McCain guru linked to subprime crisis

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McCain guru linked to subprime crisis
By LISA LERER - Politico
3/28/08

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 “But by the time [it] was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.”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A year after the Gramm-Leach-Bliley Act repealed the old regulations, Swiss Bank UBS gobbled up brokerage house Paine Weber.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.

“I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers,” McCain said. “Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.”

McCain’s campaign later clarified that he would support programs for “deserving” homeowners and reforms that would improve transparency and accountability in capital markets.

Andrew Jakabovics, a housing expert at the liberal Center for American Progress, said McCain’s interpretation of the crisis puts little blame on investment banks for their role in packaging the subprime loans into dangerously complex and ultimately hard-to-value financial instruments.

“I’d characterize this as the deux ex machina theory of financial products,” Jakabovics said. “He views this as a market problem that manifests at the local level as housing, meaning he’s more likely to argue in favor of these guys when they argue for deregulation.”

Wall Street firms are increasingly under scrutiny for contributing to the economic downturn by packaging and selling risky mortgage securities. When the home loans tied to the mortgages defaulted, investors and the banks lost billions, contributing to a widespread credit crunch.

“I think [McCain’s] attitude is the market can basically handle this and government doesn’t need to be heavily involved,” said David Wyss, chief economist at Standard and Poor’s.

McCain and Gramm have a long political history. The two became close when they worked together as senators to defeat Hillary Rodham Clinton’s 1993 health care plan, holding meetings at hospitals and clinics across the country.

In 1996, McCain was national chairman of Gramm's unsuccessful presidential bid.

In 2000, the duo had a rare parting when Gramm backed his home-state governor, George W. Bush, for president instead of McCain. But they’ve reunited in this presidential race.

Gramm stood by his former Senate colleague in his worst days last summer when his campaign went broke and his candidacy was all but written off by political observers.

Gramm, who had joined the campaign in March as a domestic policy adviser, was among those who helped cut staff and shrink the budgets. He traveled with McCain in Iowa, New Hampshire and South Carolina and stumped for him in Georgia.
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Staff writer Victoria McGrane contributed to this story.

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@BumbleBeeBoogie,

Alan Greespan is a total believer in Ayn Rand's theories.--- BBB

Alan Greenspan at the Feds: A Disaster for America
by William Hughes
Potland Media Center
3/9/08

The supposed financial guru, Alan Greenspan, was nominated to head the Federal Reserve, in 1987, by that union-bashing dunce, President Ronald Reagan. At his confirmation hearing, the late Sen. William Proxmire (D-WI), exposed the fact that Greenspan's economic forecasting record was "dismal" and "wrong" most of the time. In his book: "Greenspan's Bubbles," William A. Fleckenstein proves Sen. Proxmire's instincts were prophetic.

The Junk Yard

"Alan Greenspan had a 'calming' influence...on Wall Street!" - Sen. Hillary Clinton (D-NY), a wannabe President of the U.S.

How did Alan Greenspan ever get appointed to the chair of the prestigious Federal Reserve? This is the same guy who told a federal regulator, in 1984, not to worry about the Saving & Loan Industry. This was just before "15 of the 17 thrifts," he said were sound, went under. That fiasco cost the taxpayers a whopping "$3 billion in losses." Now, Greenspan's shaky tenure for nineteen years at the Feds of "cutting interest rates and printing money" has brought the nation's financial system close to collapse and many in the working class to their knees. In his book, "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve," William A. Fleckenstein, reveals how Greenspan has created one huge mess after another in the finance, real estate and stock markets. In his scathing indictment, the author sets the record straight, too, about Greenspan's over inflated reputation as an economic guru.

Fleckenstein's first-rate book, written with Frederick Sheehan, couldn't be more timely, especially coming on the heels of Charles R. Morris' insightful tome, "The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash." The latter's book focused on a Wall St.-related credit bubble, "of writedowns and defaults," that could exceed "$1 trillion." (1) It's fair to say that the amiable dunce, the late President Ronald Reagan, contributed to today's financial crisis by turning the country over to the Vulture Capitalists to exploit. It was the union-busting Reagan, who ushered in the "Age of Deregulation," thanks to that false economic prophet, Milton Friedman. The Bush-Cheney Gang, however, may have supplied the final nail in the coffin of our economy by launching the illegal and immoral Iraq War. Its price tag is now put at a staggering $3 trillion and counting. (2)

Digging into the transcripts of the Feds' meetings and Greenspan's testimony before various Congressional committees, Fleckenstein builds a compelling case against the foxy ex-Feds' czar. He shows how during Greenspan's reign his "devastating mistakes" resulted in colossal failures, like: "The Stock Market Crash of 1987; the Savings and Loan Crisis; the Collapse of Long Term Capital Management; the Tech Bubble of 2000; the Feared Y2K Disaster; and the Credit Bubble and Real Estate Crisis of 2007." At press time, Goldman-Sachs is predicting global credit losses coming from the current turmoil of about "$1.2 trillion," with Wall St. accounting for "40 percent of the losses." (3)

