||Home||Switchboard||Unix Administration||Red Hat||TCP/IP Networks||Neoliberalism||Toxic Managers|
|(slightly skeptical) Educational society promoting "Back to basics" movement against IT overcomplexity and bastardization of classic Unix|
|News||Political Economy of Casino Capitalism||Recommended Links||Corruption of Regulators||John Kenneth Galbraith||Hyman Minsky||Recommended Blogs|
|Critique of neoclassical economics||Supply side Lysenkoism||Trickle down economics||Rational expectations scam||Monetarism||Criminal negligence in financial regulation||Financial Sector Induced Systemic Instability|
|Helicopter Ben||Bush||Clinton||Jeffrey Sachs and "shock therapy" racket||Milton Friedman||Phil Gramm||Greenspan: Grey Cardinal of Washington|
|Ronald Reagan: modern prophet of profligacy||Rubinism||Lawrence Summers||Sandy Weill||Martin Feldstein||Financial Humor||Etc|
|"He's always willing to rise above principle. He's got every
quality of a dog except loyalty."
-- Dave McNeely, political columnist for the Austin, Texas American-Statesman
In Bailout Nation (Chapter 19) Barry Ritholtz assigned number three to Phil Gramm for his importance into unleashing the crisis:
But as for lasting regulatory damage produced he can well be No.2. He was very dangerous, ruthless and ideologically charged type. The type of predator that are more common on exchanges and night clubs that on the floor on the Congress. He skillfully used his Ph.D in economics as a bullet-proof vest to silence opponents.
1. Federal Reserve Chairman Alan Greenspan
2. The Federal Reserve (in its role of setting monetary policy)
3. Senator Phil Gramm
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley, and Goldman Sachs) and their CEOs
18. President George W. Bush
19. President Bill Clinton
20. President Ronald Reagan
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries Robert Rubin and Lawrence Summers
25. FOMC Chief Ben Bernanke
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk)
29. Institutional investors (pensions, insurance firms, banks, etc.) for
buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk
For Gramm, derivatives deregulation was a family affair. His wife Wendy Lee Gramm was the head the Commodity Futures Trading Commission under Reagan (from 1988 to 1993). His wife, Wendy Gramm, chairwoman of the CFTC from February 1988 to January 1993, had earlier shepherded through the exemption that (in April 1993) let Enron trade energy derivatives without federal oversight. A few months after passage of the exemption, she quit the CFTC and five weeks later took a seat on Enron's board of directors. The gig was lucrative. According to the watchdog group Public Citizen, over the course of the following eight years, Enron paid her between $915,000 and $1.85 million. Enron also contributed more than a hundred thousand dollars to Phil Gramm's campaign fund over the years, according to the Center for Responsive Politics. She later was involved in Enron scandal (see UC press release on Enron settlement).
As US News and World Report reported on 1/18/04:
She also was involved in killing Brooksley Born attempt to regulate derivatives. see 7-17-98, Statement of Wendy Gramm.
Wendy Lee Gramm helped continue the "Reagan revolution" as a free-market regulator and chairman of the Commodity Futures Trading Commission from 1988 to 1993, so perhaps it was no surprise the wife of former Texas Sen. Phil Gramm ended up on the board of Enron in 1993. But that post brought her a hefty dose of notoriety when the Enron debacle unfolded in late 2001. As a member of the company's audit and compliance committee, she helped approve financial statements and acted as the liaison to auditors Arthur Andersen. Enron subsequently collapsed, Arthur Andersen folded, and Gramm left the board.
So where is Gramm now? Ironically, she is in the center of the corporate governance debate. Gramm, 59, is chairman of regulatory studies for the Mercatus Center, a conservative think tank affiliated with George Mason University in Virginia. She recently moderated a panel on a proposed rule by the Securities and Exchange Commission to give shareholders more access to board selection. But the dozens of corporate governance experts attending the December meeting didn't acknowledge the white elephant in the room. Enron came up in passing, but the fact that one of its former directors was leading a discussion about how boards of directors should be held accountable to shareholders went unspoken.
General atmosphere during 1990th favored deregulation (20040830150815-39986) As Robert A. Johnson the director of economic policy the Roosevelt Institute testified before the Congress ( raj-revised-testimony1 ):
HISTORY OF ACTIONS CREATING LOOPHOLES LEADING TO UNREGULATED DERIVATIVES
Exchange Trading vs. Clearing Before CFMA. Under the law governing the regulation of derivatives (the Commodity ExchangeAct of 1936 ("CEA") as amended) prior to the passage of the Commodity Futures Modernization Act of 2000, all standardized futures contracts were to be traded on a fully regulated exchange and the futures contracts traded thereon and the exchanges themselves had to be preapproved by the CFTC.
Failure to trade a standardized futures contract on a regulated exchange was prior to the passage of the CFMA of 2000 a felony UNLESS the instrument traded was exempt from exchange trading pursuant to a fully transparent CFTC rulemaking process with notice to the public and comment allowed. Such an exemption can only be issued by the CFTC after notice and comment if that agency finds that the off exchange trade is in the public interest and cannot be subject to fraud or manipulation.
The exchange trading requirement includes: full transparency of trading prices and volumes; reporting to the CFTC of large trader positions; anti-fraud and anti-manipulation authority; self regulation by the exchange; and the regulation by the CFTC and exchange self regulation of intermediaries, e.g., futures brokerage houses (called "Future Commission Merchants"), brokers, traders, etc. FCM's are subject to full regulation. Brokers and traders are licensed. Brokers and traders cannot act "recklessly" and if authorized to conduct trades on behalf of customers, brokers owe a fiduciary relationship to the customer. FCM!s are strictly liable for the actions of their brokers and traders.
By requiring clearing, the CEA assured that there would be capital adequacy supporting trades, i.e., the posting of margin at trade initiation, and collecting margin on a twice a day mark to market process.
The CFMA created two major loopholes to the CEA's exchange trading requirement.
