enron loophole

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"Enron loophole" exempts most over-the-counter energy trades and trading on electronic energy commodity markets from government regulation.

[1]The "loophole" was enacted in sections § 2(h) and (g) of theCommodity Futures Modernization Act of 2000, signed by U.S. president Bill Clinton on December 21, 2000.[1] It allowed for the creation, for U.S. exchanges, of a new kind of derivative security, the single-stock future, which had been prohibited since 1982 under the Shad-Johnson Accord, a jurisdictional pact between John S. R. Shad, then chairman of the U.S. Securities and Exchange Commission, and Phil Johnson, then chairman of the Commodity Futures Trading Commission.

In September 2007, Senator Carl Levin (D-MI) introduced Senate Bill S. 2058 specifically to close the "Enron Loophole". This bill was later attached to H.R. 6124, the Food, Conservation, and Energy Act of 2008, also known as "The 2008 Farm Bill".

President George W. Bush vetoed the bill, but was overridden by both the House and Senate, and on June 18, 2008 the bill was enacted into law. Wendy Gramm, Senator Phil Gramm's wife, coincidentally was the former chairman of the Commodity Futures Trading Commission.[when?] After leaving the CFTC,[when?] she took a seat on Enron's board of directors.[when?][2]

On June 22, 2008, then U.S. Senator Barack Obama blamed the "Enron loophole" for allowing speculators to run up the cost of fuel by operating outside federal regulation.[3]

https://theintercept.com/2015/06/12/emails-reveal-koch-industries-lobbying-weaken-derivatives-regulations-cozy-ties-regulators/

The close ties between corporate interests and the regulators who are supposed to police them contributes, many argue, to fundamentally lax oversight.

Emails I recently obtained through a records request show howcozy a Koch Industries lobbyist is with officials at the Commodities Futures Trading Commission, the primary regulator for derivatives and commodity trading.

Though Koch Industries is better known for using its considerable political machine to promote fossil fuel industry priorities and tax cuts for the wealthy, the company also has a major stake in the financial markets via its business unit devoted to commodity speculation.Notably, the very first oil-indexed price swap was pioneered by a Koch trader in 1986, and the infamous “Enron Loophole” that deregulated the trading of credit default swaps was engineered by a lobbying team that included two Koch lobbyists.

The recent lobbying campaign around derivatives is already paying off. As Zach Carter of the Huffington Post reported, the House of Representatives on Tuesday passed a major regulatory roll-back supported by Wall Street banks and the Kochs. The legislation would affect the post-financial crisis reforms designed to rein in the global derivatives market.

Just as Citigroup lobbyists authored their own deregulation bills in Congress, the Koch emails reveal justhow comfortable the regulators and the lobbyists who curry their favor feel with each other, even as the latter are besieging the former with information and pressure that benefits their very rich clients.

Gregory Zerzan, a former Treasury Department official during the George W. Bush administration, went on to work for the International Swaps and Derivatives Association before becoming a Koch lobbyist.

The emails show Zerzan regularly communicating with CFTC officials, encouraging them to review letters from a Koch-backed coalition requesting changes in regulatory policy, and asking commissioners out for a visit to the Koch Industries’ commodity trading office in Houston.

Koch Industries has lobbied on a number of rules promulgated by the CFTC via the Dodd-Frank financial reform law passed in 2010. The so-called position limits rules — designed to reduce excessive speculation in commodity markets — have been one Koch target.

In March of this year, Zerzan emailed Clark Ogilvie, chief of staff to CFTC Chairman Tim Massad, reminding him to review a regulatory comment letter submitted by the Working Group of Commercial Energy Firms. The letter Zezan was referring to makes no mention of Koch Industries, though Koch is represented by the Working Group.The letter requests that the CFTC move to eliminate record-keeping obligations for certain derivatives traders, like Koch and other commercial end-users.

Ogilvie responded quickly that he was at the BOCA Futures Industry Conference in Boca Raton, Florida. “Awesome. That was always my favorite of those conferences,” Zerzan sent back.

The emails also show Zerzan in regular communication with Jason Goggins, the chief of staff to Republican CFTC Commissioner J. Christopher Giancarlo. The Koch lobbyist on multiple occasions reminded Goggins of regulatory requests made by Koch under the auspices of the Working Group of Commercial Energy Firms.

Commissioner Giancarlo has been one of the most outspoken opponents of derivatives regulation in Washington, announcing earlier this year that he would like to throw out and rewrite the CFTC-devised rules $700 trillion swap market.

“We are very grateful to you and the Commissioner for all of your efforts,” Zerzan wrote in September 2014, inviting Goggins and Commissioner Giancarlo to visit Koch Industries’ speculation headquarters in Houston, a subsidiary known as Koch Supply & Trading.

After that meeting took place, he wrote: “Our entire team was very grateful for your time and greatly enjoyed the opportunity to discuss the evolution of the markets post Dodd-Frank.” He then attached yet another regulatory comment letter listing policy changes that should be made.

View the emails below:

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J. Christopher Giancarlo - Wikipedia

J. Christopher Giancarlo (born May 12, 1959) is an American attorney and former business executive who served as 13th chairman of the United States Commodity Futures Trading Commission (CFTC). Giancarlo was sworn in as a CFTC commissioner on June 16, 2014, for a term expiring on April 13, 2019. Starting on January 20, 2017, with President Donald Trump's inauguration, Giancarlo began serving as acting chair of the CFTC. In March 2017, the president nominated Giancarlo to be full-time chair of the commission. Giancarlo was confirmed as chairman of the commission by the United States Senate on August 3, 2017.

