After the 2008 Financial Crisis, the Economy Was Fracked Up

The New Yorker Radio Hour

WNYC Studios and The New Yorker

Politics, Arts, News, Wnyc, Books, David, Storytelling, Society & Culture, Yorker, New, Remnick

4.2 • 6.2K Ratings

🗓️ 13 November 2018

⏱️ 20 minutes

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Summary

The American Recovery and Reinvestment Act injected almost nine hundred billion dollars into the U.S. economy to help the nation recover from the 2008 financial crisis. Ninety billion dollars went to clean energy, with the intention of jump-starting a new “green economy” to replace aging fossil-fuel technologies. Instead, the bill may have done the opposite. Low interest rates, which made borrowing easier, encouraged a flood of financing for the young fracking industry, which used novel chemical techniques to extract gas and oil. Fracking boomed, and made the U.S. the leading producer of oil and gas by some estimates. The financial journalist Bethany McLean and the investor and hedge-fund manager Jim Chanos tell The New Yorker’s Eliza Griswold that something in the fracking math doesn’t add up. If interest rates rise, reducing the flow of cheap capital, they believe that the industry will collapse. Then, the former Treasury Secretary Hank Paulson tells Adam Davidson what went wrong in Obama’s policy. Subsidies for specific industries, like solar, can’t change the market significantly enough, Paulson says. In his view—one shared by a growing consensus of economists—we need to correctly assess the costs of carbon emissions to society, and charge those costs to the emissions’ producers: a carbon tax. Then, with a more level playing field, the market can pick the best source of energy.

Transcript

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0:00.0	From One World Trade Center in Manhattan, this is The New Yorker Radio Hour, a co-production of the New Yorker and WNYC Studios.
0:24.4	Welcome to The New Yorker Radio Hour.
0:25.3	I'm David Remner.
0:29.0	In some parts of the country right now, that sound,
0:34.0	hydraulic drills and compressors used in fracking is a constant presence.
0:39.9	In Texas, the Dakotas, Pennsylvania, and other places, too, fracking has given us an energy boom. It's made the U.S. into the world's leading producer of oil and gas by some estimates.
0:47.2	Fracking, of course, has been controversial. It creates a lot of methane, which is a greenhouse
0:51.4	gas. It's been blamed for poisoning water tables and other environmental consequences.
0:57.8	Eliza Griswold's been writing a lot on the fracking industry, and she's discovered that it's
1:02.3	controversial in other ways as well.
1:04.9	Here's Eliza.
1:06.8	I've been looking into fracking for seven years.
1:09.4	I've been in people's farms and in their
1:11.2	backyards, looking at the human costs of America's energy boom. One of the things about fracking
1:17.8	that has always been true is that for the companies, it's very expensive. The key ingredient in
1:23.5	fracking isn't so much chemicals as it is capital. It was an extraordinarily expensive proposition.
1:28.9	That's Bethany McLean.
1:30.4	She's a financial journalist who brought down Enron,
1:33.4	and she's written a new book, Saudi America.
1:36.6	One of Bethany's key insights is that fracking wouldn't have been possible
1:40.3	without the 2008 financial crisis.
1:43.3	What happened is that the Federal Reserve lowered interest rates dramatically, and that made
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