- CFMA/SWAPS. Section 2 (g) created the swaps exemption. Under the CFMA, a swaps transaction could be traded off exchange if both counterparties were eligible contract participants (e.g., meet minimal net worth requirements) and if the swap was "subject to individual negotiation." The latter "negotiation" requirement has been honored in the breach. The overwhelming number of swaps transactions are done pursuant to standardized, boilerplate, and copyrighted ISDA (International Swaps Derivatives Association) Master Agreements and accompanying documentation.
CFMA/ Enron Loophole. At the behest of Enron, any energy or metals futures product was exempt from the exchange trading requirement at the request of the party wishing to trade these products.
The only restriction is that the CFTC has to be notified of the trading. Otherwise, the CFTC has no regulatory oversight except that it can lodge fraud and manipulation actions against this kind of trading. However, because the trades do not need to be reported (nor are there record keeping requirements), it is very hard to bring fraud and manipulation actions.
Because of widespread abuses of the Enron loophole, Congress in May 2008, as part of the Farm Bill, gave the CFTC authority on contract-by-contract basis to reregulate Enron Loophole trading if the CFTC can demonstrate that the contract has a "significant price discovery function." The CFTC recently has begun to reregulate some of these contracts, most prominently the Henry Hub natural gas contract traded off exchange by the Intercontinental Exchange under the Enron Loophole. There have been dozens of hearings before Congress since December 2007, concerning what has now become almost conventional wisdom that the unregulated energy futures markets have contributed to excessive speculation which have unmoored the price of crude oil, gasoline, natural gas, etc. from supply demand fundamentals.
Phil Gramm - Wikipedia, the free encyclopedia
"Has anyone ever noticed that we live in the only country in the world where all the poor people are fat?" -- Phil Gramm, during his first Senate campaign against Democrat Lloyd Doggett when Gramm had just begun running against the poor.
Best known for: Right-wing Democratic politician who switched parties and became a Republican Senator from Texas.
Born: July 8, 1942, in Fort Benning, Georgia.
Family: Wife: Dr. Wendy Lee Gramm, former chairman of the U.S. Commodity Futures Trading Commission under Presidents Reagan and Bush; Children: Marshall and Jefferson.
Education: B.B.A. from University of Georgia (1964), Ph.D. from University of Georgia (1967), M:rong>Profession: Economics Professor, Texas A&M University (1967-78); Partner, Gramm & Associates (1971-78); Author of several economic texts and articles on subjects ranging from monetary theory and policy to private property to the economics of mineral extraction.
Career: Gramm unsuccessfully sought the Democratic nomination for U.S. Senate in 1976. He first won election to the House of Representatives as a Democrat three years later. The long-standing state tradition was for right-wing Texans to pose as Democrats to get elected.
The atmosphere in Congress was beginning to get too partisan for that kind of politics, however. After Gramm co-authored President Reagan's economic program, he lost his seat on the House Budget Committee. He then resigned from Congress and "defected" to the Republican Party. As a sign that old political boundaries were changing, Gramm was the only member of Congress in the twentieth century to resign from Congress and seek re-election as a member of another political party. He won a special election on Lincoln's Birthday, becoming the first Republican elected in his district in a century.
In 1984, Gramm ran for the Senate, winning more votes than any candidate for statewide office in the history of Texas. Early campaign contributors included:
- Governor John Connally and family
- Ivan Boesky (stock market felon)
- Adolph & Joseph Coors (Coors beer magnates)
- George Bayoud (Governor Bill Clements' campaign chauffeur and secretary of state)
- Jack Rains (of Houston law firm, also Clements' secretary of state)
- Jim Huffines (of Dallas, later Bill Clements' appointments secretary)
- Louis Bechereel (San Antonio developer and University of Texas regent)
- B.G. Brookshire (of the East Texas Brookshire Bros. grocery chain)
- George W. Bush (then of the George W. Bush Co. of Dallas)
- Hugh Liedtke (Pennzoil CEO and former George Bush partner)
- Robert Mosbacher (later President Bush's Secretary of Commerce) and son
- Trammel Crow (Dallas megadeveloper)
- Cullen Davis (acquitted - with the help of Racehorse Haynes - of the murder of his socialite wife)
- Robert Deadman (of Club Corp. of America in Dallas)
- Don Dixon (convicted in failure of Dallas Savings & Loan)
- Walter Mischer (of Lajitas, and Houston's Allied Bank)
- Hilary Doran (later lobbied for the Sierra Blanca nuclear dump and various horseracing interests)
- King family (of banking, ranching and King Ranch fame)
- Tom Landry (coach of the Dallas Cowboys)
- T. Boone Pickens (Amarillo oil-&-gas corporate raider)
- Marilyn Billings and many other residents of Corpus Christi
- H.B. Zachry (San Antonio construction firm) and many employees
- Jerry Stiles (Gramm FEC scandal - see below - and convicted in failure of Dallas Savings & Loan)
During that 1984 campaign, the Federal Election Commission (FEC) began investigating Gramm's campaign finances. He had paid Jerry Stiles, a Texas builder, $63,000 to complete his waterfront house in rural Maryland. The builder also ran three troubled savings and loans. The cost of the work he did on the house was $117,000. FBI agents who later investigated Stiles on S&L-related charges found this discrepancy suspicious. Gramm was involved with the owners of at least three Texas S&Ls that later failed at a cost to taxpayers estimated at $160 million, and had previously contacted federal regulators on behalf of Stiles and his savings and loan.
When the Gramm learned of the probe, he quickly sent the builder $50,000 to cover the difference, then took back the check when the Senate Ethics Committee noticed. Gramm, who later advocated full disclosure of embarrassing records by President Clinton, sued the FEC and waged a costly fight to seal his own records. In 1987, the Senator was fined $30,000, one of the largest ever handed down by the FEC. Stiles' corrupt S&L deals collapsed in 1989, costing taxpayers an estimated $200 million. Stiles was sentenced in Texas to 55-years on 11 counts of conspiracy and fraud. The investigation originally began as the result of a complaint filed by Donna Mobley of Austin, a crusader for economic justice, civil liberties and good government who met an untimely death ten years later.
