by Nomad
In this the third in the series, I want to take a moment to examine the life and deeds of the wife of Phil Gramm, Wendy Lee Gramm. I think you will find it- for want of a better word- breathtaking, but not in a good way. Getting Started
Under normal circumstances, the wife of a senator would hardly be worth a second glance. However, Dr. Wendy Lee Gramm is no ordinary wife of no ordinary senator. As a study of modern politics, in all its corruption and ambition, perky Wendy Gramm is a fair enough study in her own right. First, let’s cover the early history, collected from various sources.
Wendy Gramm’s Korean grandfather immigrated to Hawaii as a sugar plantation laborer. Like her grandfather, Wendy’s father had originally started out as a laborer in the sugar fields. According to the story, he selected his bride from a series of photos of Korean women and sent her money to join him in Hawaii. He married in 1939 at age 25.
During the Depression, he left Hawaii for a university in Indiana where he earned an engineering degree. He later returned to Hawaii and found a job at a sugar processing plant where he eventually worked his way to the top of the company, later becoming a vice-president of a sugar company.
Born in 1945 in Hawaii, Wendy Lee got her education during the '60s, graduating with a bachelor's degree in economics from Wellesley in 1966. She then received her economics doctorate from Northwestern University in Evanston, Illinois, five years later.
As the Houston Press notes:
When she took a teaching post at A&M in 1970, she has said, Wendy Lee planned to spend only five years in Aggieland..then go teach at a small liberal arts college somewhere. That same year, she and Gramm were married. Gramm was promoted to Associate Professor in 1974 and also served as the Department's Director of Undergraduate Programs. In all, Dr. Gramm taught economics at Texas A & M for more than eight years and has published articles in the American Economic Review and the Journal of Law and Economics.
The Gramms first met in 1969 when Wendy Lee was interviewing for a job in the economics department at Texas A&M, where Phil Gramm was already on the economics faculty. They married about four months after her arrival. After her husband became a Congressman in 1978, Dr. Gramm was able to parlay her husband’s connections to find a string of increasingly important posts.
When Democrat Phil Gramm resigned his House seat on January 5, 1983, and returned in a special election held on February 12, as a new and improved Republican Phil Gramm, it was met with smiling happy faces from the Republican crowd. And of course, it was bound to do wonderful things for both of the Gramms. Her political ambitions soared in the Reagan administration because ostensibly, she saw eye-to-eye with many of the core principles that Ronald Reagan espoused. As the Houston Press article notes:
When Democrat Phil Gramm resigned his House seat on January 5, 1983, and returned in a special election held on February 12, as a new and improved Republican Phil Gramm, it was met with smiling happy faces from the Republican crowd. And of course, it was bound to do wonderful things for both of the Gramms. Her political ambitions soared in the Reagan administration because ostensibly, she saw eye-to-eye with many of the core principles that Ronald Reagan espoused. As the Houston Press article notes:
She has regularly espoused an unfettered market as the solution to almost any of the nation's problems you'd care to name. The answer for struggling mothers who need day care so they can support their families? Forget government programs or parental leave, she says, and look to free markets and a strong economy. What about helping minorities climb the economic ladder? Forget affirmative action or quotas, she says. The answer is free markets and a strong economy. Federal deficits? Environmental protection? Free markets and a strong economy.
Wendy continued to rise higher in the ranks when her husband switched hats once again, leaving the House of Representatives and took a seat in the US Senate in 1984. In that year, Dr. Gramm served as the Executive Director of the Presidential Task Force on Regulatory Relief and as Director of the Federal Trade Commission's Bureau of Economics. From 1985 to 1988, Dr. Gramm was the administrator of Information and Regulatory Affairs at the Office of Management and Budget.
In 1988, President Ronald Reagan named her chairman of the Commodity Futures Trading Commission (CFTC), a position she held until 1993. (President Reagan called her "my favorite economist." )
In 1988, President Ronald Reagan named her chairman of the Commodity Futures Trading Commission (CFTC), a position she held until 1993. (President Reagan called her "my favorite economist." )
Conflicts and Obstructions
It was here that her habitual pattern of conflicts of interests truly began. As both CFTC head and the wife of an influential senator, she would have found herself in a difficult position. (Whether Wendy herself recognized or appreciated this fact, is a different matter.)
