Price Wars
Price Wars
pg40/loc652-53: “There were many things that led this to happen,” Masters tells me. “First of all, you had the Commodities Futures Modernization Act.”
pg40/loc656-57: It was Brooksley Born, the chairwoman of the Commodities Futures Trading Commission, versus Alan Greenspan, the chairman of the Federal Reserve. The question: should “derivatives” be regulated?
Jan1999, I was asked to help try and prevent the coming economic mess (we failed). Then decade later (jan2009), I was asked to web'ize the Pecora Hearings (1930s congressional hearings into '29 crash, resulted in jail sentences and Glass-Steagall) with lots of internal HTMLs and URLs between what happened then and what happened this time (comments that the new congress might have appetite to do something). I work on it for awhile and then get a call saying it wouldn't be needed after all (comments that capital hill was totally buried under enormous mountains of wallstreet cash).
Gramm, #2 on time's list of those responsible for economic mess (2001-2008)
Now better known for GLBA and repeal of Glass-Steagall (enabling "Too Big To Fail", used as excuse for not holding TBTF accountable), but on the list for legislation blocking regulation of CDS gambling bets (derivatives). Born, CFTC chair, suggested regulating derivatives. Gramm's wife replaces Born, while Gramm gets legislation passed blocking derivative regulation), then his wife resigns to join Enron board (and audit committee).
Enron was a major contributor to Mr. Gramm's political campaigns, and Mr. Gramm's wife, Wendy, served on the Enron board, which she joined after stepping down as chairwoman of the Commodity Futures Trading Commission.
A few days after she got the ball rolling on the exemption, Wendy Gramm resigned from the commission. Enron soon appointed her to its board of directors, where she served on the audit committee, which oversees the inner financial workings of the corporation. For this, the company paid her between $915,000 and $1.85 million in stocks and dividends, as much as $50,000 in annual salary, and $176,000 in attendance fees
slightly different description: "Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right"
loc2953-55: The most fateful Mercatus Center hire might have been Wendy Gramm, an economist and director at the giant Texas energy company Enron who was the wife of Senator Phil Gramm, the powerful Texas Republican. In the mid-1990s, she became the head of Mercatus's Regulatory Studies Program.
loc2955-57: There, she pushed Congress to support what came to be known as the Enron Loophole, exempting the type of energy derivatives from which Enron profited from regulatory oversight. Both Enron and Koch Industries, which also was a major trader of derivatives, lobbied desperately for the loophole.
loc2958-59: Some experts foresaw danger. In 1998, Brooksley Born, chair of the Commodity Futures Trading Commission, warned that the lucrative but risky derivatives market needed more government oversight.
loc2959-61: But Senator Gramm, who chaired the Senate Banking Committee, ignored such warnings, crafting a deregulatory bill made to order for Enron and Koch, called the Commodity Futures Modernization Act.
Mercatus Center
I had been told that some investment bankers had walked away "clean" from the 80s S&L crisis, were then running Internet IPO mills (invest a few million, hype, IPO for a couple billion, which then needed to fail to leave the field clear for the next round of IPOs) and were predicted to get next into securitized mortgages. I was to improve the integrity of mortgage supporting documents as countermeasure, however they then found that they could pay the rating agencies for triple-A ... and could start doing liar, no-documentation mortgages (no-documentation, no documentation integrity), securitize, pay for triple-A (even when rating agencies knew they weren't worth triple-A, from Oct2008 congressional hearings), and sell into the bond market, doing over $27T 2001-2008. From the law of unintended consequences, the biggest fines from the economic mess were for the "robo-signing mills" fabricating the "missing" documents (the fines were transferred to agencies that supposedly were to aid the defrauded borrowers ... very little found it to them ... some agencies were even headed by some of the same people involved in the economic mess).
Then they started creating securitized mortgages designed to fail (paying for triple-A, sell into the bond market), and take out (CDS) gambling bets (derivatives) they would fail. As economy was failing, SECTREAS convinces congress to appropriate $700B in TARP funds supposedly to bail out "Too Big To Fail". However, the largest recipient of TARP funds was AIG (the largest holder of CDS gambling bets and negotiating to pay off at 50cents on the dollar). The SECTREAS steps in saying that they had to take TARP funds to pay off at 100cents on the dollar ... and the largest recipient of face value payoffs was the institution formally headed by SECTREAS (a firm that was also one of the major speculators in the CFTC oil/gas price spike).
The real bailout of the "Too Big To Fail" was the Federal Reserve (buying trillions of toxic assets at 98cents on the dollar and providing tens of trillions in ZIRP funds). that fought a legal battle to prevent it being made public. When they lost, the chairman held a press conference to say that he had believed that the TBTF would use the money to help "main street", when they didn't he had no way to force them (but that didn't stop the flow of funds). Note the chairman had been partly selected because he was student of the depression (where the Feds had tried something similar with the same results, so he would have no expectation that it would be different this time).
Why are gas prices so high? These obscure traders are partly to blame
"My instinct tells me that a very careful analysis of this market would show that the price is not reflective of supply chain problems, that there's just too much leeway for the big banks and the big producers to manipulate if no one is looking and watching what they're doing," says Greenberger, the former division director of the Commodity Futures Trading Commission (CFTC), the main regulator of US energy markets.
"GRIFTOPIA" had chapter on CFTC that used to require that commodity players had significant position because speculators were causing wild irrational price fluctuation (i.e. they profited by manipulating price, buy low sell high, then short sale on the way day ... including manipulating news to push price in the direction they wanted). But then CFTC sent (secret) letters to selected speculators allowing them play ... responsible for the huge oil&gas price hike summer of 2008.
Later a member of congress published the transactions for 2008 showing the speculators that were responsible for the huge price spike summer of 2008. Instead of vilifying the speculators responsible, somehow the press vilified the member of congress for violating corporation privacy (as if corporations were people, disinformation to distract from those responsible). (summer 2008) Oil settles at record high above $140
Retired at Retired
2 年Part II https://www.dhirubhai.net/pulse/price-wars-part-ii-lynn-wheeler/