Recent news that the Wall
Street banking system handed out bonuses totalling $28.5 billion to its 167,800
employees during 2014 is really not all that shocking, even when the bonuses
are added to the average base salary of $190,970 (2013 average).
According to the New York State Comptroller, the average bonus
paid in New York City's security industry rose by 2 percent in 2014, hitting
$172,860 (or 3.3 times the median American household income in 2013)
even though the industry was slightly less profitable in 2014 than it was in
2013. This is the highest level of bonuses paid since the financial
crisis. In the two previous years, the average bonus rose by a total of
52 percent, far above the level in 2014.
A recent analysis from the Institute for Policy
Studies helps to put the size of Wall Street's bonus pool into perspective in
terms of those Americans who earn at the bottom of the nation's pay scale,
America's minimum wage earners. It is important to keep in mind that the
creative minds of Wall Street were behind the near meltdown of the world's
economy in 2008, largely because the system incentivizes high risk
Here is a graphic showing
the 2014 total annual earnings for the 1.007 million Americans earning the
current federal minimum wage of $7.25 per hour:
During 2014, Wall Street
bonuses totalled more than twice the total earnings of more than a million
American minimum wage earners.
Let's frame the size of
Wall Street's bonuses in terms of what it would do for millions of America's
lowest paid workers who spend their working lives in restaurants, home health
and personal care and the fast food industry:
The $28.5 billion would
be nearly enough to raise the hourly wages of 1.5 million home health and
personal care workers and 2.2 million fast food preparation and serving workers
to the $15 per hour level.
As I have noted in a
previous posting, while wealthy Americans can afford to purchase more goods
than poorer Americans on an individual basis, on a group basis, the purchasing
power of the less well off masses is substantially greater. After all,
how many toasters will one billionaire purchase compared to the number
purchased by hundreds or thousands of middle class households? Based on
the standard fiscal multipliers used by Moody's Analytics, every dollar that
goes into the pockets of lower-wage workers adds about $1.21 to the national
economy compared to only $0.39 for high income earners. As shown in this
graphic, if the $28.5 billion in bonuses had been allocated to minimum wage
earners, GDP in 2014 would have grown by $34.5 billion rather than the $11
billion when the entire bonus pool ends up in the wallets of Wall Streeters:
Interestingly, the New
York State Comptroller notes that "...the cost of legal settlements
related to the 2008 financial crisis continues to be a drag on Wall Street
profits, but the securities industry remains profitable and well-compensated
even as it adjusts to regulatory changes." That said, after record
losses during the financial crisis, the security industry has been profitable
for six consecutive years, including the three best years on record.
Despite the fact that the
Dodd-Frank Wall Street Reform and Consumer Protection Act
was signed into federal law on July 21, 2010, very little has been done to
reign in the connection between bonuses and reckless, high risk behaviour.
Section 956, the section of Dodd Frank that
requires "...enhanced disclosure of incentive-based compensation arrangements and
prohibits covered financial institutions from offering incentive-based
compensation arrangements that encourage covered persons to expose the
institution to inappropriate risks by providing the covered persons excessive
compensation" has still not been adopted. With Wall Street's ever-growing
bonus pool and its endless line of creative financial products, we could well
be setting ourselves up for the next financial crisis.
There is an interesting
twist to the ongoing war of words with Russia over its actions in Ukraine that
is little discussed in the mainstream media. The United States State
Department is using its Russian language UkrProgress
Twitter account with the hashtag #UnitedforUkraine to counter
what the United States considers to be Russian propaganda on its activities in
Ukraine. While most of the tweets are in Russian, here are some of the
more interesting English language posts by the State Department:
If you follow the links
listed on the tweets, many of them take you to stories on the ShareAmerica
website. What is ShareAmerica? It is the Department of
State's "...platform for sharing compelling stories and images that spark
discussion and debate on important topics like democracy, freedom of
expression, innovation, entrepreneurship, education and the role of civil
society." In other words, propaganda from a State
And, as though it really
matters, the State Department seems to feel that voting on a new design for police cars in Kyiv
is a positive sign of democratic reform in Ukraine:
And, just so it doesn't
appear that the United States stands alone, here is a tweet showing that Canada
stands behind Ukraine:
To close, here are two interesting tweets showing the high cost of the Russian takeover of Crimea when
it comes to buying groceries and the high economic cost of the "illegal
The use of a social media
account permits the U.S. Department of State to take a much harsher and
unrestricted stand against Russia than normal official diplomatic statements
With Ted Cruz heading toward a 2016 run for President, I wanted to take a look at
who his important supporters are, you know, the ones that speak with dollars.
The ones that he will really listen to.