There were times when Senator Gramm sought the support of some of the same agricultural and business interests that she was regulating. On trips to Texas during his 1989 Senatorial campaign, she worked both on CFTC business and for her husband's reelection.
Clearly the proper ethical response would have been to choose one or the other. After all, in cases where the public trust is involved, where a fair and open arbitration is essential, even the appearance of improper influence is frowned upon. (Ask Clarence and Virginia Thomas.) But the Gramms were never a couple weighed down by charges of impropriety or held back by ethical concerns.
In fact, it was in that position that we have the first glimpse of the future Wendy Gramm. As a Washington Post article revealed back in 2010, one of two administrative law judges presiding over investor complaints at the CFTC, George H. Painter, claimed that Judge Bruce Levine, a longtime colleague, had a secret agreement with a Dr. Wendy Gramm, chairwoman of the agency, to stand in the way of investors filing complaints with the agency.
On Judge Levine's first week on the job, nearly twenty years ago, he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that we would never rule in a complainant's favor," Painter wrote. "A review of his rulings will confirm that he fulfilled his vow," Painter wrote.Painter continued: "Judge Levine, in the cynical guise of enforcing the rules, forces pro se complainants to run a hostile procedural gauntlet until they lose hope, and either withdraw their complaint or settle for a pittance, regardless of the merits of the case."The CFTC oversees trading of the nation's most important commodities, including oil, gold and cotton. The agency's administrative law judges handle cases in which investors allege that trading professionals or financial firms violated the rules.
Was this the kind of “unfettered market” that Wendy Gramm sought? If her later record is any indication, the answer is quite clear. Anything it takes to get the prize is enough justification for Wendy.
However, this is an obvious case of Obstruction of Congressional or Administrative Proceedings (18 U.S.C. 1505) could have conceivably ended Wendy Gramm's career early on. The effect on the system was to prevent a necessary oversight which might well have helped to prevent many clear cases of fraud in the whole sub-prime disaster.
After all, the stated mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets. Under Gramm's supervisor, the exact opposite was achieved.
When Wendy Gramm left the CFTC in 1993, she began to explore the private sector by accepting directorships on the boards of several corporations, Invesco Funds, State Farm Insurance Companies.
A PBS Frontline investigation uncovered this excellent bit of foreshadowing, which occurred around the time Phil Gramm made his unsuccessful bid in the 1996 presidential election.
Another board Wendy Gramm sits on is that of Iowa Beef Processors (IBP), a large meat processing company. Based in Dakota City, Nebraska, IBP is a powerful corporation next door to a key election- year state, Iowa. Support for Senator Gramm at IBP came in handy last August at the Iowa straw poll in Ames. IBP sent a memo to its management level employees encouraging them to attend the straw poll, which is not restricted to Iowa residents, and informing them that $25 tickets and bus transportation would be provided by the Phil Gramm-for-President campaign. Gramm campaign buses picked up the IBP employees at eight separate locations in the states of Iowa, Nebraska, and Illinois and transported them to the straw poll, where their votes helped Gramm tie front-runner Bob Dole and gave the Gramm campaign an important boost.
In a written statement to FRONTLINE, an IBP spokesman said, "Many of the campaigns provided tickets and bus transportation to the event, some bringing in people from as far away as Kansas. While the Gramm campaign paid the way for the IBP employees who attended, our people were not told to vote for Senator Gramm or any other candidate." FRONTLINE learned that the request for IBP's help in the straw poll came from the late Alec Courtelis, the former finance chair of the Gramm-for-President campaign. .. Courtelis also sat on IBP's board of directors and was responsible for bringing Wendy Gramm onto IBP's board.While no one has accused Mrs. Gramm or anyone else of breaking any laws, the IBP case nonetheless shows how questions can arise when a candidate's spouse is appointed to a well-paying corporate directorship and when that company helps promote the husband's candidacy.
Small potatoes. There was another corporation where Wendy Gramm sat as a director. And its name was Enron.
Lessons of the Past and for the Future
On the one occasion that Phil Gramm and wife, Wendy paired up, the scale of the damage that followed was absolutely stunning, especially for the investors who lost more than $60 billion in the spectacular collapse of Enron.
