Bailing Out Environmental Subprime Lenders?

Gibe III dam site in Ethiopia

Last night, I got a phone call from Henry Paulson. The Treasury Secretary urged me to quickly send some cash to bail out the imprudent Wall Street banks. For our family, Paulson explained, the bill would be $7,000. If we wanted to pay up for all members of International Rivers in the US, the amount would be $1.2 million. Our contribution would allow paying the salary and bonus of Jamie Dimon, JP Morgan Chase's CEO, for one month, and give the bank some breathing space to offload their bad debt to the taxpayers.

I didn’t want to be the one who pulled the plug on the US banking system, and was just about to give Henry Paulson my credit card number. But then I took a closer look at the loans of the Wall Street banks I was going to subsidize. Hadn’t JP Morgan Chase just offered Ethiopia $400 million for the Gibe 3 Dam - a project which violated the country’s own environmental laws? Hadn’t the bank repeatedly financed the operations of the pulp producer Aracruz, one of the most egregious loggers in Latin America?

While the Treasury Secretary grew increasingly impatient, I realized that when it comes to the environment, Wall Street banks displayed the same lending practices that they used in the housing sector. Just as they speculated with subprime mortgages for home owners who could never pay up, they recklessly (to borrow Bruce Rich’s phrase) mortgaged the Earth. As the Global Footprint Network just reminded us, humanity by September 23 consumed all the resources the planet will produce this year and went into ecological deficit spending. The dams, coal mines and deforestation projects which JP Morgan Chase and other banks are funding draw down the planet’s capital even more quickly. And once we have depleted this capital, no other planet will bail us out.

The Wall Street banks have made themselves so indispensable to our economy that we may eventually have to bail them out. But as the free marketeers keep telling us, there is no such thing as a free lunch. While I put away my credit card, I told the Treasury Secretary that I would only bail out the Wall Street banks if they adopted strict environmental policies which prevent further environmental subprime loans that squander the planet’s capital. And I would only help subsidize the salaries of Wall Street executives if their compensation packages were tied to the environmental and social sustainability of their portfolio. So sorry Mr. Paulson, but no more free lunches on the back of the planet.

Note: An expanded version of this comment appeared on Reuters AltertNet on October 1, 2008 and in The News (Pakistan) on October 10, 2008. The Campagna per la Riforma della Banca Mondiale has translated this text into Italian.

Peter Bosshard is the policy director of International Rivers. His blog, Wet, Wild and Wonky, appears at www.internationalrivers.org/en/blog/peter-bosshard