Who's Whining Now? Gramm Slammed by Economists

Karma's a bitch, ain't she:

Phil Gramm, John McCain's former economic adviser, left the campaign in July when he tried to counter criticism of the Republican candidate's economic policies by asserting that the country "had become a nation of whiners" in a "mental recession."

Even McCain came forward to say that he disagreed with Gramm's remarks, adding that someone who'd lost their job "isn't suffering from a mental recession."

And Barack Obama is using Gramm's comments and his support of deregulation, which prompted some of the risky lending that caused the current financial crisis, in a new TV ad that questions McCain's ability to handle the economy.

"They think the economy's fundamentally strong," intones a voice-over in the ad. "We know they're fundamentally wrong."

Though Gramm, a former Texas senator, is no longer a member of McCain's close-knit team, he still seems to be assisting the campaign.

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Gramm's comments seem all the more stark with the financial upheaval of the past few weeks, including the government takeover of mortgage giants Fannie Mae and Freddie Mac, as well as the de facto takeover of largest insurer AIG.

"This is a mentality that doesn't understand the nature of systemic risks in financial systems," says Joseph Stiglitz, Nobel Prize-winning economist and former chairman of President Clinton's Council of Economic Advisers. "It's social Darwinism."

Economic experts say that Gramm and others are to blame for the current crisis that is shaking Wall Street.

Gramm's successful effort to pass banking reform laws in 1999, which reduced decades-old regulations separating banking, insurance and brokerage activities, helped to create the current economic crisis.

"As a result, the culture of investment banks was conveyed to commercial banks and everyone got involved in the high-risk gambling mentality. That mentality was core to the problem that we're facing now," Stiglitz says.

John McCain's Latest Chameleon Act: Suddenly He's a Champion of De... Oops... Regulation

If there's been one consistent theme in John McCain's campaign this year, it would have to be its inconsistency. He has shown not only a willingness, but an eagerness, to completely change his entire message on a moment's notice based on polling or what he thinks he needs to do to compete.

He made a big deal about "honor" and "clean campaigning", then tossed it all aside by hiring the same Rove hitmen who went after him in 2000, to go after Obama.

He spent months mocking Obama's change message, then one day we all woke up to find McCain saying he represented change.

He spent months trying to knock Obama's lack of experience and saying how critical that is because of foreign policy issues, then picked a clueless rookie for his VP, whose sum total of foreign policy experience appears to be "You can actually SEE Russia from Alaska! Hee hee!"

Bill Clinton was criticized for changing positions based on polls, but he's got nothing on McCain. His latest chameleon act? After spending years fighting for deregulation in Washington, now we're supposed to believe he's the guy who's going to "clean up Wall Street" -- a mess that McCain and his close policy advisors helped create. This morning's Washington Post tackles this issue head-on; some excerpts:

A decade ago, Sen. John McCain embraced legislation to broadly deregulate the banking and insurance industries, helping to sweep aside a thicket of rules established over decades in favor of a less restricted financial marketplace that proponents said would result in greater economic growth.

Now, as the Bush administration scrambles to prevent the collapse of the American International Group (AIG), the nation's largest insurance company, and stabilize a tumultuous Wall Street, the Republican presidential nominee is scrambling to recast himself as a champion of regulation to end "reckless conduct, corruption and unbridled greed" on Wall Street.

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In 2002, McCain introduced a bill to deregulate the broadband Internet market, warning that "the potential for government interference with market forces is not limited to federal regulation." Three years earlier, McCain had joined with other Republicans to push through landmark legislation sponsored by then-Sen. Phil Gramm (Tex.), who is now an economic adviser to his campaign. The Gramm-Leach-Bliley Act aimed to make the country's financial institutions competitive by removing the Depression-era walls between banking, investment and insurance companies.

That bill allowed AIG to participate in the gold rush of a rapidly expanding global banking and investment market. But the legislation also helped pave the way for companies such as AIG and Lehman Brothers to become behemoths laden with bad loans and investments.

McCain now condemns the executives at those companies for pursuing the ambitions that the Gramm-Leach-Bliley Act made possible, saying that "in an endless quest for easy money, they dreamed up investment schemes that they themselves don't even understand."

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Yesterday, Obama seized on what he called McCain's "newfound support for regulation" and accused his rival of backing "a broken system in Washington that is breaking the American economy."

In a speech in Golden, Colo., Obama blamed the economic crisis on an "economic philosophy" that he said McCain and President Bush supported blindly.

"John McCain has spent decades in Washington supporting financial institutions instead of their customers," he told a crowd of about 2,100 at the Colorado School of Mines. "So let's be clear: What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed."

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As chairman of the Senate Commerce Committee for more than a decade, McCain did not have direct oversight of the financial sector. But he sat at the center of arguments between telephone, cable and satellite companies, almost always pressing for more competition.

"I'm always for less regulation," he told the Wall Street Journal in March. He added: "I'd like to see a lot of the unnecessary government regulations eliminated."

I'm not buying this bull -- are you? I don't think many others will either, except for maybe McCain's "base" -- so-called "low information voters" who will swallow any swill he spits at them. But they're pretty hopeless anyway.

