California's economy not fault of Gray Davis. Guess who ?

[kentuck]

California is directing its anger at the wrong person. No matter how unlikeable their Governor might be, the decline of their economy can be traced to one person moreso than any other. Democrats should be pointing this out everytime the word "recall" is used. Californians appear to be recalling the wrong person...and Arnold is just a little diversionary straw in the wind.
=====================================================================
Here is who we need to recall:

Growing evidence, however, shows that this Bush-can’t-be-bought story line isn’t true.

It is now clear that prior to Nov. 8, when the Securities and Exchange Commission delivered subpoenas to Enron, the Bush administration did what it could to help Enron replenish its coffers with billions of dollars. Enron desperately needed that money to prevent the exposure of mounting losses hidden in off-the-books partnerships, a bookkeeping black hole that was sucking Enron toward bankruptcy.

As Enron’s crisis worsened through the first nine months of the Bush presidency, Ken Lay got Bush’s help in three principal ways:
--Bush personally joined the fight against imposing caps on the soaring price of electricity in California at a time when Enron was artificially driving up the price of electricity by manipulating supply. Bush’s rear-guard action against price caps bought Enron and other energy traders extra time to gouge hundreds of millions of dollars from California’s consumers.
--Bush granted Lay broad influence over the administration’s energy policies, including the choice of key regulators to oversee Enron’s businesses. The chairman of the Federal Energy Regulatory Commission was suddenly replaced in 2001 after he began to delve into Enron’s complex derivative-financing schemes.

--Bush had his National Security Council staff organize an administration-wide campaign to pressure the Indian government to accommodate Enron, which wanted to sell its generating plant in Dabhol, India, for $2.3 billion. Bush administration pressure on India over the Dabhol plant continued even after Sept. 11, when India’s support was needed for the war on terrorism. The administration’s threats against India on Enron’s behalf didn’t stop until Nov. 8.
On Nov. 8, Enron disclosed the formal SEC investigation and admitted overstating earnings by $586 million with losses hidden in off-the-books partnerships run by Enron’s Chief Financial Officer Andrew Fastow. Over the next four weeks, Enron stumbled toward its bankruptcy filing on Dec. 2.

....more

http://www.john-loftus.com/enron3.asp

[kentuck]

1. More evidence from the same link:

<snip>
The contributions dwarfed what was at stake for Enron. In its energy trading in California alone, Enron stood to earn tens of billions of dollars.
Around the start of the 2000 general election campaign, the first signs of suspicions also arose that Enron was trying to gain windfall profits by manipulating the California energy market. In August 2000, an employee with Southern California Edison sent the Federal Energy Regulatory Commission (FERC) a memo, entitled "California Electricity Markets: Issues for Examination." The memo expressed concerns that Enron and other electricity providers to California’s deregulated energy market were gaming the system by cutting off supply and creating phony congestion in the electricity grid to run up energy prices.

=====================================================================

When California's economy went south, so did the rest of the nation.
Enron, with Bush's help, took out over $50 billion dollars from the CA economy and it rippled across the nation. (my comments)

[jmcgowanjm]

2. Conason-Schwarzenegger/Lay/Riordan meet in midst of Energy Crisis

Why did Schwarzenegger go to a secret meeting with Ken Lay in the midst of the crisis? Did Schwarzenegger ever have any dealings with Enron? Did he hold Enron equities in his portfolio -- and if so, when did he sell?

[kentuck]

6. Oh man !

Are they pulling this scheme in California to get Schwarzenegger in as Governor so they can somehow manipulate or destroy whatever information is still out there in public hands? :tinfoilhat:

[jmcgowanjm]

8. 10 Questions Senators Should Ask Ken Lay

http://www.consumerwatchdog.org/utilities/pr/pr002239.php3

BTW-link to Conason-
http://www.salon.com/opinion/conason/2003/08/11/enron/index_np.html

[Liberal_Andy]

3. Great post, here's a couple more relevant links

http://www.yuricareport.com/PoliticalAnalysis/FraudinWhiteHouse.htm

http://www.truthout.org/docs_03/070603C.shtml

[Nederland]

4. I blame "Deregulation"

The true blame lies with those California legislaters that passed an idiotic "deregulation" bill that did not create a free market for energy but a setup a rigged game in favor of power producers.

