Those of you worrying on Wall Street, please do not be distracted by the president’s apparent assault. He’s still got your back. With the push beginning Monday to push through a “cap-and-trade” energy tax and rationing scheme—without committee hearings and possibly, according to Harry Reid, even using “reconciliation” again—your big “ask” appears to be in better shape than ever for being crammed down on the rest of us.
Consider this excerpt from “Power Grab: How Obama’s Green Policies Will Steal Your Freedom and Bankrupt America,” released this week by Regnery (citations are omitted).
I write this from the perspective of having served very briefly and with an unhappy ending as Director of Federal Government Relations for a little company called Enron. They told me my top priority was a global warming treaty and cap-and-trade scheme (for reasons detailed in Power Grab), and they had worked out a great scheme with Goldman Sachs to make a bundle off of the ensuing scarcity. I asked questions they didn’t like and that was that. So here’s this:
Wall Street and finance players [are] calling for a “new playground,” which is how one European carbon trader famously described the EU Emissions Trading Scheme to a reporter—the cap-and-trade program which Europe now admits did not cut emissions, but did raise the cost of everything while providing some windfalls for well-connected industries. Carbon traders, of course, are parasitic, feeding off this creature of the state, not creating new wealth, but siphoning it off by the imposition of an economic inefficiency.
The Wall Street Journal cited an estimate by the broker Raymond James & Associates and claimed that, “Assuming federal cap-and-trade legislation passes the Senate, exchanges could reap $200 million or more in annual revenue from the market.” That is siphoned-off productive economic activity, in the name of changing the climate (which it will not do), while advancing the belief that the government can create economic growth by adding inefficiencies.
The recent economic rubble was brought down on us by the Wall Street derivatives-types gaming different, while at the same time highly similar, federal programs designed to advance an ideology. As already noted, even the pressure group Friends of the Earth warned that the cap-and-trade payoff to Obama’s pals was scripting a replay of the recent market meltdown, calling it “Subprime Carbon.”
As the traders climbed out from under the mess in March 2009, several grabbed reporters to tout cap-and-trade as their next big thing. Illuminating comments included that there are “bucks to be made,” “I can see nirvana coming,” and this will be the traders’ new, “huge playground.”
It is surely a coincidence that the banks most heavily leveraged in the carbon scheming led the way down in late 2008. Iconoclastic UK journalist Brendan O’Neill called on us to also remember that the green-industrial complex’s business interests played a role in bringing about the recession. The company whose collapse precipitated the credit crunch, Lehman Brothers, enthusiastically embraced the idea of carbon trading, which is held up by all members of the green-industrial complex as the way forward. In its 2007 report, The Business of Climate Change: Challenges and Opportunities, Lehman expressed hope that it might become a “prime brokerage for (carbon) emissions permits”, meaning it aspired to make money not only from speculating in mortgages but also from trading in thin air. Lehman was inspired by European carbon-trading schemes.
Lehman was the bank for Al Gore’s schemes, led by the green activist and Gore partner Theodore Roosevelt IV.
As Australia’s indefatigable Joanne Nova detailed in “Climate Money,” “carbon trading” worldwide reached $126 billion in 2008. Banks are now calling for laws to coerce us into more carbon-trading, which experts predict will make “hot air” the largest single commodity traded, absorbing anywhere from $2 to $10 trillion.
Rachel Morris wrote a detailed piece on this boomlet in the left-wing Mother Jones magazine, titled “Could Cap and Trade Cause Another Market Meltdown?” with the subhead: “The same Wall Street players that upended the economy are clamoring to open up a massive market to swap, chop, and bundle carbon derivatives.”
Cap and trade would create what Commodity Futures Trading commissioner Bart Chilton anticipates as a $2 trillion market, “the biggest of any [commodities] derivatives product in the next five years.” That derivatives market will be based on two main instruments. First, there are the carbon allowance permits that form the nuts and bolts of any cap-and-trade scheme.… In addition to trading the allowances and offsets themselves, participants in carbon markets can also deal in their derivatives—such as futures contracts to deliver a certain number of allowances at an agreed price and time.
By biggest, do we also mean this fictional “market” is thus “too big to fail”? For fail, it certainly will. Like the Fannie/Freddie mess, this too will have been created by the state, and therefore surely would be bailed out by the taxpayer.
So it fell to a nominee to the Federal Energy Regulatory Commission to tell a Senate committee that it might take 1,400 new bureaucrats to oversee the carbon-trading market that the House’s climate change bill seeks to establish.
With banks like J.P. Morgan and Goldman Sachs running with this scheme cooked up in great part by Enron (with the able counsel of Goldman) in the 1990s, the Financial Times commented, “It is perhaps not surprising, therefore, that so many carbon traders used to work at Enron. Louis Redshaw, who is now the head of environmental markets at Barclays Capital, spent four years working for Enron in London and set up its renewable energies desk. Enron alumni have also ended up on trading desks at other investment banks.”
So don’t cry for Wall Street. The Obama administration and Democratic Party are about to give them what the carbon fat cats have long pined for. What could possibly go wrong?
Christopher C. Horner serves as a Senior Fellow at CEI.