Diesel Emissions Cheating, Regulation, and the Crony State

One of my favorite correspondents, also the proprietor of the Finem Respice blog, sent me a note today about my article the other day about cheating on diesel emissions regulations.   The note covers a lot of ground but is well worth reading to understand the crony-regulatory state.  They begin by quoting me (yes, as I repeat so often, I understand that "they" is not grammatically correct here but we don't have a gender-neutral third person pronoun and so I use "they" and "their" as substitutes, until the SJW's start making me use ze or whatever.)

"My thinking was that the Cat, Cummins, and VW cheating incidents all demonstrated that automakers had hit a wall on diesel emissions compliance -- the regulations had gone beyond what automakers could comply with and still provide consumers with an acceptable level of performance."

Exactly. More importantly, the regulators KNEW it. I was researching energy shorts and had a ton of discussions with former regulatory types in the U.S. I was stunned to discover that there was widespread acknowledgement on the regulatory side that many regulations were impossible to comply with and so "compliance trump cards" were built into the system.

For instance, in Illinois you get favorable treatment as a potential government contractor if you "comply" with all sorts of insane progressive policy strictures. "Woman or minority owned business" or "small business owner", as an example. Even a small advantage in the contracting process for (for example) the State of Illinois puts you over the edge. Competitors without (for instance) the Woman or Minority Owned Business certification would have to underbid a certified applicant by 10-15% (it's all a complex points system) to just break even. It got so bad so quickly that the regs were revised to permit a de minimis ownership (1%). Of course, several regulatory lawyers quickly made a business out of offering minority or women equity "owners" who would take 1% for a fee (just absorb how backwards it is to be paying a fee to have a 1% equity partner) with very restrictive shareholder agreements. Then it became obvious that you'd get points for the "women" and "minority" categories BOTH if you had a black woman as a proxy 1% "owner." There was one woman who was a 1% owner of 320 firms.

Some of my favorites include environmental building requirements tied to government contract approval. The LEED certification is such a joke. There are a ton of "real" categories, like motion detecting lights, solar / thermal filtering windows, CO2 neutral engineering. But if you can't get enough of that, you can also squeeze in with points for "environmental education". For instance, a display in the lobby discussing the three solar panels on the roof, or with a pretty diagram of the building's heat pump system. You can end up getting a platinum LEED certification and still have the highest energy consumption density in the city of Chicago, as it turns out.

U.S. automakers have been just as bad. There's been a fuel computer "test mode" for emissions testing in every GM car since... whenever. Also, often the makers have gotten away with "fleet standards" where the MPG / emissions criteria are spread across the "fleet." Guess how powerful / "efficient" the cars that get sent to Hertz or Avis are.

Like so many other things in the crony capitalist / crudely protectionist United States, (e.g. banking prosecutions) foreign firms will get crucified for industry-wide practices.

Gee, I wonder if state-ownership of GM has been a factor in sudden acceleration / emissions prosecutions?

BTW, I wrote about the silliness of LEED certification here, among other places, after my local Bank of America branch got LEED certified, scoring many of their points by putting EV-only spaces (without a charger) in the fron of the building.  In a different post, I made this comparison:

I am not religious but am fascinated by the comparisons at times between religion and environmentalism.  Here is the LEED process applied to religion:

  • 1 point:  Buy indulgence for $25
  • 1 point:  Say 10 Our Fathers
  • 1 point:  Light candle in church
  • 3 points:  Behave well all the time, act charitably, never lie, etc.

It takes 3 points to get to heaven.  Which path do you chose?

  • jdgalt

    You aren't allowed to take out insurance on something that you don't own, Not entirely true. It would be like taking out a life insurance policy on one of your employees. You can do it if you prove you have an insurable interest in the property. The lender does.

  • DFCtomm

    I don't have a good answer for that. It doesn't make sense to me either, but it's derivatives. They're designed to be puzzle boxes, so you'll need a financial expert to guide you.

