Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

On October 18, 1991, the CFTC—in the person of Laurie Ferber, an appointee of the first President Bush—agreed with J. Aron’s letter. Ferber wrote that she understood that Aron was asking that its speculative activity be recognized as “bona fide hedging”—and, after a lot of jargon and legalese, she accepted that argument. This was the beginning of the end for position limits and for the proper balance between physical hedgers and speculators in the energy markets. In the years that followed, the CFTC would quietly issue sixteen similar letters to other companies. Now speculators were free to take over the commodities market. By 2008, fully 80 percent of the activity on the commodity exchanges was speculative, according to one congressional staffer who studied the numbers—“and that’s being conservative,” he said. What was even more amazing is that these exemptions were handed out more or less in secret. “I was the head of the Division of Trading and Markets, and Brooksley Born was the chair [of the CFTC in the late nineties],” says Michael Greenberger, now a professor at the University of Maryland, “and neither of us knew this letter existed.” And these letters might never have seen the light of day, either, but for an accident. It’s a story that reveals just how total the speculators’ hold over government is.