Yesterday June 16, 2010, the Obama administration announced that BP had agreed to its request for a $20 billion escrow account to be setup to aid victims of the oil spill.  The fund that’s set up will be run by Kenneth Feinberg the lawyer and mediator who ran the fund for victims of September 11.

This is welcome news considering the fact that there has been significant uncertainty about the future of BP.  Its stock market value has been cut in half since the initial onset of the spill, and it was rumored earlier this week that a certain bank had warned its employees not to issue debt contracts to BP that extend beyond a year.   Then you take into consideration that FEMA the federal government’s disaster recovery arm has yet to recover from the barrage of floods, hurricanes, tornadoes, and fires that have depleted its funds over the past five years.

It goes without saying that the federal government needs BP just about as much as BP needs the government right now.  The agreement by BP to the demands of the Obama administration should not come as a surprise to anyone paying close attention to what is at stake.  However, by being readily agreeable to the President’s request, BP effectively killed multiple birds with one stone.  In order for BP to survive they were already going to have to pay for the damages from this tragedy.  So by acquiescing to the  the administration’s demand, BP was able to cast itself as compassionate, while at the same time enabling the administration to show some stealth and build some political capital in the process.

Despite the staggering sum being set aside, some have speculated this amount would be insufficient to cover the long-term costs this disaster is bound to run. To offer some comparison, BP had gross earnings of $246 billion in 2009 with net profits being $17 billion.  So in actuality, BP is putting up all of last years profit and some change as a show of goodwill to the administration and the American public.  It is safe to conclude that we need BP to be alive and well in order to not only preserve 23,000 jobs, but also to ensure that our nation recovers from this catastrophe.