View from a booth: Well, what's this? Another after-hours newsdump (last week it was the 3rd largest bank failure in history, Indymac), and this time, it's Phil Gramm trying to skulk away from weekday 24/7 news cycles. I thought that Mr. McCain had tossed Mr. Gramm under the "Straight Talk Express" bus. I guess he really did lay between the tires, because he went back to work for the McCain campaign. Frankly, I am a bit confused about the message here: they rehired him after throwing him under the bus, or this is a resignation from a job he did not hold. Personally, I am sad to see him go. It was fun to see the Obama campaign and others hit that pinata. I'm sorry, but the things Gramm said recently and what he has said before require this. Now, it will be interesting to see whether or not Mr. McCain will likewise jettison the economic package that he, Gramm, wrote and who, it could be argued, was the singular face of the present economic difficulties. Not to mention the odious actions he took to protect UBS and Enron while he was a Senator. By the way, Gramm's former employer, UBS in Zurich, has passed a memorandum around forbidding its US Bankers from offering Swiss banking to its American customers. TSeems they're in a bit of a bind legally at this point because of the DOJ investigation.
Randy Shiner
NEW YORK (AP) - Phil Gramm, a top adviser to presidential candidate John McCain, is resigning from the role as campaign co-chairman after his comments that the United States had become a "nation of whiners" who constantly complain about the state of the economy.
The former U.S. senator from Texas and past presidential candidate made the remarks earlier this month. McCain immediately distanced himself from the comments, but they have been criticized constantly as McCain tries to show he can help steer the country past its current financial troubles.
Gramm had also suggested that the country was facing a "mental recession" instead of real economic problems. Gramm said in a statement late Friday that he is stepping down as a co-chair of the campaign to "end this distraction."
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Showing posts with label Phil Gramm. Show all posts
Showing posts with label Phil Gramm. Show all posts
15 July 2008
Yes I whine, I’m angry and I got my stimulus stipend but I am not buying a gun
View from the booth:This is from "puddydonne" - I wish I had the ability to write this stuff:
Yes I whine, I’m angry and I got my stimulus stipend but I am not buying a gun.
Sunday Meet the Press just misses the mark. I had time to think about Tim Russert and then my thoughts went to Joseph Patrick Dwyer. Monday, as I fantasized about an impeachment hearing with the dirty dozen all in attendance, the postal service delivered my skimpulus payment. Six hundred Federal Reserve notes. A FIAT FORGERY FOR TENDER. HUSH MONEY!
After checking it for Anthrax, I put it with a few other checks I would be depositing and continued to seethe silently over the state of affairs in my mind. It occurred to me to send $50 and sympathy card each of the dirty dozen as a contribution to their legal defense fund. Maybe I will hold it for 364 days and deposit it. I could update my wardrobe with impeachment hats and t-shirts but I already have enough that are well worn and comfortable as you know I have been promoting impeachment since 2003. How time flies when you are totally consumed with anger.
Getting to reality I would normally take a bribe like this and give to my charities. I was active with Darfur, Feed the Children and some other International Relief Orgs, but a colleague referred me to charitywatch and I was so depressed with what I saw I scratched them all off the list. I must find a new charity. Some ideas have come to mind.
The Nancy Pelosi SPINE RESEARCH Fund
The Karl Rove Soul TRANSPLANT Fund
CONSTITUTIONITIS - The search for a cure
McCain Brain Institute - The search for intelligent life
Wallstreet Make a Wish Hedge Fund
FEMA - For Ethical Misappropriation of Assets
CHENEY ARTIFICIAL HEART INSTITUTE
THE ROTUNDA BLUNDAH FUND - “Send a kid to Congress to learn self defense”
The MEDIA-MAGIC Foundation - Feeding the world by not reporting the starving and dead.
