Tom Borelli

Bad decisions by CEOs are at the core of our economic crisis.

Throwing caution to the wind, chief executives in the financial industry took enormous risks by placing huge bets on financial instruments based on mortgages. Abandoning common sense and basic economic principles, CEOs failed to execute proper risk management by contemplating the consequences of a downturn in the housing market.

The harm caused by incompetent CEOs extends well beyond shareholders – it also threatens the conservative principles of limited government and free markets.

Failures of this magnitude frequently result in calls for increased government control. This crisis has led to a huge expansion of government through the Emergency Economic Stabilization Act of 2008, which allows the Secretary of Treasury to purchase up to $ 700 billion of distressed assets from banks.

Buying “toxic securities” is only part of the plan: the federal government recently announced it will use part of the bailout booty to take equity positions in the nation’s banks.

CEO mismanagement is not restricted to the banking industry. CEO response to global warming alarmism provides ample examples of poor judgment, naive assumptions and disregard for their fiduciary responsibility to shareholders.

ConocoPhillips, for example, the third-largest integrated energy company and second-largest refiner in the United States, is allowing its global warming policy to put its business at risk.

Because its business is fossil fuels – exploring, refining and transporting oil and natural gas to supply the energy needs of society – it is surprising that ConocoPhillips is participating in the United States Climate Action Partnership (USCAP) – a coalition of companies and environmental activists lobbying for cap-and-trade legislation to address global warming.

The profit motive for ConocoPhillips under cap-and-trade is murky at best, since the goal of the policy is to reduce the use of fossil fuels. The company’s global warming stance raises more questions, as the company is increasing its “carbon liability” by making investments in Canadian oil sands – a source of oil that generates three times as much carbon dioxide through its production than conventional oil.

Tom Borelli

Tom Borelli, Ph.D., is a Senior Fellow with FreedomWorks.

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