Oil Law Update
The T. Boone Pickens Plan
When the Oil Bubble bursts
COLUMN from The Mercury News, 9-16-07, By Paul Krugman, New York Times columnist.
``Bush ally's Kurdish oil deal proves the surge has failed
To understand what's really happening in Iraq, follow the oil money, which already knows that the surge has failed.
Back in January , announcing his plan to send more troops to Iraq, President Bush declared that "America will hold the Iraqi government to the benchmarks it has announced."
Near the top of his list was the promise that "to give every Iraqi citizen a stake in the country's economy, Iraq will pass legislation to share oil revenues among all Iraqis."
There was a reason he placed such importance on oil: Oil is pretty much the only thing Iraq has going for it. Two-thirds of Iraq's GDP and almost all its government revenue come from the oil sector. Without an agreed system for sharing oil revenues, there is no Iraq, just a collection of armed gangs fighting for control of resources.
Well, the legislation Bush promised never materialized, and on Wednesday [9-12-07] attempts to arrive at a compromise oil law collapsed.
What's particularly revealing is the cause of the breakdown. Last month [8-07], the provincial government in Kurdistan, defying the central government, passed its own oil law; last week, a Kurdish Web site announced that the provincial government had signed a production-sharing deal with Hunt Oil of Dallas, and that seems to have been the last straw.
Now here's the thing: Ray L. Hunt, the chief executive and president of Hunt Oil, is a close political ally of Bush. More than that, Hunt is a member of the President's Foreign Intelligence Advisory Board, a key oversight body.
Some commentators have expressed surprise at the fact that a businessman with very close ties to the White House is undermining U.S. policy. But that isn't all that surprising, given this administration's history. Remember, Halliburton was still signing business deals with Iran years after Bush declared Iran a member of the "axis of evil."
No, what's interesting about this deal is the fact that Hunt, thanks to his policy position, is presumably as well-informed about the actual state of affairs in Iraq as anyone in the business world can be. By putting his money into a deal with the Kurds, despite Baghdad's disapproval, he's essentially betting that the Iraqi government - which hasn't met a single one of the major benchmarks Bush laid out in January - won't get its act together. Indeed, he's effectively betting against the survival of Iraq as a nation in any meaningful sense of the term.
The smart money, then, knows that the surge has failed, that the war is lost, and that Iraq is going the way of Yugoslavia. And I suspect that most people in the Bush administration - maybe even Bush himself - know this, too.
After all, if the administration had any real hope of retrieving the situation in Iraq, officials would be making an all-out effort to get the government of Prime Minister Nouri al-Maliki to start delivering on some of those benchmarks, perhaps using the threat that Congress would cut off funds otherwise. Instead, the Bushies are making excuses, minimizing Iraqi failures, moving goal posts, and, in general, giving the Maliki government no incentive to do anything differently ...
Here's how I see it: At this point, Bush is looking forward to replaying the political aftermath of Vietnam, in which the right wing eventually achieved a rewriting of history that would have made George Orwell proud, convincing millions of Americans that our soldiers had victory in their grasp but were stabbed in the back by the peaceniks back home.
What all this means is that the next president, even as he or she tries to extricate us from Iraq - and prevent the country's breakup from turning into a regional war - will have to deal with constant sniping from the people who lied us into an unnecessary war, then lost the war they started, but will never, ever, take responsibility for their failures [including allowing 9-11 to happen -- See "Cheney's in the Bunker" ].''
[The bottom line is that despite the waste of American lives and tax dollars, the owners of oil wells have made a killing.]
TRANSCRIPT from The News Hour, 6-30-08
``Iraq Opens Oil Fields to Foreign Firms
The Iraqi government announced Monday [6-30-08] it was accepting international bids for contracts to operate six of its oil fields. An economics expert discusses the prospect of Western oil companies working in Iraq.
JUDY WOODRUFF: Since the invasion of Iraq five years ago, the U.S. has faced charges that it was driven by a desire to control Iraq's estimated 115 billion barrels of oil.
Questions about those vast resources and who should control them were brought back into focus today when Iraq's oil minister invited 41 foreign firms to bid on long-term oil development contracts.
The announcement comes amid reports in the New York Times that major oil companies were negotiating short-term, no-bid contracts with the Iraqi government with the help of U.S. advisers.
To help explain today's announcement, we are joined by Yahia Said. He's the director for Middle East and North Africa at the Revenue Watch Institute, a New York think-tank. He's also a research fellow at the London School of Economics and has advised members of the Iraqi government on economic issues.
Mr. Said, thank you very much for being with us. First of all, what exactly did Iraq's oil minister do today? Because there has been some confusion about it.
YAHIA SAID, Iraq Revenue Watch Institute: The main purpose of the press conference today was to announce a bidding round for the long-term contracts to develop five -- actually, six major oil fields and two major gas fields, including the main breadwinners for Iraq, the oil fields that produce most of Iraq's output in exports. That was the main purpose of the announcement.
