First, let me apologize to weasels everywhere for the comparison to Phil Gramm. Tonight on Countdown, Keith Olberman highlights one of John McCain's crew of market buccaneers, Phil Gramm. Gramm's career offers--I think--a clear indication of just where McCain is on economic questions and where he wants to take us.
So who is he? Several weeks ago I diaried on several of McCain's advisors. Here's the bit on Gramm:
- Phil Gramm: Widely regarded as McCain's lead advisor, and a likely Secretary of the Treasury in a McCain administration.
Gramm first entered politics as a Democrat--winninng a congressional seat from Texas in 1978. He was reelected in 1980. While in his second term he betrayed his Democratic colleagues when he advised the Reagan Administration of his congressional caucus' budget strategy meetings. Stripped of committee responsibilites by the Democratic leadership, Gramm resigned, then ran successfully as a Republican in the special election his resignation forced. In 1986 Gramm ran successfully for the Senate, where he served three terms.
While in the Congress, Gramm was an aggressive proponent of spending restraint and deregulation. Working closely with the Reagan White House and Reagan's OMB director David Stockman, Gramm was a committed soldier in the war against government. (Gramm's pal Stockman was famous for observing--when discussing Social Security and Medicare--that he didn't believe "the American people are entitled to anything." Stockman was indicted in 2007 by the US attorney in Manhattan for defrauding investors in his auto parts company).
Gramm's tenure in the Congress was highlighted by two pieces of legislation, the Gramm-Rudman-Hollings Act which sought to apply an across the board budget cutting discipline to federal spending (as Grover Norquist once famously said, we'll shrink government down to the size where we can drag it into the bathroom and drown it in the tub). Key elements of the act were later deemed unconstitutional. Of more lasting importance was the 1999 Gramm-Leach-Bliley Act which repealed key provisions of the Depression era Glass-Steagall Act and broke down the firewalls between financial businesses--banking, brokerage services, and insurance--making rapid consoidation in the investment services sector possible. The breaching of these barriers led directly to the excesses and abuses of the 1990's (ex: an analyst in the brokerage arm of a firm plumps a given company's stock because the investment banking arm of the same firm wants to please the company and gain additional investment banking business. Investors--believing they are recieving objective and independent information--are then led to make decisions contrary to their interests). Many economists believe that the sub-prime slime we are currently suffering through today is another effect of Gramm-Leach-Bliley.
After leaving the Senate, Gramm became a vice-president at the international banking firm UBS. By the way, Gramm's wife Wendy is also an accomplished member of our ruling class: she sat on the board of Enron prior to its collapse and along with her fellow board members agreed to a settlement of a suit brought by the Regents of the University of California.
If you're interested, I expand on the policy implications of Gramm--and others--advising McCain, and offer some predictions of just what we can expect from a McCain administration.