Yesterday’s Paper

” . . . who wants yesterday’s paper. . .” the Rolling Stones

The Pacific Green Party of Oregon, ladies and gentlemen, is the local branch of the political arm of the Green Movement.

The biggest thing that the Green Movement requires of all members is a shift in thinking.

The closest thing the country has to a national newspaper, Pravda-on-the-Hudson last Saturday:

Tomorrow is the winter solstice, the longest night of the year. But few of us will turn off the lights long enough to notice.

There’s no getting away from the light. There are fluorescent lights and halogen lights, stadium lights, streetlights, stoplights, headlights and billboard lights. There are night lights to stand sentinel in hallways, and the lit screens of cellphones — to feed our addiction to information — in the middle of the night. No wonder we have trouble sleeping. The lights are always on.

The actual payment of dues to the Eugene, Oregon business office is nice, sure, but the change of perspective is what counts.

In the modern world petroleum may drive our engines but our consciousness is driven by light. And what it drives us to is excess, in every imaginable form.

Our friends the Greeks told us about this part of The Human Condition, but did we listen?

Beginning in the late 19th century the availability of cheap, effective lighting extended the range of waking human consciousness, effectively adding more hours to the day — for for work, for entertainment,for discovery, for consumption; for every activity except sleep, that nightly act of renunciation.

Carl Strand, the probably well-connected author of a new book, writes in the following paragraph

In centuries past the hours of darkness were a time when no productive work could be done.

Before we go any further, the chattering classes, so to speak, of the 1830s were well aware of the fact.

Which is to say, at night the human impulse to remake the world in our own image — so that it served us, so that we could almost believe the world and its resources existed for us alone — was suspended.

Let me cast about if I may beg the indulgence of my readers, for an example of such ebullience

A few days ago, accordingly, the excellent interlibrary loan service we have here in Maryland brought me a hefty 1985 hardback by financial journalist Philip Zweig, with the engaging title Belly Up: The Collapse of the Penn Square Bank. Some of my readers may never have heard of the Penn Square Bank; others may be scratching their heads, trying to figure out why the name sounds vaguely familiar. Those of my readers who belong to either category may want to listen up, because the same story seems to be repeating itself right now on an even larger scale.

The tale begins in the middle years of the 1970s, when oil prices shot up to unprecedented levels, and reserves of oil and natural gas that hadn’t been profitable before suddenly looked like winning bets. The deep strata of Oklahoma’s Anadarko basin were ground zero for what many people thought was a new era in natural gas production, especially when a handful of deep wells started bringing in impressive volumes of gas. The only missing ingredient was cash, and plenty of it, to pay for the drilling and hardware. That’s where the Penn Square Bank came into the picture.

The Penn Square Bank was founded in 1960. At that time, as a consequence of hard-earned suspicions about big banks dating back to the Populist era, Oklahoma state banking laws prohibited banks from owning more than one branch, and so there were hundreds of little one-branch banks scattered across the state, making a modest return from home mortgages, auto loans, and the like. That’s what Penn Square was; it had been organized by the developer of the Penn Square shopping mall, in the northern suburbs of Oklahoma City, to provide an additional draw to retailers and customers. There it sat, in between a tobacconist and Shelley’s Tall Girl’s Shop, doing ordinary retail banking, until 1975.

In that year it was bought by a group of investors headed by B.P. “Beep” Jennings, an Oklahoma City banker who had been passed over for promotion at one of the big banks in town. Jennings pretty clearly wanted to prove that he could run with the big dogs; he was an excellent salesman, but not particularly talented at the number-crunching details that make for long-term success in banking, and he proceeded to demonstrate his strengths and weaknesses in an unforgettable manner. He took the little shopping mall bank and transformed it into a big player in the Oklahoma oil and gas market, which was poised—or so a chorus of industry voices insisted—on the brink of one of history’s great energy booms

On the brink, ladies and gentlemen, of one of history’s great energy booms

Fortunately for Beep Jennings, one of the grand innovations that has made modern banking what it is today had already occurred; by his time, loans were no longer seen as money that was collected from depositors and loaned out to qualified borrowers, in the expectation that it would be repaid with interest. Rather, loans were (and are) assets, which could (and can) be sold, for cash, to other banks. This is what Penn Square did, and since their loans charged a competitive interest rate and thus promised competitive profits, they were eagerly snapped up by Chase Manhattan, Continental Illinois, Seattle First, and a great many other large and allegedly sophisticated banks. So Penn Square Bank started issuing loans to Oklahoma oil and gas entrepreneurs, a flotilla of other banks around the country proceeded to fund those loans, and to all intents and purposes, the energy boom began.

