CFTC Chair Wendy Gramm Exempts Enron from Derivatives Regulation, Joins Board Five Weeks Later

On her final day as Chair of the Commodity Futures Trading Commission, Wendy Gramm approves a regulatory exemption allowing Enron to trade energy derivatives without CFTC oversight. The exemption, granted on January 14, 1993 (some sources cite January 21, the final day of the George H.W. Bush administration), removes energy derivatives from federal regulation, creating what would later be known as the “Enron loophole.”

Just five weeks after granting this exemption and resigning from the CFTC, Wendy Gramm joins Enron’s board of directors, where she serves on the audit committee. Between 1993 and 2001, Enron pays Gramm between $915,000 and $1.85 million in salary, attendance fees, stock options, and dividends. Her husband, Senator Phil Gramm of Texas, receives over $97,000 in campaign contributions from Enron during the same period, making Enron the biggest donor to his political campaigns.

This sequence represents one of the most brazen examples of the regulatory revolving door in American history: a regulator grants a sweetheart exemption to a company, immediately resigns, and within weeks takes a lucrative board position at the same company. The derivatives exemption Wendy Gramm created would be expanded through her husband’s 2000 Commodity Futures Modernization Act, which explicitly prohibited federal and state regulation of energy derivatives. Enron would exploit these loopholes to manipulate energy markets, leading to the 2001 California energy crisis and Enron’s eventual collapse, wiping out billions in shareholder value and employee pensions.