In 1985, Gramm was linked to a campaign contribution shakedown run out of a Small Business Administration (SBA) office in El Paso. He was never subjected to a complete investigation or negative press coverage, however, because on February 19, 1988, a leased Rockwell Aero Commander 680 crashed and exploded shortly after taking off from El Paso International Airport. All aboard, the pilot, his wife and son, were killed. The pilot was local businessman Don McCoy who, a day earlier, had agreed to give testimony in an FBI investigation that had threatened both Senator Gramm's protégé at the SBA, and some of the city's most prominent business leaders.
Gramm was re-elected in 1990 with the highest vote percentage of any Senate candidate in a Texas general election in over three decades.
Gramm's legislative record includes such bills as the Gramm-Latta Budgets and the Gramm-Rudman Act. Gramm-Latta mandated the Reagan tax cut. Gramm-Rudman placed the first supposedly binding constraints on Federal spending. Gramm was chairman of the National Republican Senatorial Committee during the return of a Republican majority in the Senate in 1994. With that majority in place, Gramm, as chairman of the Banking Committee, led passage of the Gramm-Leach Act, making changes in the banking, insurance and securities laws which Congress had kept at bay for sixty years.
Gramm also led the fight against President Clinton's Health Care Bill, authored changes in the welfare system, and initiated the doubling of forces in the Border Patrol. He and Senator Robert Byrd of West Virginia won passage of a highway bill that mandated use of the entire gasoline tax for road construction. Gramm has also worked to invest Social Security funds in the stock market.
In 1996, Gramm spent $20 million seeking the Republican presidential nomination, but did not survive the earliest contests leading up to the New Hampshire primary. He had been defeated by conservative commentator Pat Buchanan in Louisiana and placed fifth in the Iowa caucus. A main theme of Gramm's campaign was a test he concocted for government spending programs called the "Dickie Flatt test." It was named in honor of Dickie Flatt, Gramm's symbolic everyman who ran a small print shop in Mexia, Texas. The test was based on Gramm's question: "Will the benefits to be derived by spending money on this program be worth taking the money away from Dickie Flatt to pay for it?"
Apparently, much larger business interests thought the Dickie Flatt test would benefit them. A graphic at the web site for the PBS Frontline program called "So you want to buy a president?" (which aired January 30, 1996) included the following information on Phil Gramm's top contributors at the time of his short-lived presidential campaign:
Phil Gramm $19,171,476
- Service Corp International (funeral services) $52,800
- AFLAC Inc. (health insurance) $44,500
- Vinson & Elkins (lawyers) $33,750
- Arthur Andersen & Col (accountants) $30,250
- Enron Corp. (natural gas) $28,250
- Anadarko Petroleum (oil and gas) $21,050
- Dean Witter (securities) $20,000
- Tenneco Inc. (natual gas) $19,750
- Sterling Software $19,250
- John L. Wortham & Sons (insurance) $18,800
Source: Center for Responsive Politics, FEC records.
In an appearance with his friend and senate college, Senator Kay Bailey Hutchison, at the 1999 re-dedication of the Daughters of the Republic of Texas Museum in Austin, Gramm joked about their relationship. "When people introduce us, they introduce us as the beauty and the beast. Which is always confusing to me because I never know which is which," he said. "Kay tries to charm people into doing what we want, and if that fails, I beat them into submission," Gamm added, playing down Hutchison's reported temper.
Serving his third term in the Senate, Gramm said in 1999 that he planned to seek re-election when his term was up in 2002. After Gramm's dismal showing in the race for the Republican presidential nomination in 1996, it was speculated that he might give up politics after finishing his term.
Sources: U.S. Senate Biography (http://www.senate.gov/~gramm/bio.html); USA Today, "Election '96: Sen. Phil Gramm," (http://cgi.usatoday.com/elect/ep/epr/eprgbio.htm); Sam Attlesey, "'Beauty and the Beast' tout their road show," The Dallas Morning News, December 12, 1999, (http://dallasnews.com/texas_southwest/columnists/5840_TEXPOL12.html); Louis Dubose, "On Remembering and Phil Gramm," The Texas Observer, August 19, 1994, p. 5; Louis Dubose, "Who was on First? An X-mas List of Semi-Illustrious Texans Who Bankrolled Phil Gramm Before It Was Cool," Texas Observer, December 22, 1995, (http://www.texasobserver.org/subjects/politics/gramm.html); Louis Dubose, "Phil Gramm's Dirty Money," Texas Observer, September 27, 1996, (http://www.texasobserver.org/subjects/dateline/gramm$.html); L.J. Davis, "Republican Whitewaters," Mother Jones magazine, July/August 1996 (http://www.mojones.com/mother_jones/JA96/davis_jump1.html); The Newsroom, "Phil Gramm's presidential campaign announcement," February 24, 1995 College Station, TX, (http://22.214.171.124/~vestmon/gramm.html); Frontline, PBS-TV, "So You Want to Buy a President," January 30, 1996, Phil Gramm contributors chart, http://www.pbs.org/wgbh/pages/frontline/president/guide/charts/gramm.html; Todd J. Gillman, "Wealthy Dallas-area enclaves help fund Bush campaign," The Dallas Morning News, August 21, 1999, (http://www.dallasnews.com/metro/columnists/0821metcol2gillman.htm).
Cruz Seeks Economic Wisdom in the Wrong Place :Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action. -- former U.S. Senator Phil Gramm, Nov. 16, 2008
...Gramm has been brought on as a senior economic adviser to Republican presidential candidate Ted Cruz. This isn't a promising development for Cruz... Not to put too fine a point on it, but I believe -- as do many others -- that Gramm was one of the major figures who helped set the stage for the crisis. ...
Gramm was a key sponsor of the ... Gramm-Leach-Bliley Act , which effectively repealed the piece of the Glass-Steagall Act... The damage caused by rolling back Glass-Steagall pales compared with ... the Commodity Futures Modernization Act of 2000 . Gramm was a co-sponsor of the legislation, which exempted many derivatives and swaps from regulation. Not only was the law problematic, but it veered into potential conflict-of-interest territory. ...