THE HENRY KISSINGER WAR CRIMINAL Rest Home
THE CONDOLEEZA RICE TRUST FUND for WAYWARD WOMEN
THE SIERRA FUND - “Green by Eugenics”
THE POTOMAC FUND - Better Living through K Street
UNITED WAR WAY - A Joseph Lieberman Endowment
Today I am angry. Tomorrow I will whine and Wednesday I will deposit my Skimpulus check and do more research. Good day.
11 July 2008
Raging Bull - A Nation of Whiners?
No, I am not referring to Jake LaMotta's fights with Sugar Ray Robinson or Marcel Cerdan. I am referring to the load of raging bull coming out of the mouths of those who would pretend to the office of the Presidency of the United States.
Reports and video that I have seen of former Senator and UBS (presently under investigation for helping rich people stash money away in Zurich) lobbyist Phil Gramm have come out in which he says that the U.S. is a nation of "whiners". In about five seconds, the economic adviser to John McCain was, to use present day political parlance, thrown under the bus. But did Gramm lay down between the tires of the "Straight Talk Express" while it was passing over him?
Phil Gramm uttered the same thing as John McCain did when he, McCain, admitted that the idea of a "gas tax holiday" was merely a gimmick designed to quench the thirst of Americans for gas, whose price per gallon and pump pain is also completely a figment of everyone's imagination - a "mental thing". According to Mr. McCain, anyway. It almost makes sense to cut the price of oil by .18 cents in order to allow more money to go to countries whose rulers fund terrorism designed to destroy our way of life. Our thirst for oil is nothing less than suicidal or at best self-defeating.
This is the same Phil Gramm whose long stint in the Senate included assisting companies like Enron, whose energy traders caused rolling blackouts across California several years ago and who helped to pass the "Enron loophole" to make energy futures exempt from scrutiny by the CFTC (Commodity Futures Trading Corporation) which has today made oil in addition to a commodity but also a financial instrument and which has added dollars to the cost of a gallon of gas, regardless of the fact that the OPEC cartel has held down production of oil in order to keep prices high in light of negatively inelastic demand. The rest of the world wants to live like Americans circa 1985. And the more they are successful, the more energy they are using (not to mention the impact on the environment - Dickensian China?). It is the road to global ruin.
What does it say about a candidate for President when his chief economic advisor says that the recession we are in is all in our collective heads? Who exactly is out of touch with reality here? Driven solely by the bottom line of quarterly earnings reports to help with market analysts' expectations and recommendations, Mr. Gramm and Mr. McCain are the ones who are really out of touch with ordinary Americans. Mr. Gramm and Mr. McCain are apparently only in touch with the corporations that, whether we like to admit it or not, run this country.
Are they not reading about mass layoffs all over the world? Siemens of Germany - and Germans do not, as a rule, get excited about things -- is laying off 16,500 workers worldwide. Do Mr. McCain and Mr. Gramm think that difficult global economic circumstances are in the figments of the imaginations of the directors of Siemens? That Siemens is whining, too?
It's lovely that Mrs. McCain donates the use of the company plane (or whatever the arrangement is) to the McCain campaign so that Mr. McCain does not have to unduly burden himself with ordinary commercial air travel. He does not have to worry about airlines which are going broke by the minute because of the price of jet fuel. He does not have to worry about shelling out money to check a bag. And it certainly doesn't concern his wife to have to fill up the brauhaus' company Cessna Citation Excel. It's all deductible, though it amounts to a subsidy for the McCain campaign, at the very least. http://www.nytimes.com/2008/04/27/us/politics/27plane.html
Perhaps Mr. McCain would like to stop for a second and consider that in 1972, the fuel budget for the Department of Defense was 1.2% of the total defense budget. According to figures I heard from Dr. Robert Zubrin, the fuel budget for the Department of Defense in 2007 was 52.4% of the entire defense budget. By 2010, based on current trends, the fuel budget for the Defense Department will be over 100%. That means no money for guns. No money for planes. No money for replacement parts. No money for training new troops or retention of current ones. This is not in somoneone's imagination. These are real numbers. The notion that this country's, nay, the world's economic woes (outside, of course, India, China, and the rest of the usual list of suspects)is the result of some mental deficiency on the part of the American public is an insult to our collective intelligence. Those in power would have those out of power believe that there is something wrong with the "have-nots". Otherwise, given the amazing system that people like Mr. Gramm and Mr. McCain and like thinkers have built, how could there possibly be any have-nots whatsoever? According to these people, the system is fine, so there must, ab initio be something wrong with us.
