McCain guru linked to subprime crisis

[one...two...tree 2,762]

Phil Gramm stood by John McCain in his worst days last summer

when his campaign went broke and his candidacy was all

but written off by political observers.

By LISA LERER, Politico

The general co-chairman of John McCain's presidential campaign, former Sen. Phil Gramm (R-Texas), led the charge in 1999 to repeal a Depression-era banking regulation law that Democrat Barack Obama claimed on Thursday contributed significantly to today's economic turmoil.

"A regulatory structure set up for banks in the 1930s needed to change because the nature of business had changed," the Illinois senator running for president said in a New York economic speech. "But by the time [it] was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework."

Gramm's role in the swift and dramatic recent restructuring of the nation's investment houses and practices didn't stop there.

A year after the Gramm-Leach-Bliley Act repealed the old regulations, Swiss Bank UBS gobbled up brokerage house Paine Weber. Two years later, Gramm settled in as a vice chairman of UBS's new investment banking arm.

Later, he became a major player in its government affairs operation. According to federal lobbying disclosure records, Gramm lobbied Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006.

During those years, the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages.

For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS's American subsidiary. In the past year, UBS has written down more than $18 billion in exposure to subprime loans and other risky securities and is considering cutting as many as 8,000 jobs.

Gramm did not respond to an e-mail and was unavailable for comment, according to a UBS spokesman. The bank has no official position on the subprime crisis, the spokesman said, but is a member of the Financial Services Roundtable and other industry groups that are actively lobbying Congress on the issue.

Now, some housing experts and economists see Gramm's thinking in the recent housing proposal from McCain, the Republican Party's presumed presidential nominee. Gramm is often a surrogate for the Arizona senator, particularly in meetings focused on the economy. And McCain has hinted he'd consider the former Texas senator for Treasury secretary in a McCain administration.

McCain delivered an economic speech Tuesday that had Gramm's input, but it was written by domestic policy adviser Douglas Holtz-Eakin.

"Sen. Gramm was one of dozens of folks whom Sen. McCain has consulted on the housing issue, including Carly Fiorina and Meg Whitman from eBay," said McCain campaign spokesman Brian Rogers. "They've been friends for years, and he values Sen. Gramm's advice."

In the speech, McCain rejected the type of aggressive government intervention in the economic meltdown that has been embraced by his Democratic opponents — and even some Bush advisers.

http://www.politico.com/news/stories/0308/9246.html

[Trumplestiltskin 5,791]

Offhand weren't those regulations put in place in the 30's as a direct result of the 1929 stock market crash?

The act is summarised on wiki here - and I think there's a link to the bill itself in there too.

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Former Sen. Phil Gramm, standing by Republican presidential hopeful Sen. John McCain (R-Ariz.) in this June, 2007, photo, stood by his some of his controversial comments, too.

Gramm Stands by Recession Comments

By Jonathan Weisman and Perry Bacon Jr.

Former senator Phil Gramm -- under fire for saying the United States has "become a nation of whiners" -- said in an interview today that he meant the nation's leaders were whiners, not its citizens. But the top adviser to Sen. John McCain repeated his assertion that the economy is not in recession, and he declined to retract the comments quoted yesterday in the Washington Times.

"I'm not going to retract any of it. Every word I said was true," Gramm said.

Gramm stirred up controversy when he called the nation's economic malaise a "mental recession," then added, "We have sort of become a nation of whiners," he said. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline."

http://blog.washingtonpost.com/the-trail/2...ssion_comm.html

Edited September 16, 2008 by Jabberwocky

[Trumplestiltskin 5,791]

I suspect we're more likely to move into a recession with these latest banking collapses.