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I think you will enjoy this new article from Virtual Citizens titled "McCain still supports corrupt laws, which benefit Phil Gramm, McCain's financial advisor!".

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 (former Republican Senator from Texas, and devotee of neo-liberal economics) also wants to stop regulation of energy futures trading.  Recall the future's market [sic] was famously abused by Enron when it manipulated California’s electricity prices in 2001.  Gramm cleared the way for that price gouging (which also opened the door for a man named Arnold Schwarzenegger to be (s)elected governor), in 2000 by slipping an Enron-backed provision into the Commodities Futures Modernization Act that exempted electronic trades from regulation.  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 tax-payers out of about $40 billion.  (Editor's note:  that was just on the front end.  Schwarzenegger then got the California legislature to issue bonds to cover that bill, meaning that tax-payers were hit again).

Gramm left the Senate in 2002, but now has emerged as what Fortune magazine calls “McCain’s econ brain,” not only filling McCain's acknowledged void on economic expertise (“I don’t know as much about the economy as I should”) but as one of McCain’s closest friends in politics. 

The two men talk daily.  One McCain aide told me that McCain opposes the farm bill because it “rewards lobbyists” by granting rich farmers lucrative subsidies, yet he would support “a reasonable level of assistance and risk management to farmers when they need America's help.” But the aide acknowledged that the presumptive Republican presidential nominee also opposes the farm bill because Gramm advised McCain that he should resist any efforts to regulate the energy futures market.

Democrats have dubbed that gap in energy futures regulation the “Enron loophole,” but the law played part in the 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.  This month (May 2008), a study sponsored by Sen. Carl Levin (D-MI), 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 news conference on 15 May 2008, Levin said that 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.  Bush has vowed to veto the bill, and Republicans are unlikely to override him.

Gramm and Enron

The battle over the “Enron loophole” also could draw attention to McCain’s dependence on Gramm as a chief economic adviser given Gramm’s role in passing legislation that let Enron rob Wall Street investors and tax-payers alike.  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 hearing!  Internal Enron documents, released in 2002, reveal that the Bush benefactors wrote the legislation, signed by Clinton in December 2000.  (Editor's note:  so much for the idea of two parties, with one representing average Americans).  Freed from regulatory interference, Enron then used fraud to game the California electricity market and drive up electricity prices across the state.

While Californians were getting fleeced, the new Bush administration shielded Enron from accusations of criminal action.  Bush personally joined the fight against imposing caps on the soaring price of electricity, buying additional time for Enron though the company’s house of cards collapsed by the fall of 2001.  (See Consortiumnews.com’s “Bush’s Enron Lies.”)

In 2006, the “Enron loophole” allowed Amaranth Advisers hedge fund to shift 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.  Though the hedge fund lost about $6 billion as natural gas prices fell to a two-year low in September 2006, in July 2007, the Federal Energy Regulatory Commission (FERC) and the Commodity Futures Trading Commission (CFTC) charged that Amaranth manipulated prices.  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-MI), chairman of the subcommittee on Oversight and Investigations, during a hearing on energy speculation in December 2007.  By trading on the “dark” ICE market, traders can avoid rules of the CFTC 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.  McCain now vows that, if elected President, he would make the subsidies to the super-rich permanent. 

Despite the obvious changes in McCain's positions, and the overt influence of Phil and Wendy Gramm, the MSM has avoided scrutinizing McCain. Gramm received more than $34,000 in campaign contributions from Enron and served as one of the company’s key legislative allies, including the act in 2000 of 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 had with Enron chair, Ken Lay, in 2000 to discuss that Enron legislative priority.

An internal Enron e-mail dated Aug. 10, 2000, with the heading “CFTC Reauthorization” – sent by Enron’s top lobbyist Richard Shapiro to Steve Kean, Enron’s executive vice president – said that the company needed to get Lay on the phone with Gramm so the bill could be passed.  Notable was the following:

“The bill is not moving quickly in the Senate due to Senator Phil Gramm's desire to see significant changes made to the legislation.  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 ... 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.”  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 after Clinton signed the energy bill, California began to experience rolling blackouts due to artificial electricity shortages which, according federal regulators, were the result of manipulative trading practices employed by Enron.  The fraudulent California crisis centered on Enron’s energy trades through a new platform called EnronOnline.  In his last days in the Senate, in April 2002, Gramm blocked an amendment by Sen. Dianne Feinstein (D-CA), that would have closed the loophole that Gramm opened.  

Gramm’s wife, Wendy, also had played a role in the anti-regulatory policies that contributed to the Enron scandal. On 14 January 1993, in the final days of the first Bush administration, Wendy Gramm – the chair of the Commodity Futures Trading Commission (Editor's note:  we call it plutocracy) – removed energy derivatives contracts and interest-rate swaps from federal oversight.  That rule was a financial boon to Enron, where Wendy Gramm was given a job only five weeks later, as a member of the board of directors.  (Editor's note:  she obviously was the best Senator's wife for the job).  As a member of the Enron board, she also served as a member of the audit committee that signed off on another fraudulent scheme, as Enron created fake partnerships that hid the company’s debt.

Even after Enron had collapsed in fall 2001, Phil Gramm continued to resist congressional efforts to tighten regulatory rules.  In 2002, despite the accounting scandals at Enron, WorldCom and others, with his wife in the cat-bird seat at Enron, Gramm objected to the Sarbanes-Oxley bill which purportedly holds executives liable 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, Phil Gramm. … Most of [McCain’s] current positions are vintage Gramm indeed.”  (See Fortune, 19 February 2008) The first test of McCain’s commitment to Gramm’s anti-regulatory purity might come in the looming battle over the “Enron loophole” that the farm bill seeks to close.  What will the MSM say if anything?  They will probably explain how the millionaire, who is helping other millionaires, at the expense of the public good, is a maverick.

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