The problem is not that America is a nation of whiners. On the contrary, whining is not part of the Protestant work-ethic on which this country was founded. The problem is that people did not whine loud enough before the sky began to fall.
George H. W. Bush, in the 1980 Republican Primaries, called Reaganomics "voodoo economics". He was absolutely right. The notion that if you give the wealthy loads of tax breaks that this will spur investment whose benefits will "trickle down" to the rest of society has proved to be exactly the fiction that Bush pére warned against. The results of that fiction, however, are painfully very real to the vast majority of Americans today.
What we are facing right now is the culmination and collapse of voodoo economic theology. The rich have become insanely rich, and the middle class - you remember - the ones who worked on assembly lines in Flint who could afford to buy a house and send their children to well-funded state universities - has been systematically destroyed, with people today just trying to keep the electricity from being turned off. The middle class has been redefined, wiped out of existence permanently, unless things drastically change in this country.
The oil problem and larger energy problem in this country is nothing less than a national security issue based on the DOD numbers. In 1952, President Truman attempted to nationalize the steel industry to avert a proposed steelworkers' union strike that would have impacted the US' ability to fight the Korean War. The strike was averted, but the US Supreme Court ruled that such an action was an unconsitutional seizure of private property that was not otherwise allowed by statute.Youngstown Sheet & Tube v. Sawyer 343 U.S. 579; 72 S. Ct. 863; 96 L. Ed. 1153 (1952) In the end, the steel industry was forced to accept exactly what the union had offered four months before the scheduled national shutdown.
I seriously doubt that Mr. Bush will take any drastic actions to avoid further spectacular profits from going to his friends in the oil business, not to mention Mr. Cheney's own carnal ties in that field of endeavor. We can only hope that a President Obama will take a good long look at this situation and make the hard and politically unpopular (at least to the oil and gas lobby and our dear friends the Saudis) choices that need to be made.
In my view, these are worse circumstances than even Harry Truman faced over 50 years ago. The price of oil's impact on the US and world economies -- spiked by the confluence of rising global demand, the OPEC cartel's reduced or steady levels of production, the fall of the dollar used to buy all that oil, and last, the transmutation of oil from a commodity to a financial instrument - Morgan Stanley owns more oil in the Northeastern United States than any other company - has made the very existence of the independence of the US as a soveriegn nation a questionable proposition unless some radical measures are taken to wrest our independence away from oil and the people who control its flow into this country.
The national priority right now needs to be the total destruction of OPEC. The "war on terror" begins there. And I am talking about a war footing in order to do so. For if we do not, and things are allowed to continue ad infinitum as they are now, there will be nothing left of what was once the most powerful nation on earth.
The benefits to the destruction of OPEC are manifold and almost too obvious for explanation. Regardless, it is a maxim that once the flow of money to Wahabbi institutions is cut off from the Western world, we will see, over time, a reduction in radicalism or at least a stemming of its tide. With the reduction in places that teach radicalism will be the marginalization of those insitutions that insist upon terror as a way to stay in power, such as Hamas and Hezbollah, not to mention all the other lesser-known but just as deadly terror groups waging Jihad against Westerners and non-Wahabbi Muslims. There are complicated questions that will still linger even if we were to throw off the bondage of OPEC. But those questions -- e.g., what to do about a resurgent Iran - pale in importance when compared to the idea that we have to have our independence back. Once we have our independence back, we will have our defense credibility and capability back and can then, with some level of reassurance, begin to again confidently assert our national interests globally so that when the US speaks, people will listen, not laugh in our national face.