The Village Voice, citing a report by a non-profit research organization, Public Citizen, explains the dubious Gramm involvement in the Enron affair.
In an apparent response to a 1992 plea from Enron, Dr. Wendy Gramm, then chair of the federal Commodity Futures Trading Commission, moved to exempt the company's energy-swap operation from government oversight. By then, the Houston-based Enron was a major contributor to Senator Gramm's campaign.
This decision also came about after intense lobbying by Koch Industries, several oil companies, and Wall street speculators. This group has formed a coalition called “The Energy Group” which pressed the CFTC to allow oil derivatives to be traded outside of government regulation. As Think Progress notes:
On the final day of the [George H.W.] Bush administration, January 21, 1993, [CFTC chairwoman] Wendy Gramm … approved the rule exempting key energy futures contracts from government regulation and returned a great chunk of the energy market to the grand old days of unregulated futures trading,” writes author Antonia Juhasz in the book Tyranny of Oil. The move mirrored the demands made by Koch’s lobbying coalition, The Energy Group.
One might think that Wendy Gramm would have wanted to take a break from all that scheming. One would be wrong. The audacity of Phil Gramm is second only to his wife.
A few days after she got the ball rolling on the exemption, Wendy Gramm resigned from the commission. Enron soon appointed her to its board of directors, where she served on the audit committee, which oversees the inner financial workings of the corporation. For this, the company paid her between $915,000 and $1.85 million in stocks and dividends, as much as $50,000 in annual salary, and $176,000 in attendance fees, according to a report by Public Citizen, a group that has relentlessly tracked Enron, which in turn has called the report unfair.
Meanwhile Enron had become Phil Gramm's largest corporate contributor—and according to Public Citizen, the largest across-the board donor in its industry. Between 1989 and 2001, the company tossed Gramm just under $100,000. In 1998, Wendy Gramm cashed in her Enron stock for $276,912. There's nothing unusual about a Washington regulator quitting the government and going to work for a private company she was regulating. And people often get rich in the process. Wendy Gramm, whose office didn't return Voice calls, has told reporters she sold the stock expressly to avoid any hint of a conflict of interest.
So, to recap: wearing her hat as a regulator, she gives one company an exemption, and then quits her job and becomes a director in that company. That company then delivers a contribution to her husband and then she quits before the whole she-bang collapses, with a tidy profit from her stock sell-out. Is that how this pretty little scheme worked?
By cashing out at this time- using the alibi of conflicts of interest, Gramm was able to profit just before Enron collapsed.
When Enron went over the cliff, the Gramms even portrayed themselves as victims: Wendy’s stand on her imaginary moral high ground led her to sell before Enron’s price peaked, they whined, so she forfeited some potential profits. Enron employees lacking Gramm’s finely tuned ethics, and the rest of the investing public lacking her inside knowledge of the company’s twisted finances, were left holding worthless paper.Astounding, isn’t it? But the Voice article has even more:
But that's not the end of the story. In June 2000, Senator Gramm co-sponsored the Commodity Futures Modernization Act, a measure aimed at deregulating certain kinds of futures trading, but not energy futures. That bill never made it to the floor, and thus quietly died.
Six months later, on December 15, Gramm curiously turned up as co-sponsor of a bill with the same name, the Commodity Futures Modernization Act, which did deregulate energy futures and which, without undergoing the usual committee hearings and preliminary votes, was immediately attached as a rider to an 11,000-page appropriations bill. It passed and was signed into law by President Bill Clinton six days later. Few lawmakers had likely perused the rider carefully, if they even knew it was there. And at any rate, Enron had given to the campaigns of over 200 legislators.So apparently, Phil Gramm successfully slipped this crafty bit of legislation unnoticed by other members of Congress or the president. In the end, some cheap imitation of justice was offered to the public. Wendy Gramm did not escape unscathed.