He also spoke about the ongoing negotiations for smaller contracts to develop some of these same fields, to increase their capacity marginally, until the long-term contracts come into force.
JUDY WOODRUFF: But in terms of the long-term contracts, what is he actually asking these companies to do?
YAHIA SAID: Actually, in both cases, the minister is talking about technical service contracts. He's not talking about contracts that would give the companies equity ownership in Iraq's oil. He stressed that fact.
So in both cases, Iraq will remain in control over the oil resources. And oil companies will act as service providers to presumably either the Ministry of Oil or the national oil companies that will be established for that purpose.
JUDY WOODRUFF: Well, what is so attractive for these companies to be interested in bidding if they're not going to have ownership? And we're talking about a country, of course, that's still at war.
YAHIA SAID: That's a good question. Of course, Iraq is the last repository -- the largest, last largest reserve of oil almost left on the planet. This is a hundred billion, maybe even more barrels of oil that is easily accessible, that is easy to extract and easy to produce. And so no major oil company can stay away from this.
But the terms that the minister announced today are not extremely or particularly lucrative for the companies. These are terms similar to those used in the region, in Saudi Arabia and Kuwait, where the companies, the foreign companies, are only invited as service providers, and ownership remains with the state or its national oil company.
JUDY WOODRUFF: Now, we know that the northern part of Iraq, the Kurdish-controlled part of the country, has separately had its own negotiations with oil companies. Will that remain separate? And will those contracts still stand?
YAHIA SAID: Indeed, the Kurdish region is offering contracts -- has offered by now almost 30 contracts on completely different terms, where an equity ownership is being offered to the international oil companies.
None of the oil majors have participated in the Kurdish contracts as of yet, but there are many midlevel oil companies involved. [See Hunt]
Indeed, there is a big difference between the model that is being presented by the central government in Baghdad and the one offered by Kurdistan. And this is going to be a conflict at some point, but they are both insisting that they're acting in a way consistent with the constitution and in a legal way.
But these are entirely different models that -- it will be hard to coexist on an ongoing basis ...
Stalled national oil law
JUDY WOODRUFF: And we also know that the parliament has not yet passed the laws necessary to set up a legal structure around the ownership, the management of these oil and gas resources. How does that affect this whole process?
YAHIA SAID: Yes, the absence of a clear legal framework, legal environment is one of the main obstacles for further development of the Iraqi oil industry.
The Iraqis haven't agreed yet on two major issues. One is the division of power and responsibilities between the central government and the regions and the province over the industry, who controls the industry, who signs contracts, who manages the fields.
The other area of disagreement is the level of engagement of the private sector, particularly the international oil companies, and the way -- and the form through which they are engaged. So disagreement on those two main issues have prevented Iraqi politicians from reaching agreement on the oil law ...''
TRANSCRIPT from The News Hour, 7-28-08
``Tensions in Iraqi City of Kirkuk Raise Security Concerns ...
KWAME HOLMAN: ... Kirkuk is on the edge of the territory controlled by the Kurdish Regional Government, but is prized by the Kurds, who consider it their capital. There's no recent official count, but U.S. officials believe Kurds comprise more than half the city's nearly 600,000 people, followed by Arabs and Turkmen.
Kirkuk borders on some of Iraq's major oil reserves.
Last week, Kurdish members walked out of the Iraqi parliament to protest an election law that would redistribute power in the country's 18 provinces, including a power-sharing arrangement for Kirkuk.
Iraq's president, Jalal Talabani -- himself a Kurd -- vetoed the law. Provincial elections, planned for October  and something the Bush administration has pushed for, were thrown into doubt ...
What's at stake for Iraq? ...
MARGARET WARNER: And for that, we go to Juan Cole, a professor of history at the University of Michigan, and Peter Galbraith, a former U.S. ambassador who served as an unpaid advisor to the Kurdish Regional Government.
Welcome to you both.
Professor Cole, before we get into the nitty-gritty of Kirkuk, what's at stake for Iraq as a whole in this unresolved dispute over this particular city?
JUAN COLE, University of Michigan: Well, the Kurdistan Regional Government is a kind of confederacy. It took three provinces out of the 18 of the old Iraq and made them into one super-province with a parliament, a prime minister, a president.
It gives out visas. It's contracting with oil companies. It's acting like an independent state. And it very much would like to incorporate further territory from Iraq proper into itself, including the entirety of the province of Kirkuk, which is one of three major oil areas in Iraq.
So, really, the destiny of the country is at stake here. A U.N. official, Staffan de Mistura, called this the mother of all crises.
MARGARET WARNER: Peter Galbraith, do you agree that the destiny of Iraq or certainly the unity, potentially, of Iraq as a country is at stake in this unresolved dispute?
PETER GALBRAITH, Former U.S. Diplomat: ... the unity of Iraq has already vanished. As Professor Cole said, Kurdistan is de facto an independent country, even has its own army.