[AP]

10. You can't have a free market for things

which you can't live without, and things which have no effective competition.

[Nederland]

13. Nonsense

Food, clothing, shelter.

All these things are things you cannot live without, and yet all are provided (in the US at least) by the free market.

[kentuck]

14. There's no monopoly on those ?

at least, the markets cannot be controlled like energy...

[Nederland]

15. No, there is not

At least, if there is a company that makes every house in America I am unaware of its existence. Perhaps he could clue me in :)

Transmission of electricity is a natural monopoly. It makes absolutely no sense to have multiple sets of wires running to every building merely so people can have a "choice". However, the production of electricity is a perfectly applicable to free market solutions. Give people a choice as to who they want to generate their power, then add in the costs incurred by the transmission monopoly (i.e. the utility), and you have an elegant free market solution to the problem. For example, in many places that have free market generation you can chose to buy your power from a renewable energy producer. For a slightly higher cost per Kw, you can know that your electricity comes from wind turbines, not polluting coal plants.

The problem in California was that the state botched the entire system. The rules forced utility companies to buy power on the spot market and restricted their ability to raise consumer rates. There is nothing "free market" about price caps, and preventing utilities from purchasing long term contracts is just idiotic. The combination allowed power producers to rig the system in their favor and squeeze the state into submission. This is what happens when you have people that fundamentally don't understand markets create a "market" solution.

[kentuck]

16. What part did "deregulation" play in the runup of prices in California?

And what part did the politicians play? including George W Bush?

[Nederland]

18. Two Things

One undeniable, one suspect.

The undeniable thing is that power producers staged a power shortage in order to drive up prices. I know that many people blame them for this, and there is little doubt that it was unethical. The problem is that while it is unethical, it wasn't really illegal. My point is that a well formed market that permitted long term contracts would prevent producers from artificially driving up prices. You see, if producers of power tried to drive up prices, the owners of long term contracts would step in and start selling the contracts that they had purchased in previous months at fixed (and lower) prices. This is the role of long term contracts: they moderate prices and prevent them from moving in the wild swings that we saw in California. Sure you can blame the power producers, but I blame the legislators that created a flawed system.

Which brings us to the suspect part. Many believe that the regulation restricting utilties from purchasing long term contracts was no accident. Rather, it was a provision delibrately added at the request of power producers and trader like Enron. They knew that with such a provision they would at some point in time be able to manipulate the market to their advantage. It would be interesting to see which legislators pushed the provision and see who their campaign contributers were...

[salin]

22. That would fit

would I found to be the MO of Lay - who got the ball rolling in dereg at the national and state level. But look more closely at direct lobbying of agencies than campaign giving to legislators.

After this digging foray, I have long thought the real Enron story was not just in the campaign giving - but in their lobbying expenses and who they lobbied and how. I think they were able to fly for a long time under the radar screen - as this level of the exec branch is often not so heavily lobbied.

Somewhere a year or so ago I believe I read that their lobbying fees were underestimated (because they also gave huge bucks to some consurtium type lobbying interests) but even that number was something like 3 times as much as what they gave in campaign donations.

[salin]

23. But at the federal level (when Enron was gasping and desperate)

dont underestimate the nexus of when the campaign giving at its most lavish came together with his heavy lobbying. The consortium news did a really well documented piece on the various ways that the administration DID try to bailout Enron as it was struggling but before it was clear it was going down (they admin very well might not have known it was a sick company). This is counter to the popular spin the media gave at the time.

Bush Did Try to Save Enron

By Sam Parry
May 29, 2002

http://www.consortiumnews.com/2002/052902a.html

[kentuck]

24. and this part was printed in the NYTimes....

<snip>
By late October, however, it could also be argued that Enron’s troubles were too advanced – and the public spotlight too intense – for the administration to launch a rescue mission. News of Enron’s financial difficulties already was spreading through the business press and the SEC had started to investigate.
In fact, the record shows that, in spite of the risk, the Treasury Department did respond to Lay’s call for help. The New York Times reported that Secretary O’Neill instructed Under Secretary for Domestic Finance Peter Fisher to "look into the condition of Enron." Fisher responded by following up with Enron President Greg Whalley, speaking with him "six to eight times" over a few day period in late October and early November. After the conversations, perhaps recognizing the political peril, Treasury decided against further support.