We got a chance to see those consequences a few years later when American International Group failed, thanks in part to swaps ... on $441 billion of securities that turned out to be junk. AIG wasn't required to put up much in the way of collateral, set aside capital or hedge its risk on the swaps. Why would it, when the law said it didn't have to? The taxpayers were then called upon to bailout AIG to the tune of more than $180 billion.
Maybe it isn't too surprising that Cruz would seek advice from Gramm. Cruz, after all, seems to want to hobble modern economic policy by returning to the gold standard. ... We have seen these movies before, and they end in tragedy and tears.
He also talks about Gramm's sad performance in his brief appearance as one of McCain's advisors in 2008.
pgl :Phil Gramm says he got his economic degree from the University of Georgia. Well - it was from the Terry College of Business which is a business school. Not the graduate program of economics of the University of Georgia. I guess this makes Gramm one notch above Stephen Moore, Donald Luskin, and Lawrence Kudlow (aka the three stooges).
pgl :The LA Times on Gramm's record on economics:sanjait :
"Gramm's most notable moment in that position came on July 10, 2008, when he dismissed the developing economic crisis as "a mental recession" in an interview -- and video -- released by the conservative Washington Times. "We've never been more dominant," he said. "We've never had more natural advantages than we have today. We've sort of become a nation of whiners." McCain immediately disavowed the remarks, and a few days later Gramm stepped down as his campaign co-chairman."
OK that was July. Menzie Chinn always notes that Luskin was saying the same thing as late as September 2008.Gramm seems pretty firmly in free market ideologue territory. Cruz deciding to bring him in as an economic advisor is certainly noteworthy.pgl -> sanjait...
Though I'm still struck by how determined some people seem to lump Graham Leach Bliley in as a cause/major contributor to the crisis.
The CFMA very plausibly serves that purpose. If we want to mark Gramm as a villain, his sponsorship of that bill should be sufficient, as well as his abject refusal to acknowledge the crisis in real time.
But for whatever reason people have picked up Glass Steagall as a Very Important rule, and seem to be pushing to rationalize that by claiming it is a big part of the crisis story.
Ritholtz, to his credit, is qualified and nuanced about this. He notes that CFMA is the big story, and says GLB wasn't didn't "cause" the crisis.
But following through the links to his WaPo piece, he still looks like he is reaching for a reason to label it a major contributor to the crisis.
He claims that removing G-S restrictions caused the major banks to in turn cause the shadow banking entities like AIG, Bear, etc. to "bulk up" their holdings of subprime, based on ... nothing that I can see.
Sure, the major banks were customers and counterparties for those shadow banks, but Ritholtz seems to assume that if G-S weren't in place that demand would somehow have been less. Why?
Take a major bank with mixed commercial and investment banking activity and split the parts. Would that have changed their activities? Not much. The commercial banking side still would have held MBS (and purchase insurance on them) and the I-banks would still make speculative investments of various types.
No one, as far as I've seen, ever bothers to tell a complete story where the structural incentives in the financial sector changed as a result of Glass Steagall in a way that materially impacted the depth or serverity of the housing crisis. How would splitting megabanks into separate big C- and I-banks have changed anything? Bueller?
Instead I see a great many people, including well credentialed economists, just assume or hand waive the claim that it made a big impact without bothering to model or specify it. I'm not saying such an explanation couldn't exist that I'm not aware of ... but at this point I do see the absence of explanation as evidence of absence.Gramm dismissing the concern over a recession in the summer of 2008 is the kicker for me!Charlie Baker -> sanjait...sanjait:pgl -> Charlie Baker ...
"But for whatever reason people have picked up Glass Steagall..."
No need to speculate: Simon Johnson and James Kwak wrote a whole book about it. It's called 13 Bankers:
The short version: the Glass Steagall repeal allowed the banks to become "Too Big To Fail" and gave them enormous political leverage. It's the political leverage - the ability to count on Uncle Sam to come to the rescue, and provide easy terms for rent-seeking - that GLB provided. If they were separated, and only the investment banks could make risky investments, we would let the investment banks fail while protecting the boring old payments system. You won't get an argument on CFMA, however: it was worse. And that has Gramm's fingerprints all over it. And it might not have passed if the SIFIs were smaller.
When I think of the villains of the Great Recession, Phil Gramm is always Public Enemy #1.The Glass Steagall repeal was not my biggest problem with Phil Gramm. My big problem is he wanted to have a completely deregulated financial sector. Sort of like when Newt Gingrich talked about "rational regulation" which was code for no regulation. But anyone who understands financial economics and our financial system knows that no regulations whatsoever is a recipe for a complete melt down. Which is what happened.The Rage :Cruz just wants to make money for his buddies while waving the bible. JDR was there 100+ years before that "Ted".
The Baseline Scenario
Who needs big banks??? Ask Republican Senator Phil Gramm. He was Chairman of the Senate Banking Committee when Gramm-Leach-Bliley was passed.
Phil Gramm also helped to pass the "Commodity Futures Modernization Act" which allowed the infamous "Enron loophole". This deregulated energy trading and increased wholesale electricity prices by a monstrous amount in California. Which in no small way contributed to California's current budget crisis.
You can read about it in an article by Mark Sumner at "The Nation" magazine/website http://www.thenation.com/doc/20081006/sumner
Since deregulation and Phil Gramm has been brought up, let's add to the outrage here. Senator Gramm's wife, Wendy, was chairwoman of the Commodity Futures Trading Commission (CFTC,) which was empowered to regulate exchange traded futures contracts. It could also exempt commercial futures if desired. After George H. W. Bush lost the 1992 election, Enron petitioned the CFTC to define energy derivitive contracts and interest rate swaps so that it exempted them from CFTC oversight. Mrs. Gramm, as chairwoman on the committee, which was short two members, fast tracked the petition and instead of a year long review process, granted Enron's request on January 14, 1993 after only two months. A week later, she resigned her position. Roughly a month after that, she accepted a position on the board of directors at Enron.