So the issue is, how will this -- which side will control this particular bit of territory? And the struggle over Kirkuk is an old one. It's been going on for the entire history of Iraq. It was what produced the wars in the 1970s between Mullah Mustafa Barzani, the legendary Kurdish leader, and the Iraqi government.
So that unless this can be resolved and Iraq's constitution has a mechanism for resolving it, it could open a new front, that is, between Arabs and Kurds in the ongoing civil war in Iraq ...
MARGARET WARNER: So, Juan Cole, what would you add to that about why this is such a festering sore in Iraq? In other words, there are a lot of multiethnic disputed areas of Iraq, and we've seen some pretty ugly things going on. And yet you quoted someone saying this is the mother of all crises. Why Kirkuk?
JUAN COLE: Well, because it's being framed in black and white. That is to say, either Kirkuk will join the Kurdistan Regional Government, in which case the Turkmen and the Arabs in the province become a tiny minority in a largely Kurdish independent state -- in the long run, probably -- or it stays as a stand-alone province, in which case you have a restive Kurdish population that wants to join the Kurdistan Regional Government.
In addition to which, the neighbors have an interest in what happens here, because Syria, Turkey and Iran all have Kurdish minorities. Turkey has a very large Kurdish minority. And they're afraid that, if Kurdistan gets rich through having Kirkuk's oil, that it will be a magnet and that there will be a kind of Kurdish unification and a very large Kurdistan will emerge that might rip them apart.
MARGARET WARNER: So, Peter Galbraith, talk about the oil here as a factor. Is that one of the main reasons why Iraq doesn't want to give up Kirkuk? Because even if it is majority Kurdish -- though I know that's in dispute at the moment -- because of the oil?
PETER GALBRAITH: Well, I'm sure that the Kirkuk oil field, which is one of the oldest in Iraq, is a factor in this dispute ...
But there's another human element to this, which I think is also very important. Successive Iraqi governments settled Arabs in Kirkuk ... to work in the oil industry. And then Saddam Hussein greatly accelerated this process by then expelling the Kurds and the Turkmen.
So there's a real sense of grievance on the part of the Kurds and many of the Turkmen over the history. And there's no shared narrative as to who this city and province really belong to ...
MARGARET WARNER: So, Professor Cole, why have the parties resisted any kind of political solution? I mean, there was supposed to be a referendum last December ; that was put off. Now the election law, which was going to reallocate power within the Kirkuk province among the three ethnic groups, that was turned down by the Kurdish president of Iraq.
I mean, is everyone playing a zero-sum game here? Is that why?
JUAN COLE: Sure, because, if you have a decisive outcome, then it probably means a lot of warfare, and violence, and trouble, not only inside northern Iraq, but possibly including with Iraq's near neighbors.
So the easy thing to do is to kick the can down the road. But that, as Ambassador Galbraith rightly says, is very unwise ...
MARGARET WARNER: Let me get down now to the stakes in the United States, beginning with you, Peter Galbraith. Is it fair to say that the U.S. hopes for withdrawing from Iraq, that Iraq could come to some sort of political reconciliation within the country, among its different ethnic factions, that that, in part, depends on Kirkuk getting resolved? I mean, or could Kirkuk remain in this unstable state and still the U.S. could leave?
PETER GALBRAITH: Kirkuk is the place that before the Iraq war I think most experts thought would be the biggest problem. And it is a ticking ethnic time bomb, precisely because it brings the Kurds and Arabs and this third group, the Turkmen, which have an ethnic link to Turkey, into the picture. And unless it's resolved, I think it will complicate a U.S. withdrawal ...''
The T. Boone Pickens Plan
``America is addicted to foreign oil.
It's an addiction that threatens our economy, our environment and our national security. It touches every part of our daily lives and ties our hands as a nation and a people.
The addiction has worsened for decades and now it's reached a point of crisis.
In 1970, we imported 24% of our oil. Today it's nearly 70% and growing.
As imports grow and world prices rise, the amount of money we send to foreign nations every year is soaring. At current oil prices, we will send $700 billion dollars out of the country this year alone - that's four times the annual cost of the Iraq war.
Projected over the next 10 years the cost will be $10 trillion; it will be the greatest transfer of wealth in the history of mankind ...''
For more, see Tbe Pickens Plan
TRANSCRIPT from The News Hour, 7-7-08
``High Oil Costs May Advance Conservation Research
Car owners have been wincing in recent months as the price of oil has shot up well over the once-unimaginable $100-per-barrel mark. But an economist at Carnegie Mellon University believes that skyrocketing oil prices are a good thing, and will lead to necessary innovations in conservation and green technologies.
PAUL SOLMAN, NewsHour economics correspondent: Late 2004, at conservation conscious Carnegie Mellon University [CMU], where they looked at the giddy-high oil price of $40 a barrel as a positive.
DEBORAH LANGE, engineer: ... because that's the catalyst that you need for us to put more investment into environmentally friendly solutions.
PAUL SOLMAN: At CMU, they were already fielding a fleet of electric and natural gas vehicles, campus power provided by windmills, [and a] green roof on a classroom building ...
