1. In April, 1993, the CFTC, headed by Wendy Gramm, exempted a variety of over-the-counter energy derivatives transactions from some requirements under the commodity exchange act. This was part of a broader effort by the CFTC to eliminate legal uncertainty for over-the-counter transactions. The actions involving energy derivatives followed other CFTC actions involving OTC interest rate and currency derivatives. The CFTC granted no special favors to the energy industry in general or Enron in particular. The regulations in question had their origins in the 1920s and were completely inappropriate to modern financial markets.
2. Enron wasn't Enron in 1993. That is to say, it wasn't nearly as big, important, and influential back then. There is little reason to believe that the CFTC was unduly influenced by Enron. A lot of other firms favored the new regulatory structure.
3. Wendy Gramm's "big money job" in 1993 was $22,000 in director's compensation.
4. In 2000, Congress passed the Commodity Futures Modernization Act of 2000. This also revised the regulatory structure for energy and other OTC derivatives. Phil Gramm was involved in this as head of the Senate Banking Committee. So was Richard Lugar, head of the Senate Ag Committee (which has jurisdiction over the CFTC). It was passed as an attachment to a budget bill.
5. There is no evidence whatsoever that Enron's collapse was connected in any way to the 1993 exemptions or the 2000 Modernization Act. Enron didn't collapse because it speculated wildly in energy derivatives. It collapsed in large part because it speculated wildly in bandwidth, water, and foreign power plants. Although Enron is known primarily as an energy company, its demise is more directly attributable to the collapse of the telecom sector (think Lucent, Global Crossing, and on and on) than anything involving the energy markets or the regulation thereof.
I have little sympathy for Wendy Gramm. She headed the audit committee of a company whose audits were a sham. For this she should be held accountable. However, these dark hints that she participated in a conspiracy to change regulations to favor a firm that subsequently rewarded her seem wide of the mark. The regulatory changes were defensible--indeed, they were correct. What happened subsequently is a different story altogether. She failed in her responsibilities as a director.
In 1998, Wendy Gramm cashed out over $280,000 of stock options that Enron awarded her for serving on the the Enron Board of Directors.
That means it's an F for you "financeprof".