[salin]

17. A year or so back, I spoke at length

with folks who were around the issue in Sacramento when deregulation was pushed through. What happened was really instructive.

First know that usually "new" legislation take forever to work through the statehouse. And that this went through in a couple of months - from start to finish.

I previously had done some research on the Washington end - as to how rules had been changed over time to deregulate energy in the way it had that allow Enron such a free hand at their freewielding energy trading (no oversight) program. Too long to go into - but starting back in the late 80s Ken Lay spent a lot of time lobbying - not congress - but members of the exec branch - and not just the top - working through the agencies. I think they had an "idea" with no market - and studied all of the then current agency blocks (from the branch of the SEC which usuall oversaw utility conglomerate mergers - under the Public Utilities Holding Commission; to getting energy derivatives (not yet existing, mind you) to not fall under regular SEC supervision but to be treated as a Commodity and under Wendy Graham's commission; to changing the energy infrastructure rules and getting the government (now congress steps in) to pass an energy law that REQUIRED public utilities to give access to their infrastructure to new companies; back to the Commodities - getting a 'waiver' so that none of the usual oversight of commodoties would apply to energy derivitives, etc. etc.

It appears that once most of the federal blocks were lifted the same approach was used in California (and later Texas). What is interesting is that at both the Federal level and later at the state level - other energy companies were not on board they were not also pushing for these changes - until things started moving pretty far down the pike. This really was a Ken Lay/Enron operation. (And though ended up being fairly nefarious in their operations - the approach - of siting a market that didn't exist due to rules - and then clearing all the rules and thus being best poised to become a dominant player in the new market - was pretty briliant.)

Lay (much later joined by other energy players) started working at the public utility level... Get the support of the Public Utilitlies commission first (sell the deal of HOW MUCH MONEY would be saved by consumers... Billions I tell you... Billions!), then with their support go to the Governor and Legislature. Where the bill went from introduction to passage in record time.

A little sidenote - the next election cycle CalPirg pushed for a referendum (that was confusing as heck) that would have created protection for consumers if the deregulation didn't save money but instead lead to higher energy prices. Big money made the question even more confusing and the voters of california voted against protecting themselves. (See the public does have a role in this as well).

The amazing thing is this law was passed that required deregulation by a specific date - but did not specify HOW it was going to be done. A group was formed (the PowerExchange) to design the system. And from a major dem player who was the chair of this group (and at the time sold on its benefit) he claimed before congress that the key player in designing the entire system was.... Ken LayHe (don't recall the name) now claims that he believes that from the beginning some of the systems were set up (designed) to be gamed. The question is would it have been so seriously gamed to be detected had ENRON not been facing such financial disarray? No answer to that question - but that is an aside.

The vultures were lining up, it now seems, from the beginning (after Lay did the heavy lifting to get the legislation passed) once the structure was set up by the Power Exchange. A new entity called The Independent Systems Operator would monitor the systems, would implement strategies to prevent overload on the wires (eg not TOO much energy running through the wires at once) which would include financial incentives (eg - if you wait to send that energy until after peak time we (state) will pay you X) which was one of the methods is documented (fake energy runs were "scheduled" and then the ISO would offer the money to pay the company NOT to run the ghost run).

Thing is the company that set up the ISO system - turned around and tried to sell its knowledge to companies such as Reliant - said they could earn the companies MILLIONS. How? By showing them how to game the system. Not by producing a more effective product, but by cheating California residents. This was a Ross Perot Company as well.

The games that went on are amazing.

But the main point is that the lobbying to push this though was more on the executive branch... and when the Public Utility folks come to the legislature (with the blessing/push of the Governor) with this idea... it went through much faster than it ever should have. Bad way to form policy - especially when it is for a necessary resource.

[kentuck]

19. And it is estimated that Enron took about $50 billion out of CA economy..

That is not small potatoes...

[Nederland]

20. Thanks

I was under the impression that the rules for creating the market were passed directly by the legislator, not an independant group. Learning that the rules were created by unelected officials makes me ask: who were these people and who are their minders? Were they appointed by Pete Wilson, then governor?

