Gramm disputes role in oil price

Calls charge 'false,' political

By Jon Ward THE WASHINGTON TIMES | Thursday, June 26, 2008

• Print
• [-][+] Font Size
• E-Mail Alerts
• Tell a Friend
• Got a Question?
• You Report
• Click-2-Listen

A top McCain campaign official accused by Democrats of allowing speculators to drive up the price of oil Wednesday said he is the victim of a smear campaign that is "verifiably false" and that distracts from the need to produce more oil domestically.

"For about two months, there has been a concerted effort by Democratic spokesmen to sell this idea that there is such a thing as the 'Enron loophole' and that somehow I am responsible for it," said former Sen. Phil Gramm, Texas Republican.

"First, I didn't care, but then it struck me that not only is this verifiably false, but it's an effort to hurt McCain by attacking me," Mr. Gramm, now vice chairman of UBS investment bank, said by phone from Turkey.

Campaign officials for Sen. Barack Obama, the presumptive Democratic presidential nominee, stood by their contention that Mr. Gramm surreptitiously inserted language in a massive, end-of-the-year budget bill in 2000 that allowed energy-futures traders to escape regulation.

Democrats say that loophole led to abuse by the now-defunct Enron Corp., which manipulated electricity prices in California in 2001, leading to rolling blackouts.

Mr. Obama has blamed high gas prices on this loophole, saying it has allowed energy traders to speculate on oil prices, which has driven the price up nearly double in the past year, to a record high of $140 a barrel last week.

"It makes a hell of a story," Mr. Gramm said. "The problem is, it's not true."

Mr. Gramm and others involved with passing the Commodity Futures Modernization Act of 2000 say there is no loophole, and that the type of trading that Democrats say became deregulated under the 2000 law was actually never regulated prior to the bill's passage.

The Obama campaign, and other Democrats, point to Enron's nearly $100,000 in campaign contributions to Mr. Gramm, his friendship with fellow Texan Kenneth L. Lay, Enron's now-deceased founder, and to the presence of Mrs. Gramm's wife, Wendy, on Enron's board, as support for why he would have inserted a loophole provision "at the behest of Enron lobbyists."

But Mr. Gramm on Wednesday provided documents that he said showed the so-called "loophole" language came from a House Republican - Rep. Thomas W. Ewing, of Illinois, who retired in 2001.

Mr. Ewing, now a semi-retired consultant, said in an interview Wednesday that he wrote the language of his own accord.

"No one pressured me to do anything in the bill," Mr. Ewing said.

"The Enron loophole was a loophole that was there before we passed the act in 2000. There was no regulation of the Enron-type entity before we passed the bill," Mr. Ewing said.

The bill with Mr. Ewing's language was introduced in May 2000.

Ryan Weston, the top staffer on the House Agriculture subcommittee chaired by Mr. Ewing in 2000, said the purpose of the loophole language was to give certainty to investors that complicated investment transactions called swaps were not and would not be regulated by the Commodities Futures Trading Commission.

"Gramm didn't have anything to do with the supposed loophole," said Mr. Weston, now with the Florida Sugar Cane League. "We were basically trying to make legal certainty for swaps and to make sure the domestic U.S. futures exchanges could compete with foreign futures exchanges."

Click here for reprint permissions!
Copyright 2009 The Washington Times, LLC

Do you have another point of view, photos, audio, video or more information about a story?