Source: American Dynasty: Aristocracy, Fortune and the Politics of Deceit in the House of Bush by Kevin Phillips
Not only do these business get "too big to fail," they have the advantage of buying the people in Washington who are supposed to be looking out for the good of the American people.
How interesting that nobody mentions that Wendy Gramm was a board member of Enron and getting paid about a half a million dollars for four meetings a year while Phil was trashing Glass-Steagal.
"The short strokes go like this, Phil Gramm begets the Financial Services industry by tearing down the wall between investment banks and commercial banks, which begat CDOs and credit default swaps, which begat outrageous levels of risk taking, which begat fortunes for Wall Street bankers, which begat a huge financial mess for all of the rest of us."
Dear Ted, this is direct quote from our new book, The Great Recession Conspiracy. I know you hate the idea and also that you have not read it. Try it. You might find we are not so far apart.
August 19, 2009 | .thenation.com
Robert Scheer is the editor of Truthdig, where this article originally appeared. His latest book is The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America(Twelve).
In recent days yet another wealthy private customer of the Swiss-based banking conglomerate UBS admitted to criminal fraud in a growing parade of perp walks that could extend into the thousands. It is a case that threatens to ensnare former Sen. Phil Gramm, the Texas Republican who is vice chairman of UBS' investment banking business. Given the widespread involvement of UBS in what the Justice Department alleges were systematic efforts to violate US tax laws, it must be asked: Did Gramm as a top executive have no inkling about what was going on?Perhaps, but for Gramm this has to be a moment that at the very least tests his ideological commitment to the radical deregulation of banking that he championed during his twenty-four years in Congress. He joined UBS soon after the bank acquired Enron, a company that had gone bankrupt after jumping through the "Enron loophole" in the Commodity Futures Modernization Act, which Gramm had pushed though Congress. Gramm's wife, Wendy, had been an Enron board member and head of its audit committee but failed to sound the alarm before the Houston-based company collapsed. Then UBS itself ran into big trouble because of $37 billion in bad mortgage debt made possible by derivatives market deregulation engineered by then-Sen. Gramm. US taxpayers have had to pony up money to heal UBS' self-inflicted wound. But the bank's involvement with tens of thousands of secret accounts tied to allegations of tax evasion raises starker issues--of possible criminal fraud through practices that Gramm as a senator helped keep opaque.
In his last years in the Senate, Gramm succeeded in blocking legislation that, as The New York Times editorialized, would have made it easier "to crack down on offshore tax havens" and "would have expanded rules that require banks to find out more about individuals and foreign jurisdictions they are dealing with." The Times noted, "The legislation won bipartisan support but was blocked by Senator Gramm of Texas, a foe of government regulation...."
Following that victory, Gramm stepped into a top position at UBS, stating: "It will provide me with an opportunity to practice what I've always preached....I have a strange combination of experiences that a lot of people don't have...knowledge of economics, a knowledge of government policy." Given that knowledge, it is legitimate to ask just how Gramm could have been unaware of the extensive efforts of his new employer, UBS, to thwart the IRS. In court cases involving UBS over the past year, witnesses have provided extensive details of the bank's alleged practices in abetting tax avoidance.
As The Wall Street Journal said of the federal government's campaign against UBS clients evading US tax laws, "plea agreements...are providing a clearer picture of UBS's sophisticated efforts to help Americans hide income or the existence of foreign bank accounts."
In agreeing in a US district court last week to plead guilty, Los Angeles businessman John McCarthy disclosed how UBS facilitated his defrauding of the US government through secret offshore accounts set up by the bank. "While banking with UBS Cayman Islands, the defendant was advised by UBS representatives that a lot of United States' clients don't report their income and just take it off the top," according to the court filing. Now that the Swiss-based bank has agreed to turn over the names of upward of 10,000 secret account holders, the arraignment of those charged with breaking US tax laws could extend very high into the ranks of the affluent.
As The Wall Street Journal reported, "The US crackdown on clients of UBS AG is widening into a global hunt, with the government detailing in court documents how the Swiss bank and outside advisers helped Americans hide money using enterprises set up in Hong Kong."
Was Gramm truly unaware of the widespread efforts at UBS to defraud the US Treasury? Did extreme ideologically driven naivete lead him to believe that the bank would never engage in such chicanery? In the past he was the first to deny any hint of business naivete and indeed defended his being hired by a bank that benefited from his legislation. Deflecting any suggestion of a conflict of interests, Gramm told a reporter: "You know, there is something to be said for not hiring people who just came in off a turnip truck. I have always believed that when I left the Senate that I would go into financial services as something that I know something about."
Well, what exactly did he know about those offshore tax shelters that caused a revenue shortfall of at least $100 billion that honest taxpayers have to make up?
First, the demise of Glass-Steagall. Ritholtz sees this as kicking off Citi's foray into universal banking; in fact it is more of a belated recognition of the status quo. American banks have been trying to end-run Glass-Steagall for a long long time. London's Big Bang was an early straw in the wind: in 1986 Bank of America, Chase and Citi were buying up not very good UK securities trading firms at silly prices, because they could establish roughly Anglophone subsidiaries in an overlapping time zone doing something completely forbidden in the US. There is regulatory arbitrage, by God. Incidentally, London is still trading off its ability to be 5% sleazier than the States: witness the location of AIGFP and ofthe world HQ of the hedge fund industry. Anyhow, with a precedent established, courtesy of Big Bang, Citi could buy SSB confident that its legal path would be smoothed. As it was – and be damned, inter alia, to the proper functioning of FDIC, whose charter becomes unworkable when you have universal international banks trading in securities. Now we have 'too big to fail banks' – Barry for once has little to say about the self-serving contradictoriness of this construct, wherein a bank can attain a sort of critical mass and is henceforth exempted from any kind of market discipline, and can always depend on a bailout. This is not free-market capitalism: it is a one way bet that must end up lethal for nationalfinances at some point. It is therefore alarming to see any restructuring of these not-so-dormant financial supervolcanoes (proliferating after the BoA/Merrill and JPM/Bear/Wamu mergers) moved so quickly and firmly off the reform agenda.
