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Chris Hayes had a nice piece not long ago about President Obama’s nomination of Gary Gensler to head the Commodity Futures Trading Commission (CFTC). A long-time employee of Goldman Sachs, Gensler served at the Treasury Department as an assistant secretary during the Clinton years. While there, he “shared the prevailing deregulatory ethos” on derivatives” along with Robert Rubin, Larry Summers and Alan Greenspan (not to mention Phil Gramm), Hayes wrote. “On the biggest issue of commodity futures regulation in the past decade, he was a star player on the team that got it exactly wrong.”
The New York Times editorial board found Obama’s nomination of Gensler “troubling.” Iowa Senator Tom Harkin, who chairs the Agriculture Committee, which has jurisdiction over Gensler’s nomination, released a statement saying that he is “concerned about the deregulatory orientation in this nominee’s past.” And fellow committee member Bernie Sanders issued this terse statement: “It is imperative that we not continue the same mistaken policies that got us into this mess in the first place. I have real concerns.”
What’s received less attention is Gensler’s role overseeing the disastrous privatization of the United States Enrichment Corporation (USEC). Several years after it was sold, Gladys Kessler, a U.S District Judge, said that the USEC board’s discussions about the matter “were ‘model’ only insofar as they were a model of what not to do when considering various options for privatizing a federal entity.”
In the mid-1990s, the USEC was a government-owned corporation responsible for enriching uranium for domestic nuclear power plants. USEC purchased uranium from Russia and operated two enrichment plants in the U.S. Congress authorized USEC’s privatization in 1996, but said it could only proceed if eight strict “preconditions” were met. From his post at Treasury, Gensler was charged with supervising the privatization, which was eagerly sought by Wall Street.
Critics — among them the Council on Foreign Relations, uranium mining industry leaders and unions, and numerous prominent economists, including Joseph Stiglitz — predicted that there would be an inherent conflict between the public interest and USEC’s goals as a profit-seeking private firm. Gensler downplayed the risks and pushed ahead with privatization, even though critics continued to warn that the conditions attached to the deal could not be met. In July of 1998, USEC was sold for $1.8 billion. (Incidentally, a number of USEC insiders did quite well on the privatization, as did J.P. Morgan, which netted $12.5 million in fees as USEC’s financial consultant.)
In the end, seven of the eight conditions for USEC’s sale were not met. USEC pledged to keep open its two uranium enrichment plants until at least 2005, but closed one of them four years before that due to shareholder pressure. That forced the government to step in with an infusion of $380 million to keep the plant on “cold standby” in case uranium supply from Russia was disrupted.
The Department of Energy had to shell out another $325 million when the price of uranium collapsed following privatization – exactly as the critics had warned – and Russia suspended sales to the U.S. DoE’s money was used to buy large quantities of Russian uranium and keep it off the market for ten years, thereby propping up the price. And just last year, USEC applied for a $2 billion federal loan guarantee to help underwrite a new uranium enrichment plant.
Another precondition of privatization was that USEC would ensure a reliable source of domestic uranium. Yet today only 25 percent of the U.S. nuclear industry’s fuel needs are met from domestic sources.
Privatization was also supposed to ensure the long-term economic viability of USEC. Advocates for privatization promised to move forward rapidly with AVLIS, a new laser enrichment technology, which one insider said would “be the method by which this company stays viable.” Eleven months after USEC was privatized, management announced that it was scrapping the technology. USEC’s share price is currently $5.90, down from $14.50 at the time of the sale. A portion of USEC’s debt is rated CCC, or junk level.
A decade after the sale, only one of the eight preconditions for USEC’s privatization was clearly met: USEC is not “owned, controlled, or dominated” by foreigners.
(Research assistance from Sam Fellman)
More from Ken Silverstein:
Commentary — November 17, 2015, 6:41 pm
The Clintons’ so-called charitable enterprise has served as a vehicle to launder money and to enrich family friends.
In Havana, the past year has been marked by a parade of bold-faced names from the north — John Kerry reopening the United States Embassy; Andrew Cuomo bringing a delegation of American business leaders; celebrities ranging from Joe Torre, traveling on behalf of Major League Baseball to oversee an exhibition game between the Tampa Bay Rays and the Cuban national team, to Jimmy Buffett, said to be considering opening one of his Margaritaville restaurants there. All this culminated with a three-day trip in March by Barack Obama, the first American president to visit Cuba since Calvin Coolidge in 1928. But to those who know the city well, perhaps nothing said as much about the transformation of political relations between the United States and Cuba that began in December 2014 as a concert in the Tribuna Antiimperialista.
Estimated portion of registered voters in Zimbabwe who are dead:
Honeybees can recognize individual human faces.
Pope Francis announced that nuns could use social media, and a priest flew a hot-air balloon around the world.
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“Matt was happy enough to sustain himself on the detritus of a world he saw as careening toward self-destruction, and equally happy to scam a government he despised. 'I’m glad everyone’s so wasteful,' he told me. 'It supports my lifestyle.'”