So what are we to make of Mr. Gramm and his notion that the US is a nation of whiners? Given the gravity of the situation the world is in right now, I cannot see any reason not to whine. But we, as Americans, need to whine much, much louder. I understand now, in the harsh light of national tragedy, how people in the past have called for revolution. Where is Thomas Paine when you need him?*
Randy Shiner
*Right here: http://www.ushistory.org/Paine/commonsense/index.htm
23 June 2008
Phil Gramm Creator and Protector of "The Enron Loophole"
Editor's Note:
On Wednesday evening, Keith Olbermann, the host of MSNBC's "Countdown," reported the findings of a "Countdown investigation" into the "Enron Loophole," a policy that left some commodities trading unregulated. The "loophole" was created by McCain adviser and former Texas Senator Phil Gramm, who had close ties to Enron, and whose wife, Wendy was a member of Enron's board of directors. Olbermann failed to provide me with proper credit for breaking the story more than a month earlier at the investigative news website Consortium News, which first published my report on May 19, 2008. The Public Record has decided to republish the story now that there is renewed interest in the issue and to let our readers know where and when the story first appeared.
Sen. John McCain says he opposes the $307 billion farm bill because it would dole out wasteful subsidies, but his chief economic adviser Phil Gramm also wants to stop its proposed regulation of energy futures trading, a market that was famously abused when Enron Corp. manipulated California’s electricity prices in 2001.
Clearing the way for that California price gouging, Gramm, as a powerful Texas senator in 2000, slipped an Enron-backed provision into the Commodities Futures Modernization Act that exempted from regulation energy trading on electronic platforms.
Then, over the next year, Enron – with Gramm’s wife Wendy serving on its board of directors – worked to create false electricity shortages in California, bilking consumers out of an estimated $40 billion.
Gramm left the Senate in 2002 but now has emerged as what Fortune magazine calls “McCain’s econ brain,” not only filling the Arizona senator’s acknowledged void on economic expertise (“I don’t know as much about the economy as I should”) but recognized as one of McCain’s closest friends in politics. The two men talk daily.
A McCain aide told me that the Arizona senator opposes the farm bill because it “rewards lobbyists” by granting rich farmers lucrative subsidies, although he would support “a reasonable level of assistance and risk management to farmers when they need America's help.”
But the aide, who spoke on condition of anonymity, acknowledged that the presumptive Republican presidential nominee also opposes the farm bill because Gramm advised McCain that he should resist its regulatory language on the energy futures market.
Democrats have dubbed that gap in energy futures regulation the “Enron loophole,” but it played a part, too, in the more recent attempt by the Amaranth Advisers hedge fund to corner the national gas market by shifting trades to the unregulated “dark markets” of the Intercontinental Exchange.
The “Enron loophole” also has become part of the debate over the soaring price of oil. Last week, a study sponsored by Sen. Carl Levin, D-Michigan, concluded that speculative futures markets were partly to blame for the surge in oil prices that have pushed gas at the pump toward $4 a gallon.
At a May 15 news conference, Levin said the skyrocketing price of oil is “not the result of supply and demand. Speculators have taken over most of the futures market."
However, the 673-page farm bill, containing the regulatory provisions on electronic energy trading, still faces obstacles amid overall concerns about the bill’s largesse to farmers at a time of rising food prices.
President George W. Bush has vowed to veto the bill, although it cleared the House and Senate by margins wide enough for an override, assuming Republicans don’t rally behind Bush and McCain, their current and future standard bearers.
Gramm and Enron
The battle over the “Enron loophole” also could draw attention to McCain’s dependence on Gramm as his chief economic adviser and Gramm’s key role in passing legislation that let Enron trade commodities on electronic platforms without federal oversight.
In 2000, with the Republicans in charge of Congress and Gramm chairing the Senate Banking Committee, the exemption on electronic trading was approved without a Senate hearing.