Secondly, elsewhere in the book, Ritholtz highlights a little mentioned clause in the Securities Litigation Reform Act of 1995 that effectively eliminates liability for fraud from the accountants who audit companies. Presumably that wouldn't have made it into the books if there wasn't a pre-existing concern among the well connected and legally liable. But it is a green light for much worse: within two years Jim Wadia is at the controls in Andersen, and they are willing to sign off any old books and dream up any old accounting wheezes. Within 6 years you have WorldCom and Enron. 10 years later you have the full blown financial-economic nirvana of off balance sheet entities of banks, whereby the bank derives the economic benefits of risky loans without (apparently) actually owning the risks. In the meantime company accounts mean little, the audit means nothing, and the auditors are actually conniving at frauds (see Satyam). The spectacular repudiation of commercial good practice, integrity, honesty and responsibility embodied in this legsislation means that it definitely belongs in Ritholtz' list. As if the dominance of the Big Four accounting firms wasn't bad enough in itself, this legislation's implications for the level of integrity we can look for in corporate conduct in future years are discouraging. AA won the race to the bottom; how far behind were the others? I can't help wondering whether Phil Gramm has something to do with this piece of law. Its relevance to the situation at Enron, where Gramm was deeply connected, is striking.
June 30, 2009 | The Big Picture
Last week, UBS announced a 2nd Quarter loss "due to restructuring charges." The banking giant is raising $3.45 billion in a stock sale.
Partly owned by the Swiss government (for years prior to the crisis, if memory serves), UBS was one of the biggest losers in the financial crisis. After a huge expansion into riskiest businesses at the peak of the market, they have had steep losses and enormous write-downs. Since then, they have laid off tens of thousands of workers. (Aside from UBS' tax problems).
One such worker who has escaped such an ignominious firing is former Texas Senator Phil Gramm. He was hired in 2002 to "advise clients on corporate finance issues and strategy." This was around the same time that UBS acquired Enron's energy trading operations. Recall Gramm's wife Wendy was on the board of Enron, which was up til then the US's biggest bankruptcy. You can insert whatever revolving door complaint about polticos you want here, but by now its almost besides the point.
Gramm's position at UBS is "vice chairman" - dubbed "the greatest job in business" for its combination of high status and low work rate. It is a do nothing patronage role that is reward for all the Wall Street friendly legislation Gramm has sponsored. At least, they used to be considered Wall Street friendly, prior to their leading to the Street imploding.
To me, the more significant issue is how respected Gramm's radical deregulation philosophy was - at least at the time - by the biggest of global investment houses. His philosophy rationalized the irresponsible investing behavior of these big banks.
I almost feel bad for Gramm. His cognitive dissonance and now discredited philosophy must be of little comfort to him in his twilight years.
Meanwhile, plenty of folks at UBS have told me he is an embarrassment to the firm.
Which raises the question: What exactly does Gramm do for UBS these days? Other than hang around as a reminder of bad decision making and his scheme of radical deregulation, does he really add anything to their bottom line? Or are they simply too embarrassed to throw the bum out?
If anyone can advise me as to why he is still gainfully employed at a large investment house that is suffering from enormous losses, I am all ears.
NOTE: Prior to his resignation as Chairman, I asked many of the same questions about Robert Rubin and Citigroup.
Phil Gramm: A Deregulator Unswayed (November 17th, 2008)
Amity Shlaes Does Not Know What a Recession Is (July 12th, 2008)
UBS Expects Second Quarter Loss
WSJ, June 26, 2009,
Phil Gramm's UBS Problem
Slate, July 7, 2008, at 5:58 PM ET
Senator Phil Gramm to join UBS Warburg
UBS, October 7, 2002
May 1, 2009 | Economist's ViewJamie Galbraith versus Phil Gramm:
Causes of the Crisis, by James K. Galbraith, Commentary, Texas Observer: Editor's note: These remarks were delivered ... at a debate between University of Texas professor James Galbraith ... and former Majority Leader Richard Armey, chief instigator of the recent Astroturf "tea party" protests. Armey had begun his remarks by noting that his rule in life was "never trust anyone from Austin or Boston," and proceeded to declare his allegiance to the "Austrian School" of economics, a libertarian view that regards public intervention in private markets as socialism.
... ... ...
This is a panel on the crisis. Mr. Moderator, you ask what is the root cause? My reply is in three parts.
First, an idea. The idea that capitalism, for all its considerable virtues, is inherently self-stabilizing, that government and private business are adversaries rather than partners...; the idea that regulation, in financial matters especially, can be dispensed with. We tried it, and we see the result.
Second, a person. It would not be right to blame any single person for these events, but if I had to choose one to name it would be... former Senator Phil Gramm. I'd cite specifically the repeal of the Glass-Steagall Act-the Gramm-Leach-Bliley Act-in 1999, after which it took less than a decade to reproduce all the pathologies that Glass-Steagall had been enacted to deal with in 1933. I'd also cite the Commodity Futures Modernization Act, slipped into an 11,000-page appropriations bill in December 2000 as Congress was adjourning following Bush v. Gore. This measure deregulated energy futures trading, enabling Enron and legitimating credit-default swaps, and creating a massive vector for the transmission of financial risk throughout the global system. ...
Third, a policy. This was the abandonment of state responsibility for financial regulation... This abandonment was not subtle: The first head of the Office of Thrift Supervision in the George W. Bush administration came to a press conference on one occasion with a stack of copies of the Federal Register and a chainsaw. A chainsaw. The message was clear. And it led to the explosion of liars' loans, neutron loans (which destroy people but leave buildings intact), and toxic waste. That these were terms of art in finance tells you what you need to know. ...
The consequence ... is a collapse of trust, a collapse of asset values, and a collapse of the financial system. That is what has happened, and what we have to deal with now.