Early life and education

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Giancarlo was born on May 12, 1959, in Jersey City, New Jersey to a family of physicians, nurses, and small business owners. He has four brothers, including Charles Giancarlo, an entrepreneur, investor, and former senior executive of Cisco Systems and board chairman of Avaya.

Giancarlo received primary and secondary education at the Dwight-Englewood School in Englewood, New Jersey from 1970 to 1977. He attended Skidmore College in Saratoga Springs, New York, where he graduated with college and Government Department Honors. At Skidmore, Giancarlo was a member of Phi Beta Kappa, of the Winter Term Scholarship Committee and a contributing editor to Politea magazine. In 1984, he received a Juris Doctor degree from the Vanderbilt University School of Law^[1] where he was an associate research editor at the Vanderbilt Journal of Transnational Law and President of the Law School's International Law Society. Since 1985, Giancarlo has been a member of the Bar of the State of New York.

Career

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Business

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From 2001 to 2014, Giancarlo served as the executive vice president of GFI Group Inc., an intermediary in the global over-the-counter and listed markets that offers trading technologies and products to financial market participants(NYSE: GFIG).^[2] Giancarlo was responsible for GFI's strategic transactions and relationships, including mergers and acquisitions, equity finance, investment banking, strategy development, analyst and investor communications and government relations. During his tenure, Giancarlo directed GFI's initial public offering in 2005 and led the acquisition strategies of Trayport Limited and Amerex Brokers LLC.

Prior to joining GFI, Giancarlo was executive vice president and U.S. legal counsel of Fenics Software.^[3] From September 1997 to April 2000, Giancarlo was a corporate partner in the New York law firm of Brown Raysman Millstein Felder and Steiner, where he advised technology businesses on corporate and finance transactions. He joined Brown Raysman from Giancarlo & Gleiberman, a law practice founded by Giancarlo in 1992 following his return from several years practicing law in London with the international firm of Curtis, Mallet-Prevost, Colt & Mosle.

Giancarlo was a founding board member and former chairman of the Wholesale Markets Brokers Association (Americas), and served as chair of three annual conferences on Swap Execution Facilities, SEFCON I ^[4] October 4, 2010, SEFCON II ^[5] October 3, 2011 and SEFCON III^[6] November 13, 2012 where he delivered opening and closing remarks.

He was a member of the Leadership Board of the Center for Capital Markets Competitiveness of the United States Chamber of Commerce.^[7] He was also a founding co-editor-in-chief of eSecurities, Trading and Regulation on the Internet, (Leader Publications) and has written and spoken extensively on public policy, legal and other matters concerning technology and the financial markets.

In February 2011, Giancarlo testified before the U.S. House Financial Services Committee of the U.S. Congress on implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act").^[8] In October of that same year, Giancarlo also testified before the House Committee on Agriculture on Legislative Proposals Amending Title VII of the Dodd-Frank Act.^[9] In December 2012, he testified once more, this time before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises on "Challenges Facing the U.S. Capital Markets to Effectively Implement Title VII of the Dodd-Frank Act".^[10]

Government service

[

Giancarlo was nominated by President Barack Obama on August 1, 2013, to serve as a Commissioner of the Commodity Futures Trading Commission (CFTC).^[11][12][13] On March 6, 2014, Giancarlo testified on his nomination before the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, which approved the nomination on April 8, 2014. The U.S. Senate confirmed his nomination by unanimous consent on June 3, 2014, for a term expiring April 13, 2019.

On April 14, 2015, Giancarlo testified before the U.S. House of Representatives, Committee on Agriculture Subcommittee on Commodity Exchanges, Energy, and Credit regarding commercial end-user concerns, derivatives trading position limits, CFTC swaps trading rules and the cross-border impact of U.S. derivatives regulation.^[14]

Having served as acting CFTC chair since President Trump's inauguration on January 20, 2017, Giancarlo was nominated by the president to be full-time chair of the commission on March 14, 2017, subject to confirmation by the Senate.^[15] He was confirmed by the U.S. Senate on August 3, 2017. His successor as commissioner and chairman, Heath Tarbert was confirmed by the Senate on June 5, 2019.

Cryptocurrency

Following service in the US government, Giancarlo took on several roles: senior counsel to the law firm Willkie Farr & Gallagher,^[16] chairman of the board of Common Securitization Solutions LLC,^[17] a joint venture between Fannie Mae and Freddie Mac, Senior Advisor of social trading company eToro,^[18] and a member of the advisory board of the Chamber of Digital Commerce.^[19] He's also director of the American Financial Exchange (AFX) and senior adviser to capital markets technology provider Baton Systems.^[20]

Giancarlo is a blockchain technology advocate and contributor to the global discourse on cryptocurrencies and digital assets.^[21][22] Mr. Giancarlo is the founder of the Digital Dollar Project, to "advance exploration of a United States Central Bank Digital Currency,"^[23] and former director of financial service company BlockFi.^[24][20]

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enron loophole

Early life and education

Career

Business

Government service

Cryptocurrency

Enron loophole - Wikipedia

Gramm and the 'Enron Loophole' - The New York Times

The Enron Loophole - UNT Digital Library

The Enron Loophole - EveryCRSReport.com

New rules on natural gas to close up 'Enron loophole'

Closing the Enron Loophole: Feds May Limit Speculative ...

A Pitfall Called the Enron Loophole - The Washington Post

Congress Approves Measure to Close “Enron Loophole”

McCain Defends 'Enron Loophole' By Jason Leopold

Swaps, Enron, London loopholes: a rough guide - MarketWatch