At least that’s what it looked like. There was a great deal of drilling going on, certainly; the economists insisted that the price of oil and gas would just keep on rising; the local and national media promptly started featuring giddily enthusiastic stories about the stunning upside opportunities in the booming Oklahoma oil and gas business. What’s more, Oklahoma oil and gas entrepreneurs were spending money like nobody’s business, and not just on drilling leases, steel pipe, and the other hardware of the trade. Lear jets, vacation condos in fashionable resorts, and such lower-priced symbols of nouveau richesse as overpriced alligator-hide cowboy boots were much in evidence; so was the kind of high-rolling crassness that only the Sunbelt seems to inspire. Habitués of the Oklahoma oilie scene used to reminisce about one party where one of the attendees stood at the door with a stack of crisp $100 bills in his hand and asked every woman who entered how much she wanted for her clothes: every stitch, then and there, piled up in the entry. Prices varied, but apparently none of them turned down the offer.

It’s only fair to admit that there were a few small clouds marring the otherwise sunny vistas of the late 1970s Oklahoma oil scene. One of them was the difficulty the banks buying loans from Penn Square—the so-called “upstream” banks—had in getting Penn Square to forward all the necessary documents on those loans. Since their banks were making loads of money off the transactions, the people in charge at the upstream banks were unwilling to make a fuss about it, and so their processing staff just had to put up with such minor little paperwork problems as missing or contradictory statements concerning collateral, payments of interest and principal, and so on.

Mind you, some of the people in charge at those upstream banks seem to have had distinctly personal reasons for not wanting to make a fuss about those minor little paperwork problems. They were getting very large loans from Penn Square on very good terms, entering into partnerships with Penn Square’s favorite oilmen, and in at least some cases attending the clothing-optional parties just mentioned. No one else in the upstream banks seems to have been rude enough to ask too many questions about these activities; those who wondered aloud about them were told, hey, that’s just the way Oklahoma oilmen do business, and after all, the banks were making loads of money off the boom.

um, . . banks making loads of money. check.

In 1979, the Iranian revolution drove the price of oil up even further; in 1980, Jimmy Carter’s troubled presidency—with its indecisive but significant support for alternative energy and, God help us all, conservation—was steamrollered by Reagan’s massively funded and media-backed candidacy. As the new president took office in January of 1981, promising “morning in America,” the Penn Square bankers, their upstream counterparts, their clients in the Oklahoma oil and gas industry, and everyone else associated with the boom felt confident that happy days were there to stay. After all, the economists insisted that the price of oil and gas would just keep rising for decades to come, the most business-friendly and environment-hostile administration in living memory was comfortably ensconced in the White House; and investors were literally begging to be allowed to get a foot in the door in the Oklahoma boom. What could possibly go wrong?

Then, in 1981, without any fuss at all, the price of oil and natural gas peaked and began to decline.

In retrospect, it’s not difficult to see what happened, though a lot of people since then have put a lot of effort into leaving the lessons of those years unlearnt. Energy is so central to a modern economy that when the price of energy goes up, every other sector of the economy ends up taking a hit. The rising price of energy functions, in effect, as a hidden tax on all economic activity outside the energy sector, and sends imbalances cascading through every part of the economy. As a result, other economic sectors cut their expenditures on energy as far as they can, either by conservation measures or by such tried and true processes as shedding jobs, cutting production, or going out of business. All this had predictable effects on the price of oil and gas, even though very few people predicted them.

As oil and gas prices slumped, investors started backing away from fossil fuel investments, including the Oklahoma boom. Upstream banks, in turn, started to have second thoughts about the spectacular sums of money they’d poured into Penn Square Bank loans. For the first time since the boom began, hard questions—the sort of questions that, in theory, investors and bankers are supposed to ask as a matter of course when people ask them for money—finally got asked. That’s when the problems began in earnest, because a great many of those questions didn’t have any good answers.

At night, Pravda-on-the-Hudson op-ed author was saying

at night the human impulse to remake the world in our own image — so that it served us, so that we could almost believe the world and its resources existed for us alone — was suspended. The night was the natural corrective to that most persistent of all illusions: that human progress is the reason for the world.

.

About M. Meo

Worked as translator, museum technician, truck lumper, lecture demonstrator, teacher (of English as a Second Language, science, math). Married for 25 years, 2 boys aged 18 & 16 (both on the Grant cross-country team). A couple of scholarly publications in the history of science. Two years in federal penitentiary, 1970/71, for refusing the draft.
This entry was posted in Astronomy, Economics, Education, Global, Inequality, Marxism, Pacific Green Party, Permaculture, Reservoirs, Saudi Arabia, Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s