JOHN MCCAIN: ANTI-POPULIST, ANTI-GRASSROOTS, ANTI-COMMON PEOPLE, PRO-HYPER-GREEDY PHIL GRAMM

McCain Defends 'Enron Loophole'
Written by Jason Leopold
Friday, 23 May 2008

by Jason Leopold

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.
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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
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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.
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"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.
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...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.
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...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.
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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]
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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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