LESTER LAVE: When we talked three years ago, people thought they could go about their lives the way it is. When oil hits $115 a barrel and natural gas is going up very fast, then everybody understands that we're going to need to do something.
Cost of living, fueled by oil
PAUL SOLMAN: "Something," like conservation, now the norm in other countries. At today's price of a barrel, even higher than the $115 of just a few weeks ago, it's a bonanza elsewhere in the world.
LESTER LAVE: Denmark has half the energy consumption per capita and per dollar of GDP that we do. But if you've been to Copenhagen, you see that the Danes live pretty well.
And so, if we were to adopt the efficiencies of Northern Europe and the lifestyles of Northern Europe, we could cut our energy use in half. So think about that: We could cut our energy use in half. That's our greenhouse gases; that's our oil imports; that's our use of coal. And it seems to me that's a worthy goal to strive for ...
Innovation, child of high oil price
PAUL SOLMAN: No pipe dream ... as long as the price of fossil fuels stays up. Right now, OPEC -- and especially Saudi Arabia -- are playing along.
But what if the price begins to droop? What if speculators then sour on oil as quickly as they became sweet on it? What if the price drops by two-thirds, as it did after it last peaked and conservation was last big news in the 1970s? ...
PAUL SOLMAN: Will promising projects peter out, as so many did back then?
LESTER LAVE: If you go back, the price of oil was down to $10 a barrel in 1998, so less than 10 years ago it was that low. So the price of oil has been cycling up and down.
PAUL SOLMAN: A low price would, of course, be good news for motorists, truckers, those who heat their homes with oil. But Lave thinks even a small price drop, like the gas tax holiday now being proposed in Washington and around the country, would send a dangerous signal.
LESTER LAVE: ~~We ought to use more gasoline. We ought to import more oil. We ought to send more dollars to the Middle East.~~ I think that's crazy.
PAUL SOLMAN: Lave is among the growing number of economists calling for a floor to the price of oil, beneath which it could not fall.
And how would it work?
LESTER LAVE: Well, one of the things that you could do is you could just have a tax on imported oil, so that, whenever imported oil fell below a level, then this tax would kick in, so that, for example, if the oil ever did fall to $10 a barrel, then you could have a tax which would bring it up to, say, $50 a barrel.
A price floor could protect change
PAUL SOLMAN: This idea has been around since the '70s. We heard it not long ago from biofuels venture capitalist Vinod Khosla, inspired in part by an ominous encounter he had at an energy conference years back.
VINOD KHOSLA, co-founder, Sun Microsystems: I was recently at a conference where one of the senior executives of a major national oil company from Saudi Arabia, Aramco, came up to me and said, "Be careful." It was almost a warning. He said, "Be careful, because if biofuels are successful, we will drop the price of oil."
PAUL SOLMAN: At the time we interviewed Khosla -- March 2006 -- oil was approaching $70 a barrel. He proposed a tax to kick in if oil fell below $40. Today those numbers seem ridiculously cheap, a price floor even at $70 politically feasible as never before.
LESTER LAVE: The problem is that everybody has agreed that we should be doing things. But as long as energy is cheap, we don't do them. And so we have to have the stimulus of a high price to do it ...''
NEWS ARTICLE from Seeking Alpha, 7-14-08, by First Coverage
``... For those of you who might have missed his comments, Gramm, who holds a PhD in economics, told the Washington Times that the U.S. is not in a real recession, but merely in a "mental recession" being caused by a "nation of whiners". I can only imagine that those individuals who are currently seeing their home equity devastated, their stocks drop by a third and their food and energy costs soar felt much better upon being informed that it was all in their heads ...''
ARTICLE from PR.Canna Zine, 7-12-08, by Bobby Fontaine
``The whole Wendy - Phil Gramm/ Enron/ MTBE story
... In 1990, congress lead by the lobbing efforts of Ken Lay of Enron, and then president George Bush passed a law requiring that an additive to gasoline called MTBE be added to gasoline supplies nationwide. Enron was to be the future manager of bringing MTBE to market to be used at ratios of 10 and 15 percent per gallon of gasoline. Being as MTBE was very cheap to produce meant Enron stood to make a great deal of money, which they did, for a while.
But see the way MTBE worked was it caused gasoline emissions of formaldehyde to worsen significantly. So although it was supposed to help clean up our air quality, it actually made it worse. The reason it was accepted as being so good for air quality was because formaldehyde is a VOC, a Volatile Organic Compound. And the smog that MTBE was supposed to reduce was made up largely of NO's, Nitrogen Oxide that originated from coal burning and diesel emissions.
When VOC's and NO's mix in the sun's rays, they form low level ozone. Low level ozone is very dangerous to breath but it is largely invisible except in cities with the worst pollution where it becomes and orange haze. But it is still ascetically better to look at then the old gray brown smog that MTBE [made into] into low level ozone.
