And now he wants us to quit "whining" about his blunder.
There is a laundry list of things wrong with our economy right now: Weak dollar, high energy prices, inflation, housing crisis, failing investment banks, rising unemployment, increasing wealth disparity, etc. Phil Gramm and his decades long push for deregulation stand at the heart of it. I will lay out the big three moves that Gramm has made while in office that directly contributed to the mess we are in... after the flip...
Most of the following information came my way thanks to David Corn's article Foreclosure Phil in the July/Aug '08 issue of Mother Jones.
- As Chairman of the Senate Banking, Housing and Urban Affairs Committee in from 1995 to 2000, Gramm...
routinely turned down Securities and Exchange Commission chairman Arthur Levitt's requests for more money to police Wall Street; during this period, the SEC's workload shot up 80 percent, but its staff grew only 20 percent. Gramm also opposed an SEC rule that would have prohibited accounting firms from getting too close to the companies they audited—at one point, according to Levitt's memoir, he warned the SEC chairman that if the commission adopted the rule, its funding would be cut.
Remember Enron and auditor Arthur Anderson? AA was in so deep with Enron, they couldn't afford to tell their client that off-book trading was a big no-no. At least they paid for it by losing millions of other people's retirement dollars and sending thousands of people out of a job. Thanks, Phil.
- Gramm spearheaded the Gramm-Leach-Bliley Act which, in effect, gutted the Glass-Steagall Act of the 1930s.
And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania.
Those Depression era rules were put in place for a reason. It was to prevent your bank from investing the money from your CD or your pension into a risky derivatives bond or sub-prime mortgage loan package. The investment banks were no longer simply playing with rich people's money, now they play with your checking account balance. Good move Phil.
- David Corn says it best:
As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm.
Thankfull for the banking corporations, the SCOTUS handed down the Bush v Gore decision two days earlier and thus provided a smoke cover.
Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.
[...] The act, [Gramm] declared, would ensure that neither the SEC nor the Commodity Futures Trading Commission (CFTC) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."
Yes, they are now leading us right over the cliff. Credit default swaps would grow into an $62 trillion dollar market. Just for reference, the US stock market is about a quarter that size. Swaps are completely unregulated but the stock market is. The end effect was that securities traded in the swap market (such as sub prime mortgage bundles) were under insured for default because they were under rated for risk because they were unregulated. Good idea, Phil.
There is actually a fourth thing Phil Gramm did to sink the economy. It would be his life's work in the Congressional branch, that life as a financial deregulator. Why are prices so high? Because oil is expensive. Why is oil so expensive? The value of the dollar has dropped. Why has the dollar dropped? because many of the world's investors don't want to get mixed up in an economy that has economic rules that are equivalent to a third world unregulated economy. So they invest in securities that accept Euros or Yen or something else. They just don't need dollars anymore. So the value of the dollar has dropped.
But apparently John McCain can't do without Phil Gramm as his economic guru.