Phil Gramm met his wife Wendy in the halls of Texas A&M, where both taught economics in the 1960s, so the two have an understandable attachment to the school. Wendy currently serves on the Texas A&M Board of Regents, courtesy of an appointment by Governor Rick Perry. Now, after 23 years in Congress, Phil is rumored to be headed back to A&M, this time as University President, following his planned retirement next January. In the wake of the Enron scandal, it’s time for both Phil and Wendy to retire from public service for good.
If Enron sticks to anyone, it should stick to these two, yet comparatively little ink has yet been spilled on their involvement in the scandal, perhaps because Phil Gramm is a now a lame duck. But for those who question whether Enron actually got anything for its campaign largesse, look no further than the Gramm family. As Public Citizen and others have thoroughly documented, their fingerprints are all over this billion-dollar debacle. Leave aside for the moment the fact that Wendy Gramm served on the audit committee of Enron’s Board of Directors, and therefore is particularly culpable for failing to alert investors about the off-balance sheet hijinks that resulted in the largest bankruptcy in American history. In fact, Wendy and Phil helped create this disaster in the first place. As chairwoman of the Commodity Futures Trading Commis-sion, a federal regulatory agency, Wendy Gramm exempted Enron’s energy derivative contracts from regulation in the fall of 1992, setting the stage for the company to become a huge player in the wholesale energy market. That was one of her last official acts; Enron hired her a few days later to serve on their board, where she would earn at least $900,000 over the next eight years. After Wendy joined the board, Enron quickly became Phil Gramm’s top corporate contributor. It paid off. In December 2000 Phil Gramm pushed through–over the objection of regulators–a bill deregulating energy commodity trading, which set the stage for Enron’s online trading operation and ensuing dominance of the California energy market. That bill was a disaster for California ratepayers and a bonanza for Enron.
Unfortunately, Enron was at the same time hemorrhaging huge amounts of cash on ill-advised overseas investments in power plants, public water utilities, pipelines, and other capital-intensive enterprises. As head of the Senate Committee on Banking, Gramm helped them hide those losses, fighting banking reforms that would have made transactions in offshore tax havens much more transparent. Enron had hundreds of subsidiaries in the Cayman Islands whose primary reason for existence seems to have been to deceive investors and Wall Street analysts.
Gramm announced his decision to retire on September 4, shortly before Enron made its stunning restatement of earnings and Wall Street’s favorite cookie began to crumble. Coin-cidence? With his wife on the audit committee, privy to inside information that nobody on Wall Street had seen, he was uniquely positioned to know that things were about to get ugly. That being the case, Texas A&M might have appreciated a call from their former prof–the university, along with various state pension funds, was among the public entities in Texas that lost money on Enron investments. Texas has joined a class-action suit to try to recover those losses. According to Phil, there was never any Enron-related pillow-talk at the Gramm residence. “We talk about my taking out the garbage and Texas A&M football,” he told the Houston Chronicle. (Depressing, but certainly plausible as far as it goes.) Wendy may very well wind up testifying in front of one of many Congressional panels currently investigating the meltdown. Does Texas A&M, which already went through a series of scandals involving dishonest or incompetent administrators in the mid-’90s, really need the headache? To say the least, it’s not exactly an auspicious start for a potential university president, whose main job, after all, is to raise money for the school.
For all of his railing against government waste, Gramm owes his entire livelihood to public spending, from his birth in a military hospital to his National Defense Fellowship in graduate school, to his career at A&M and in Washington. It’s time for him to try the private sector for awhile–where his sympathies have always lain anyway–and he should take his wife with him. –NB