[salin]

21. That, is an excellent question

and one I do not have an answer for (and am off for awhile - so I can't dig back through my files to see if I do have an answer somewhere).

There was a fascinating hearing before the Senate in DC last spring/early Summer (2002) - I think the hearing was chaired by Senator Wyden (Wieden?). Focus was market manipulation (as much as was known at that time) in California and the west coast (there was a big impact on Oregon and Washington as well. Somewhere I am sure that there are transcripts available - or atleast submissions of the testimony but I wouldn't know where to begin to look. The head of the California Public Utilties Commission was there, the state senator (dem) who was running the hearings in the state house (cochaired by a repub state sen. - and both have been heavy hitting)
the head of the Power Exchange, and then some energy industry stuff.

It would have been a huge story.

But - that evening the CBS news broke the first "BUsh Knew" story (about the Minnesota FBI agent). And away all the attention went. For me - it was what started my serious digging - as it seemed very relevant and instructive as to what might be involved in the Cheney energy bill.

Anyhow - The PowerExchange person did speak to how they began - and I would guess somewhere in testimony/the record the details of who appointed this group are there.

[BJ]

5. Gov Schwarzenegger = Higher Energy Bills For Us All

MWO's headline this morning is "Arnold's Secret Meeting With Kenny Boy Lay!" http://www.mediawhoresonline.com/

If Schwarenegger's elected Gub-nor uf Caly-vorr-nyah one of his first acts will be to push for complete utility deregulation in the Golden State. As I understand the current California dereg law, retail price is yet subject to public oversight.

If California goes for total energy dereg the rest of the Republican controlled state legislatures will fall like dominos. Utility dereg will the law of the land!

This will mean higher energy bills for all Americans.

[kentuck]

7. These revelations call for re-opening Enron hearings...

Are you listening Democrats?

[Kolesar]

9. Call your Reps! If they are GOP, call someone else's reps

[Kolesar]

11. Moveon.org should buy some billboards in California stating this

If we can tie Schwarzenegger to Enron, we may be able to beat him down--permanently.

[kentuck]

12. We should use this whole recall against Bush...

A great opportunity to educate the people...about Bush, Enron, Ken Lay, and Arnold...

[stevedeshazer]

25. Dick Cheney is responsible

From Greg Palast's book, "The Best Democracy Money Can Buy":

On April 10, 1989, Jacob "Jake" Horton, senior vice-president of Southern Company's Gulf Power unit, boarded the company plane to confront his board of directors over the company's accounting games and illegal payments to local politicians. Minutes after takeoff, the plane explodd. Later that day, police recieved an anonymous call: "You can stop investigating Gulf Power now."
Fast-forward to December 2000. The lights in San Francisco blinker out. Wholesale electricity prices in California rise on some days by 7,000 percent, and San Francicsco's power company declares bankruptcy. Dick Cheney, just selected vice president by the U.S. Supremem Court, begins a series of secret meetings with power comany executives. On their advice, within three days of Bush's inaugural, his Energy Department wipes away regulations against price gouging and profiteering ordered that December by outgoing President Clinton.
Out of Cheney's off-the-record meetings came the energy plan released by the president in May 2001. Billed as the response to the California electricity crisis, the president (sic) told us the plan contained the magic potion to end the power shortage. Then, after the horrors of September 11, 2001, the plan was remarketed as a weapon against Middle East terrorists. Nast-minded readers may believe the Bush energy program, still rolling around Congress, is just some pea-brained scheme to pay off the president's oil company buddies, fry the planet, and smother Mother Earth in coal ash, petroleum pollutants, and nuclear waste. In truth, it's more devious than that.
<snip>

Read Palast's book if you all haven't, he goes into much detail about this massive fraud and how it started in the UK and crossed the Atlantic.

[leftyandproud]

26. the economy isn't is fault, BUT...the debt just might be

I read a few weeks ago that he increased spending 30% EVERY YEAR for the past 12 years he has been in office...a 30% increase! Now, I know some programs are important..but jesus...he is doubling the size of government every 2.5 years...and what did he think would happen when things turned down? duuh