The Bush Dynasty and the Rise of Enron – Part II

The following is an excellent excerpt from the book “AMERICAN DYNASTY: Aristocracy, Fortune, and the Politics of Deceit in the House of Bush” by Kevin Phillips from Part II: Crony Capitalism, Covert Operations, and Compassionate Conservatism” from Chapter 5: The Enron-Halliburton Administration” on page 160 and I quote: “In formulating his major overhaul of Texas state taxes, Bush seems to have been very much influenced by Enron. Company president Richard Kinder served on the seventeen-member committee that recommended a $3 billion program easing taxes on capital-intensive industries (like natural gas and petrochemicals) and making up the revenue in part by shifting the burden onto services and professionals.
Other important early guidance on tax policy seems to have come from former deputy treasury secretary Charls Walker, an old friend of [Kenneth] Lay’s. Walker’s brother Pickney, an economist and former member of the Federal Power Commission, had been the Enron chiefs original Washington mentor. Charls Walker, himself a longtime Enron director and lobbyist, doubled as the chairman of the American Council for Capital Formation, a Washington group funded by capital-intensive industries, including Texaco, Shell, Exxon, and Enron. Although Bush’s tax package failed in the legislature in 1997, it followed the Enron-Walker outline, and one reporter noted that “his willingness to advocate Walker’s position indicates the kind of consideration Bush gave to Enron’s point of view.”
On the international front, meanwhile, the Dabhol plant project–far and away the biggest foreign investment India had ever allowed–had been followed by a dozen other ventures, making Enron the closest thing to a global utility and energy-trading firm. Besides building a natural gas and electricity market in Europe, Enron also owned all or portions of power plants in Latin America (Brazil, the Dominican Republic, Guatemala, Nicaragua, and Panama), as well as in India, China, the Phillipines, Guam, and Turkey; natural gas pipelines in Argentina, Bolivia, Brazil, and Columbia; and the Elektro electric utility and transmission grid in Brazil.
The speed and success of this huge agglomeration can be explained in two words: crony capitalism. Over the course of a single decade, government agencies, both American and foreign, gave Enron $7.2 billion in publicly funded financing for thirty-eight projects in twenty-nine countries. The World Bank provided $760 million but also aided Enron’s cause by pressuring third-world countries to privatize their economies. In the words of one report, “The World Bank would issue loans for the privatization of the energy or the power sector in a developing country and make this a condition of further loans, and Enron would be among the first, and often the most successful, bidders to enter the country’s newly privatized or deregulated energy markets.” The U.S. Export-Import Bank and Overseas Private Investment Corporation together funded twenty-five Enron power projects with $3.7 billion in loans and insurance. The Inter-American Development Bank loaned $751 million, and the Asian Development Bank, $26 million. Nations, development banks, and agencies elsewhere in the world produced an additional $1.9 billion to support Enron expansion.
Domestically, Enron’s sales and profits appeared to be doubling every few years during the mid-nineties as energy and futures deregulation opened novel opportunities for trading, marketing, and speculation. At the end of 1993, there were only 11 power-marketing companies or “merchants” in the United States; by early 1995, there were 69; and by early 1997, there were 284–and Enron was the biggest. Wholesale-type marketing of power to industrial customers got the commercial ball rolling, after which retail deregulation at the state level speeded evolution in the marketplace.
California was the first to open its electricity market, in early 1998, and six more states followed by early 1999. By late 2000, the tally had grown to twenty-four states. The volume of electricity traded nationally climbed slowly in 1995 and 1996, followed in 1997 by a surge that somewhat paralleled the speculative bubbling of the NASDAQ stock market index. One can reasonably hypothesize, in somewhat similar terms, a turn-of-the-century energy marketing and trading bubble.
Besides trumpeting Enron-modeled electricity deregulation in Texas, George W. threw his support behind the company’s nationwide lobbying campaign to restructure and open up as many other states as possible. In 1997, Bush telephoned Pennsylvania governor Tom Ridge to convince him that the state would benefit by letting Enron and the marketers in. Shortly thereafter, Pennsylvania deregulated. In Texas, where some officials did not agree with the Enron blueprint, Lay himself got involved. According to Enron lobbyist George Strong, “We’d call Houston and ask Lay to call the governor and explain our position.” Other corporate executives had access to Bush, Strong said, but from the Houston standpoint, Lay had better access to Bush than just about anybody.” The legislature eventually passed electricity deregulation in 1999.
By the end of the 1990s, the Houston firm had become a major political power in Texas and Washington alike. Beginning in 1993, Enron climbed to the top of the list of corporate federal campaign contributors in the energy-natural resource sector, giving a total of $5.3 million to federal candidates for 1993 to 2001–40 percent more than the number two company on the list. In 1999 and 2000, Enron’s in-house lobbyists spent $3.4 million promoting a deregulation agenda in Congress, and the salaries of those registered came to nearly $1.6 million. At its peak, the company’s Washington office staff was over one hundred strong, including former aides to House majority leader Dick Armey and the wife of House majority whip Tom DeLay. When this kind of money spoke, national and state legislators listened.