Printed from http://www.texasobserver.org/article.php?aid=2767
The GOP presidential nominee is relying on the ex-senator who helped bring you the mortgage crisis and Rick Perry.
Patricia Kilday Hart | May 30, 2008 | Features
In the early evening of Friday, December 15, 2000, with Christmas break only hours away, the U.S. Senate rushed to pass an essential, 11,000-page government reauthorization bill. In what one legal textbook would later call "a stunning departure from normal legislative practice," the Senate tacked on a complex, 262-page amendment at the urging of Texas Sen. Phil Gramm.
There was little debate on the floor. According to the Congressional Record, Gramm promised that the amendment-also known as the Commodity Futures Modernization Act-along with other landmark legislation he had authored, would usher in a new era for the U.S. financial services industry.
"The work of this Congress will be seen as a watershed where we turned away from an outmoded Depression-era approach to financial regulation and adopted a framework that will position our financial services industry to be world leaders into the new century," Gramm said.
Watershed indeed. With the U.S. economy now battered by a tsunami of mortgage foreclosures, the $30-billion Bear Stearns Companies bailout and spiking food and energy prices, many congressional leaders and Wall Street analysts are questioning the wisdom of the radical deregulation launched by Gramm's legislative package. Financial wizard Warren Buffett has labeled the risky new investment instruments Gramm unleashed "financial weapons of mass destruction." They have fed the subprime mortgage crisis like an accelerant. While his distracted peers probably finalized their Christmas gift lists, Gramm created what Wall Street analysts now refer to as the "shadow banking system," an industry that operates outside any government oversight, but, as witnessed by the Bear Stearns debacle, requiring rescue by taxpayers to avert a national economic catastrophe.
While the nation's investment bankers are paying a heavy price for their unbridled greed (in billions of dollars of write-offs), Gramm has fared quite nicely. He currently serves as a vice president at UBS AG, a colossal, Swiss-owned investment bank, the post, no doubt, a thank you for assiduously looking out for Wall Street interests during his 23 years in public office. Now, with the aid of his longtime friend Arizona Sen. John McCain, Gramm may be looking at a quantum leap in power and influence.
Gramm serves as co-chair of the McCain 2008 presidential campaign. As one of the candidate's chief economic advisers, he is mentioned as a possible secretary of the treasury in a McCain administration. Their friendship was forged in the Senate as they worked against the Clinton health care proposal, and cemented when McCain served as national chairman of Gramm's own (ill-fated) 1996 presidential bid.
During McCain's rocky road to the nomination, it was Gramm as much as anyone who helped smooth the way. Last July, when it looked as though McCain's campaign would go bankrupt, Gramm, who once called money "the mother's milk of politics," advised him to slash his costs and assisted him with fundraising. Throughout the marathon primary season, Gramm has made numerous appearances with McCain and served as an ambassador to conservative groups. This spring, when conservative commentators attacked McCain as too liberal, McCain shored up his conservative bona fides by (according to The Huffington Post) bringing Gramm to a meeting with the editorial board of The Wall Street Journal.
But ask Gramm about his influence with McCain and it's clear that the former senator has not lost his talent for political spin. "My position [with the campaign] is, I am the senator's friend," he aw-shuckses in a telephone interview. "It would be a mistake to call me an economic adviser." Calling himself "a private citizen," Gramm claims ignorance of McCain's appearance two days earlier on Jon Stewart's The Daily Show.
"I'm so out of it, I don't even know who Jon Stewart is," he says in his trademark Georgia drawl.
It's hard to imagine that anyone remotely connected to politics is unaware of Stewart, but the remark fits well with the homespun persona that Gramm has carefully crafted for public consumption. Despite his false modesty, Phil Gramm remains a powerful force in Republican politics. Here in Texas, his many protégés-most notably Gov. Rick Perry, the beneficiary of a whopping $612,000 in campaign donations from Gramm's Senate campaign reserves-give him significant reach in Lone Star public policy.
Gramm might be interested in downplaying his role with the McCain campaign because, while the alliance might help with conservatives, it's at odds with the maverick image McCain has worked so hard to project. Gramm is more closely aligned with the kind of influence-peddling represented by the Keating Five scandal, in which McCain intervened with federal regulators on behalf of a campaign contributor with a failing savings and loan. The scandal shredded McCain's reputation and convinced him of the efficacy of reform.
In Gramm, McCain has chosen for a campaign adviser a former senator who espouses free market, conservative principles, but whose actions in public office served wealthy contributors and even himself. Exhibit A: Gramm's cozy Enron Corp. connections. Not only did CEO Ken Lay chair Gramm's 1992 re-election campaign, but Gramm's wife, Wendy, earned $50,000 a year as an Enron director from 1993 to 2001 (not counting perks that included stock options). Meanwhile Gramm pushed the company's aggressive-and ultimately self-defeating-political agenda to escape government scrutiny.
That Gramm is now advising the Republican nominee for president on economic matters "shouldn't give people a lot of comfort," says University of Maryland law professor Michael Greenberger, a senior official at the Commodity Futures Trading Commission in the late 1990s. "Gramm has been a central player in two major economic crises-the credit crisis and the incredibly high price of energy. ... He's got his fingerprints all over legislative efforts that led to this."
Nonetheless, Gramm holds fast to his ideology. "I've never seen any evidence that opening up competition among banks and insurance companies in any way contributed to this," he says with the patience of the college prof he once was. "You've got a lot of people trying to rewrite history. You've got people with an ax to grind. They always wanted more government regulation, and when you have a problem, they want the government to regulate more."
His critics say that Gramm's anti-regulatory rhetoric failed the bulk of his constituents-which included thousands of hapless Enron employees who lost their life savings-but lavishly rewarded a few wealthy pals, like Ken Lay. University of Texas economist James Galbraith says Gramm is "not against government at all. His career has been finding ways to make money for his friends. It's a predator relationship. [Government] is his food supply."
