Washington Babylon — February 17, 2009, 9:00 am

Obama Nominee’s Past Includes Botched Privatization of Uranium Company

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)

Share
Single Page

More from Ken Silverstein:

Commentary November 17, 2015, 6:41 pm

Shaky Foundations

The Clintons’ so-called charitable enterprise has served as a vehicle to launder money and to enrich family friends.

From the November 2013 issue

Dirty South

The foul legacy of Louisiana oil

Perspective October 23, 2013, 8:00 am

On Brining and Dining

How pro-oil Louisiana politicians have shaped American environmental policy

Get access to 165 years of
Harper’s for only $45.99

United States Canada

CATEGORIES

THE CURRENT ISSUE

May 2017

Facing the Furies

= Subscribers only.
Sign in here.
Subscribe here.

The New Climate

= Subscribers only.
Sign in here.
Subscribe here.

A Dream Preferred

= Subscribers only.
Sign in here.
Subscribe here.

Snowden’s Box

= Subscribers only.
Sign in here.
Subscribe here.

American Duce

= Subscribers only.
Sign in here.
Subscribe here.

A Prayer’s Chance

= Subscribers only.
Sign in here.
Subscribe here.

view Table Content

FEATURED ON HARPERS.ORG

Article
Snowden’s Box·

= Subscribers only.
Sign in here.
Subscribe here.

Mrs. B’s Baby Village Day Care was on a frontage road between a mattress wholesaler and a knife outlet. There were six or so babies as regulars and another one or two on weekends when their parents were passing through looking for work. They wouldn’t find work, of course, all the security positions were full, the timber and ore had all been taken under the active-stewardship program, and the closest new start-up industry was the geothermal field hundreds of miles away. Mrs. B didn’t even bother to write those babies’ names down in her book. It was fifteen dollars a day and they had to be in reasonable health. Even so the occasional mischievous illness would arise and empty the place out.

Illustration (detail) by Taylor Callery
Post
The Forty-Fifth President·

= Subscribers only.
Sign in here.
Subscribe here.

Mrs. B’s Baby Village Day Care was on a frontage road between a mattress wholesaler and a knife outlet. There were six or so babies as regulars and another one or two on weekends when their parents were passing through looking for work. They wouldn’t find work, of course, all the security positions were full, the timber and ore had all been taken under the active-stewardship program, and the closest new start-up industry was the geothermal field hundreds of miles away. Mrs. B didn’t even bother to write those babies’ names down in her book. It was fifteen dollars a day and they had to be in reasonable health. Even so the occasional mischievous illness would arise and empty the place out.

Photograph (detail) by Philip Montgomery
Article
A Prayer’s Chance·

= Subscribers only.
Sign in here.
Subscribe here.

Mrs. B’s Baby Village Day Care was on a frontage road between a mattress wholesaler and a knife outlet. There were six or so babies as regulars and another one or two on weekends when their parents were passing through looking for work. They wouldn’t find work, of course, all the security positions were full, the timber and ore had all been taken under the active-stewardship program, and the closest new start-up industry was the geothermal field hundreds of miles away. Mrs. B didn’t even bother to write those babies’ names down in her book. It was fifteen dollars a day and they had to be in reasonable health. Even so the occasional mischievous illness would arise and empty the place out.

Photograph (detail) by Robin Hammond/NOOR
Article
Bee-Brained·

= Subscribers only.
Sign in here.
Subscribe here.

Mrs. B’s Baby Village Day Care was on a frontage road between a mattress wholesaler and a knife outlet. There were six or so babies as regulars and another one or two on weekends when their parents were passing through looking for work. They wouldn’t find work, of course, all the security positions were full, the timber and ore had all been taken under the active-stewardship program, and the closest new start-up industry was the geothermal field hundreds of miles away. Mrs. B didn’t even bother to write those babies’ names down in her book. It was fifteen dollars a day and they had to be in reasonable health. Even so the occasional mischievous illness would arise and empty the place out.

Illustration (detail) by Eda Akaltun. Source photograph of Jairam Hathwar at the 2016 Scripps National Spelling Bee © Pete Marovich/UPI/Newscom
Article
My First Car·

= Subscribers only.
Sign in here.
Subscribe here.

Mrs. B’s Baby Village Day Care was on a frontage road between a mattress wholesaler and a knife outlet. There were six or so babies as regulars and another one or two on weekends when their parents were passing through looking for work. They wouldn’t find work, of course, all the security positions were full, the timber and ore had all been taken under the active-stewardship program, and the closest new start-up industry was the geothermal field hundreds of miles away. Mrs. B didn’t even bother to write those babies’ names down in her book. It was fifteen dollars a day and they had to be in reasonable health. Even so the occasional mischievous illness would arise and empty the place out.

Illustration by Katherine Streeter

Percentage of Russians who believe the West is attempting “to weaken Russia with its economic advice”:

54

African elephants can distinguish the gender, age, and ethnicity of a human speaker from voice alone.

Three bodies were tossed from a low-flying plane in the Sinaloa state of Mexico.

Subscribe to the Weekly Review newsletter. Don’t worry, we won’t sell your email address!

HARPER’S FINEST

Who Goes Nazi?

= Subscribers only.
Sign in here.
Subscribe here.

By

"It is an interesting and somewhat macabre parlor game to play at a large gathering of one’s acquaintances: to speculate who in a showdown would go Nazi. By now, I think I know. I have gone through the experience many times—in Germany, in Austria, and in France. I have come to know the types: the born Nazis, the Nazis whom democracy itself has created, the certain-to-be fellow-travelers. And I also know those who never, under any conceivable circumstances, would become Nazis."

Subscribe Today