Enron also poured money into home-state politics. During the 1997-98 and 1999-2000 election cycles, the firm moved $1,003,273 to Texas political action committees and state politics, as well as spending $4.8 million on eighty-nine Texas lobby contracts. Of the money spent on state candidates, George W. Bush got $238,000; Lieutenant Governor Rick Perry, $187,000; and Attorney General John Cornyn, $159,000. Texas also elects judges, and justices of the Texas Supreme Court received $134,958 from Enron between 1993 and 2000, making it the court’s single largest corporate donor. The bulk of these outlays, virtually all to Republicans, came in 1996, the year that the justices would reverse a lower court decision, thereby slashing $15 million off the inventory taxes that Enron owed to the Spring, Texas, school district.
During the 1997-2000 election cycles, Enron, like other power merchants, maximized its contributions to local candidates in states where statewide electricity deregulation was in the forefront of debate. The industry totals for the two cycles were roughly $20 million. No comprehensive nationwide total was released for Enron alone, but the National Institute on Money in State Politics found that in the 1999-2000 cycle, the firm gave more than $419,000 to local candidates in nineteen states. The spigot was especially wide open in three: California ($142,880) and Texas ($107,650), states that had enacted deregulation; and Florida ($67,000), which was studying the idea.
By 2000, federal issues were once again on Enron’s front burner. Trouble was brewing in India, where Lay needed assistance from Washington to pressure the Indian government to pay for a Dabhol project that, after Enron outlays of $900 million, had worn out its welcome. There were multiple reasons for the plant’s failure: alleged company human rights violations; electricity production that was so expensive the Indians stopped paying; the bankruptcy of the local state utility board; and refusal by the World Bank to support Enron. Without help and luck, the project could well be a write-off.
In California, where electricity deregulation was off to a rocky start, a supportive Federal Energy Regulatory Commission might soon be vital in upholding the practices of Enron and the other power merchants. On the dicey futures-trading front, Lay was pushing for a full federal deregulation that would exclude companies like Enron from both the Commodity Exchange Act and the not-always-clear jurisdiction of the Commodity Futures Trading Commission. Last but hardly least, hundreds of the hidden subsidiaries and partnerships set up to camouflage Enron’s debt and inflate its profits–soon-to-be-famous entities like Chewco, Osprey, and LJM Cayman L.P.–were based in the Cayman Islands, a prominent overseas tax haven. This secrecy was threatened by the Clinton administration’s proposal to apply economic sanctions to tax havens that did not reform their disclosure procedures before July 2001.
For all these reasons, Enron made its biggest-ever effort on behalf of a White House candidacy. Lay and Enron combined would provide George W. Bush’s biggest contribution, with Vinson and Elkins, Enron’s Houston law firm, not too far behind. Enron aircraft were placed at Bush’s disposal, although the cost of their use had to be reimbursed by his campaign. Lay became one of Bush’s early “Pioneers”–fund-raisers who had raised $100,000 or more–and Enron and his executives also gave $713,200 to the Republican National Committee.
Indeed, the fruits of the larger reach of Enron influence–donations to George W. Bush in 2000 by the Texas energy firm’s bankers, investors, insurers, and accountants–were also juicy, although these contributors had other reasons for giving. A subsequent study of U.S. donations in the 2000 campaign compiled in Enron-loathing India found that fully half of Bush’s twenty largest donors had major ties to Enron.
When the election wound up in the courts, Lay doubtless breathed a sigh of relief as the Bushes called in the A-Team: James A. Baker III, the ex-secretary of state who had traveled the world for Enron, and his long-time lieutenant, Robert Zoellick, also an Enron adviser. Baker and Zoellick, sometimes called “Baker’s Second Brain,” earned their pay, and it was later revealed that Enron had been a major contributor to funding the Republican support team in the Florida recount.
In Texas, Enron had provided $50,000 for the 1995 gubernatorial inaugural and a second $50,000 for the 1999 follow-up. For the 2001 festivities in Washington, Ken Lay’s apparent money machine produced $300,000. When the ceremonies were over and the Bush White House opened for business on Tuesday morning, Enron may have had more influence than any single company had previously commanded in a new administration. The surprise was that it turned out not to be enough.”
“Despite their years in the political limelight, the Bushes are the family nobody knows–so contends Kevin Phillips, onetime Republican strategist and one of the country’s premier political and economic commentators. The cozy imagery of Maine summer cottages, a gray-haired national grandmother, and cowboy boots had emphasized comforting family values. It has also distracted us from the fact that the Bush family has used all its resources to create a political dynasty that has gained the White House to further its family and ideological agenda, which would have horrified America’s founding fathers. They, after all, led a revolution against a succession of royal Georges.
In this biting book, Phillips reveals how four generations of Bushes, beginning with the original alliance between George Herbert Walker and Samuel P.Bush, have ascended the ladder of national power since World War I, solidifying their place in the American establishment–at Yale; on Wall Street; in the Senate, the CIA, the vice presidency, and the White House. The Bush family has never produced a doctor, judge, teacher, scholar, or lawyer of note. As far back as World War I, the family’s single-minded focus has been on three major areas: intelligence, energy, and national security. It is no coincidence that these three categories of Bush family operations were also three of the key enterprises of the American twentieth century.”
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran


About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog ( and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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