McCain's Financial Guru, Phil Gramm, has been Wrecking the Economy for Years!

Former Senator Phil Gramm is not just another Texas blow-hard with an abrasive personality. He's "John McCain´s brain on economic matters", and it doesn't matter that he resigned as co-chairman of McCain´s presidential campaign in July. He'll be back if the old "maverick" is elected, and he might even be our next Treasury Secretary!

Gramm resigned in July after offering these words of consolation to Americans who have been suffering from foreclosures, job losses, high gas prices and rising food costs:

"You've heard of mental depression; this is a mental recession" he told the Washington Times. "We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, ´America in decline´ … We've never been more dominant; we've never had more natural advantages than we have today."

Gramm didn't become that arrogant overnight. Back in 1996 he thought enough of himself to run for President, and John McCain was his campaign chairman! The night before he formally announced his candidacy, Gramm spoke to a glittering crowd in a Dallas hotel where he took in $4.1 million. That set a record for the largest amount raised in a single campaign event.

He told the crowd: "Thanks to you, I have the most reliable friend you can have in American politics, and that's ready money." How inspirational!

Gramm must have kept his light under a bushel on the campaign trail because he came in fifth on the Republican side of the Iowa Caucuses, and ended up with only one delegate to show for the $20 million he spent. In political terms, his "reliable friends" didn´t amount to a bucket of warm spit!

Even without becoming president, Gramm still inflicted terrible damage on the economy. In 1999, he happened to be Chairman of the Senate Banking Committee just when the finance, insurance, and real estate industries were spending $200 million lobbying Congress to deregulate the banks. They targeted their campaign contributions to the leaders of Congressional banking committees, and Phil was there.

He introduced the Gramm-Leach-Bliley Act. When it became law, it repealed the Depression-era banking reform law called the Glass-Steagall Act.

In the run-up to the stock market crash of 1929, bankers invested vigorously in the market, loaned money to speculators to invest, and even loaned their depositors' money to companies in which they were invested. When the market imploded, 11,000 banks failed, and millions of Americans went broke overnight. A lot of them blamed bankers.

The Roosevelt Administration enacted the Glass-Steagall Act to create a firewall between commercial banks and investment (corporate securities) banks because the volatile mixture of the two helped fire the speculative frenzy in the stock markets.

The Act also established the Federal Deposit Insurance Corporation (FDIC) which allowed ordinary Americans to put their money into accounts that were federally insured and detached from stock market risks. For many Americans, the Glass-Steagall Act was the New Deal.

Seven decades later, Phil Gramm got rid of that banking reform law at the request of investment bankers, although the FDIC still exists.

Phil took charge again in 2000. Congress was trying to pass a 10,000 page, $384 billion omnibus spending bill just before Christmas break, and Senator Gramm clandestinely slipped in a 262-page amendment entitled the Commodity Futures Modernization Act. (CFMA) The entire bill passed and was signed into law by lame-duck President Bill Clinton.

The CFMA effectively made the market for exotic derivatives off-limits to regulatory agencies like the SEC. Two of these financial instruments, credit default swaps and collateralized debt obligations, led directly to the sub prime real estate debacle and the banking credit crisis of today.

Phil Gramm´s legislation created a shadow banking system that operates outside any government oversight. Unfortunately, it leads to financial disasters that often require government (taxpayer) rescue in order to avert a national economic catastrophe.

After all his hard work undermining the economy, Gramm left the Senate in 2003 and joined the Swiss banking firm, UBS. However, he remained in Washington,DC so he could lobby Congress, the Federal Reserve and the Treasury Department for more banking deregulation laws.

Congress responded by passing the Responsible Lending Act, which consumer advocates called "The Loan Shark Protection Act" because it was designed to circumvent state laws against predatory lending.

James K. Galbraith, a University of Texas economist, said: "Phil Gramm's career was as the most aggressive advocate of every predatory and rapacious element that the financial sector has. He's a sorcerer's apprentice of instability and disaster in the financial system." Yes, and he's John McCain's chief economic adviser!

On August 8th 2008, Phil's firm, UBS, agreed, under duress, to buy back $18.6 billion in auction-rate securities from investors, and pay a fine of $150 million. Whatever for? The New York Attorney General, Andrew Cuomo, said UBS had misled customers about the safety of the securities. That's putting it mildly.

When the auction-rate securities market completely collapsed, UBS and other banks left investors holding the bag for billions in losses. Phil said he had nothing to do with that debacle, and, by the way, he was also "unaware" of UBS's $19 Billion in sub-prime mortgage losses! How much can a vice-chairman be expected to keep track of anyway?

When Gramm was forced to step down as McCain campaign co-chair, he said: "It is clear to me that Democrats want to attack me rather than debate Senator McCain on important economic issues facing the country.

Not true. Attacking Phil Gramm and his policies is debating the most important economic issues facing the country. And stop whining, Phil!