Last week, I pointed out that Saint Maverick's solution to the mortgage crisis is to blame the victims, bail out the banks, when necessary, and otherwise do nothing. It's the type of bold, visionary leadership we've come to expect by The Man Who Would Be Bush. But an article in Politico, of all places, illuminates the probable rationale behind McCain's approach.
The general co-chairman of John McCain’s presidential campaign, former Sen. Phil Gramm (R-Texas), led the charge in 1999 to repeal a Depression-era banking regulation law that Democrat Barack Obama claimed on Thursday contributed significantly to today’s economic turmoil.
“A regulatory structure set up for banks in the 1930s needed to change because the nature of business had changed,” the Illinois senator running for president said in a New York economic speech. “But by the time [it] was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.”
Gramm’s role in the swift and dramatic recent restructuring of the nation’s investment houses and practices didn’t stop there.
A year after the Gramm-Leach-Bliley Act repealed the old regulations, Swiss Bank UBS gobbled up brokerage house Paine Weber. Two years later, Gramm settled in as a vice chairman of UBS’s new investment banking arm.
McCain is often described in the corporate media as a champion of lobbying reform. A more honest assessment would, of course, describe him as a champion of lobbyists.
According to federal lobbying disclosure records, Gramm lobbied Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006.
During those years, the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages.
Ah, yes. McCain's pal worked to loosen the rules on predatory lending, and when such practices devastate the lives of millions of homeowners, McCain blames the homeowners and asserts that it's not the government's job to bail them out of bad loans that government deregulation helped them get suckered into. A pretty neat trick, by the Saint.
For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS’s American subsidiary. In the past year, UBS has written down more than $18 billion in exposure to subprime loans and other risky securities and is considering cutting as many as 8,000 jobs.
And if worse comes to worst, and McCain is president, UBS can always depend on a government bailout. Because McCain's not completely opposed to those.
Gramm is often a surrogate for the Arizona senator, particularly in meetings focused on the economy. And McCain has hinted he’d consider the former Texas senator for Treasury secretary in a McCain administration.
Which should comfort bankers everywhere.
McCain and Gramm have a long political history. The two became close when they worked together as senators to defeat Hillary Rodham Clinton’s 1993 health care plan, holding meetings at hospitals and clinics across the country.
In 1996, McCain was national chairman of Gramm's unsuccessful presidential bid.
In 2000, the duo had a rare parting when Gramm backed his home-state governor, George W. Bush, for president instead of McCain. But they’ve reunited in this presidential race.
Because there's still much work to be done. Banks need bolstering, and the American public has not yet been completely fleeced.