Phil Gramm and the Subprime Financial Crisis

Discussion in 'Current Events' started by Care4all, Sep 21, 2008.

  1. Care4all
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    Care4all Warrior Princess Supporting Member

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    found this article that talks about what Gramm did to help cause this mess...

    granted it can be slanted.....but this DOES NOT NEGATE the TRUTH....McCain needs to stay as far away from this guy as possible....

    Here is a quip from it that might help all of you begin your own google searches to find out more:

    The Subprime Mess and Phil Gramm: An Experiment in Deregulation | InjuryBoard Los Angeles
    In 1933, a few years following the stock market crash, Congress passes the Glass-Steagall Act, in hopes that regulating banks will help prevent market instability, particularly amongst Wall Street banks. The purpose of the act is to separate commercial banks that focus on consumers from investment banks, which deal with speculative trading and mergers.

    The Glass-Steagall Act provided the proper oversight and entity separation that would prohibit banks and other financial companies from merging into giant trusts (conflict of interests) -- giant trusts or corporations being more powerful, naturally, and having the seemingly limitless capital to lobby their corporate interests, however, with a very myopic scope (particularly when it comes to factoring in potential losses -- most banks, as seen in contemporary times, chose not to anticipate losses in the mortgage market; they presumed home prices would continue to appreciate).

    In 1999, former Senator Phil Gramm (who is, incidentally, Senator John McCain's economic adviser and cochairs his presidential campaign) set out to completely gut the Glass-Steagall Act, and did so successfully, replacing most of its components with the new Gramm-Leach-Bliley Act: allowing commercial banks, investment banks, and insurers to merge (which would have violated antitrust laws under Glass-Steagall). Sen. Gramm was the driving force behind the Gramm-Leach-Bliley Act, as he had received over $4.6 million from the FIRE sector (Finance, Insurance and Real Estate donations) over the previous decade, and once the Act passed, an influx of "megamergers" took place among banks and insurance and securities companies, as if they had been eagerly awaiting the passage of Gramm's Act. Everything in between Glass-Steagall and Gramm-Leach-Bliley (i.e. Savings and Loan crisis/bust) was, in large part, the incubation period for what would take place over the nine years that would follow the passage of Gramm's Act: an experiment in deregulation.

    Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.
     
  2. Care4all
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    Care4all Warrior Princess Supporting Member

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    here some more pertinent info:

    In 2003, Gramm left the Senate to join UBS, which had acquired investment house PaineWebber due to his deregulation bill. At UBS, Gramm lobbied Congress, the Fed and the Treasury Department. During Gramm's tenor at UBS and as a lobbyist, Congress passed the Responsible Lending Act, billed as an anti-predatory-lending measure, but was called the "Loan Shark Protection Act" by consumer advocates, as it was designed to preempt stronger state laws against anti-predatory lending. The Fed largely ignored the underlying and growing problems within the subprime mortgage/housing markets, as Bernanke famously acknowledged the housing market in April, 2007 as, "[showing] signs of softening," but said that a "sharp slowdown," is unlikely. Then, according to Mother Jones magazine, Henry Paulson became the Treasury Secretary in July, 2007, when, "In 2005, [at] Goldman [he] securitized $68 billion in residential mortgages and $23 billion in 'other assets' primarily related to CDOs," (Mother Jones, August, 2008). With such self-interest, and a lack of the nation's interest, we can see how this subprime mess was allowed to escalate to such great proportions.

    Some justice was served, however, this spring, as UBS became one of the subprime debacle's biggest losers, having to write down $37 billion -- the same amount as their previous four years of profits combined. UBS also made the public aware that two-thirds of its losses were due to reckless investing in collateralized debt obligations (CDOs).
     
  3. editec
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    editec Mr. Forgot-it-All

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    The legislative and accounting forensics leading to this disaster will show us

    1. The rush to dergulation was the problem;

    2. The Republicans were the primary, but not the sole, enablers of these STUPID politicies;

    3. That, sans regulations to prevent it, WALL STREET can no more control its addiction to easy money that costs the commonweal money, than a meth addict can stop smoking ICE.

    GREED unharnessed by regulation does NOT lead to a better world for all, folks.

    You libertarians, you objective libertopians, you Ayn Ranian nitwits do NOT understand economics.

    Atlas is NOT shrugging, ATLAS is falling down drunk from money ATLAS did not EARN but instead has been STEALING from the working classes for the last 40 years.
     
    Last edited: Sep 21, 2008
  4. Diuretic
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    Diuretic Permanently confused

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    Damnit! I can't rep ya!
     
  5. Care4all
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    Care4all Warrior Princess Supporting Member

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    i realize that both sides have hands in this mess, but what i posted above, and this amendment that Gramm COVERTLY SLIPPED IN to an Appropriations bill, IS THE SINGLE ITEM that allowed this mess to happen....without it, NONE of what has just happened to us, COULD have happened...

    Let the sun shine.....let the sun shine in.

    This amendment for deregulation that Gramm snuck in to this appropriation bill needs to be REVERSED.
     
  6. Diuretic
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    Diuretic Permanently confused

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    That's a horrible stain on your democracy that bills can be "stuffed". You need to get rid of that, it doesn't happen here, I simply don't understand how your system allows it.
     
  7. Care4all
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    Care4all Warrior Princess Supporting Member

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    That's a good question Diuretic....

    and as i mentioned, this article was a biased article so I need to continue my google on this Gramm-leach-biley amendment to get the full story....

    be back in a bit! :)

    Care
     
  8. Care4all
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    Care4all Warrior Princess Supporting Member

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    Well, found out one thing...

    President Clinton, is absolutely not to blame on this...because it was a veto proof bill....they had enough votes in the senate and house to over ride a veto from Clinton.
     
  9. Care4all
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    ok, here is some more less biased than the article i posted info on....from Wiki....

    The bills were introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA). The bills were passed by a 54-44 vote along party lines with Republican support in the Senate[1] and by a 343-86 vote in the House of Representatives[2]. Nov 4, 1999: After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill only after Republicans agreed to strengthen provisions of the Community Reinvestment Act and address certain privacy concerns.[3] The final bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. This veto proof legislation was signed into law by President Bill Clinton on November 12, 1999. [4]

    The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.[5]
     
  10. editec
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    editec Mr. Forgot-it-All

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    Yes, this was an important bit of data that we needed to read.

    but understand that our CONGRESSPERSONS either voted FOR this, or didn't know THEY WERE VOTING FOR IT.

    Either way, they should ALL be stripped office and run out of Washington a rail.

    I am sick to fucking death of Congress voting for crap they haven't even READ.

    For god's sakes I often understand bills before Congress better than people making six figures who have STAFFS whose sole job is to explain what these bills mean!

    Our congressmen are so damned busy lining up bribes so they can elected next term, they don't know what they're even voting on half the time.

    And that isn't just a slam at Rs, that's a slam at the whole damned CORRUPT system they ALL enjoy.
     
    Last edited: Sep 21, 2008

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