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America's Media Mayhem

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The roiling blogosphere, blowhards on Fox and news that stalks everyone anywhere, now appears to be driving politics and enhancing corporate risk.

But some corporations can handle it and some find it has spun out of control. Goldman Sachs and BP are live examples of the new media chess game.

Goldman has been pilloried since 2008 for not only surviving but thriving after the meltdown, thanks to billions in taxpayer bailouts of its operations and customers like AIG, who, otherwise, would have stuck it with billions in bad debts regarding credit default swaps.

In 2010, Goldman was charged by the Securities and Exchange Commission with shenanigans. Its big shots were dragged through the mud on TV by the Senate and deserved to be.

This virtual tar-and-feathering was excessive because it was helpful to reformers who were otherwise having trouble getting new financial reforms out of Congress so that Goldman and others wouldn't have to be bailed out again, like maybe, in 2015.

It worked. On July 15, the most stringent banking reforms since the Depression passed, helped by the Goldman scandal.

That's why it should have not surprised that within hours, on July 15, Goldman and the SEC announced a settlement. The investment bank would not have to admit guilt but would pay $550 million and change some behavior.

Critics fumed that the fine was equivalent to only two weeks' profits for Goldman in 2009.
But not so fast, said Goldman. Just a couple of workdays later, on July 20, Goldman announced that 2Q profits plummeted by 83%.

(Restated, Goldman's fine would now be equivalent to seven weeks' profits this year on an annualized basis.)

Prediction? Goldman's ok now. Other probes into its affairs will go nowhere. It will be business as usual: profits as big as African GDPs and more risky business.

BP, on the other hand, is a study in mistakes and bad luck.

Its biggest problem is that the misdeed was telegenic, with dead birds and blackened beaches, so CNN's Anderson Cooper has turned into the tee-shirted anchor of the "BP Blowout" Channel nightly. Ratings have deep-sixed which only drives viewers into the arms of Fox and the bloghards.

Proud american cold warriors all, they are accusing BP of pressuring the British government into releasing a Lockerbie terrorist in return for oil concessions in Libya. Their politicians, facing re-election this fall, are doing the TV rounds demanding an investigation be initiated into BP's profiteering from an Evil Empire.

Pressure was so great that Britain's new Prime Minister had to deflect this in the Oval Office by saying there would be no investigation and that, by the way, the terrorist was released by the Scottish Parliament not Britain's.

Prediction? Nobody down there knows Scotland has its own Parliament or cares. BP will get a new CEO, its stock won't recover even if the cap holds and Libya or China may end up owning it.