  • CapitalistRoader

    Your argument is an appeal to a dubious authority? Thomas Lifson over at American Thinker describes that kind of thinking:

    Blue Team Progressivism is a church, offering you moral superiority and a path to spiritual enlightenment. As a church it's got a lot going for it. It runs religious programming on television, all day every day. Every modern primetime program is like a left-wing Andy Griffith show, reinforcing lessons of inclusion, tolerance, feminism, and anti-racism.
    ...
    Jon Stewart and John Oliver are basically TV preachers. Watching them gives the same sense of quiet superiority your grandma gets from watching The 700 Club. The messages are constantly reinforced, providing that lovely dopamine hit, like an angel's voice whispering, "You're right, you're better, you're winning."

  • Tk

    I think the difference regarding prosecution is proving criminal intent. Most of the money makers on wall street, they employ a lot of lawyers who review and sign off on deal, marketing etc. If that turns out to be illegal later, the money makers point to the lawyers, say "I thought this was all legit, those guys signed off" and you dont have mens rea. The auto folks, they lied directly to government officials, hiding the cheat devices. Pretty easy prosecution if you can prove they knew, which seems to be the case

  • Tara Steele

    I love the LEED scam. Similar to ISO and the old SCS Global scams. Went to a meeting once for BIFMA in Canada. BIFMA is an office furniture industry cabal (ok, so it isn't secret). This was around 15 years ago when 'sick building syndrome' was all the rage. They were tossing around standards of off gassing that were acceptable that we would all comply with. Of course there were only two places to pay for the testing. I asked what the decay curve was. Got some stunned looks. What is the decay curve for newly manufactured office furniture? Turns out it was like 27 days and they couldn't detect any off-gassing of formaldehyde, VOCs and whatever else was scary. I thought to myself, 'I have never seen an office install that was manufactured, transported, stored, installed and moved into in less than 27 days. This was just a scam to keep the smaller players locked out by regulation. Wrote an internal white paper to my boss about the crap sandwich and was then appointed as the director of our new green certified emission program. Smack my head.

  • Matthew Slyfield

    You are the one who isn't understanding.

    "Second, Iowa State is doing tons of research in distillers mash to try to make it palatable to animals."

    Sounds like they are trying to make wet distiller's grain usable as animal feed. Dried distiller's grain has been used as animal feed for decades.

    The first study done on using distiller's grains as cattle feed was done in 1907. http://www.progressivecattle.com/topics/feed-nutrition/5479-a-primer-on-distillers-grains-for-livestock

    "But the big issue is energy balance. Yes the distillers could.dry the
    grain leftovers, there is no technological reason they couldn't"

    You are missing the point, not only can they do it, they have been doing it for decades and were doing it decades before the fuel ethanol mandates ever existed.

    The energy balance issues with fuel ethanol aren't relevant to the impacts on animal feed prices.

    "Somehow I am guessing that there is enough difference between what you
    and I are saying that you are probably mixing up some other mash, with
    that created by fuel Ethan distillers."

    No, you are imagining that there is somehow a meaningful difference between distiller's grains from liquor distiller's ,which have been selling dried distiller's grain as animal feed for a very long time, and distiller's grains from fuel ethanol producers.

  • red speck

    I love when my assumptions, based on past behaviors, prove to be correct. Namely, that VW and others were being expected to do the impossible by un-scientific bureaucrats not to save the planet, but to punish less favored companies in the marketplace and enrich the federal coffers.

    Thing is, at the time VW was discovered to be thwarting the system, I saw them as heroes, not villains.

  • red speck

    Silicon Valley is a haven for environmentalists, but it also often sits in a blanket of smog, though there are very few diesel cars on the road.

  • red speck

    The improvements in engineering of crumple zones and airbags has little to do with arbitrary CAFE standards.

