It's Even Worse Than You Think

by David Cay Johnston

  FERC has rules to prevent such manipulations. Without enforcement, though, rules are meaningless.

  Sponseller, the Pittsburgh utility lawyer, filed a lawsuit challenging three years of New England auctions as illegal because they violated the fairness rule, the just and reasonable standard. The evidence showed that New England electricity customers paid an extra $3.8 billion because a single power plant was not in the capacity auction bidding. Those former Goldman Sachs and Deutsche Bank traders, the very kind of people Trump promised to drain from the swamp, made an extra $225 million in profits, federal court papers state.

  LaFleur’s response? Nothing to see, folks, so move along.

  Her position is that once FERC declares that a market exists, any price the market auction sets is the market price. That circular argument ignores an underlying problem. If the rules themselves are flawed, if the rules enable price gouging, the results cannot be just and reasonable. And as with the fake pipeline tax, ripping millions of people off for a few extra dollars each month concentrates billions of dollars in the hands of the very few who own power plants. And that upward redistribution of money occurs thanks to the federal government adopting unfair rules, rules that few people know about. Stopping electricity price gouging would seem to be exactly what Trump was talking about in his inaugural address when he said Washington made the few prosper while “the people did not share in its wealth.”

  Trump’s first federal budget also included a proposal to sell various federal electricity assets, including the Bonneville Power Administration’s electricity transmission network in the Pacific Northwest. Robert McCullough, a utility economist known for exposing regulatory games and artificially inflated electricity prices, told me he was struck by the proposed sale terms. Private ownership would require profits and within a few years would almost certainly mean high costs for consumers, not at all what Trump had promised voters. But it was the proposed selling price that startled McCullough. Trump offered the grid at 75 cents on the dollar taxpayers had invested. “This is a new way to sell a car,” McCullough said, “start the bidding significantly below the sticker price.”

  Congress created FERC and its predecessor agency the Federal Power Commission to protect families, small-business owners, and industry from monopolists and pricing schemes that jack up prices while at the same time ensuring an abundant supply of electricity. Unregulated, electricity prices can cause economic and political turmoil. Enron, the energy trading firm that collapsed in 2001, took power plants offline and used other manipulations to make West Coast electricity prices soar, devouring the profits of electric-intensive businesses from ice-skating rinks and grocers with freezer cabinets to metal-bending factories. That issue prompted California voters to recall Governor Gray Davis and replace him with Arnold Schwarzenegger—like Trump, a novice politician who was a household name only because he was an entertainer.

  Trump’s letter promoting LaFleur and forcing out Bay, along with the three long-delayed appointments of new commissioners, was also an early indicator of the quality of the Trump White House team. Historically the people fortunate enough to have the once-in-a-lifetime opportunity to work in the White House exercise extreme diligence to get every detail right, from how names of appointees are rendered to references to historical events. Trump’s letter to LaFleur was late arriving. The address on the envelope was wrong, the letter mailed to a location that FERC had moved out of more than a decade before.

  PART V

  * * *

  GLOBAL AFFAIRS

  Diplomacy

  Four months after taking office, Donald Trump flew to Saudi Arabia, where he lavished praise on a family-run country that makes sure its people learn only the official version of events, not unlike the regimes in Russia and North Korea.

  The extended family that has run Saudi Arabia for nearly a century was not satisfied with controlling what its own people know. They were determined to make sure that people throughout the Middle East lacked access to independent news because it was a threat to their absolute rule.

  Trump’s visit helped that cause mightily while offending the government of Qatar, the Middle Eastern country that is home to the most important United States military base in that part of the world. Qatar runs Al Jazeera, a television news service that the Saudis and other dictatorial and monarchical regimes in the Middle East cannot block because it uses satellites to beam its reports directly to television sets.

  The Saudis and their allies, after the Arab Spring uprisings in Algeria, Egypt, and Bahrain, wanted desperately to shutter Al Jazeera to ensure their iron grip would not be challenged. They saw an ally in Trump, who complains that news he does not agree with is fake news that should not be allowed.

  It quickly became apparent that the Trump administration had no idea about the authoritarian nature of the Saudi regime, nor the competing interests and religious divisions in the Arab world. This was especially true when it came to the official form of Islam in Saudi Arabia, an extreme form of Sunni Islam called Wahhabism that had inspired many attacks on America, including those on 9/11.

  Mieke Eoyang, a longtime Capitol Hill adviser on diplomatic, intelligence, and military matters, said Trump brought “bluff and bluster” to the Gulf Cooperation Council meeting in Riyadh. “He goes to Saudi Arabia, gives a speech he thinks makes him popular with the host country, but masks a much more complicated situation as he steps into this fight between the monarchist-based Wahhabist-friendly Gulf States and those who say the Saudis shouldn’t have a lock on religion within the Sunni branch of Islam.”

  Eoyang said Trump’s speech and actions in Riyadh showed that “he really doesn’t get what the issues are and he won’t pay attention to those who try to explain it to him. He speaks without thinking about other people, other interests. Below-the-radar people are turning away from the U.S. in ways Trump does not see.”