Internal Enron documents, which were released in 2002, revealed that the Houston-based company helped write the legislation, which was signed into law by President Bill Clinton in December 2000. Freed from regulatory interference, Enron then used manipulative trading practices to game the California electricity market and drive up electricity prices across the state.
While California consumers were getting fleeced, the new Bush administration shielded Enron from early accusations of market manipulation. President Bush personally joined the fight against imposing caps on the soaring price of electricity, buying additional time for Enron although the company’s house of cards collapsed anyway in fall 2001. [For details, see Consortiumnews.com’s “Bush’s Enron Lies.”]
In 2006, the “Enron loophole” allowed Amaranth Advisers hedge fund to shift its trades from the regulated New York Mercantile Exchange (NYMEX) to the unregulated Intercontinental Exchange (ICE) in Atlanta.
That let Amaranth corner the natural gas market, betting that futures prices would rise. The hedge fund lost about $6 billion and imploded as natural gas prices fell to a two-year low in September 2006.
Last July, the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission charged that Amaranth manipulated prices paid in the physical natural gas markets. FERC has proposed $291 million in penalties and the forfeiture of “unjust profits.”
“Unregulated markets are known as ‘dark markets’ because there is very little oversight of the trades,” said Rep. Bart Stupak, D-Michigan, chairman of the subcommittee on Oversight and Investigations, during a hearing on energy speculation last December. By trading on the “dark” ICE market, traders can avoid the Commodity Futures Trading Commission’s rules which are in place to prevent price distortions or supply squeezes.
Stupak said trading volumes on ICE “have skyrocketed in the past three years and are now as large or even larger in some months, than the volumes traded on the regulated futures market.”
The lack of oversight “makes it difficult for regulators to detect excessively large positions which could lead to price manipulation,” Stupak said.
Advising McCain
Gramm, who is now a vice chairman of financial services company UBS, began advising McCain in 2005 when the Arizona senator indicated he planned to run for President.
Since then, McCain has adopted much of Gramm’s anti-tax, anti-regulatory agenda. Most strikingly, McCain shifted to support Bush’s tax cuts, which McCain had voted against in 2001 and 2003. He now vows that, if elected President, he would make them permanent.
Yet Gramm’s influence over McCain’s economic agenda – and the checkered political-business history of Gramm and his wife Wendy – have largely escaped media scrutiny.
Gramm received more than $34,000 in campaign contributions from Enron and served as one of the company’s key legislative allies in Washington, including his help in 2000 removing federal oversight from energy trades on electronic platforms.
At the height of the Enron scandal in January 2002, Gramm’s press secretary Larry Neal told The New York Times that Gramm did not “recall a conversation” he apparently had with Enron’s chairman Ken Lay in 2000 to discuss that Enron legislative priority.
An internal Enron e-mail dated Aug. 10, 2000, under the subject “CFTC Reauthorization” – sent by Enron’s top lobbyist Richard Shapiro to Steve Kean, Enron’s executive vice president – said the company needed to get Lay on the phone with Gramm so the bill could be passed. “The bill is not moving quickly in the Senate due to Senator Phil Gramm's desire to see significant changes made to the legislation (not directly related to our energy language),” Shapiro said.
“Last week at the [2000] Republican Convention, I asked the Senator about the bill and he said they were working on it, but much needs to be changed for his support. More telling perhaps, were Wendy Gramm's comments that she would rather the current bill die if a better bill can be passed next year.
“What this means is that we must, at the least, remove Senator Gramm's opposition to the bill to move the process and more importantly seek to gain his support of the legislation.”
Shapiro added: “However, with less than 20 or so legislative days left, we need Senator Gramm to engage.
“A call from Ken Lay in the next two weeks to Senator Gramm could be an impetus for Gramm to move his staff to resolve the differences. Gramm needs to fully understand how helpful the bill is to Enron.
“Let me know your thoughts on this approach. I am prepared to assist in coordinating the call and drafting the talking points for a Ken Lay/Sen. Gramm call.” Several other internal Enron e-mails briefed company staffers on the status of Gramm’s position and Enron’s lobbying of the senator. Gramm finally removed a “hold” on the bill in December 2000, reintroduced the bill under a different number, and forced a vote on it without floor debate.