  • TruthisaPeskyThing

    Neither bankers nor other segments of society became more greedy in the early and mid 2000s. It was not a new breed of greed that cause the Financial Crisis. There were three main elements that led to the Financial Crisis, and all of the three have the fingerprints of government. First, the CRA as re-implemented by the Clinton Administration forced banks to lower standards for home mortgages. These relaxed standards and innovative products logically were made available to all customers. This CRA initiative continued under Bush even though his Administration tried several times to mitigate the worse aspects of federal housings policy -- many regard these as half half-hearted attempts, but they were shut down by cries of racism and bigotry from Democrats and the media. The second element was easy FED monetary policy which made enough money available for the housing bubble. The third was the belief that escalation in housing prices would continue. Without this belief, banks would have shut down their lending departments; yet the main cheerleader for continued home price increases was the government; remember
    Barney Frank's declaration -- it is racist to raise concern that home prices may not continue to increase. There were other minor (government) actions that spurred the crisis, but these three are the major builders of the crisis. Again, not new greed, but rather government actions.

  • jdgalt

    Indeed, if the CEO of a private company had said that (much less Frank's "Fannie and Freddie are sound!" speech), he would be sued for his eye teeth for defrauding the shareholders. This is why Congresscritters should be stripped of their legal immunity for what they say in floor debate, even though it would require constitutional change.

  • DFCtomm

    Without this belief, banks would have shut down their lending departments;

    You weren't doing too bad till you hit that, and then your proved you didn't know what the hell you were talking about. The banks were bundling their loans and selling them as securities. They got paid not in interest but on fees. The creation of the loan itself is where they made money. Whether housing values rose or fell had no effect upon that business, only the churn mattered.

    yet the main cheerleader for continued home price increases was the government; remember
    Barney Frank's declaration -- it is racist to raise concern that home prices may not continue to increase.

    You missed that one too. It's rumored that banking software was incapable of accepting a negative number for annual changes in home values. If true It wasn't just the government that was sniffing it's own farts, and I'm not sure why that's so hard for you guys to accept. The government played a role, but the banks most certainly did as well, since they were able to privatize massive profits, and socialize even larger losses.

  • DFCtomm

    no it's not an appeal to authority. I was simply advising you to figure out what the hell happened and quit embarrassing yourself with stupid youtube videos that are only applicable in the most general sense. That was just a site that had an excellent description of what actually happened, and a nice Easter egg, in the robosigning catastrophe. It's an interesting read and almost nobody knows about it, but as always suit yourself. You can figure out what's happening now or you can watch dead guys on youtube.

  • CapitalistRoader

    Here's something more specific. And I realize that leftists don't believe that anything happened before the year 2000 has any relevancy to today's reality so I picked a video by someone who's still alive. And black, in case you/re afflicted with have the fashionable dead white guys prejudice.

    https://www.youtube.com/watch?v=5GoAGuTIbVY

  • Bruce Zeuli

    I see the fact that nobody went to jail as the best evidence that bankers were acting in accordance with the wishes of government. Of course bankers want to make money hand over fist. But banks followed the directions of their betters and so received a tax payer (and savers) bail out. The cost to the public at large wasn't even on the radar. This to me does not absolve bankers in any way. But then I again I have always believed that when you lie down with dogs, you get up with fleas.

    As you said the penalties facing VW have little to do with public harm. But they have everything to do with government power. I suspect VW could have avoided most of these charges by falling on their sword, accepting fault (real or imagined). Their crime was to elevate good engineering and customer satisfaction over government power and that is unforgivable.

  • DFCtomm

    So if the government wishes you to commit a crime such as massive systemic fraud such as liar loans, then hey it's just dandy. I though you guys believed in personal responsibility.

  • DFCtomm

    During this whole conversation have I said anything to defend the government? You might want to ask yourself why you're so married to the concept that bankers can do no wrong, such as conspiracy to commit fraud regarding the systemic use of liar loans.

    There is an important concept you seem to be overlooking. Can the government compel you to commit a crime, and if they attempt it does that absolve you? I propose that they cannot. It's your personal responsibility, that's a concept you should be familiar with, not to accept that, even if it comes with a personal cost to you. If you're a bank then that would mean getting out of the home mortgage market.

