Gramm has made a career out of deregulating markets for the financial services and mortgage industry in the Senate, after which he went on to become a lobbyist for UBS- a top financial firm with massive subprime mortgage holdings. Gramm also secretively slipped in the "Enron Exemption" into a massive appropriations bill in 2000 that deregulated the energy market for disgraced Enron and set the stage for the current rampant oil speculation which is hiking up gas prices.
Former TX Senator Phil Gramm Serves as McCain"s Chief Economic Advisor & National Campaign Co-Chairman. Former Texas Senator serves as John McCain"s National Campaign Co-Chairman, as well as his "chief economic advisor -- and perhaps his closest political friend." [1]
Fortune Magazine: Most of McCain"s Positions on Economy Are "Vintage Gramm." Wrote Fortune Magazine: "most of his current positions are vintage Gramm indeed" [2]
Gramm, Named Vice Chairman of UBS Bank, Has Lobbied For UBS Since 2004. In 2002, former Senator Phil Gramm was named vice chairman of UBS Warburg; since 2004 Gramm has served as a lobbyist for UBS, representing the Swiss bank"s interests on Capitol Hill. Since Gramm began lobbying, UBS has spent $3,110,000 on its lobbying expenses. [3]
While Shaping McCain Economic Policy, Phil Gramm Simultaneously Lobbying Congress on Mortgage Crisis for Swiss Bank UBS. Phil Gramm, vice chairman of Swiss-based UBS and McCain campaign general co-chair and advisor "was being paid by a Swiss bank to lobby Congress about the U.S. mortgage crisis at the same time he was advising McCain about his economic policy, federal records show." Gramm, who was reported to have been advising McCain on economic policy back in October 2006, "had input on McCain"s March 26 policy speech about the mortgage crisis" which "recommended further deregulation of the banking industry as his response" to the ensuing mortgage meltdown. [4]
In 2007, Gramm Lobbied Against (Failed) Measure That Would Have Helped Homeowners Avoid Foreclosure. Federal lobbying disclosure forms "filed by the giant Swiss bank UBS, list McCain"s campaign co-chair, former Texas Sen. Phil Gramm, as a lobbyist dealing specifically with legislation regarding the mortgage crisis as recently as Dec. 31, 2007." According to UBS"s 2007 year-end report, Gramm "was lobbying the Senate in the second half of 2007 regarding the Helping Families Save Their Homes in Bankruptcy Act." The legislation which would have allowed "bankruptcy judges rewrite mortgage terms for Americans facing foreclosure so they could repay their loans and keep their homes" was vehemently opposed by the banking industry and eventually failed. [5]
Gramm Also Involved in Pressing Congress to Roll Back State Anti-Predatory Lending Laws. "According to federal lobbying disclosure records, [Phil] 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." [6]
Since 2006, Gramm's Lobbying Has Focused on Mortgage Related Issues. While pushed UBS interests on a number of issues -- including insurance reform, SEC trade, charitable giving tax reform, foreign investment, trade issues, and sanctions policies -- as of late 2006, his lobbying issues focused on those related to the mortgage industry. According to disclosure reports, Gramm lobbied Congress on: the Emergency Home Ownership and Mortgage Equity Protection Act (HR 3609); Helping Families Save Their Homes in Bankruptcy Act of (S.2136); the Federal Housing Finance Reform Act (HR 1427); the Fair Mortgage Practices Act of 2007 (HR 3012); the Borrower"s Protection Act (S.1299); the Responsible Lending Act of 2005 (HR 1295); and secondary market liability provisions in the Prohibit Predatory Lending Act (HR 1182). [7]
McCain Blamed "Explosion" of Derivatives for Mortgage Crisis. After asking how "4 million mortgages [could] cause this much trouble for us all?" in a speech on the economy, Senator McCain then blamed what he called "the explosion of complex financial instruments that weren"t particularly understood by even the most sophisticated banks, lenders and hedge funds" as part of "what happened" to financial markets that has resulted in the current credit crisis. [8]
Difficult-to-Value Derivatives Led to Billions in Losses for UBS and Mortgage Industry. In an article detailing the unfolding credit and mortgage crisis that has shocked the U.S. and global markets, the New York Times referred to the emergence of the "derivatives market" in the late 1990s as partly to blame for the ensuing credit crisis. Former Fed vice chairman Alan Blinder, who holds a doctorate in economics from M.I.T., held "only a 'modest understanding" of complex derivatives. 'I know the basic understanding of how they work," he said, 'but if you presented me with one and asked me to put a market value on it, I'd be guessing,"" wrote the Times. In the late summer of 2007, banks such as UBS lost billions as a result of "ill-considered derivatives" according to the Times. [9]