John McCain and Phil Gramm - A Match Made in Hell

I think we will start hearing more of this in the media soon:

...[W]hile Obama seeks financial advice from Warren Buffett and respected economists, McCain relies primarily on his long-time friend Phil Gramm, who deserves much of the blame for the nation’s present economic problems.

Concern with Gramm-McCain economics may explain why three former SEC chairmen, appointed variously by Reagan, Clinton, and George W. Bush, took the unprecedented step of jointly endorsing a candidate for the Presidential race: Barack Obama, whom they praised for his “reasoned approach” to “the current financial crisis and the need for balanced regulatory reform.” Other Obama backers are Paul Volcker, ex-Federal Reserve head, and Vanguard founder John Bogle, who said “We need some regulation! . . . I’m a Theodore Roosevelt Republican, and the party has abandoned me.”

McCain has admitted that “the issue of economics is not something I’ve understood as well as I should,” a shortcoming made more worrisome by the swarm of lobbyist-advisors surrounding him. Of these, Phil Gramm, whom McCain has called his “economic guru,” has influenced him most; under his tutelage McCain put together an economic policy that Fortune magazine called “vintage Gramm.”

Until Gramm mortified McCain by belittling America as “a nation of whiners” and the present economic downturn as a merely “mental recession” he co-chaired McCain’s campaign and was considered to be his likely pick for Treasury secretary. Although public reaction to Gramm’s gaffe required his swift removal as co-chair of McCain’s campaign, he has reportedly returned as an informal advisor and may yet get the Treasury post.

Throughout his career Gramm worked to weaken or remove regulations that allowed the government to keep an eye on big business. As chair of the Senate banking committee in the 1990s he routinely rejected SEC requests for more money to police Wall Street, while investigators’ work loads increased by 80%. “Competition and freedom” not government “are the answers,” he said in 1999 after signing a bill he coauthored that scrapped protections enacted in 1933 to ensure that the bank failures the country had recently experienced would never be repeated.

In December 2000, Gramm furtively slipped his own 262-page bill, titled the Commodity Futures Modernization Act, into an 11,000-page appropriations bill.

Written with the assistance of financial industry lobbyists, read by few legislators, and passed without hearings by a lame-duck Congress racing to finish before recess, Gramm’s bill prevented the SEC and the Commodity Futures Trading Commission (CFTC) from regulating most over-the-counter derivatives, credit derivatives, and swaps, trading instruments that Warren Buffet called “financial weapons of mass destruction.”

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But a far more expensive result of Gramm’s bill was the creation of a shadow banking system, a $62 trillion unregulated market managed by banks and hedge funds no longer required to have enough assets to cover potential losses. The results have been catastrophic: mortgages that “adjusted” far beyond home-buyers’ ability to pay, bundled together by banks and finance companies and resold as bonds and new jumbo securities to other banks, pension funds, and private investors and leading to bankruptcies and immense losses in the financial and housing markets that spread throughout the economy here and abroad with no end in sight. The same banks and investment companies that paid Gramm millions to free them from government regulation are now asking the government, using our money, to bail them out.

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Given Phil Gramm’s record, voters are faced with the following questions: even if McCain swears to cut all ties with Gramm, how can we entrust the Presidency to a man who condones the ruthless character and unscrupulous practices of his longtime friend? And how can we give such great responsibility to someone advised by a man whose deregulation of the energy and financial markets released a Pandora’s box of evils upon the nation, harming not only the general public but even many of the corporations he served?

If we don't hear more about Gramm and McCain's reliance on him to craft his economic policy, Obama isn't doing his job. This is very relevant to current events, and a very important issue in the election debate.

Looks Like "It's the Economy, Stupid" Once Again

Nothing like a little banking crisis to make people put away their lipstick and start acting like adults again, and Obama and Biden are wasting little time going on the offensive over McCain's various out-of-touch comments during the campaign:

“We just woke up to news of financial disaster, and this morning he said that the fundamentals of the economy are still strong,” Obama told an estimated crowd of 5,800 at the Cross Orchards Historic Site in Grand Junction, Colo. “Sen. McCain –- what economy are you talking about?

“What’s more fundamental than the ability to find a job that pays the bills and can raise a family?” Obama asked, his voice rising. “What’s more fundamental than knowing that your life savings is secure, and that you can retire with dignity? What’s more fundamental than knowing that you’ll have a roof over your head at the end of the day?”

At a rally at South Lake High School in St. Claire Shores, Mich., Biden chimed in, as well, saying, “just as George Herbert Walker Bush was nicknamed ‘Bush 41’ and his son is known as ‘Bush 43,’ John McCain could easily become known as ‘Bush 44.’” Hammering McCain’s remarks in Jacksonville, Biden said, “Friends, I could walk from here to Lansing, and I wouldn’t run into a single person who thought our economy was doing well, unless I ran into John McCain.”

This is another thing Obama really needs to do. Because while McCain personally isn't responsible for this mess, he's in bed with people who are.

I haven't seen any mention yet of Phil Gramm -- he of the infamous "Americans are whiners" comment -- who has been criticized for his anti-regulatory stance, and who was being talked about as a possible Secretary of the Treasury appointment by McCain. He needs to be gone after as well.