  • DFCtomm

    This tangent has managed to wander back to the original topic. The government made regulation so onerous that the automakers, like the banks, were forced to break a law to meet the regulatory burden. Was it their person responsibility to remove themselves from the moral trap laid for them by the government? My position is that it was their responsibility, and if they choose to play the rigged game then don't cry when a SWAT team shows up at your door at 4 AM.

  • CapitalistRoader

    That works both ways, right? You say that automakers or mortgage writers should have done the honorable thing and avoided the regulatory moral trap by withdrawing from the market, thus ruining their careers. Then shouldn't government bureaucrats have done the same honorable thing by quitting their jobs instead of enforcing immoral regulations on the manufacturers and bankers?

  • jdgalt

    None of which mattered. Since about 1980, banks' main profit center has been outrageous NSF fees, combined with fraud to generate more of those fees. And as long as that remains true, banking is not an honorable business.

  • DFCtomm

    I never said honorable. It's not about honor necessarily. It's about knowing that you're dealing with an unpredictable,dangerous, beast that changes shape every 8 years or so. This administration may want you to break a few laws for them, but the next may convict you before the statue of limitations is up. If you choose to play that game then don't cry when a SWAT team breaks down your door.

  • CapitalistRoader

    No, you said "moral trap." And you lay the responsibility to abstain from "choosing to play the rigged game" on just one of the rigging parties. But of course there's always two parties involved in the rigging process, as Woodrow Wilson identified one hundred years ago:

    If the government is to tell big business men how to run their business, then don't you see that big business men have to get closer to the government even than they are now? Don't you see that they must capture the government, in order not to be restrained too much by it? Must capture the government? They have already captured it.
    Woodrow Wilson, 1913

    Politicians take campaign contributions to steer regulations in favor of the corporations making those campaign contributions. Quid pro quo. There are two immoral parties.

  • DFCtomm

    I get there are two immoral parties, but I can't tell you whether congress passing legislation that requires a business to commit fraud to meet the requirements of that legislation is illegal. I'm not sure the ordinary lawyer could either. However, SWAT teams will not be coming for Congress, at least not for that reason. We are suppose to police the politicians, so if you don't like how they behave then get the dumbass who lives beside you to get his nose out of ESPN and pay attention. Good luck with that.

  • CapitalistRoader

    The answer is to devolve power from the national level to the state level. That way if one state goes insane with regulations, people and entities are free to move to another, less onerous state. 50 laboratories of democracy and all that. Federalism:

    The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
    Tenth Amendment to the United State Constitution

    That amendment should have guarded against this, on a national scale:

    After having thus successively taken each member of the community in its powerful grasp and fashioned him at will, the supreme power then extends its arm over the whole community. It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd.
    ― Alexis de Tocqueville, Democracy in America (1835)

  • DFCtomm

    The only reversal is collapse, but everyone should have a dream.

  • CapitalistRoader
  • tfowler

    There were a lot of actual loans still own by the banks. Your right that many were sold off (often but not always in securitized bundles) but that just pushes the issue back one level without changing it. Instead of "if they didn't believe that home values would go up than the banks wouldn't have made the loans", because "if it wasn't for the belief that home prices would keep going up, you wouldn't have had the demand to support the market for the securitized/bundled loans and so the banks wouldn't have made them."

    Also government regulation also drove the demand for securitization of these loans. counting the bundles as a lower risk asset that would count for more against reserve requirements.

  • DFCtomm

    none of us are getting out of this alive, and that includes the United States.

  • Bruce Zeuli

    As I said "This to me does not absolve bankers in any way."
    Going along to get along is not a practice I support. I just recognize that there is sometimes a cost to do the right thing.

  • Mannie

    Having worked on LEED projects, I consider it nothing more than a form of Greenwashing and a points winning scam. You end up doing a lot of expensive construction that adds nothing to the environmental quality of the project, but you get a couple of points.