The Bell Tells for You
12.22.10, 12:00 PM ET
I didn’t receive an invitation to attend the annual holiday festivities sponsored by the Chicago Climate Club this year. Initially concerned that this might possibly be due to something I wrote in this column, a different reason is now apparent. The Chicago Climate Exchange (CCX) has shut its doors in response to a different sort of climate change–one producing a cold political Northern that blew into the Windy City from the Great Plains and beyond on Nov. 2.
Consequently, many prominent officers, corporate affiliates and individual shareholders–many of whom you are likely to recognize–won’t receive the public gifts they had hoped.
CCX was launched in 2003 as a “voluntary pilot agency” that aspired to become the New York Stock Exchange for Carbon-emission trading. Its planning was initiated thanks to a $345,000 grant from the Chicago-based Joyce Foundation to Northwestern University’s Kellogg School of Management to study and test the viability of a future carbon-credit market.
This transaction occurred when a young community organizer, Barack Obama, served on the Joyce Foundation’s board of directors, along with his mentor, present White House advisor Valerie Jarret. Eventually Joyce Foundation startup contributions for CCX totaled about $1.1 million, and its president, Paula DiPerna, later left the organization to become executive vice president of CCX.
CCX was cofounded by Richard Sandor, a former research professor at Kellogg when the school received the Joyce grant, along with former Goldman Sachs CEO Hank Paulson. The group got off to a blazing start, with hundreds of companies, including DuPont, Ford and Motorola, rushing in with agreements to buy and sell rights to emit CO2 above a legally binding quota. At its peak in May 2008, CCX was trading 10 million tons of carbon permits per month, causing the price of carbon offsets to rise from $1 per ton to a high of $7.40 in mid-2008. Time magazine called Sandor a “hero of the planet.”
The actual operating system for CCX trading was provided by deposed former Fannie Mae head Franklin Raines, who had purchased the technology rights. Raines had become an expert in bundling bad subprime mortgages, and the technology was ideal for bundling worthless air credits.
Al Gore’s longtime pal Maurice Strong, leader of the U.N. Rio de Janerio Earth Summit and a key Kyoto Protocol architect, was a CCX board member. Speaking in Rio, Strong left no doubt about his priorities: “We may get to the point where the only way of saving the world will be for industrial civilization to collapse.” Another board member was Stuart Eizenstat, who led the U.S. delegation to Kyoto.
Several partner companies positioned themselves to capitalize on the CCX carbon-trading markets. One was Al Gore’s Generation Investment Management LLP, a London-based firm established in 2004 that invests money from institutions and wealthy investors that are “going green.” GIM planned to purchase lucrative CO2 offsets when anticipated federal government regulations were passed to mandate cap-and-trade.
Gore’s co-founding partners in the venture are former chief of Goldman Sachs Asset Management (GSAM) David Blood, along with Mark Ferguson and Peter Harris, also of Goldman Sachs. Bloomberg reported in March 2008 that the investment fund had hit a hard cap of $5 billion, and had been turning away investors.
GSAM also became the largest CCX shareholder, with about an 18% ownership position. (Al Gore’s GIM–with three former Goldman Sachs cofounders–was the fifth largest.) According to figures released by the Federal Election Commission, Goldman Sachs is also heavily invested in the Obama presidency. Goldman’s PAC and individual contributors made up the campaign’s second-largest donation, nearly $1 million.
Still another major CCX shareholder was ShoreBank, a small Chicago bank that once teetered on the edge of bankruptcy due to failed subprime mortgage investments. It was saved from that ignominious fate thanks to a $35 million TARP bailout and about $150 million of investments from powerful friends. Included (once again) are the Joyce Foundation and Goldman Sachs, joined by other big Wall Street firms and influential private partners. ShoreBank then invested heavily in a variety of green businesses and became designated as CCX’s “banking arm.”
Coincidentally, one ShoreBank cofounder, Jan Piercy, was a Wellesley College roommate of Hillary Clinton. She and her husband Bill are small ShoreBank investors. A former ShoreBank vice president, Bill Nash, was deputy campaign manager for Hillary’s own presidential bid. Another cofounder, Mary Houghton, was reportedly a friend of President Obama’s mother, who had worked for Treasury Secretary Tim Geithner’s father, Peter, at the Ford Foundation.
Howard Stanback, a ShoreBank board member, formerly served as chairman of the Woods Foundation, where Barack Obama and now retired terrorist Bill Ayres also sat on the board. Stanback was previously employed by New Kenwood, a real estate development company co-owned by convicted felon Tony Rezko (who arranged a great deal for the president on a Chicago home purchase). ShoreBank’s director, Adele Simmons, is a close friend of Valerie Jarret. Deposed Obama-Biden administration green czar Van Jones serves as its green projects marketing director.
All these chance associations show that it’s truly a small world after all–they surely shouldn’t be taken to reflect poorly upon Chicago’s clean reputation. Sadly, with such an intriguing club guest list, it had all the makings of a really swell holiday party. After arrangements were canceled for Uncle Sam to appear dressed as Santa, Sen. John Kerry has a notably long face, even for him. But alas, the merriment was not to be.
Big problems originally struck between May of 2008 and October of 2009 when the CCX market value for one metric ton of carbon plummeted from $7 per metric ton to 10 cents, along with the shareholders’ investment values. Members included Ford Motor, Amtrak, DuPont, Dow Corning, American Electric Power, International Paper and Waste Management, along with the states of Illinois and New Mexico, seven cities and a number of universities. As planned, these members would “purchase” carbon offsets on the CCX trading exchange and make contributions to, or investments in, organizations that provide “alternative” or “renewable” energy.
Almost from its inception, CCX had a strong connection with the Atlanta-based Intercontinental Exchange, whose subsidiary is the International Petroleum Exchange, the world’s largest petroleum futures options market. In May 2010 ICE agreed to purchase CCX and its parent company Climate Exchange, along with two of its other exchanges (Chicago Climate Futures and European Climate Exchange), for $603 million. CCX founder and CEO Richard Sandor had also served as an ICE board member since 2002, and chaired the Climate Exchange.
CCX shut down its operations in November. This occurred after an avalanche of its investors bailed following a hurricane of ill winds for cap-and-trade that swept away Democrat control of the U.S. House of Representatives. By that time Sandor had already pocketed an estimated $98.5 million for his 16.5% CCX ownership. Just how much Al Gore’s GIM and Goldman’s GSAM ended up with no one is saying. But it was probably enough to pay for a nice private party.
And regarding most of the member investors: sure, maybe they only received lumps of coal for their stockings. But if global temperatures continue to drop, as many experts predict will happen, that’s probably not such a bad gift after all.
Larry Bell is a proud Texan (all hat, no cattle), a professor at the University of Houston and the author of Climate of Corruption: Politics and Power Behind the Global Warming Hoax, which will be released Jan. 1 and which can be previewed at climateofcorruption.com.