In Senate, Gramm Led Effort for Banking Deregulation, Which Set Stage for Current Mortgage Crisis. Gramm led "aggressive efforts when he was chairman of the Senate Banking Committee to deregulate the banking and financial services industry. That culminated in passage in 1999 of a sweeping financial services law that tore down the Depression-era Glass-Steagall wall separating regulated commercial banks from largely unregulated investment banks. And little regulation was put in to replace it." :To many liberal economists, Gramm's efforts set the stage for the current crisis," with investment banks lending soaring, starting the trading in subprime mortgages and becoming too large to be allowed to fail. [10]
2004: Gramm Told Derivatives Conference You"re Doing "God"s Work." In a staunch defense a practice that has been criticized by the likes of no less than Warren Buffet as opaque and hard to value --calling them "weapons of mass destruction"—Gramm "told dealers at a derivatives conference in Chicago [in 2004] that they were doing 'God's work" and had no reason to apologize for their industry - which has been faulted for creating opaque and complex financial transactions that helped bring down the likes of Enron." The Financial Times wrote that Gramm said, "derivative dealers have helped make the economy more resilient to recession" by spreading risk. "'When you're defending your interest, you're defending the public interest," he said. "But," the Times noted, "how many noted Gramm's admission earlier on in his speech? 'I find as I get older, I know less."" [11]
McCain Calls For "Meeting" Of Lenders... "We should also convene a meeting of the nation's top mortgage lenders. Working together, they should pledge to provide maximum support and help to their cash-strapped, but credit worthy customers." [12]
...While Lenders Have Already Met, Adopting "Principles." At the urging of Senator Dodd in the spring of 2007, "several major participants in the home mortgage market have agreed to adopt a set of principles for dealing with homeowners with high-priced loans who face possible foreclosure." Among the principles are, "contacting distressed borrowers promptly to try to work out arrangements; making loans more affordable by reducing rates, changing terms and other means; and providing refinancing at the lowest cost possible for those who are eligible." Among the major participants were the Mortgage Bankers Association, Citigroup, JP Morgan, HSBC Holdings, Bear Stearns, Fannie Mae, Freddie Mac, AARP, and the Leadership Conference on Civil Rights. [13]
...But Action Taken Thus Far by Lenders Has Wrested Control from Homeowners and Investors. The Bush Administration unveiled a plan to forestall massive foreclosures in December of 2007. The plan, written with the American Securitization Forum (ASF), "allows the financial institutions that wrote it to declare large swaths of mortgages in danger of default, and to rewrite those loans without sign-off from homeowners or the investors who own the loans." In the spring of 2007, the ASF and the Mortgage Bankers Association lobbied for, and were granted, powerful new autonomy to decide which loans they could step in to rework by deciding which mortgages" default they deemed "reasonably foreseeable," as opposed to stepping in when mortgages were actually in default. Banks "continue to keep those loans off their own balance sheets via an increasingly flexible interpretation of existing accounting rules." [14]
McCain Argued for "Transparency in the Lending Process." "We must have greater transparency in the lending process so that every borrower knows exactly what he is agreeing to and where every lender is required to meet the highest standards of ethical behavior." [15]
Gramm Slipped in "Enron Exemption" At Last Minute. In the "most cunning coup on behalf of his friends in the financial services industry," "Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act" into a late-year omnibus spending bill." Included was what became known as the "Enron Exemption," which exempted companies that trade derivatives electronically from disclosing details of transactions. [16]
Gramm "Raked In Enormous Contributions" From Securities Industry and Enron. "Gramm raked in enormous contributions from those who stood to gain the most from derivatives deregulation: Enron and those in the banking and securities industry." Between 1989 and 2002 he received nearly $100,000 in contributions from Enron and its employees, according to the Center For Responsive Politics [17]
Gramm"s Wife Paid $78,000 By Enron, Then Advocated for Deregulation of Derivatives Market. Wendy Gramm, former head of the Commodities and Futures Trading Commission (CFTC), "told the House banking committee that derivative markets would suffer from 'unnecessary or overly burdensome regulatory costs." Gramm, a professor at George Mason University's James Buchanan Center for Political Economy, described her views as 'comments that reflect the public interest rather than any special interest."" Enron compensation for Wendy Gramm in 2000 "included at least $78,000 in salary and fees, according to filings with the Securities and Exchange Commission." [18]