Since low level ozone wasn't regulated the same way smog pollutants were, the big polluting industries that created the smog were off the hook on having to spend money to clean up their act. So for years we've been being told that our air quality is better when it's worse while big polluting industries have been sitting back foregoing updating their infrastructures with the latest environmentally friendly technologies.
What all this has to do with Phil Gramm is that he and his wife Wendy, who was on the board of Enron, are the masterminds behind putting together this plan to use the atmosphere as a chemistry lab to get rid of pollution by mixing together this deadly recipe of pollutant to make them appear to be gone.
They'd spent the years before 1990 working together changing federal regulations, her as Ronald Reagan's Commodity Futures Trading Commissioner and him a senator from Texas, laying the framework needed to support MTBE being produced from natural gas and isobutylene, a byproduct of refining crude oil ...
Then once the Clean Air Act was amended to require MTBE in our gasoline, there needed to be refineries built to produce enough of it to meet the schedule laid out in the new clean air rules which required a great deal of new refining capacity to be needed in a short period of time.
Later the whole deal seemed to almost fall through when it looked like there was no money to pull it all together with. But in a last minute deal struck by Phil Gramm between the Federal Reserve, Saudi oil companies, and the United Bank of Switzerland [UBS] for a trillion dollar loan to get the MTBE program up and running in one years time, money that had originally come from the Soviet Union's failed economy looted and laundered though UBS by former KGB agents which now was supposed to be going to Halliburton to build MTBE refineries ...
Much of the capacity to produce MTBE was already in control of the people who were supposed to be using the trillion dollars to fabricate new refineries. The money was actually used to underwrite a whole new way of doing business on Wall Street, a pyramid scheme of financial gimmicks that's crashing in on itself now as it takes our economy with it ...
The problem was that the trillion dollar loan was being paid off slowly using sales of MTBE through Enron to do it. It wasn't due to be paid off until May of 2006. But there was even more of a problem than just the trillion dollar loan going into default if MTBE use stopped. The money itself was spent illegally by a lot of people.
In fact MTBE would never have been added to gasoline in the first placed except for all the people who took a chunk of the money who then supported the Clean Air Act. Since the money was used to prop up a kind of underground corporate banking system that did special favors for all MTBE's supporters ...
When 911 came along and distracted the American people from anything negative I might say that implicated the President in a scandal, I was on the verge of success in making my story a national issue. I had found a way to successfully tie a missing intern named Chandra Levy whose murder was being blamed on a congressmen from California named Gary Condit. I had found evidence that lead back to MTBE being a motive for why someone wanted to make it look like Condit killed her ...
If it hadn't been for Saddam Hussein invading Kuwait in 1990 while the Clean Air Act was being debated, MTBE wouldn't have had a chance of being legislated to be added to our gasoline. Since the war distracted the media and US citizens from everything else, the new laws glided through congress onto president Bush's desk with almost no one knowing what MTBE was. Then again as the topic of MTBE almost hit our front pages when I was well on my way to exposing it, 911 distracted the nation again.
When I looked at how old man Bush let Saddam invade Kuwait and how Saudi Arabia played such a big a role along with Phil Gramm in bringing MTBE to market where all of the terrorists in the 911 attacks were from Saudi Arabia, I had to figure the reason Bush was talking so intently about invading Iraq was because war was the accepted way to keep the American people from finding out the truth about MTBE ...
On March 5, 2003, the FBI crashed through my doors with a copy of the Phil Gramm letter and seized my computers. They would have arrested me but the first thing I told them was that I had been expecting them and that since they were there, it meant the MTBE debate had begun in discreet committee hearings on Capitol Hill which would make it easy for me to prove why they were really arresting me ...
When I was done, the amendment for MTBE producers in the energy bill was exposed with lawsuits being filed across the nation against the oil industry for MTBE polluting groundwater ...''
To check other articles by Bobby Fontaine, go to
ARTICLE from Mother Jones, 7-1-08,
July/August 2008 Issue, By Nomi Prins
``Where Credit Is Due: A Timeline of the Mortgage Crisis
News: A field guide to the loan sharks and politicos who got us into the predatory lending mess
1913: Federal Reserve Act creates national banking system ...
1933: With memories of 1929 stock crash still fresh, Glass-Steagall Act separates "commercial banks" focusing on consumer activities (checking, savings) from "investment banks," which deal with speculative trading and mergers.
1968: Truth in Lending Act requires banks to disclose loan terms & fees ...
1984: S&Ls start crashing in Texas as oil boom peters out. More than 1,000 thrifts nationwide will fail between 1986 and 1995; debacle will cost $500 billion, including $124 billion in taxpayer money.
April 2, 1987: Sen. John McCain meets with federal regulators to discuss investigation of Lincoln Savings and Loan. The thrift's owner, Charles Keating, was the senator's business partner and campaign contributor, and flew McCain around on his private jet.
Sept, 1987: Drexel Burnham Lambert, home to "junk-bond king" Michael Milken, creates "collateralized debt obligations" (cdos) -- securities made up of myriad loans and bonds with different risk levels.
