Full Senate Fails First Enron Reform Test, Rejects Feinstein Derivatives Amendment
House Financial Services Committee Next Test
Statement of Ed Mierzwinski, Consumer Program Director

We are extremely disappointed that the U.S. Senate rejected the bi-partisan Feinstein-Fitzgerald derivatives amendment to the energy bill today by a vote of 48-50 (60 votes needed to end debate and proceed with the amendment). Consumers and investors as well as employees and taxpayers need tough laws and tough rules to guarantee that their investments are protected. The Senate failed the first major test of whether Congress is going to enact Enron reforms, or just wring its hands and stick with business as usual.

The amendment offered today by Senators Feinstein (D-CA), Fitzgerald (R-IL), Cantwell (D-WA), and Wyden (D-OR) would have repealed certain provisions of the Commodity Futures Modernization Act, enacted in 2000 with strong support from Senator Phil Gramm (R-TX), former Senate Banking Committee chairman. That legislation exempted energy and minerals trading and electronic trading platforms from regulatory oversight. Enron Online and others in the energy sector took advantage of this new loophole by trading energy derivatives absent any regulatory oversight or transparency. As a result, about 90% of energy trades representing purely financial transactions escape regulation by either the Federal Energy Regulatory Commission (FERC) or the Commodity Futures Trading Commission (CFTC).

Enron used over-the-counter derivatives extensively in order to hide just what it was doing to make money. Far too many former employees, investors and retirees are now paying the price for Enron's desire to operate through murky, confusing, and unregulated transactions. The Feinstein-Fitzgerald Amendment would have restored necessary transparency and oversight to the financial marketplace by adding registration, reporting and capital requirements to energy derivatives trading and restoring anti-fraud authority of the CFTC.

According to a report by the state PIRGs' Enron Watchdog campaign, nine industry associations publicly opposing the Feinstein amendment have spent $46 million on lobbying in 2000 and the first half of 2001 alone. These industry associations have also given more than a million dollars in PAC contributions to Senate candidates and contributed more than $1.7 million in soft money in the 1999-2000 and 2001-2002 election cycles. The associations opposing the amendment include the American Bankers Association, Securities Industry Association, International Swaps and Derivatives Association and the U.S. Chamber of Commerce. See www.EnronWatchdog.org later today for an updated PAC analysis on the Feinstein vote.

On Thursday, Congress will take another test on Enron Reform. The House Financial Services Committee will vote on a very weak accounting reform bill, HR 3763-Oxley (R-OH), which fails to establish the strong auditor independence and oversight mechanisms needed to prevent future Enrons. Committee members should support strengthening amendments by John LaFalce (D-NY) and other sponsors of the consumer-supported alternative accountant reform bill, HR 3818. Consumers, investors, employees and taxpayers deserve better than what the Senate gave us today.

More information about the PIRGs Enron Watchdog Campaign, including a 4/11/02 letter from leading consumer groups to the House Financial Services Committee, can be found at www.EnronWatchdog.org. More information about the PIRGs Campaign for A New Energy Future can be found at www.NewEnergyFuture.com.