.”

Bankers used to be trustworthy, but threw their reputation out the window – a reprise

In 2014, I wrote the following post which was predicated on yet another huge fine of a large bank for inappropriate activities in selling products. Just yesterday, per The Charlotte Observer in an article called “Bank settles with feds over claims it ‘misused’ 401(k),” Wells Fargo was fined $145 million (after earlier fines for unethical and some illegal practices) for cheating its own employees and retirees with higher stock transaction fees in the company 401(k). This latest fine was forthcoming from the Department of Labor as they govern employer sponsored 401(k) plans. It should be noted the bank settled the case without admitting guilt.

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Last week, Bank of America was the latest bank to be penalized for fraudulent or aggressive marketing practices. They have had so many fines for malfeasance or aggressive marketing practices that it is hard to keep track of their sins. The latest penalty fined Bank of America $783 million for selling credit card consumers products and services they did not request. The Consumer Financial Protection Bureau (CFPB), which was newly created a couple of years ago by the Dodd-Frank Act under the tutelage of now Senator Elizabeth Warren, said the $738 million of that fine is used to restore money to those customers who were fraudulently sold these products.

In its first two fiscal years of operations ending June 30, 2013, the CFPB has fined banks and financial entities $942 million of which the significant majority goes to the consumers who were harmed or defrauded. The banks and financial institutions that were penalized include, but are not limited to American Express, Capital One, Discover, and JP Morgan Chase. While the significant majority of the penalty goes to the consumers, the remainder, which is usually less than 10% of the overall fine, goes into a Civil Penalty Fund, which has the following purpose as stated in the CFPB 2013 Annual Report:

“Under the Act, funds in the Civil Penalty Fund may be used for payments to the victims of activities for which civil penalties have been imposed under the Federal consumer financial laws. To the extent that such victims cannot be located or such payments are otherwise not practicable, the Bureau may use funds in the Civil Penalty Fund for the purpose of consumer education and financial literacy programs.”

What is interesting to me is why certain politicians are against this agency? I want them to tell me why an agency designed to protect the average Joe’s and Josephine’s is a bad thing. To state the obvious, these politicians tend to be Republican and tend to be supported by bankers. Senator Richard Shelby, who Chaired the Senate Banking, Housing and Urban Affairs Committee from 2003 – 07 is one of the key critics of the CFPB. (Sidebar – under president Donald Trump, Mick Mulvaney was appointed to lead the CFPB to hobble it).

This is one area where people who don’t want regulation need to explain how we would be better without it. Would it be OK for bankers to have full license to sell their customers services they do not need? Is it OK for banks to screw people over? I find most people confuse unwieldy bureaucracy with regulation. We need the latter, but need to guard against the former. I also find people who don’t want to be regulated tend to be those who need to be regulated more. The fossil fuel industry comes to mind, but that would be a large digression.

Having worked in Human Resources within a bank back in the 1990s, what I have witnessed is being a banker used to be one of the most trusted professions. Now, it ranks much lower in trust.  And, they only have themselves to blame. Truth be told, bankers used to be trustworthy, but threw their reputation out the window.

The slippery slope began in earnest with the repeal of the Glass-Steagall Act in the late 1990s. This act had been put in place at the time of the Great Depression and was designed to assure that banks would be banks and not investment banks, security traders or insurance companies. With the feeling everyone learned their lesson and cooler heads would prevail, the repeal of the Glass-Steagall Act reopened the can of worms. The real reason for the repeal was banks wanted the fee income that usually came with those products and services. Yet, to add another metaphor, the can of worms became a Pandora’s Box.

What transpired after that repeal is banks pushing the envelope more and cross selling products and services to unsuspecting customers. Two marketing trends emerged. “Bundling” and “Tying.” Bundling represents the concept if you do more business with us, we will give you better terms. By itself, that is not necessarily a bad practice. Yet, when married with tying, it becomes unethical and illegal. Banks started tying business marketing together, so that you had to business with them in one area to get a better deal on another service which was more vital to the buyer. Usually these offers were not made in writing, as some tying can be illegal.

But, the larger trend that occurred is a selling push to reward employees for selling you services you may or may not need. The unscrupulous ones would push the hardest and do things that now get the attention of the CFPB. One of the key reasons the mortgage crisis hit is the better mortgage market dried up and banks had all of these mortgage bankers with nothing to do.