From Open Secrets, here is a look at his top twenty
contributors for the period from 2013 to 2014:
Note the $69,350 from
Goldman Sachs? Cruz's wife, Heidi Nelson Cruz, is a managing director at
Goldman Sachs, Ted Cruz's fourth biggest donor. While Cruz took a strong stance against Obamacare, he
lives in a health care world that most Americans can only dream of, one that
has gold-plated health care coverage worth at least $20,000 according to the New York Times. On top of that,
according to the Centre for Economic and Policy Research, the cost of the
health insurance is tax deductible, meaning that if the Cruz's are in the
highest income bracket, their tax deduction would be more than $8000 annually.
Just in case you are curious, you can get information on the entirety of
the compensation and benefits package for Goldman Sachs employees at this link.
Here is a table showing the top five industries that have contributed to Mr. Cruz over the period from 2011 to 2014:
Now, let's go line-by-line
through Mr. Cruz's top three donors.
1.) Club for Growth: This is a conservative
political action group that promotes public policies that adhere to a fiscally
conservative economic agenda. It was founded in 1999 and claims to be the
only organization that is willing to take on any Member of Congress on policies
that fail to uphold basic economic conservative principles. It has over
100,000 members throughout the United States. Their goals
include the repeal of Obamacare, the reduction of income tax rates and
replacing the current tax system with a flat tax. Here is a look at the group's beneficiaries in
the 2012 election cycle showing that Mr. Cruz was their second highest
Of the $4.25 million
spent by Club for Growth, Mr. Cruz received 16.6 percent.
2.) Senate Conservatives Fund: The Senate
Conservatives Fund is an independent PAC that is dedicated to electing
"true conservatives" to the United States Senate. Its goal
is to get Senators to enact policies that will restore America's greatness
through cutting spending and balancing the budget without raising taxes,
repealing Obamacare, enforcing immigration laws, banning bailouts and defending
the Second Amendment of the Constitution. It funds itself through
individual donations from grassroots donors. Here is a look at the group's beneficiaries
for the 2012 election cycle which also shows that Mr. Cruz was their second highest
You will note that Mr.
Cruz received well less than Josh Mandel (R-OH) who received just over $5.23
million. Despite spending $18.87 million on the Ohio Senate race, Mr.
Mandel lost to Sherrod Brown who spend $24.58 million.
3.) Woodforest National Bank: Woodforest
National Bank is a Texas-based bank formed in 1980. The
bank has more than 750 branches in 17 states and is privately owned with nearly
one-third of its branches located in Texas. Here is a look at the bank's beneficiaries for
the 2012 election cycle:
Mr. Cruz was their top
recipient, receiving $88,000 of the bank's $141,587 contributed to candidates
during the 2012 cycle. In fact, he received just over five times the
amount that Republican Presidential candidate Mitt Romney received in 2012.
Now, let's take a brief look at how much Mr. Cruz spent in 2012
to get elected to the Senate compared to his competition:
Mr. Cruz spent $14.03
million to get elected compared to only $510,439 by his main Democratic competitor,
Paul Sadler, who received 40 percent of the vote compared to Mr. Cruz's 57
percent. Here is a look at Mr. Cruz's current career fundraising efforts
and spending from 2011 to 2014:
A total of $13.694 million or 74 percent of the total raised comes from individual contributions
and 9 percent comes from PAC contributions. Only $843,000 or 5 percent of
the total comes from self-financing.
Looking through the list
of Mr. Cruz's donors, we get a pretty good idea of what his political backers
will be expecting of him should he actually manage to pull off a win in November 2016.
And, just in case you've forgotten, here is a screen capture showing Ted Cruz's birth certificate showing that he was quite clearly born in Canada, albeit to American parents:
Updated July 2017
Back in September 2013, I
posting this explanation
on one of the key potential problems with fracking. At that time, I did
not have access to data regarding the failure of well bores in areas where
there has been substantial horizontal drilling and multi-stage fracking on
land. Thanks to researchers at Cornell, we now have some idea about where
the potential problems with shale gas may lie.
First, let's review.
Here, quoting from my posting in September, is an explanation of how a
well is drilled, completed and where the problems with well bore integrity can
When the oil industry
drills a borehole to depth, as you can imagine, the sides of the borehole are
very unstable and rock continually sloughs into the hole, causing all manner of
problems. To alleviate these problems, a long string of hollow steel production
casing of varying diameters is run into the hole to the total depth of the well
(or somewhere below or at the depth of the producing formation depending on the
type of well). The diameter of this casing is somewhat smaller than the
diameter of the borehole; the space between the walls of the borehole and the
outside of the production casing is known as the annulus. Once the
casing is in place, cement is pumped down the casing and flows back up the well
between the casing and the sides of the borehole through the annulus. The
cement is allowed to harden and tools are run to ensure that the "cement
job" is sound. The purpose of the cement is three-fold; it holds the
casing in place, it prevents the fluids used in the well completion operations
from flowing to the surface and it prevents fluids from inside the borehole
from flowing into the surrounding formations once the well is completed and on
production. For example, if there is a water-bearing formation above the
productive zone, the production casing and cement will seal off that formation,
preventing the formation water from flowing into the well bore.
a cross sectional diagram comparing a conventional well bore and an unconventional well bore:
One of the key issues
that can cause a completed well bore to fail is related to the cement that is
used to fix the production casing in place. In some cases, the when the
cement is pumped down the well bore, it fails to displace the drilling mud
in the annulus and in some cases, the cement fails after a period of time.