  Trump acted against America’s traditional role as a beacon of liberty and a promoter of freedom. And he did so while swaddled in what by his own account was a major conflict of interest that raised questions about what motivated his actions. (More on that later.) Those actions were inconsistent with those of any previous administration. His moves made no obvious sense in the three-dimensional game of global geopolitical chess, especially his attack on America’s militarily important ally Qatar.

  The clearest example of Trump administration know-nothingism in world affairs emerged on the final day of the visit to Riyadh. Wilbur Ross, the richest member of the Trump cabinet, appeared on the CNBC business channel, where he unintentionally revealed his ignorance about how rare the freedoms Americans enjoy are and why petition and protest are constitutional rights. Ross had made his money as a vulture capitalist, buying cheaply the distressed bonds of companies headed toward bankruptcy. He reorganized their finances to make himself a pot of money. The companies, infused with cash from new loans, became corporate zombies stumbling toward collapse again in the future. That was how he met Trump more than a quarter century earlier when Trump’s companies could not pay their debts.

  CNBC wanted Ross to tell its audience of investors about how newly announced arms sales to the Saudi regime would affect the stock of American weapons makers like United Technologies and Lockheed Martin. The White House announced that it had made deals worth $110 billion in immediate sales of weaponry. In time, it said, the total value was expected to reach $350 billion.

  That was not true. Not a single deal was signed during Trump’s May 20 to 22 visit to Saudi Arabia. Instead the official-looking documents in large portfolios that Trump and Saudi officials signed with flourishes before cameras in a great hall were nothing more than preliminary memoranda about deals that might be made. The $110 billion of arms sales that Trump claimed credit for turned out to include $26 billion of deals made by the Obama administration.

  Ross repeated the official version of events. Then he volunteered that beyond the speed with which deals were made he had something else to share with the CNBC au
dience.

  “The other thing that was fascinating to me,” Ross said, “was there was not a single hint of a protester anywhere there during the whole time that we were there. Not one guy with a bad placard.”

  As Ross marveled at the lack of public dissent in Saudi Arabia, the CNBC host, Becky Quick, broke in. She pointed out that Saudi Arabia does not allow demonstrations. “They control people and do not let them express their feelings,” she explained.

  This prompted a Trumpian response by Ross, who neither acknowledged facts he was not aware of nor recognized his misunderstanding. “In theory, that could be true,” Ross replied. “But, boy, there was certainly no sign of it. There was not a single effort at any incursion. There wasn’t anything. The mood was a genuinely good mood.”

  Had Ross read the State Department’s latest annual report on human rights during his long flight on Air Force One, he would have known that the Saudi “government strictly monitored politically related activities and took punitive actions, including arrest and detention, against persons engaged in certain political activities, such as direct public criticism of senior members of the royal family by name, forming a political party, or organizing a demonstration.” The report cited examples of arbitrary arrests lasting years without trial and long prison sentences for dissent, which explained the lack of protesters that had so impressed Ross.

  Ross further demonstrated his naïveté by noting that as he departed, his Saudi security guards wanted to pose with him for photographs and then presented two gigantic bushels of dates, which he called not a diplomatic courtesy but “a genuine from the heart gesture that really touched me.”

  Ross also said he was impressed at how Saudi Arabia was liberalizing. The seventy-nine-year-old billionaire pointed out that a woman runs the Saudi stock exchange, gratuitously observing that she was young and beautiful.

  Ross said nothing of laws that banned women from driving or even being in a car with a man unless he is a relative. He said nothing of the religious police using violence to enforce requirements that women wear abayas, an outer robe, lest men lose control of their lustful impulses. There are other such examples too numerous to mention. Then there were the Saudi beheadings, public executions that human rights groups say often are carried out based on dubious evidence.

  During the presidential campaign, Trump stirred up crowds with lurid descriptions of ISIL’s beheadings. ISIL sought to inflame Americans and Europeans with its atrocious acts. But they served another purpose as well—frightening people in areas ISIL controlled so they would submit to its authority lest their heads come off.

  Trump said nothing about Saudi Arabia beheading people, which government executioners did on average three times per week in 2015 and 2016. Nor did he protest executions via public stonings, another Saudi government technique to frighten its 28 million people into submission to the monarchy’s absolute rule. Burying people in the ground up to their necks so rocks could be thrown at their heads was both a brutal way to kill and a terrifying reminder of the regime’s barbaric views on official violence.

  Sometimes beheaded bodies are crucified in Saudi Arabia, all this done in public as crowds watch what journalist John R. Bradley describes as the “only form of public entertainment” in Saudi Arabia, aside from soccer matches.

  Qatar, the country the Saudis wanted to bring to heel, does not stage beheadings. The last Qatari execution occurred in 2003 when a firing squad ended the life of a convicted murderer. But it was Qatar that Trump denounced while he was in the Saudi kingdom, shocking its emir and many American diplomatic and military leaders because Qatar is crucial to American interests in that part of the world.