It was then attached to an appropriations bill that was signed by President Clinton on Dec. 21, 2000.
California Crisis
Less than a month later, California began to experience rolling blackouts due to artificial electricity shortages which, according to documents later released by federal energy regulators, were the result of manipulative trading practices employed by Enron.
The California crisis centered on Enron’s energy trades through a new platform called EnronOnline, which had been freed from regulatory oversight by the legislation pushed by Gramm. In April 2002, Gramm blocked an amendment by Sen. Dianne Feinstein, D-California, that would have closed the loophole that Gramm had helped open.
Gramm’s wife, Wendy, also had played a role in the anti-regulatory policies that contributed to the Enron scandal.
On Jan. 14, 1993, in the final days of the first Bush administration, Wendy Gramm – as chairwoman of the Commodity Futures Trading Commission – pushed through a key regulatory exemption removing energy derivatives contracts and interest-rate swaps from federal oversight.
That was a major financial boon to Enron, where Wendy Gramm landed five weeks later as a member of the board of directors. She also became a member of the audit committee that signed off on another one of Enron’s fraudulent schemes, partnerships that hid the company’s growing debt.
Even after Enron had collapsed in fall 2001, Sen. Gramm continued to resist congressional efforts at tightening up the rules.
In 2002, despite the accounting scandals at Enron, WorldCom and other major companies, Sen. Gramm objected to the Sarbanes-Oxley corporate reform bill designed to hold executives accountable for inaccuracies in financial reports.
Now, the Gramm family’s anti-regulatory agenda is returning via McCain’s presidential campaign.
As Fortune’s editor-at-large Shawn Tully wrote, “economic conservatives should take heart. McCain’s chief economic adviser – and perhaps his closest political friend – is the ultimate pure play in free market faith, former Texas Sen. Phil Gramm. … Most of [McCain’s] current positions are vintage Gramm indeed.” [Fortune, Feb. 19. 2008]
The first test of McCain’s commitment to Gramm’s anti-regulatory purity may come in the looming battle over the “Enron loophole” that the farm bill seeks to close.
Read more from this blogger
On Wednesday evening, Keith Olbermann, the host of MSNBC's "Countdown," reported the findings of a "Countdown investigation" into the "Enron Loophole," a policy that left some commodities trading unregulated. The "loophole" was created by McCain adviser and former Texas Senator Phil Gramm, who had close ties to Enron, and whose wife, Wendy was a member of Enron's board of directors. Olbermann failed to provide me with proper credit for breaking the story more than a month earlier at the investigative news website Consortium News, which first published my report on May 19, 2008. The Public Record has decided to republish the story now that there is renewed interest in the issue and to let our readers know where and when the story first appeared.
Sen. John McCain says he opposes the $307 billion farm bill because it would dole out wasteful subsidies, but his chief economic adviser Phil Gramm also wants to stop its proposed regulation of energy futures trading, a market that was famously abused when Enron Corp. manipulated California’s electricity prices in 2001.
Clearing the way for that California price gouging, Gramm, as a powerful Texas senator in 2000, slipped an Enron-backed provision into the Commodities Futures Modernization Act that exempted from regulation energy trading on electronic platforms.
Then, over the next year, Enron – with Gramm’s wife Wendy serving on its board of directors – worked to create false electricity shortages in California, bilking consumers out of an estimated $40 billion.
Gramm left the Senate in 2002 but now has emerged as what Fortune magazine calls “McCain’s econ brain,” not only filling the Arizona senator’s acknowledged void on economic expertise (“I don’t know as much about the economy as I should”) but recognized as one of McCain’s closest friends in politics. The two men talk daily.
A McCain aide told me that the Arizona senator opposes the farm bill because it “rewards lobbyists” by granting rich farmers lucrative subsidies, although he would support “a reasonable level of assistance and risk management to farmers when they need America's help.”
