The problematic future of U. S. energy investment

Can the current financial system in America help us make the energy infrastructure investment we need for a transition away from fossil fuels?

First, let’s look at how things are going right now. As investors have watched like deer in headlights while their stock portfolios melted down in recent months, the many flaws of America’s peculiar form of cowboy capitalism have been revealed. Perhaps most telling is that we now know that the swashbuckling traders and bankers of America’s new era financial system are not the rugged individualists they purported to be. Instead, they are pampered members of America’s ruling teenager class who, having received no ethical guidance or discipline during the boom years, are now being coddled by regulators and bailed out by the country’s central bank and the U. S. Treasury Department. All this comes after they have gambled away investors’ money on what amounts to a Ponzi scheme in mortgages.


(Incidentally, none of them is being asked to give back the bonuses they earned during the boom years. They take the risks; somebody else gets the bill when things go bad.)

To add insult to injury, the public found out just recently that two of the biggest teenage Ponzi schemers are Fannie Mae and Freddie Mac, the country’s two largest mortgage lenders whose names make them sound like a perfectly innocent young couple. While pretending to be freestanding independent organizations for many years, they have always been, it seems, wards of the state. Having been effectively nationalized via a promise from the U. S. Treasury to extend additional credit and buy equity in the firms if necessary, taxpayers may now pay for the crimes of both institutions.

This then is the American capitalist system that is supposed to allocate capital to the areas of highest return which are presumably the areas of highest need. But as we have seen, high returns can be manufactured–that is, for a time–and thus attract vast pools of capital to areas already suffering from a glut. So, what does this portend for the future of energy investment?

Energy Bulletin