Dec 9, 1988: Silverado S&L collapses, leaving $1.3 billion taxpayer liability; board members include Neil Bush, who engineered loans to friends in what federal Office of Thrift Supervision will call "multiple conflicts of interest." Bush later tells Congress a few of his deals may have looked "a little fishy."
Feb 6, 1989: President George H.W. Bush bails out S&L industry; among those helped is his son, Jeb, as government takes over most of a $5 million second mortgage on his Miami office building.
Sept 30, 1995: Congress enacts Truth in Lending Act "reform," easing regulations on creditors; bill powered through by Rep. Bill McCollum (R-Fla.), a key recipient of finance, insurance, and real estate (fire) donations ($136,000 in 1993-94).
Dec 22, 1995: As part of Newt Gingrich's Contract With America, Congress enacts a measure making it more difficult to sue companies for securities fraud.
Aug 2, 1996: Office of Thrift Supervision issues rule preempting almost all state laws regulating S&L credit activities ...
April 1998: Citicorp and Travelers announce biggest-ever corporate merger ($70 billion); transaction technically illegal under Glass-Steagall; CEO Sandy Weill launches $12 million campaign to repeal law ...
Nov 1999: Gramm-Leach-Bliley Act guts Glass-Steagall, setting off wave of megamergers among banks and insurance and securities companies. Driving force is Sen. Phil Gramm (R-Texas), who has received $4.6 million from fire sector over previous decade ...
Dec 14, 1999: As Congress heads for Christmas recess, Sen. Gramm attaches 262-page amendment to an omnibus appropriations bill. Commodity Futures Modernization Act will deregulate derivatives trading, give rise to Enron debacle, and open door to an explosion in new, unregulated securities ...
Oct 7, 2002: Swiss investment bank UBS announces that Sen. Gramm is joining it to "advise clients on corporate finance issues and strategy"; he will also lobby Congress, Treasury, and Fed on banking and mortgage issues as industry pushes to eliminate predatory-lending rules ...
July 10, 2006: Henry M. Paulson Jr. sworn in as Treasury secretary, leaving job as Goldman Sachs chairman and ceo. In 2005, Goldman securitized $68 billion in residential mortgages and $23 billion in "other assets" primarily related to cdos ...
March 12, 2007: Sen. John McCain's presidential campaign announces that Sen. Gramm will join it as cochair and economic policy adviser ...
March 16, 2008: Bear Stearns announces takeover by JPMorgan Chase in Fed-engineered bailout; measure approved by Fed Board of Governors with fewer votes than required by law, under a post-9/11 "national security emergency" exception.
March 25, 2008: In speech on housing market, Sen. McCain calls for easing crisis by "removing regulatory, accounting, and tax impediments to raising capital." ...
May 6, 2008: Bush announces he will veto legislation directing $15 billion to neighborhoods ransacked by foreclosures. Also threatens to veto legislation to provide $300 billion for struggling homeowners ...''
Mother Jones writer Nomi Prins has worked at Goldman Sachs and Bear Stearns.
Research assistance by Sara Abbas and Megan Kiefer
ARTICLE from Mother Jones, 7-1-08, By David Corn
Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank [UBS] at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today's subprime meltdown.
May 28, 2008
Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown ...
Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win ...
Gramm's most cunning coup on behalf of his friends in the financial services industry -- friends who gave him millions over his 24-year congressional career -- came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore ...
As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act ... Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee ...
It's not exactly like Gramm hid his handiwork ... The act, he declared, would ensure that neither the SEC nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products ...
For starters, the legislation contained a provision -- lobbied for by Enron, a generous contributor to Gramm -- that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed.
(For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron's energy futures contracts from government oversight. Wendy later joined the Houston-based company's board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.) ...
Gramm's record as a reckless deregulator has not affected his rating as a Republican economic expert. Sen. John McCain has relied on him for policy advice, especially, according to the campaign, on housing matters. The two have been buddies ever since they served together in the House in the 1980s; in 1996, McCain chaired Gramm's flop of a presidential campaign. (Gramm spent $21 million and earned only 10 delegates during the gop primaries.)
In 2005, McCain told a Wall Street Journal columnist that Gramm was his economic guru. Two years later, Gramm wrote a piece for the Journal extolling McCain as a modern-day Abraham Lincoln, and he's hailed McCain's love of tax cuts and free trade. Media accounts have identified Gramm as a contender for the top slot at the Treasury Department if McCain reaches the White House ...''
NEWS ARTICLE from The Plain Dealer, 7-18-08, by Desmond Butler, Associated Press
``Witness describes how U.S. taxes evaded abroad
Washington -- A man wanted by Liechtenstein for leaking secret banking information that identified millionaire tax cheats across Europe and the United States has described to congressional investigators how money was concealed.
Lawmakers played a videotape of the testimony by Heinrich Kieber at a congressional hearing Thursday [7-17-08] that revealed rare details of offshore practices at two European banks.