But the aide, who spoke on condition of anonymity, acknowledged that the presumptive Republican presidential nominee also opposes the farm bill because Gramm advised McCain that he should resist its regulatory language on the energy futures market.
Democrats have dubbed that gap in energy futures regulation the “Enron loophole,” but it played a part, too, in the more recent attempt by the Amaranth Advisers hedge fund to corner the national gas market by shifting trades to the unregulated “dark markets” of the Intercontinental Exchange.
The “Enron loophole” also has become part of the debate over the soaring price of oil. Last week, a study sponsored by Sen. Carl Levin, D-Michigan, concluded that speculative futures markets were partly to blame for the surge in oil prices that have pushed gas at the pump toward $4 a gallon.
At a May 15 news conference, Levin said the skyrocketing price of oil is “not the result of supply and demand. Speculators have taken over most of the futures market."
However, the 673-page farm bill, containing the regulatory provisions on electronic energy trading, still faces obstacles amid overall concerns about the bill’s largesse to farmers at a time of rising food prices.
President George W. Bush has vowed to veto the bill, although it cleared the House and Senate by margins wide enough for an override, assuming Republicans don’t rally behind Bush and McCain, their current and future standard bearers.
Gramm and Enron
The battle over the “Enron loophole” also could draw attention to McCain’s dependence on Gramm as his chief economic adviser and Gramm’s key role in passing legislation that let Enron trade commodities on electronic platforms without federal oversight.
In 2000, with the Republicans in charge of Congress and Gramm chairing the Senate Banking Committee, the exemption on electronic trading was approved without a Senate hearing.
Internal Enron documents, which were released in 2002, revealed that the Houston-based company helped write the legislation, which was signed into law by President Bill Clinton in December 2000. Freed from regulatory interference, Enron then used manipulative trading practices to game the California electricity market and drive up electricity prices across the state.
While California consumers were getting fleeced, the new Bush administration shielded Enron from early accusations of market manipulation. President Bush personally joined the fight against imposing caps on the soaring price of electricity, buying additional time for Enron although the company’s house of cards collapsed anyway in fall 2001. [For details, see Consortiumnews.com’s “Bush’s Enron Lies.”]
In 2006, the “Enron loophole” allowed Amaranth Advisers hedge fund to shift its trades from the regulated New York Mercantile Exchange (NYMEX) to the unregulated Intercontinental Exchange (ICE) in Atlanta.
That let Amaranth corner the natural gas market, betting that futures prices would rise. The hedge fund lost about $6 billion and imploded as natural gas prices fell to a two-year low in September 2006.
Last July, the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission charged that Amaranth manipulated prices paid in the physical natural gas markets. FERC has proposed $291 million in penalties and the forfeiture of “unjust profits.”
“Unregulated markets are known as ‘dark markets’ because there is very little oversight of the trades,” said Rep. Bart Stupak, D-Michigan, chairman of the subcommittee on Oversight and Investigations, during a hearing on energy speculation last December. By trading on the “dark” ICE market, traders can avoid the Commodity Futures Trading Commission’s rules which are in place to prevent price distortions or supply squeezes.
Stupak said trading volumes on ICE “have skyrocketed in the past three years and are now as large or even larger in some months, than the volumes traded on the regulated futures market.”
The lack of oversight “makes it difficult for regulators to detect excessively large positions which could lead to price manipulation,” Stupak said.
Advising McCain
Gramm, who is now a vice chairman of financial services company UBS, began advising McCain in 2005 when the Arizona senator indicated he planned to run for President.
Since then, McCain has adopted much of Gramm’s anti-tax, anti-regulatory agenda. Most strikingly, McCain shifted to support Bush’s tax cuts, which McCain had voted against in 2001 and 2003. He now vows that, if elected President, he would make them permanent.
Yet Gramm’s influence over McCain’s economic agenda – and the checkered political-business history of Gramm and his wife Wendy – have largely escaped media scrutiny.
