I read it joe, and while you managed to pick the only
liberal paper in texas, I found that reading it was repetitive. It droned on and on, repeating that gramm's addition made all this happen, and while I am not sure about it either way, it never explained how the legislation accomplished all of this. Or what was in it, and what did it change?
It might as well said:
Once upon a time, all was good in the land, then someone sneakily changed something, and everything went bad. And so and so agreed that he that changeth did bad, and so and so also agreed. And since things have been bad.
The Commodity Futures Modernization Act of 2000 amended the Commodity Exchange Act to effectively deregulate some aspects of commodities trading. Commodities sold on NYNEX are regulated. The CFMA basically allowed commodities (including oil and mortgages packaged as securities) to be traded on unregulated electronic exchanges, free from oversight.
Here is a good explanation:
http://www.star-telegram.com/ed_wallace/story/659081.htmlConnecting the dots: Enron wanted to make a profit by playing with energy futures, but doing so was illegal under the CEA. In 1993, Phil Gramm's wife joined Enron's Board. The Texas Congressional delegation (including Gramm, the #2 Enron contributee) tried to push through the deregulation Enron wanted, but it was dead in Committee. As a last minute hail mary, Gramm got the CFMA inserted into an appropriations bill in the House/Senate conference report.
This is why this deregulation is referred to as the 'Enron Loophole'.
Enron made billions, energy prices spiked, California had rolling blackouts. Then price controls were applied and Enron's financial ship became the Titanic, unable to offset its massive debt without the revenue from manipulating energy prices.
In this case, the whiners were Ken Lay and Enron. They were whining that the big bad federal government would not let them make money in the unregulated energy markets. They spent millions lobbying Congress. Their whining paid off - in the short term.
People here have said energy futures cannot be manipulated to spike prices, but that is exactly what Enron did. As the above article shows, Enron's 'dark' energy market idea was resurrected by oil companies and major investment houses. Not surprisingly, Goldman Sachs, part owner of the ICE, was reported to be one of the largest holders of oil futures. And the ICE handles not only oil futures, but mortgage-based securities.
The Enron crisis, the energy crisis, and the mortgage crisis - all have the CFMA in common.