This failure allows the formation fluids including oil, natural gas or
water of varying salinity that are under higher pressure because of the weight
of the rock that lies on top of them to flow through the annulus to the surface
where the pressure is lower. It is this problem of well bore integrity
that results in contamination of near surface groundwater and the atmosphere.
There are two key differences
between conventional natural gas production and unconventional or shale gas
1.) Shale gas wells
require much higher volume fracks than conventional gas wells.
2.) Shale gas wells
require far higher well density than conventional gas wells.
These two factors
help explain the potential magnitude of the problem with shale
Let's switch gears for a
minute and take a look at a map
showing the extent of the Marcellus Shale play both inside and outside of
Please note the
concentration of Marcellus producing wells in the northeast part of
Here is a more detailed map showing the
Marcellus shale producing gas wells (in red) in Pennsylvania, again,
noting the concentration of Marcellus producers in the northeast part of Pennsylvania:
Now that you have all of that
background information, let's look at the study by the Cornell-led research team.
The researchers, Anthony Ingraffea, Martin Wells, Renee Santoro and Seth
Shonkoff, examined compliance reports for 41,381 conventional and unconventional
(i.e. shale gas) wells in Pennsylvania that were drilled between January 1,
2000 and December 31, 2012. In total, 32,678 wells were inspected; of
these, 26,915 were conventional wells and 5,763 were unconventional. The
majority (92.6 percent) of the unconventional wells were drilled during or
after 2009. The objective of their examination was to get complete and accurate
statistics of casing and cement impairment, otherwise known as well bore
integrity. Previous studies noted the presence of thermogenic methane which is sourced in
deeply buried sediment (i.e as opposed to biogenic methane which is a
result of near-surface bacterial activity) in private water wells in Pennsylvania
and this study looked to identify the sources of this contaminant.
The authors of the study
note that there are many reasons why well bore integrity can fail:
1.) Failed cement
barriers because of inappropriate cement density, inadequately cleaned
boreholes, premature gelation of cement, excessive fluid loss in the cement,
cement shrinking, high permeability in the cement and normal age-related
2.) Failed casing
because of collapse and corrosion.
In these cases, fluids
can flow from the reservoir at depth to the surface or into aquifers.
In cases where there are
leaks that cannot be repaired, Pennsylvania regulations mandate that these
wells be permanently plugged and abandoned. Unfortunately, in many cases,
the flow of hydrocarbons and formation waters between zones may still occur,
resulting in continued contamination of aquifers and the atmosphere.
Now that we have the
necessary background to understand where the problems may lie, let's look at
the results of the study. The authors found the following:
spudded before 2009 had a structural failure rate of between 0.73 percent and
2.08 percent after 2009 in non-northeastern counties of Pennsylvania.
Unconventional wells over the same time periods had a failure rate of 1.49
percent and 1.88 percent. The differences begin to show up in the
Northeast counties of Pennsylvania; in pre-2009 conventional wells, there was a
5.29 percent failure rate and a 2.27 percent failure rate after 2009.
Unconventional wells in the same area had far higher failure rates;
unconventional wells spudded before 2009 had a failure rate of 9.84 percent and
nonconventional wells spudded after 2009 (over 92 percent of the unconventional
wells as noted above) had a failure rate of 9.14 percent.
Wells spudded before 2009
make up 72 percent of the total wells in the study but only 31 percent of the
wells with casing/cement integrity problems. Of the wells drilled in
Northeast Pennsylvania after 2009, unconventional wells are four times more
likely to have integrity problems than their conventional counterparts.
The northeast counties (which includes Bradford, Cameron, Clinton,
Lycoming, Potter, Sullivan, Susquehana, Tioga, Wayne and Wyoming) make up only
11 percent of the 3030 wells spudded over the time frame of the study but make
up 54.7 percent of the state's unconventional wells and 88.8 percent of the
wells with cement and casing integrity issues.
The authors conclude
that there is a 1.6- to 2.7-fold increase in the risk of well integrity problems
in unconventional wells versus conventional well types. The study predicts that
in the Northeast counties of Pennsylvania, the cumulative hazard of well casing
or cement failure will exceed 40 percent over the next 25 years. Keeping in mind that cement and
casing integrity usually declines as a well ages, their estimates may not be
far from wrong. Given that over a 100 year period, methane is 21 times as potent as a greenhouse gas when compared to carbon dioxide, the impact of well integrity issues in
unconventional wells across the United States and around the world could be
very significant in the coming years.