The New Republic, Soapbox - August 27, 2020

Hurricane Laura—one of the most powerful storms ever to hit the United States—made landfall early this morning, just a few hours after the end of the Republican National Convention’s third night. Those with homes in Laura’s path, some 1.5 million of whom were placed under evacuation orders along the Texas and Louisiana coasts, face all kinds of questions in the days and months to come: When will it be safe to return home? Will I have a job when I get there? Can we afford to rebuild? Will damage to the region’s petrochemical refineries fill the water with chemicals?

Those safe in mid-Atlantic townhouses or seafront mansions may have a different question: Where’s the money to be made? For as the last few weeks have proved, there are any number of ways to get rich in a disaster.

Insurance Journal reported last week that the Baupost Group—a hedge fund headed by the billionaire so-called “Oracle of Boston” Seth Klarman—collected $3 billion for betting that PG&E, Northern California’s embattled electric utility, would have to pay out insurance claims from California’s deadly wildfires. (Earlier this summer, PG&E pleaded guilty to 84 counts of manslaughter for its role sparking 2018’s Camp Fire.) Klarman is what’s known as a distressed asset investor. For roughly 35 cents on the dollar, he bought $6.8 billion worth of an obscure financial product known as subrogation claims, in which an insurance company sells off the right to sue to recoup the cost of damages borne by its policyholders. It’s a financial tool, basically, to help insurance companies move the liability for large insurance claims off their balance sheets.

Baupost Group will be getting roughly double what it paid for these claims back due to the terms of PG&E’s bankruptcy settlement. As an equity investor in PG&E, Klarman’s company will take a hit on the other side of the ledger but is likely to net a cool $1 billion from one of California’s deadliest wildfire seasons.

... Finance is functionally ambivalent about death. Companies are obligated to return profits to their shareholders, and the presence or absence of human suffering is frequently irrelevant to that pursuit unless the intensity or scale of it starts to really turn shareholders’ stomachs or spark boycotts that endanger the rate of return—both pretty rare. Insurance companies defrauded homeowners to the tune of $240 million in the aftermath of Hurricane Sandy while working as glorified contractors for the National Flood Insurance Program. Real estate magnates get a big cut, too. In the decade after Katrina, researchers Eric Joseph van Holm of Arizona State University and Christopher Wyczalkowski found, hurricane damage was positively correlated with a neighborhood’s likelihood of gentrifying: Gentrification was more likely in parts of the city that had been hit harder, since whole blocks could be razed or rebranded, the storm having cleared out many working-class Black and brown residents who can’t afford to come back. As Naomi Klein has documented, it was Mike Pence who convened a meeting at the corporate-funded Heritage Foundation in the wreckage of Hurricane Katrina, dreaming up a wish list that included everything from the wholesale privatization of the New Orleans school system to turning the entire area hit by the storm into a “flat-tax free-enterprise zone.” ...
Read full report at The New Republic, Soapbox