The Futures market is a very important market in our economy. The Futures Market allows for companies that deal in commodities to keep a relatively stable price for the commodity even with a high uncertainty in the market. The problem comes when those markets are not regulated and oversight is taken away. This leads to analyst and big business driving up prices on speculation at the expense of the consumers.
Follow the timeline
1980s
* Enron is Founded Omaha Nebraska. Enron under Ken Lay moves into the Energies futures market.
* President Bush creates an government organization called the Commodities Futures Trading Commission (CFTC). This organization essentially deregulates and removes government oversight from the Commodities trading industry.
* Wendy Gramm (the woman holding the Enron sign in her right hand), wife to former Senator Phil Gramm( Phil Gram is the Economic Advisor to the John McCain's campaign. But more on that later) , was named Chairwoman to the CFTC.
1992
* One week after Bush was defeated by Bill Clinton in the 1992 Presidential Election, Enron approached Wendy Gramm to ask her to lock in the no oversight and deregulation as official CFTC policy. So that Bill Clinton could not put a stop to the no oversight policy.
* With the help of Wendy Gramm, the CFTC approved the policy on Bill Clinton inauguration day.
* Wendy Gramm takes a part time post on the Board of Directors for Enron. Wendy Gramm earned over $900,000 over the next decade. (see picture above)
Mid 90's
* California Gov Peter Wilson began to deregulate the energy industry in California.
* Part of the deregulation called for Investor Owned Utilities (IOUs) such as Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric to sell off significant parts of their power generation to private unregulated companies such as Enron, AES, and Reliant
* Now the IOUs had to buy the energy, that they once made, from the private companies.
* The theory was that by deregulating the energy industry it would create more competition in the marker and push price of energy down.
2000-2001
* December 21, 2000 Bill Clinton signs into office The Commodities Futures Modernization Act. (which contains a provision that later came to be known as the Enron Loophole)
* Charlie Black, lobbyist and now top McCain Campaign advisor, was paid $140,000 by JP Morgan to lobby The Commodities Futures Modernization Act
* Former Texas Senator Phil Gramm, husband to former CFTC Charwoman and Enron board of Directors members Wendy Gramm and head economic advisor to the McCain campaign, was the one that slipped the Enron loophole into the bill.
* This Act, which Enron assisted in writing, allowed for entire online markets of energy commodities such as oil, propane, and natural gas to be traded on deregulated markets known as dark markets. dark markets are markets that are not regulated by the CFTC or any other Government oversight.
* In the summer of 2001 companies like Enron and Reliant created a fake energy shortage to drive up energy cost on the people of California.
* Enron and Reliant created rolling blackouts by shutting down power plants, to manipulate supply and demand, for what they called "maintenance".
* The plant shutdowns forced power plants to buy power from "spot markets", where private owned energy companies could charge astronomical rates.
* Thou the prices are semi-regulated and tied to the price of natural gas, the supply of natural gas was also controlled by companies such Reliant and Enron (the same companies manipulating energy supply).
* By manipulating the supply of natural gas they were able to push the prices even higher. Fleecing the residents of California out of an estimated $40 billion dollars.
2002 -2003
* Senator Gramm blocked a amendment by Senator Feinstein that would close the Enron loophole in April 2002.
* In a losing effort, the Senate votes to close the Enron loophole. John McCain is one of the Senators that votes to close the Enron loophole.
* Phil Gramm becomes Vice-Chairman for UBS in 2002 (see picture to the right of Wendy Gramm)
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* UBS buys Enron's energy trading division in 2002
2004
* British Petroleum (BP) paid $303 million to settle charges that it cornered the propane market. This raised the heating costs for over 7 million homes.
2006
* Amaranth Advisers, a hedge fund, uses the Enron Loophole to shift trading natural gas from the regulated Mercantile Exchange market to the unregulated Intercontinental Exchange market.
* Amaranth used the dark markets to try and corner the market. They lost about $6 billion dollars as natural gas prices fell to a 2 year low.
* A Senate republican report acknowledged the effect that speculators have had on the energy market. Sighting that direct blame lies in the Enron Loophole
* John Savercool (picture next to Phil Gramm), Phil Gramm assistant and UBS lobbyist , lobbied congress against the closing of the Energy Loophole Act.
2007
* CFTC in conjunction with Federal Energy Regulatory Commission (FERC) brought charges against Amaranth for trying to manipulate prices in the Natural Gas market. The FERC leveled fines totaling $291million and Amaranth had to forfeit their "unjust profits".
* Wayne L. Berman( picture next to John Savercool) , Chevron lobbyist and John McCain Finance Co-Chairman for his 2008 Presidential campaign, lobbied for Chevron and the Petroleum Institute against the Price Gouging Prevention Act.
2008
* In May 2008 John McCain voted against the signing of a Farm Bill that had in it a prevision to close the Enron loophole. Sighting wasteful subsidies as the reason for his opposition. According to The Public Record, a McCain aid said that the Senator also opposed the bill because "Gramm advised McCain that he should resist its regulatory language on the energy futures market".
* June 2008, the Senate Commerce committee heard testimony about the Enron Loophole's affect on the price of oil.
* Michael Greenberger, Former CFTC Chairman, said that closing the Enron Loophole " over night that would bring down the price of crud oil. To at least get a 25% drop in the price of oil and a corresponding drop in the cost of gasoline". He goes on to say that some estimate even a 50% drop in the price of oil and a subsequent drop in gasoline.
* John McCain went from being opposed to the Enron loophole to take a neutral position on the subject.
* Wayne L. Berman was hired by the New York Mercantile Exchange to lobby against the Close the Enron Loophole act.
* Senator Klobuchar sends a letter to the CFTC to close a loophole that will allow us speculators to channel unregulated trades through London and Dubai. John McCain refused to sign the letter
More information:
http://www.pubrecord.org/index.php?opti ... &Itemid=16 http://www.youtube.com/watch?v=XaDelhvtQ98 http://en.wikipedia.org/wiki/California ... ity_crisis http://www.stroock.com/SiteFiles/Pub134.pdf
