Money for Nothin'

Why are welfare queens sent to prison while eco-capitalists buy mansions?  It appears that the carbon credit trading exchange some eco-capitalists sold just a few months ago for $634.5M is now worthless.  According to the Financial Times:

The owner of the US’s only nationwide cap-and-trade market has signaled the death of the seven-year-old industry, saying companies were no longer interested in trading carbon emissions credits in the absence of government legislation.

Virtually nothing the eco-capitalists produce creates wealth for society, including their carbon exchanges.  They are not participating in free-market capitalism; it’s just parasitic political capitalism.  And since most of what they do is based on the AGW scam, one could argue that many of them are guilty of misrepresentation or outright fraud.

Meanwhile, the buyer at the other end of this transaction, Intercontinental Exchange, apparently lost a half-billion-dollar bet that the carbon-taxing Democrats would retain control of the House in the 2010 elections.  That’s fine; ICE is a profitable private sector company that took a calculated risk, and whose losses will be borne by its shareholders.  Because of pending Democratic legislation, that risk had potentially great rewards -- perhaps even “windfall profits” -- so it’s unlikely that shareholders now blame the company’s executives for malfeasance.

But taxpayers indirectly cover about a third of the shareholders’ losses.  Because ICE’s overall business is profitable, its losses on the climate exchange reduce its tax liability.  For instance, according to its most recent SEC filing, ICE expensed a total of $25M during the third quarter for costs associated with the Chicago Climate Exchange acquisition:

The increase in operating expenses was primarily attributable to costs associated with the acquisition of Climate Exchange plc, including $7 million of acquisition expenses and $5 million in severance charges. Operating expenses also include $5 million in amortization of intangibles and $8 million in ongoing operational expenses associated with Climate Exchange during the third quarter of 2010.

During the third quarter, ICE’s effective tax rate was 32 percent, so other US taxpayers will have to pick up about a third of that $25M cost -- over $8M -- because the acquisition reduced ICE’s tax liability by that amount.  Assuming it takes another quarter or two to shut down the exchange completely, its operating expenses probably will total about $20-25M.  Those charges are taken in the quarters incurred, and the remainder of the $635M write-off will get amortized over many more quarters.

Bottom line: Taxpayers will have to cover about a third of the total $655-660M bet that ICE lost on its Climate Exchange acquisition.  Can the leftists be happy about that?  After all, the added government revenue would have paid for a large portion of Nancy Pelosi’s taxpayer-funded private jet.