LETTER TO THE EDITOR: Thank Gramm for the bailout mess
September 21, 2008 · Updated 1:57 PM
To the editor:
Eight years ago, Texas Senator Phil Gramm helped orchestrate the collapse of the housing market and the subsequent foreclosure of millions of homes, which has sparked our current recession.
As chairman of the Senate Banking Committee while the Republicans were in control of Congress, he routinely rejected requests from the Securities & Exchange Commission for more money to help police Wall Street, threatening the agency with funding cuts should the SEC oppose a rule designed to prohibit accounting firms from getting too close to the companies they audited. Gramm subsequently shepherded a banking deregulation bill through the Senate that eliminated safeguards against capricious behavior among banks, insurance companies and securities firms.
One year later during the budget showdown of 2000, Gramm quietly slipped a 262-page measure into the $384 billion omnibus spending bill written largely by financial industry lobbyists that would “protect financial institutions from overregulation” and “position our financial services industries to be world leaders into the new century,” according to Gramm.
While there was a slight bit of regulation buried in this bill, there was a provision lobbied for by Enron that exempted energy traders from oversight. Gramm had earlier taken millions in campaign contributions from Enron. His wife Wendy was serving on the board at the time and earned their family close to $2 million before the company’s collapse, which wiped out the life savings of thousands of working families.
Because of the swap-related provisions of Gramm’s bill, a $62 trillion market became unregulated. From this point on, no one was accountable to ensure that the banks and hedge funds had the assets to cover the losses they guaranteed.
As a result, taxpayers are now left to bail out trusted financial institutions like Freddie Mac and Fannie Mae just as we had to do with the savings and loan industry during the Reagan Administration, which cost each taxpayer in this country several thousand dollars. In their zeal for a free market economy, conservatives in Congress have routinely sabotaged their constitutional duty of oversight, and then when the economy reaches the brink, they support expensive public bailouts as John McCain has now done.
Phil Gramm has been a major economic advisor to John McCain and three years ago McCain told the Wall Street Journal that “Gramm was his economic guru.”
Despite the fact that Phil Gramm recently called us American taxpayers a “nation of whiners,” he has been mentioned as a possible treasury secretary should McCain win the election in November.