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Enron directors FIRSTROW, FROM LEFT, Ken L. Harrison, John A. Urquhart, Robert A. Belfer, Norman P. Blake, Jr., Robert K. Jaedicke, Ronnie C. Chan, Jeffrey K. Skilling, Kenneth L. Lay and Wendy L. Gramm. Second Row, from left, Bruce G. Willison, John H. Duncan, Joe H. Foy, Charles E. Walker, John Wakeham, Jerome J. Meyer, Herbert S. Winokur, Jr. and Charles A LeMaistre. |
Speaking to the BBC regarding the Enron scandal, Robert McCullough - a consultant from Oregon and a professor at Portland State University- drew a parallel to events of the past. The emerging shape of the Enron scandal was almost identical to one of 70 years ago, which prompted the setting up of the first regulators to govern the way companies report their performance, he said. Following the collapse of Anglo-American innovator and investor Samuel Insull’s financial empire during the Great Depression,
The US set up the Securities and Exchange Commission to regulate companies' financial reporting. "At the time, regulatory practices were set in force to avoid its repetition," Mr McCullough said. "Their enforcement has been eroded over the intervening years, and today we are almost exactly reproducing that scandal. That regulation had been chipped away to the point where it is no better than it was in the 1920s, Mr McCullough said.
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| Enron's Compensation (courtesy of Public Citizen) |
Future historians will most likely look back at the Enron collapse as merely a small-scale rehearsal of the financial meltdown of 2008. Some analysts have said that Enron was a wake-up call in our era of postmodern capitalism, if so, clearly somebody hit the snooze button. The same elements were in play, corporations taking substantial risks, cooked books to hide losses and secret partnerships with those paid to oversee operations. Behind both of these disgraceful episodes, Senator Phil Gramm and his helpful wife. However, with Enron, it was the investors that lost their life savings, with the later events, it was to be the entire financial system of the West that took the blow.
How Quaint the Ways of Paradox
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| Joshua Lee, wife, and children |
Returning to the life of Wendy Gramm’s father, the sugar plantation worker turned vice-president of the company, a glaring paradox emerges.
Conditions on the sugar plantation where he grew up and worked were every bit as dire as any Brazilian slum of today. It was only through the concerted unionization of workers, culminating in the Great Sugar Strike of 1946 that conditions improved.
Before 1946, Hawai‘i's economy, politics and social structures were completely dominated by a corporate elite known as the Big Five (Alexander & Baldwin, American Factors, Castle & Cooke, C. Brewer, & Theo. Davies). The leaders of these factor companies exercised absolute control over Hawai‘i's plantation workers and the majority of the islands multi-ethnic workforce. The 1946 strike forever changed the balance of power between workers and the plantations. No longer would living and working conditions be set unilaterally by the plantation owners or their parent corporations..
The legacy of the great Hawaiian sugar strike of 1946 is the success we can see today of Hawai‘i's multi-ethnic workforce to bridge ethnic differences and build trust based on worker solidarity. Hawai'i's diverse workforce united in 1946 and began for the first time to form a single working class culture, unique to Hawai'i. Like today, the issues of housing, medical care, pensions and wages were key issues for the 1946 sugar workers. Previously the quality of housing, medical care and old-age pensions depended upon the whim of individual plantations. As a result of the 1946 sugar strike, the ILWU negotiated a new era for labor relations, establishing these important issues as contractual rights of workers, rather than as favors the plantations could wield to force worker compliance. Thus, the 1946 sugar strike is an event whose impact reaches beyond the sugar fields, into the lives of every worker in Hawai‘i.
Interestingly, according to an oral history interview conducted with Wendy Gramm’s father back in 1976, Joshua Lee recounts how, during the Great Depression, he found work through a government-sponsored work program. The National Youth Administration (NYA) was a New Deal agency in the United States that focused on providing work and education for Americans between the ages of 16 and 24. Without that offer of support at a crucial time in his life, it is possible that Wendy’s father might not have been able to better himself and allow his family the stability they needed to rise out of poverty.
Given her family history, one can only speculate how Dr. Wendy Gramm- who owes much to both unions and to government regulations and social programs, can reconcile her work on behalf of exploitative corporations. I suppose she has not given it a moment’s thought.
After all, she’s a very busy woman.
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In the fourth- and last part of this investigation, we shall be taking a close look at Wendy’s ties to Rick Perry, their shared friends, and shared interests.
To Continue to PART FOUR
