Monday, October 6th, 2008 at 5:39 AM
Where It Started
I’ve been keeping an eye out for mojo because he’s the potential winner of the third-quarter contest, and saw him post this on CR. Mojo, check in when you get a chance – the number of detached sales for the 3rd quarter is up to 5,403! (his guess was 5555).
Here is his post on CR, commenting on the 60 minutes piece on credit default swaps:
mojo writes:
Credit Default Swaps or Credit default Insurance was an illegal scam. Selling Insurance without adequate reserves is illegal because it has to fail. ~ Cynical Yes
That was former (1997-99) Division of Trading and Markets director Michael Greenberger, speaking about derivatives and how they’re completely unregulated. Last April, he spoke with Terry Gross after Bear Stearns died:
GROSS: And there’s no regulation?
Prof. GREENBERGER: There is no regulation. In fact, when I was in the
government, we argued very strenuously that these kinds of hidden bets could be
very disruptive to the financial system, and they played as important a role as
securities and bonds did, which are regulated. We wanted them to be regulated.
That was a battle that we lost out on, and essentially, in December 2000 on the
floor of the Senate, Phil Gramm, chairman of the Senate Finance Committee,
introduced a piece of legislation that completely deregulated these markets,
not only at the federal level but, for the most part, at the state level. So
they are completely outside the law, so to speak.
GROSS: And what was this legislation?
Prof. GREENBERGER: It was called the Commodity Futures Modernization Act. It
was a 262-page bill, and it was added as a rider to an 11,000-page omnibus
appropriation bill as Congress was recessing for Christmas in 2000. I would say
there was no one, except the drafters of the bill, who understood what it did,
and I can assure you that the drafters of the bill were not members of
Congress. They were the lawyers for the investment banks on Wall Street. They
convinced Senator Gramm to introduce this, they freed the system from any
regulation, and we’ve been embarking on financial fiascoes ever since.
http://prairieweather.typepad.co…hadow- syst.html
Posted on Monday, October 6th, 2008 at 5:39 AM in Uncategorized | 12 Comments » | 
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These guys really deserve a bailout. The world wouldn’t turn without bankers.
shadash | October 6th, 2008 at 6:05 amWasn’t (until recently) Phil Gramm the economic adviser to John McCain?
I believe he was let go after he called Americans who complained about their financial condition, “a nation of Whiners.”
Downturn | October 6th, 2008 at 7:14 amJim, That must be another Mojo. I don’t recall ever posting on CR. However, I am the Mojo with the 5555 guess and the Mojo who asked for advice a couple of weeks ago regarding the possible sale of my house. By the way, just an update for those who were interested – Buyer #2 couldn’t get his loan with his 10% down payment, so went back to big money buyer #1 and fortunately they were still interested. Scheduled to close next week … just need to fix a couple of items from their request for repair list.
Mojo | October 6th, 2008 at 8:44 am“Wasn’t (until recently) Phil Gramm the economic adviser to John McCain?
I believe he was let go after he called Americans who complained about their financial condition, “a nation of Whiners.””
Yes, that’s the same guy. But I’m not sure whether he was let go because of the remark or because the remark led to him getting more attention as the author of the law that set the stage for the subprime debacle.
GeneK | October 6th, 2008 at 9:03 amCommodity Futures Modernization Act? Well, that certainly was some great modernization. Well, done, congress.
Simone | October 6th, 2008 at 9:33 amOn July 18, 2008 Gramm stepped down from his position with the McCain campaign. However, he often accompanies McCain during the campaign, and continues to be an unofficial adviser on economic and financial matters.
Great…He still has McCain’s ear.
PoorHouse | October 6th, 2008 at 9:40 amIdeologues are some of the most dangerous people. They are just sure their theory is right despite the evidence to the contrary. Pure communism is supposed to work in theory, and fails miserably in practice. Ditto for pure socialism. Yes, I’ve read some of the works claiming that capitalism is the exception, that ANY interference in it is worse than no interference, yet actual events keeps showing otherwise. A very small amount of regulation could have prevented the excesses of the housing bubble, yet some people still cling to the theory over the actuality.
Dwip | October 6th, 2008 at 1:50 pmHe’s also connected to Enron (through his wife):
Due to Wendy Gramm’s position on Enron’s Audit Committee, she had intimate knowledge of Enron’s financial structure and had access to sensitive financial information not available to Wall Street analysts or average shareholders. It is therefore probable that she knew of Enron’s possibly fraudulent practices for some time and that her husband would have known as well. Enron’s 874 tax haven subsidiaries allowed Enron to funnel billions of dollars to offshore accounts.
The Gramms’ close involvement with Enron’s corporate and legislative activities, the Gramms’ possible knowledge and/or connection to criminal misconduct relating to Enron’s collapse, and the effects of Enron’s layoffs and other economic impacts on Senator Gramm’s constituents may have been the leading factor in Gramm’s decision on September 4 not to seek re-election to the Senate in 2002.
http://www.tradewatch.org/cmep/energy_enviro_nuclear/electricity/Enron/articles.cfm?ID=7104
CA renter | October 6th, 2008 at 11:31 pmAnd this:
Gramm didn’t just make a fairy tale world for Wall Street, though. He included in his bill a provision that prevented the regulation of energy trading markets, which led us to the Enron collapse. There was no collapse of the house of Gramm, however, because his wife Wendy, who once headed up the Commodities Futures Trading Commission, took a job on the Enron board that provided almost $2 million to their household kitty. And why not? Wendy got a CFTC rule passed that kept the federal government from regulating energy futures contracts at Enron.
If John McCain gets elected and chooses Phil Gramm as his Treasury Secretary, which many politico types see as likely, they will be able to talk about the good old days when Gramm was in congress and McCain was in the senate and they were in the midst of the Savings and Loan crisis.
The S and L scandal, which may look precious when compared to our present cascade of problems, isn’t hard to understand, either. But it is impossible to take John McCain seriously on our current financial Armageddon since he was dabbling in the historic collapse of 747 S&Ls that occurred during Ronald Reagan’s era. In the early 80s under the Republican president, congress deregulated the savings and loan industry in much the same way that Gramm made sure there were no laws hindering our current financial malefactors on Wall Street. S&Ls simply lobbied until they had less regulation and then began making rampant, unsound investments.
http://www.huffingtonpost.com/jim-moore/a-nation-of-village-idiot_b_127340.html
CA renter | October 6th, 2008 at 11:33 pmAnd this:
Republican presidential candidate Sen. John McCain’s national campaign general co-chair 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.
“Countdown with Keith Olbermann” reported Tuesday night that 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.
Gramm joined the bank in 2002 and had registered as a lobbyist by 2004. UBS filed paperwork deregistering Gramm on April 18 of this year. Gramm continues to serve as a UBS vice chairman.
http://www.huffingtonpost.com/2008/05/27/phil-gramm-mccain-co-chai_n_103801.html
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So…why isn’t this guy in jail????
CA renter | October 6th, 2008 at 11:34 pm“So…why isn’t this guy in jail????”
The federal prosecutors in charge of bringing people in Gramm’s party to trial were all sacked, I think.
GeneK | October 7th, 2008 at 4:08 pmI hate to say it, but I don’t think there is much public outrage about that kind of thing simply because a lot of people don’t understand it. I mean c’mon, one of the best predictors of politician’s success is “would you like to have a beer with so-and-so.” A lot of the public simply tunes out when you start talking about “874 tax havens” and “lobbying disclosure forms.” Unfortunately, we all end up paying the price for that lack of interest.
Dwip | October 7th, 2008 at 6:58 pm