McCain’s Cronies: Handling Gramm’s Enron/UBS Baggage?
How exactly does John McCain answer the question of what he’s doing handling Phil Gramm’s Enron and UBS baggage in exchange for highly dubious economic advice? Is this what we could expect McCain to foist on the rest of the country — a man who helped run energy and banking policy in the ground while he and his family pocketed millions?
Is this the ethical distance from lobbyists McCain trumpted while using the UBS lobbyist Gramm for banking and economic policy crafting advice? Using a lobbyist and officer of a troubled bank to craft banking policy in which it has an interest while, at the same time, using him to stump for you on the campaign trail? Does the word "self-dealing" come to mind for you, too?
Do you recall that UBS Bank — the bank for which former Sen. Phil Gramm works as a vice president and lobbyied for until April 18, 2008, while simultaneously serving as a senior economic adviser to John McCain — bought out Enron’s energy mess? (H/T to reader Again for the reminder.) Did you know that Phil Gramm’s wife Wendy was a director at Enron — and was responsible for overseeing "audits," if I may be so bold as to even call them that — while there? Cozy.
But wait, there’s more:
While former US Senator Phil Gramm’s wife, Wendy Gramm was a member of Enron’s audit committee, and also serving on the company’s of the Board of Directors, UBS was a consultant for the State of California in 2002 to help fix the State’s energy crisis.
The Foundation for Taxpayer and Consumer Rights (FTCR) wanted Governor Gray Davis to fire UBS, saying the company had a conflict of interest since they represented both the State of California and Enron. Read Article
Senator Gramm defended Enron, and basically told California that the state’s energy problems were of their own making.
Shortly after, Enron went bankrupt, and Gramm resigned taking a job with UBS Warburg as a Vice President.
After Enron went bankrupt, UBS Warburg bought Enron’s energy trading operations. UBS PaineWebber which is a subsidiary of UBS Warburg, was in charge of Enron’s employee stock option program.
And even more:
In 2000 those terms were known only to a small circle of investment bankers and brokers who created and traded the complex financial instruments they describe. They are familiar today because the unregulated trading of them had a great deal to do with the near-death experience of the Bear Stearns investment bank, which was only avoided when the Federal Reserve provided JPMorgan Chase with $30 billion in backing to acquire Bear Stearns and avoid the international financial disaster that would have followed the bankruptcy of a large investment bank.
The current economic crisis is not the first one made possible by Phil Gramm’s commodity futures act. Gramm’s wife, Wendy, served on the Commodity Futures Trading Commission from 1983 to 1993. As a commissioner, she helped develop many of the trading rules her husband turned into law in 2000. When Mrs. Gramm left the commission, she joined the corporate board of Enron, when the Texas-based gas-pipeline company was reinventing itself as a commodities trading combine, with its own "trading floor" in Houston. In his book Pipe Dreams, Robert Bryce describes Enron’s on-line commodities trading, which could not have developed as it did without a key provision in Senator Gramm’s commodities futures act.
The "Enron exception" that Senator Gramm included in the act protected all on-line derivatives from federal regulation, even when they were designed to defraud investors. It did seem like a conflict of interest that Senator Gramm was passing a law that would benefit his spouse, who was being paid by a corporation that would reap enormous benefits from its passage. And although the glaringly evident conflict was reported in some news outlets, the Gramms emerged unscathed from the situation.
Enron, on the other hand, didn’t do so well. Enron board chair Ken Lay is dead, even if conspiracy theorists claim he is living under an assumed name in Vail, Colorado. Jeff Skilling is in prison, appealing his Enron-related convictions. And tens of thousands of Enron employees and investors saw their pensions disappear when the company collapsed. Today, Bear Stearns shareholders have been put in a similar position; shares worth $145 two weeks before the company’s collapse were acquired by JPMorgan for $10. But the Gramms are all right. When he is not advising John McCain, Phil Gramm is ensconced in the New York offices of UBS, where he is a vice chairman of the Swiss investment banking giant. On April 2, UBS announced that it had sustained $19 billion in losses, which were doubtless exacerbated by the deregulation that Gramm had pushed through Congress eight years earlier.
And a whole lot more interesting tidbits floating around just waiting to be asked and answered. Would that more in the media were actually asking them — and demanding full and complete answers. I know we’ll be following up on this…