When Bear Stearns, Wall St.'s fifth largest investment firm, recently went down for the count, folks wondered: "How could that be?" Well, one of my favorite financial pundits, Jay Hancock, provided a concise answer. He wrote: "There are uncountable culprits and dupes in the extraordinary chain of events that finished Bear Stearns...But at its heart the crisis is 'A FAILURE OF REGULATION.' If not for the Federal Reserve's and Bush administration's refusal to stop crazy mortgage lending, former Bear boss James E. Cayne would still be chewing cigars at his Manhattan office, counting his money and complaining about regulators. And the country wouldn't be headed toward what might be the worst recession in decades." Hancock added that Greenspan did a "great job of describing the danger...of subprime and exotic mortgages...but he did 'little to stop' the poison loans,'' even though the Congress had explicitly instructed the Feds [as far back as 1994] to do just that. (4)

Getting back to Fleckenstein's book. He recalls a time when we actually had honest politicians in the Congress, who genuinely represented the interests of the people. One of them was the late, great Sen. William Proxmire (D-WI). When Greenspan was nominated to be boss of the Feds by President Reagan, back in 1987, a public hearing was held. Sen. Proxmire dug into Greenspan's "forecasting record," when he served as the President of the Council of Economic Advisers (CEA). He labeled his CEA record "as dismal!" He said that Greenspan's predictions on future interests rates "were wrong by the largest margin of those made during the period under review...Hopefully, when you [Greenspan] get to the Federal Reserve Board, everything will come up roses. YOU CAN'T ALWAYS BE WRONG." Tragically, Sen. Proxmire's gut reaction to Greenspan's supposed expertise rang with the truth. If only Congress would have then rejected his nomination, maybe we could have avoided this present mess.

The crafty Greenspan headed the Feds from 1987 to 2006. After leaving office, he penned a self-serving book. It's entitled, "The Age of Turbulence." In it, he made this shocking statement: "It is politically inconvenient to acknowledge what 'everyone' knows: the Iraq War is largely about oil." After reading his tract, I wrote: "Greenspan consciously chose to remain silent about what he now reveals was one of the true reasons for the Iraq War--oil! Why didn't he resign his office and come clean with the American people that a massive fraud, a war based on serial lies [remember those WMD?] was being perpetrated on them by the Bush-Cheney Gang?" (5) I felt then and I feel now that Greenspan should be forced to testify, under oath before a Federal Grand Jury, and/or the House Judiciary Committee, about his amazing disclosure. The American people are entitled to the full truth about why we really got into the Iraq War. And, the liars, who took us there, should be severely punished. President Bush and VP Dick Cheney, first! (6)

Who benefitted from Greenspan's disastrous policies at the Feds? Fleckenstein puts it this way: "Did he actually set out to redistribute wealth from the middle class to the rich, while the country itself essentially burned the furniture for heat? After all, his bubbles made the sponsors of those bubbles 'fabulously wealthy,' ultimately to the detriment of the average person of the United States as a whole. Or was he simply not up to the task?"

Author Fleckenstein concludes: "Down through financial history, markets have intermittently gone to excess. Prices go to the sky and then fall through the floor...But the bubbles in U.S. stocks and real estate didn't just happen. To a degree that the American public had not yet fully realized, these costly distortions were instigated and financed by the Federal Reserve--ALAN GREENSPAN'S FEDERAL RESERVE!"

Notes:

1. http://bellaciao.org/en/spip.php?article16683
2. To see the baleful effects of the policies of the globalist schemers, via their so-called "Free Trade" ploys, on the U.S. economy, go here: http://www.economyincrisis.org/
3. http://www.reuters.com/article/bankingFinancial/idUSN2539260820080326 and http://www.reuters.com/article/bankingFinancial/idUSN2539260820080326 and link to www.marketwatch.com and
http://www.bloomberg.com/apps/news?pid=20601087&sid=arRP1iTbLQ94&refer=home
4. "Bear Stearns Fiasco is Regulatory Failure," Jay Hancock, March 18, 2008, Baltimore Sun; and, See also:
http://apnews.myway.com/article/20080327/D8VM0BPO1.html
5. http://baltimore.indymedia.org/newswire/display/15914/index.php
6. http://www.afterdowningstreet.org/

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The problem with both McCain and Obama's rhetoric is that both have been receiving millions in donations from finance companies and Wall Street.

There's a simple thing called "conflict of interest," and that worries me.

Politics is a dirty business, but both candidates are selling their souls to big money.

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@BumbleBeeBoogie,

Ah, you're just a whiner. (They don't call it Grammstanding for nothing.)

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@BumbleBeeBoogie,

It is Ayn Rand who has turned Republicans into mean-spirited with her me-first philosophy called Objectivism, a misnomer for sure. Her influence is mirrored by Milton Friedman of 'Milton's Inferno' fame with his privatization of public facility after a crisis. Phil Gramm seems to another of Ayn Rand's fans. The collapse of the Nathaniel Branden Institute shows the effects of her philosophy in which everyone is for him/herself. It is a failure as it generates meaness as shown by those involved with the Objectivist movement.

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@talk72000,

http://able2know.org/topic/122904-1

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I never had any respect for Greenspan - even while the financial pundits looked upon him as some kind of god.

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McCain guru linked to subprime crisis

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