At the hearing, Swiss banking giant, UBS AG, announced that because of recent revelations, it will stop offering U.S. clients offshore services through branches based abroad. Kieber ... described ruses that he saw while working at the bank, which he said were used to cover the tracks of money moved into accounts.
The hearing by the Senate Homeland Security and Governmental Affairs investigations subcommittee highlighted offshore tax abuses that they believe cost the U.S. government about $100 billion a year.''
TRANSCRIPT from The News Hour, 7-15-08
[Interview with Barack Obama]
``In an interview with the NewsHour's Gwen Ifill, Sen. Barack Obama calls for the U.S. to dramatically scale down in military effort in Iraq and, instead, focus more forces on the deteriorating situation in Afghanistan.
GWEN IFILL: Senator Obama, welcome.
SEN. OBAMA: Thank you so much.
GWEN IFILL: Today we hear that General Motors is restructuring; Fannie and Freddie Mae are the subjects of a rescue attempt by the government; inflation worries are up again. Would you do what this president has done, if you were president, to try to set this economy right?
SEN. BARACK OBAMA: Well, first of all, this has been a problem eight years in the making, and so absolutely not. I would not do what George Bush has done.
He has neglected efforts to deal with an ongoing energy problem, hasn't been serious about creating greater energy efficiency, hasn't been serious about increasing fuel efficiency standards on cars that would have made our automakers more efficient, has not been serious about investing in solar and wind and biodiesel, and restructuring how we build our buildings or developing high-speed rail.
So there are a host of things we could have done, just in the energy sector. He has not been serious about restructuring our financial regulatory infrastructure and architecture to ensure that we didn't have some of the problems with the sub-prime housing market ...
GWEN IFILL: What would you do if you were president today?
SEN. BARACK OBAMA: Well, at this point, I was happy to hear that the president embraced the need to get this housing bill done, and I think we got enough bipartisan support at this point that that's a good start, the Dodd-Frank bill that would allow borrowers and lenders to negotiate and stabilize homes before people get into deep water and go into foreclosure. You know, we've got 7,000 people who are being foreclosed on every single day ...
I also think it's time for us to initiate what I called for, a second round of stimulus. I want to see energy rebates that are going up, several hundred dollars per family, that would allow people to absorb the rising costs, short-term, of gas, potentially home heating oil once the winter hits, rising food costs. All those things, I think, would be important short term.
And then long term, we've got a lot of work to do around a serious energy policy, around changing our tax codes so that we're rewarding work and not just wealth. I want to provide a middle-class tax cut of $1,000 per family per year. I think it's going to be important for us to fix the health care system, which is a drain on a lot of families' budgets ...
GWEN IFILL: If the government should step in in other ways to shore up things like Fannie Mae and Freddie Mac, why shouldn't the government step in to help companies like GM?
SEN. BARACK OBAMA: Well, that's why I think it's important that whatever's done on Freddie Mac and Fannie Mae is carefully structured so that we're not simply bailing out wealthy investors who were doing pretty -- very well for long periods of time. What we have to do is just make sure that the housing market itself is still liquid, so that there are not larger ramifications.
As far as a company like GM is concerned, I have already said that as president, I want to partner with U.S. automakers to help them make the fuel-efficient cars of the future. We have the technology now to have a 100-mile-per-gallon hybrid; we have the technology now to start developing an electricity grid where you can plug in your car at night, and not only would you get energy from that grid but you'd also be able to sell energy back into that grid ...
GWEN IFILL: I would like to talk to you about Iraq ...
SEN. BARACK OBAMA: Yeah. Look, as I said in my speech today, in some ways we've been arguing, I think, about the wrong thing. My opposition to the war in Iraq from the start was never premised on the day-to-day tactics that we employ once we are in Iraq. I've never had any doubt that the U.S. military would defeat Saddam Hussein's army.
There was never any doubt that if we poured enough resources in there, that we could lock down Iraq. The problem has always been a broader strategic question, and that is was it wise for us to go in there in the first place and once we were in there, you know, was it wise for us to continue a long-term occupation in Iraq. That remains the question.
So John McCain wants to argue about tactics; you know, have we seen a reduction in violence in Iraq. Absolutely, and that's a testament to the extraordinary work of our U.S. military.
Can we sustain spending $10 billion a month, putting enormous strains on military families, at a time when the central front on terror -- Afghanistan and the hills in northwest Pakistan -- are deteriorating, and we are seeing brazen attacks against U.S. military bases in the region by al-Qaida operatives.
And what I have said continuously is that in light of the problems that we're having in Afghanistan, in light of other security threats that we have out there, non-proliferation issues, Iran, what we're doing with respect to China, what we're doing with respect to North Korea, it is important for us not to be single-minded about Iraq ...
GWEN IFILL: So do you no longer believe, as you once said, that the surge would be imposing a military solution on a civil war? Do you now believe that the surge worked?
