We've all heard by now the links that McCain economic advisor and former Senator Phil Gramm has to the subprime mortgage crisis. In essence, he was a lobbyist for UBS, which worked to deregulate the housing market, which in turn led to the current real estate fiasco. I'm not going to link to the stories; they're essentially common knowledge `round these parts. If you're in the dark on this issue, go see Olbermann's take fraom last night.
However, we now have documented evidence linking Gramm not only to the subprime crisis, but to the massive increase in oil futures trading, and thus the rapid increase in the price of gasoline. Thus, perhaps MAIN economic advisor is linked in no uncertain terms to BOTH causes of the current economic situation in the U.S. I submit that, in a reasonable world, this would sink McCain's campaign, particularly given his oft-quoted remarks about knowing nothing about the economy. If Phil Gramm is the guy he listens to, now we know WHY he's clueless regarding economics.
Here's the deal. Point the First: futures trading is one cause of the current spike in oil prices. That's not me talking, that's the United States House of Representatives, which made the declaration while still in Republican hands:
"There’s a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." — National Gas Week, September 5, 2005 as reprinted in the US Senate Permanent Subcommittee on Investigations’ report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006
We ok so far? The REPUBLICAN House is on record blaming, at least in part, futures trading for high gas prices. This view is supported by the evidence. Diarist Dr Observer quotes a recent Ft. Worth Star-Telegram article thusly:
Does it surprise you to discover that the US Senate investigated the rigging of the oil market by speculators in the summer of 2006 – and concluded that there was no supply and demand problem with oil? Did you know that their conclusion was that speculators were responsible for a 70 percent overcharge in the price of oil in the months leading up to the summer of 2006?
This from page 1 of the Executive Summary of that Senate investigation, there is this one troubling line: "Today, U.S. oil inventories are at an eight-year high, and OECD (Organization for Economic Co-operation and Development) oil inventories are at a 20-year high."
That’s odd because, in 2006, just like today, the media reporting covered the serious international shortage of oil and justified oil’s high price. Even more troubling is that the House of Representatives held a hearing this past December, ominously titled "Energy Speculation and Price Manipulation."
Give the diary a read here: http://www.dailykos.com/...
Well, you may ask yourself, if oil futures trading can have a big impact on price, and if oil prices are a huge factor in the health of our economy, shouldn't it, like, be illegal or deeply regulated or somesuch?
A just question. And the story of how said regulation fell by the wayside is rather interesting. From the same Star-Telegram article:
Six months later came Senate Bill 3283, also named the Commodity Futures Modernization Act of 2000. This time around the sponsor was Republican Sen. Richard Lugar of Indiana, and now Phil Gramm was listed as one of the bill’s co-sponsors. Like it had in the House, this bill was destined to go nowhere until, late one night, it was attached as a rider to an 11,000-page appropriations bill – which was signed into law by President Clinton.
Now traders had an officially deregulated market for energy futures. Worse, that bill also deregulated many financial instruments – including the collateralized debt obligations that are at the center of today’s mortgage crisis, which may well cost us more than $1 trillion before it’s over.
[snip]
As USA Today wrote of this fiasco in January of 2002, "But, as a power marketer, [Enron] could buy enough energy-futures contracts in a region to create a virtual monopoly." That’s right: As early as the winter of 2002, it was widely known that the 2000 Commodities Futures Modernization Act had created a monster, capable of running up energy prices outside of the normal law of supply and demand. Worse, our government had been warned this was going to happen. Representatives of the Federal Reserve, the Securities and Exchange Commission and the CFTC had already told Congress not to deregulate energy because "the market was ripe for manipulation." Everybody was warned; that’s why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.
Phil Gramm’s office denied that he had anything to do with writing the section of that bill that actually deregulated energy. And yet Prof. Michael Greenberger, formerly a CFTC board member himself, said that Gramm’s wife Wendy, along with a few lobbyists and Wall Street attorneys, had rewritten it. When Robert Manor of the Chicago Times wrote about this situation on January 18, 2002, neither Gramm could be reached for comment.
