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Gramm became the scapegoat
Published Monday, October 27, 2008
Tom Hintgen
In 1999 U.S. Sen. Phil Gramm pushed through Congress the Gramm-Leach-Bliley bank deregulation bill. The law allowed commercial and investment banks to consolidate, repealing Franklin Roosevelt’s New Deal-era Glass-Steagall Act.
“Gramm-Leach-Bliley tore down the walls between financial institutions,” said Rich Lowry of the National Review.
Lowry reminds us that Democrats in good standing supported the final bill authored by Gramm, a Texas Republican. Sen. Joe Biden, a Democrat, voted for the bill which passed the Senate with 90 votes. President Clinton, a Democrat, signed the Gramm-Leach-Bliley bank deregulation bill into law.
“The bill was a foregone conclusion,” Lowry said. “Europe already had so-called universal banking in which financial institutions could undertake varied operations. U.S. banks were finding loopholes in the law to keep up with foreign competitors.”
Lowry said that American banks increasingly bumped up against the 60-year-old regulatory constraints.
“It's the very word deregulation that galls Gramm's critics,” Lowry said. “In their simplistic morality play, anything promoting it must be to blame. But Fannie Mae and Freddie Mac were practically arms of the government and still did more than any other institution to spread the bad debt before requiring a bailout themselves.”
He says that Barack Obama and every other Democrat should lay off what Lowry terms “their scapegoat of the hour.”
Gramm, however, has not always had the best interest of his country at heart. Nor has his wife, Wendy, according to a Washington, D.C., watchdog group called Public Citizen.
In June 2000, with close ties to Houston-based Enron, Sen. Gramm co-sponsored the Commodity Futures Modernization Act which deregulated energy futures. It passed and was signed into law.
Enron was a chief beneficiary of the deregulation.
The Gramm legislation set Enron free to run what, according to Public Citizen, amounted to an energy auction. Enron gained control over a significant share of California's electricity and natural gas market.
“Out-of-state suppliers withheld energy and ran up the price,” a Public Citizen group spokesperson said. “Finally, in June 2001, public pressure forced the Federal Energy Regulatory Commission to reassert price controls.”
By reasserting those federal controls, FERC basically killed Enron's auction system. The company eventually filed for bankruptcy.
Earlier, in response to a plea from Enron, Wendy Gramm, then chair of the federal Commodity Futures Trading Commission, moved to exempt Enron’s energy-swap operation from government oversight. By then, Enron was a major contributor to Senator Gramm's campaign.
On one Enron tape, an employee brags about, “all the money we’re stealing from those poor grandmothers in California.”
A few days after she got the ball rolling on the exemption, Wendy Gramm resigned from the commission.
Enron soon appointed her to its board of directors, where she served on the audit committee — overseeing the inner financial workings of the corporation.
For this, the company paid her an estimated $1.85 million in stocks and dividends.
This year Phil Gramm was forced from the John McCain campaign after he called people of lesser means “whiners.”
One wonders what his reaction would be if the shoe were on the other foot.
Tom Hintgen’s column runs on Mondays.
Comments
The Daily Journal is happy to host community conversations about news and life in Fergus Falls and the surrounding area. As hosts, we expect guests will show respect for each other. That means we don't threaten or defame each other, and we keep conversations free of personal attacks. Witty is great. Abusive is not. If you think a post violates these standards, don't escalate the situation. Instead, flag the comment to alert us. We'll take action if necessary. It's not hard. This should be a place where people want to read and contribute -- a place for spirited exchanges of opinion. So those who persist with racist, defamatory or abusive postings risk losing the privilege to post at all.Posted by ANonnyMoose (anonymous) on October 27, 2008 at 12:25 p.m. (Suggest removal)
Gramm's complex Commodity Futures Modernization Act not only deregulated energy futures, it also prevented regulation of bank-issued instruments such as credit default swaps, which turned out to be one of the key ingredients in this autumn's investment bank brouhaha. It's worth noting that the CFMA was inserted into an omnibus spending bill the evening before it came up for a vote with hardly an opportunity for a debate on the floor. It was a sneaky blindside move, and Congress passed it virtually without knowledge. Gramm has a lot more to do with the present economic climate than his supporters are willing to admit.
http://www.texasobserver.org/article.php...
Posted by Zepherin (anonymous) on October 27, 2008 at 1:50 p.m. (Suggest removal)
If you read entire column, the writer points out that Gramm is not lily white....
Posted by bigdaddy (anonymous) on October 27, 2008 at 1:57 p.m. (Suggest removal)
The link provided was excellent. Definitely gives some great insight to the political workings of Gramm. great read
Posted by retiredteacher (anonymous) on October 27, 2008 at 2:32 p.m. (Suggest removal)
Nor is Gramms "lily white" on the deregulatory bill he shoved through as a rider to a budgetary bill at the last minute of the Clinton administration. He knew the parties had fought bitterly over this bill for months and he knew they were both very weary and ready to go home. He attached it to a bill he knew they had compromised on and BOTH would want to pass. He introduced his rider very briefly and in language typical of today's credit default swaps, in other words almost unintelligible. Both parties voted for the bill because it was the BUDGET bill they wanted. Gramms has plenty to answer for concerning the recent Wall Street crash. This bill would have passed regardless if Clinton vetoed it or not, but he should have.
Posted by retiredteacher (anonymous) on October 27, 2008 at 11:04 p.m. (Suggest removal)
According to the economic experts, the credit default swaps are exactly what caused the lending collapse. They were fraudulent insurance policies on sub-prime loans and they were sold again and again because people thought they were being insured against loss if they bought up a mortgage, but there was no cash behind them, so all those people who bought them up, including many European banks, were left holding the bag. Actually what it was, was gambling against houses becoming devalued and that their values would continue to rise. The very same sort of thing killed off the banks during the Great Depression. Under the Franklin Roosevelt administration laws were fashioned to outlaw these sort of slimy instruments and against this kind of gambling with stocks in the market. There was a Republican President Hoover and a Republican Congress that allowed it to occur. There were even shops to do the gambling with stocks all over the place that resembled today's bookie shops. This last time both Democrats and Republicans let it happen, along with Bush, Greenspan and Thompson, but the mess DID start with none other than Phil Gramms. He was no fall guy at all.
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