With the push out of the second Bush White House that home ownership was good, the higher risk mortgage market became the target. It was at this time you saw mortgage-in-a-box retail stores competing against banks to sell mortgages to people who did not understand fully what was being sold to them. Variable mortgages and the dreaded Pic-a-payment mortgages that brought Wachovia down after their acquisition of Golden West, were being sold to people who were in over the heads, both economically and educationally. People should have been asking more questions, but trusted the men and women in nice suits that told them they could afford the American Dream. They failed to mention or fully explain terms like “negative amortization” and “variable mortgages” especially what transpires when the rate goes up by 200 basis points.

So, bankers used to be trustworthy, but they threw it out the window. They earned these new stripes. You have to be the navigator of your customer service experience, in general, but especially with a bank. You have to ask questions about why you are being asked to do something. You need to ask why you need another credit card. You need to ask why is the salesperson pushing so hard on this issue. If you don’t, you may need the help of the Consumer Financial Protection Bureau.

With that said, I know many fine people who work for banks. They do their best to serve their customers. Yet, the higher-ups are pushing for sales and align incentives with that push. As a result, even well-meaning people will push the envelope even more. I have been a business for over 34 years and a truism I have learned is you make more money serving the needs of your client long term. You may make more money on occasion by pushing that envelope, but you may do so at the expense of a long term relationship which might come to an end.

For full disclosure, I am a shareholder (sidebar – I am no longer a shareholder of BofA) and customer of both Bank of America and Wells Fargo. These fines disappoint me. I want them to be accountable to their customers, employees and shareholders. But, they also need to be accountable to their regulators. They owe it to all of us.

Rural Virginia pivots from coal to green jobs

An article by Nina Lakhani in The Guardian this weekend called “‘This is the future’: rural Virginia pivots from coal to green jobs,” is a must read, especially for those who still want to cling to a declining industry. The article can be linked to below. Here are a few salient paragraphs that will give you the gist.

“When Mason Taylor enrolled at the local vocational school with dreams of becoming an electrician like his dad, it was assumed that the ninth-grader would eventually end up moving away from Wise county, Virginia, to find a decent job.

Now 19, Taylor just bought a truck after a summer apprenticing with a crew of electricians installing rooftop solar systems at public schools in the county. He was among a dozen or so rookies paid $17 an hour, plus tools and a travel stipend, as part of the state’s first solar energy youth apprenticeship scheme.

The region’s long-awaited energy and economic transition will be substantially boosted by America’s first climate legislation, the Inflation Reduction Act (IRA).

It’s far from a panacea, but Joe Biden’s legislation provides $369bn for the transition to electric vehicles and renewable energy – a historic investment that scientists estimate will reduce greenhouse gases by 40% below 2005 levels by 2030 and ​​create an estimated 1.5m new jobs.

Decent well-paid jobs are desperately needed. In Virginia, coal production has declined by 70% since its peak in 1990, and much of what’s left is semi-automated. Those old jobs are largely gone and are not coming back.

The IRA provides ring-fenced money for training, innovation and manufacturing, as well as an array of tax breaks and other financial incentives to help consumers and businesses transition away from fossil fuels. And Joe Manchin, the conservative Democrat senator from West Virginia played a pivotal role in watering down – and then reviving – the legislation, directing billions of dollars to the economic revival of depressed coal towns.

‘It’s a game changer for rural and coal communities,’ said Autumn Long, a project manager for solar financing and manufacturing workforce development at the non-profit Appalachian Voices. ‘Renewables are a way to honour the region’s energy-producing legacy and be part of the 21st-century global energy transition. The IRA is a turning point.‘”

In my view, these efforts are about ten years overdue. I have been writing for several years now of the demise in coal jobs in our country as contrasted to the uptick in solar and wind jobs. If I knew of the demise, the elected officials in these coal states have had to have known. This would include the Senate Minority leader who hails from Kentucky, one of those coal states. The sun has always shined and the wind has always blown in those states.

Yet, they did nothing. They were paid campaign funds by coal manufacturers to do nothing and perpetuate the status quo. Whether people like him or not, the only 2016 presidential candidate who told coal miners the truth – in person – was Senator Bernie Sanders, who said your jobs are going away, but here is what I plan to do about it.

Now, at long last, more is being done about it. Solar and wind energy are now on par or better in production costs with coal energy. And, when you factor in the environmental, maintenance, trucking, and litigation costs, the two renewables beat the pants off coal. It makes little sense to build a new coal plant which will become obsolete before it is finished.

So, this new law is good news and we should give credit to this Congress and President for getting it done. It is better late than never, but let’s hope it is not too late.

https://www.theguardian.com/us-news/2022/sep/08/rural-virginia-pivots-from-coal-solar-green-jobs