Would that be the same Phil Gramm who....well, yes it would. And the story behind exactly how Phil Gramm came to be involved with this legislation is sort of interesting. Public Citizen, a non-profit public interest organization, wrote a scathing and detailed report on Gramm's ties to the bill that deregulated energy futures trading in December 2001. You can read the whole report here: www.citizen.org/documents/Blind_Faith.PDF
But here are some highlights:
Dr. Wendy Gramm [yes, that's his wife], in her capacity as chairwoman of the Commodity Futures Trading Commission (CFTC), exempted Enron’s trading of futures contracts in response to a request for such an action by Enron in 1992. At the time, Enron was a significant source of campaign financing for Wendy Gramm’s husband, U.S. Senator Phil Gramm.
Six days after she provided Enron the exemption it wanted, Wendy Gramm resigned her position at the CFTC. Five weeks after her resignation, Enron appointed her to its Board of Directors, where she served on the Board’s Audit Committee. Her service on the Audit Committee made her responsible for verifying Enron’s accounting procedures and other detailed financial information not available to outside analysts or shareholders.
Following Wendy Gramm’s appointment to Enron’s board, the company became a significant source of personal income for the Gramms. Enron paid her between $915,000 and $1.85 million in salary, attendance fees, stock option sales and dividends from 1993 to 2001. The value of Wendy Gramm’s Enron stock options swelled from no more than $15,000 in 1995 to as much as $500,000 by 2000.
Phil Gramm is the second largest recipient in Congress of Enron campaign contributions, receiving $97,350 since 1989.
It gets better:
Less than one month later, Gramm rejected the recommendations of the President’s Working Group when he helped introduce the Commodity Futures Modernization Act of 2000, which included language deregulating energy trading by excluding companies like Enron from both the Commodity Exchange Act and Commodity Futures Trading Commission jurisdiction. But the bill languished in the Senate, too controversial to get a committee hearing. But the bill’s companion in the House did get a hearing, and the House voted to approve the measure in the evening of October 19, 2000. But the more deliberative Senate, where minority members have more authority to alter legislation than their minority colleagues in the House, had no such opportunity to hold the legislation up to the light of public scrutiny. Daniel Rappaport, then chairman of the New York Mercantile Exchange, noted that "if this bill ever saw the light of day with full floor debate, it wouldn’t have a chance to survive."
And Phil Gramm ensured the bill would not be subject to a floor debate. Three days after the Supreme Court issued its ruling sealing Bush’s victory in the disputed 2000 presidential election, Phil Gramm helped re-introduce the same bill he had helped introduced in June — but this time with a different bill number. Now-retired Rep. Thomas Ewing did the same in the House, despite the fact that the House had already approved the measure. This coordinated trickery of introducing the same bill under a different name was necessary for Gramm to get the entire bill attached to the appropriations bill that Congress and a lame-duck Clinton had battled over for weeks. With most of the news media still absorbed by the Supreme Court election decision, Congress passed the appropriations bill on December 15, 2000 — the same day Gramm re-introduced the bill in the Senate under a different bill number. The bill, on which Gramm did not hold a hearing in his banking committee, was signed by the president on December 21. When combined with California’s electricity deregulation law, this commodity deregulation law enabled Enron to operate an electricity auction closed to the public and free from federal regulation.
Thus, here's the situation, as far as I can tell. This one bill, the Commodity Futures Modernization Act of 2000, is a primary cause of BOTH the housing fiasco and the dramatic rise in gas prices. Phil Gramm co-sponsored this legislation, and then PERSONALLY assured that no hearings would be held on the matter, because he knew he didn't have the votes. The chief energy company in his state has previously spent the last decade driving a Brinks bank truck to his front door, in the form of campaign contributions and payments to his wife. Shortly after the bill was passed, Enron made a killing by porking California consumers. Phil Gramm is currently employed as a lobbyist for UBS, ANOTHER giant company that made a killing on his legislative handiwork (before they ended up losing their shirts on bad investments). Meanwhile, Gramm has been a leading economic advisor to John McCain since 2006, and his name is being fluttered for Secretary of the Treasury.
I believe this is a striking revelation, coming as it does on the heels of the UBS story. It stinks of corruption, economic elitism, and McCain's stone-deaf attitute to the suffering of working people. I also submit that this speaks to John McCain's judgment as to whom he associates.
I therefore respectfully request that you forward the story about the internets to whoever will listen, and recommend so we can get a full discussion going of this story. There's a lot more documentation out there. Frankly, Gramm could be the gift that keeps on giving for Dems in 2008.