  More than 11,000 American military personnel work out of the twenty-square-mile Al Udeid Air Base south of Doha, the capital of Qatar. From there the Air Force directs American bombers and jet fighter attacks on ISIL, the Taliban in Afghanistan, and Houthi rebels the Saudis want suppressed in Yemen. Americans at the airbase in Qatar also controlled drones used for surveillance of suspected Al Qaeda, Taliban, and other terrorist leaders, directing missile strikes at them and their entourages.

  Trump’s Riyadh speech praising the Saudis and their Middle Eastern allies while condemning Qatar drew firm lines in the sand. “With God’s help, this summit will mark the beginning of the end for those who practice terror and spread its vile creed,” Trump said, adding, “there can be no coexistence with this violence. There can be no tolerating it, no accepting it, no excusing it, and no ignoring it.”

  Those remarks indicate Trump was unaware, or did not care, that the Saudis are the world’s largest sponsor of terrorism, far exceeding the Iranian government that Trump frequently denounces for its support for terrorism. The State Department lists sixty-one terrorist organizations, all but two of which are aligned with Sunnis and the extreme Wahhabi sect that is officially endorsed in Saudi Arabia. The Saudis fund fifty-seven of those terrorist groups. Qatar, the country that Trump joined the Saudis and their allies in denouncing, was also involved in funding terrorist groups, though they committed their acts of political violence mostly in the Middle East.

  All American presidents before Trump had, in varying degrees, modulated their remarks to avoid exacerbating the centuries-old rivalries within Islamic countries. Their carefully scripted and nuanced public statements and official actions reflected the intelligence assessment that taxpayers paid for so our officials would understand the Middle East. Previous presidents took care not to excite a viper’s nest of poisonous religious and political conflicts in that part of the world and to balance American interests among these contending factions.

  Abandoning that history of thoughtful diplomacy, Trump went all in with the Saudis and their allies. He said he applauded the “Gulf Cooperation Council for blocking funders from using their countries as a financial base for terror, and designating Hezbollah as a terrorist organization last year. Saudi Arabia also joined us this week in placing sanctions on one of the most senior leaders of Hezbollah.” While the designation did occur, it was likely window dressing to please Trump, not an actual severing of the relationship between rich Saudis who depend on the Saud family government for their fortunes and Hezbollah.

  The official White House version of the speech, including capital letters, declared:

  A better future is only possible if your nations drive out the terrorists and extremists. Drive. Them. Out. DRIVE THEM OUT of your places of worship. DRIVE THEM OUT of your communities. DRIVE THEM OUT of your holy land, and DRIVE THEM OUT OF THIS EARTH. For our part, America is committed to adjusting our strategies to meet evolving threats and new facts. We will discard those strategies that have not worked—and will apply new approaches informed by experience and judgment. We are adopting a Principled Realism, rooted in common values and shared interests.

  How attacking Qatar could be principled or realistic is something people deeply versed in the Middle East could not understand. It did, however, align with Trump’s desire to make American news organizations come to heel and present only news that in his opinion accurately reflects his actions.

  We cannot know what Trump was thinking as he read his speech. He showed no sign then or later of realizing the irony of delivering these remarks to a room filled with religious authoritarians whose governments and citizens finance terrorists, including the 9/11 hijackers. Nothing he said suggested that he understood the disputes among the various countries controlled by Sunni potentates and dictators.

  Trump’s remarks also made no sense to those who know that Saudis fund the Taliban, the Afghan forces that harbored Osama bin Laden at the time of the 9/11 attack.

  The Saudis surely have an interest in going after some terrorists. Their interest is in stopping terrorism by Shia Muslims, the branch of Islam dominant in Iran.

  Trump had interests, too. At a 2015 rally in Mobile, Alabama, Trump said Saudis “buy apartments from me. They spend $40 million, $50 million. Am I supposed to dislike them? I like them very much.” Trump crea
ted more than a half dozen companies in Saudi Arabia. All were inactive, but he suggested that he had plans to build a golf course, hotel, or other property there.

  A month after the inauguration, his sons opened the Trump International Golf Club in Dubai. A few weeks before taking office, Trump said that his partner in that venture, Hussain Sajwani, offered him a $2 billion deal. Trump said he rejected the offer out of concern that people would think he would “take advantage” of the presidency to make money.

  Trump said he would have a conflict of interest regarding Turkey if he became president. “I have a little conflict of interest ’cause I have a major, major building in Istanbul,” he told Breitbart in 2015. “It’s a tremendously successful job. It’s called Trump Towers—two towers, instead of one, not the usual one, it’s two.” Ivanka Trump tweeted thanks to Turkish leader Recep Tayyip Erdoğan in 2012 for attending the launch of the Trump twin towers.

  There was also a possible explanation for his attack on Qatar. Trump has a long history of being incredibly petty, his tweets showing his thin skin. Qatar Airways rented space in Trump Tower in 2008, but moved out in 2014, a slight Trump would likely not forget.

  In Las Vegas, during the final presidential election debate, Trump had taken a very different tone about Saudi Arabia. Referring to gifts to the Clinton Global Initiative, a charity that helps poor people, Trump demanded that Hillary Clinton and her husband “give back the money you’ve taken from certain countries that treat certain groups of people so terrible.”