Gramm received more than $34,000 in campaign contributions from Enron and served as one of the company’s key legislative allies in Washington, including his help in 2000 removing federal oversight from energy trades on electronic platforms.
At the height of the Enron scandal in January 2002, Gramm’s press secretary Larry Neal told The New York Times that Gramm did not “recall a conversation” he apparently had with Enron’s chairman Ken Lay in 2000 to discuss that Enron legislative priority.
An internal Enron e-mail dated Aug. 10, 2000, under the subject “CFTC Reauthorization” – sent by Enron’s top lobbyist Richard Shapiro to Steve Kean, Enron’s executive vice president – said the company needed to get Lay on the phone with Gramm so the bill could be passed. “The bill is not moving quickly in the Senate due to Senator Phil Gramm's desire to see significant changes made to the legislation (not directly related to our energy language),” Shapiro said.
“Last week at the [2000] Republican Convention, I asked the Senator about the bill and he said they were working on it, but much needs to be changed for his support. More telling perhaps, were Wendy Gramm's comments that she would rather the current bill die if a better bill can be passed next year.
“What this means is that we must, at the least, remove Senator Gramm's opposition to the bill to move the process and more importantly seek to gain his support of the legislation.”
Shapiro added: “However, with less than 20 or so legislative days left, we need Senator Gramm to engage.
“A call from Ken Lay in the next two weeks to Senator Gramm could be an impetus for Gramm to move his staff to resolve the differences. Gramm needs to fully understand how helpful the bill is to Enron.
“Let me know your thoughts on this approach. I am prepared to assist in coordinating the call and drafting the talking points for a Ken Lay/Sen. Gramm call.” Several other internal Enron e-mails briefed company staffers on the status of Gramm’s position and Enron’s lobbying of the senator. Gramm finally removed a “hold” on the bill in December 2000, reintroduced the bill under a different number, and forced a vote on it without floor debate.
It was then attached to an appropriations bill that was signed by President Clinton on Dec. 21, 2000.
California Crisis
Less than a month later, California began to experience rolling blackouts due to artificial electricity shortages which, according to documents later released by federal energy regulators, were the result of manipulative trading practices employed by Enron.
The California crisis centered on Enron’s energy trades through a new platform called EnronOnline, which had been freed from regulatory oversight by the legislation pushed by Gramm. In April 2002, Gramm blocked an amendment by Sen. Dianne Feinstein, D-California, that would have closed the loophole that Gramm had helped open.
Gramm’s wife, Wendy, also had played a role in the anti-regulatory policies that contributed to the Enron scandal.
On Jan. 14, 1993, in the final days of the first Bush administration, Wendy Gramm – as chairwoman of the Commodity Futures Trading Commission – pushed through a key regulatory exemption removing energy derivatives contracts and interest-rate swaps from federal oversight.
That was a major financial boon to Enron, where Wendy Gramm landed five weeks later as a member of the board of directors. She also became a member of the audit committee that signed off on another one of Enron’s fraudulent schemes, partnerships that hid the company’s growing debt.
Even after Enron had collapsed in fall 2001, Sen. Gramm continued to resist congressional efforts at tightening up the rules.
In 2002, despite the accounting scandals at Enron, WorldCom and other major companies, Sen. Gramm objected to the Sarbanes-Oxley corporate reform bill designed to hold executives accountable for inaccuracies in financial reports.
Now, the Gramm family’s anti-regulatory agenda is returning via McCain’s presidential campaign.
As Fortune’s editor-at-large Shawn Tully wrote, “economic conservatives should take heart. McCain’s chief economic adviser – and perhaps his closest political friend – is the ultimate pure play in free market faith, former Texas Sen. Phil Gramm. … Most of [McCain’s] current positions are vintage Gramm indeed.” [Fortune, Feb. 19. 2008]
The first test of McCain’s commitment to Gramm’s anti-regulatory purity may come in the looming battle over the “Enron loophole” that the farm bill seeks to close.
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