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The Senator and the Swiss Bank
Critics have charged that Gramm's action as a senator helped lay the groundwork for some of the problems in the housing and oil markets. But it's hard to pin any of the UBS debacles on the former Texas senator. At UBS, Gramm held the post of vice chairman, a position Michelle Leder dubbed in Slate "the greatest job in business" for its combination of high status and low work rate. Gramm was a lobbyist and adviser, not an operating executive. And he had nothing to do with the forces that impelled banks and banking executives into foolish behavior in recent years; cheap money, greed and a bubble mentality are far bigger than Gramm. But UBS's continuing travails should lead us to wonder how effective Gramm is as an elder statesman. As an adviser, an economist, an expert in the ways of Washington and in the American financial system, part of Gramm's job surely was to advise the bank how to stay out of investment and regulatory trouble. Oops!
Of course, being a senior employee of a bank at a time when it was destroying shareholder value, screwing over customers and having run-ins with federal prosecutors shouldn't preclude one from serving in the cabinet. Apply that standard across the board, and—given the pervasive incompetence and mendacity on Wall Street in this decade and last—the next president, Obama or McCain, will have to look to a tiny credit union in Kansas for a treasury secretary.
© 2008
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Member Comments
Posted By: Alessandro Machi @ 07/12/2008 9:01:18 PM
Comment: Did Gramm have a role in the Keating Five?
Posted By: Nins @ 07/10/2008 7:38:12 PM
Comment: Can you believe that McCain considered this charlatan Gramm for Secretary of Treasury?
That fact shows you that either McCain is an inside player with the investment bankers who have ruined our economy with the help of Bush and Gramm, OR McCain is a naive fool who doesn't understand the first thing about the interface of banks, government and the stock market.
Either way, McCain looks pretty bad. No wonder he wants to distance himself from Gramm.
Posted By: Nins @ 07/10/2008 7:33:14 PM
Comment: Know why McCain wants to distance himself from former Senator Phil Gramm? It is not just because of Gramm's recent obnoxious remarks calling Americans "a nation of whiners" and that unemployed Americans are in "a mental recession." In fact, those remarks were so obnoxious that I wonder if they were engineered just to provide McCain an excuse for publicly distancing himself from Gramm. This issue is a lot deeper than it looks on the surface.
When Gramm was a Senator he was chair of the Committee on Banking, and in that capacity he was able to push through the legislation now known as the "Enron Loophole." This loophole allowed US investment banks to bypass the Federal regulations governing futures trading, and is the reason why the investment banks were able to falsely inflate the prices of oil, wheat, corn and other commodities through massive futures trading, causing your costs of gas, heating oil and food to go through the roof.
Gramm was a member of McCain's campaign team, but now Gramms' name is turning to mud. In addition to the Enron loophole, Gramm pushed through the Gramm-Leach-Biley Act in 1999, which got rid of the laws that seperate banking, insurance and brokerage activities in America. Essentially, this Act did away with all of the good laws written after the Great Depression to protect us from another Wall Street/Banking Industry collapse. That's right, Gramm stripped the system of it's safe guards nine years ago, and guess what? The value of the dollar has nose-dived, Wall Street is highly unstable, and we are in the midst of a recession.
Now you could say that this is not Gramm's fault, that he didn't know what the outcome of his actions would be. However, it turns out that the same investment banks that benefited from the Enron loophole and from the Gramm Act gave more than a million dollars to Gramm's campaign. Uh oh. A Congressional hearing is going to be convened to investigate this. And McCain wants to have noting to do with Gramm, wants us to forget that Gramm has been a key player on McCain's campaign team. Gramm was McCain's campaign CO-CHAIR and LEADING ECONOMIC ADVISER.
With Gramm in the driver's seat as his leading economic adviser, now you know why economists and analysts are saying that McCain's economic policy plans are untenable.