SEN. BARACK OBAMA: Well, what I believe is that a combination of factors, and if you talk to military commanders, they will acknowledge this, the fact that al-Qaida overplayed its hand in Anbar province and alienated the Sunni populations, so that the Sons of Iraq and other forces were able to form to oppose al-Qaida in Iraq. The success in getting the Shi'a militias to stand down and to recognize that their path to power is going to be more effectively pursued through the political process, as well as the enormous sacrifice and work of our troops, has all led to a reduction in violence.
And that is a terrific opportunity, but the underlying issue, which is what the surge was supposed to accomplish, creating the space so that the Iraqi factions would actually start working together more effectively politically so that you have a stable government and you've got a relationship between the central government and the provinces that works, that has not yet occurred. And it is my belief that it will not occur unless they have a greater sense of urgency about it. Now is the right time for us to begin bringing our combat troops out of Iraq.
GWEN IFILL: Your plan involves moving combat troops out, two brigades a month, 16 months, out if Iraq and then beginning to build more troops on the ground in Afghanistan. Is that something -- part of that plan involves residual forces, leaving some people behind in case things go wrong, I guess, or to protect American diplomats. What do you mean when you say residual force?
SEN. BARACK OBAMA: Well, this is one of the things I want to discuss when I travel there. And I think that it's important to have the commanders on the ground help to shape what is going to be necessary for limited missions that have been defined by the president, the commander in chief.
The missions that I've called for: as you said, protecting diplomatic forces and civilians, U.S. civilians or foreign civilians in Iraq, making sure that we are protecting our bases, training Iraqi forces, if, as long as we are short of the fact that we are not training them to engage in sectarian war but rather training them for the integrated force structures that are needed to protect them, and to have a counterinsurgency force that can act swiftly if you start seeing the reemergence of al-Qaida in Iraq. Those would be the limited missions that they would be carrying out ...
GWEN IFILL: Sounds like a zero-sum game taking troops out of Iraq, sending them to Afghanistan. Don't Americans just look at that and say, we're just going to stay at war?
SEN. BARACK OBAMA: Well, no, no, no. I mean, keep in mind the scale and the scope. I mean, you've got 140,000 or so troops [in Iraq] even after the next drawdown that's been announced by the president ... You're looking at 30,000 troops in Afghanistan. And an additional two brigades will obviously greatly supplement the force in Afghanistan, but you've also got NATO troops in Afghanistan. So the idea here is that we can leverage a significant amount of additional troops in Afghanistan if we make those commitments in the way that we can't do in Iraq.
GWEN IFILL: ... People look at your shifts on issues, from warrantless surveillance to gun control, and they say: "Who is this guy? What does he believe?" ...
SEN. BARACK OBAMA: Well, first of all, I do think that this notion that somehow we've had wild shifts in my positions is simply inaccurate. You mentioned the gun position. I've been talking about the Second Amendment being an individual right for the last year and a half. So there wasn't a shift there.
GWEN IFILL: Campaign finance?
SEN. BARACK OBAMA: Well, campaign finance, there's no doubt that that was a shift in recognizing that we could not broker a deal with the Republicans that would prevent the Republican National Committee or the Republican Governors Association or all these other organizations, that are already spending millions of dollars against us, that we could not contain them within a public financing system ...
The broader point, Gwen, is if you compare sort of my shift in emphasis on issues that I've been proposing for years, like say, faith-based initiatives, which have raised questions in the press, if you compare that to John McCain ...
If you compare that to John McCain's complete reversal on oil drilling, complete reversal on George Bush's tax cuts, complete reversal on immigration where he said he wouldn't even vote for his own bill, that I think is a pretty hard case to make that somehow I've been shifting substantially relative to John McCain.
The fact of the matter is on the big issues --
And so I don't think it's going to be hard to persuade people what I stand for because the truth is the things that I stand for today are the things I stood for 10 years ago and 20 years ago. And that's what we're fighting for in this campaign and that's what, I think, is going to lead to our ultimate success in November ...''
NEWS ARTICLE from The Plain Dealer, 7-18-08, by Steven Mufson, Washington Post
``Gore gives U.S. 10 years to end fossil fuel dependence
Washington -- Former Vice President Al Gore on Thursday [7-17-08] called on Americans to convert all electricity generation to wind, solar and other renewable sources within 10 years and end their reliance on fossil fuels for the sake of the U.S. economy and the world's climate ...
He ... called on automobile companies to make plug-in electric cars and advocated an overhaul of the national electricity grid "to link areas where the sun shines and the wind blows to the cities in the East and the West that need the electricity."
Before a packed and enthusiastic crowd at George Washington University's Constitution Hall, the Nobel Peace Prize winner [took aim] ... at proposals to address high gasoline prices by expanding drilling and at "repeated troop deployments to dangerous regions that just happen to have large oil supplies." ...
Gore said that the cost, while large, should be compared to the money being spent importing oil. "We're borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the planet," he said. "Every bit of that has to change."''
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