Saturday, March 29, 2008

McCain's economic brains - Ex. Sen Phil Gramm (R-TX)

When John McCains says he doesn't know too much about economics, then makes a statement on his economic policy, the question arises, who wrote the statement? A number of people see the hand of ex Texas Senator Phil Gramm, the man who more than anyone else in government was responsible for removing the 1930's Glass-Stegall Act that separated banks into regulated and government insured retail banks and unregulated financial banks and insurance companies and prevented the latter from using funds collected by insured retail banks for risky financial activities.

As Chairman of the Senate Banking Committee, Sen. Gramm got his wife (Wendy Gramm, also a Ph.D. economist) a seat on the Security and Exchange commissions (SEC). Both Phil Gramm and his wife Wendy were in the forefront of financial deregulation of the kind that has led to the merger and consolidation activity of the last decade and to the current credit collapse. At the SEC she proceeded to rewrite the SEC regulations so that Enron, who was operating as a financial market maker in energy markets, was excluded from SEC oversight. She moved directly from the SEC to the Board of Directors of Enron, where she was on the Audit Committee when Enron restated prior year's earnings (meaning the financial statements had been fraudulent) and then collapsed. When Enron collapsed, Wendy Gramm was one of the Directors sued for insider trading and violation of SEC regulations. The lawsuit was settled in early 2005. Go read this article in Salon for more details on Wendy Gramm's work at the SEC and her role in the collapse of Enron.

Lisa Lerer of the Politico today published an article providing more of Gramm's history and his role as John McCain's economic adviser. She provides a great deal of additional detail on Phil Gramm.

Phil Gramm has been as responsible for the current credit collapse and set of failures in Wall Street as any man in recent history, although possibly not quite as much as his fellow libertarian, Alan Greenspan. Gramm is a firm advocate of financial deregulation and small government, and was closely tied to the fraud involved in the Enron collapse. Now he is a key economic adviser to the self-admitted economic naif, John McCain and is being spoken of as McCains Secretary of Treasury of McCain is elected President.

The current financial problems are a direct result of the political philosophy behind the Reagan Revolution, and Phil Gramm and his wife Wendy were two major cogs in the machine that brought the current financial collapse to us. That he is advising McCain on economics is like the fox advising hens on security for the hen house. That's another major strike against a McCain Presidency.

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