When Gramm retired from the U.S. Senate in 2002, Texas Democrats celebrated that a powerful nemesis would no longer be a force on the national scene. Wrote Molly Ivins: "Gramm both looks like a snapping turtle and has the personality of one. When he ran for president in 1996 and finished fifth in Iowa, all the profiles written of him included the line 'Even his friends don't like him.'" She concluded: "We'll sure miss that sweet style." Clearly Molly's jubilation was premature.
It's easy to understand why Democrats were so eager to say goodbye to Gramm, who began his political career when he was elected to Congress in 1978 as a Democrat-and then quickly broke ranks with his party.
Gramm often jokes that he "didn't go to Washington to be loved, and was not disappointed." In his telling, his lack of popularity stemmed from his uncompromising stand on issues. Democrats who served with him, however, felt deeply betrayed by his actions as co-author of Ronald Reagan's austere first budget.
Former House Speaker Jim Wright recalls in his memoir, Balance of Power, that he learned to his "chagrin and sorrow" that Reagan sought counsel from a fellow Democrat who "was the beneficiary of my help and recipient of my naïve faith. His name was Phil Gramm."
In 1981, Gramm pleaded with fellow Texan Wright to help him win a seat on the powerful House Budget Committee, a privilege he had been denied by his Democratic peers, who found him unreliable. "Phil Gramm promised me ... that if he were favored by a Budget Committee assignment, he would make his arguments within the committee and then would close ranks and back whatever budget resolution the committee majority approved," the former speaker wrote. "That sounded fair enough." Later, Wright would be "flabbergasted" to learn that Gramm met clandestinely with Reagan budget guru David Stockman to strategize and defeat a Democratic budget plan. Reagan's "Gramm-Latta" budget would prevail.
Having led the charge for a Republican president's budget plan that, among many other things, drastically cut Social Security benefits, Gramm resigned in 1983 and forced an election for his House seat, which he won as a Republican. In a 1984 special election hastily called by then-Gov. Bill Clements, he waltzed to victory in the contest for longtime Republican John Tower's seat in the U.S. Senate.
When his new party won control of the Senate, Gramm rose to chairman of the Senate Banking Committee, where he was able to put his anti-regulation views into law. The Gramm-Leach-Bliley Act of 1999 repealed laws put in place after the Great Depression setting up protective barriers between commercial banks, investment banking firms, and insurance companies.
Consumer groups strenuously opposed the landmark legislation. "It was strongly deregulatory and ... did not address safety and soundness," says lobbyist Ed Mierzwinski of the public interest group U.S. PIRG.
But more powerful interests were pushing for the law, and they had a deadline. In 1998, Citicorp Inc. purchased Traveler's Insurance Group. Under the old law, the new company had a two-year grace period to divest either its insurance or banking functions. Instead, it went to Washington, D.C., and got the law changed-with Gramm's help.
"Some people jokingly refer to it as the Citigroup Relief Act," says University of North Carolina law professor Lisa Broome. "Normally, they would have had to spin off their insurance activities."
Another beneficiary: Gramm's future employer, UBS, which was able to absorb the brokerage house Paine Webber. (As of March 31, UBS employees and company-related PACs have given the McCain campaign $82,865, according to the Center for Responsive Politics.)
Banks had been chipping away at the barriers through Federal Reserve rules for decades. But Gramm's sweeping deregulation "stripped away restraint," says Broome.
While Gramm denies any link between the current subprime mortgage crisis and his legislative efforts, Mierzwinski, Broome, and even some Wall Street analysts trace a direct connection.
Michael Panzner, a Wall Street veteran and author of Financial Armageddon, says the massive deregulation encouraged "aggressive, swashbuckling, high-risk practices that might have been frowned upon in the banking industry, but which were viewed as typical, say, on Wall Street." Eventually, those practices "became the modus operandi throughout the financial services industry."
Panzner also believes that Gramm-Leach-Bliley "may have even set the stage for both the collapse and the subsequent 'rescue' of Bear Stearns by the Federal Reserve." The deregulated financial services industries were "encouraged to push the envelope in terms of risk-taking, and were not entirely dissuaded from thinking that the public purse would be available if things went horribly wrong."
Still others blame Gramm's Commodity Futures Modernization Act. Prior to its passage, they say, banks underwrote mortgages and were responsible for the risks involved. Now, through the use of credit default swaps-which in theory insure the banks against bad debts-those risks are passed along to insurance companies and other investors.
Maryland law professor Greenberger believes credit default swaps "were a key factor in encouraging lenders to feel they could make loans without knowing the risks or whether the loan would be paid back. The Commodity Futures Modernization Act freed them of federal oversight."
Before passage of the modernization act, the Commodity Futures Trading Commission was attempting to regulate the swaps market through rule-making. The modernization act, Gramm noted in his remarks on the Senate floor, provided "legal certainty" for the growing swaps market. That was necessary, Greenberger says, because at the time, "banks were doing these trades in direct violation of federal law."
Greenberger has also been critical of former Clinton Treasury Secretary Robert Rubin, who supported Gramm's banking deregulation. But Greenberger insists that it was Gramm's slick legislative move that prevented government regulators from halting the spread of the risky financial instruments.
"Without Phil Gramm adding that 262-page bill onto an 11,000 page appropriations bill in 2000, it never would have seen the light of day," Greenberger says. "It was a lame duck Congress ... racing off to Christmas recess. It was not an orderly process."
A more notorious feature of the modernization act was the "Enron loophole," which allowed energy trading to escape federal oversight. It was Enron's electronic trading that led to the California electricity crisis of 2000 and 2001, as well as Enron's own demise.
The issue of regulating electronically traded energy futures had been a pitched battle at the Commodity Futures Trading Commission throughout the '90s. One chairman advocated so passionately for deregulating energy futures that she persuaded her fellow commissioners to agree to a rule exempting them from oversight. Who was that? Wendy Gramm, the senator's wife, who served on the commission from 1988 to 1993. Shortly after her resignation, she was welcomed onto the Enron board of directors, where she would ensconce herself on the happily deaf-blind-and-mute audit committee.
The exemption received broad criticism from an array of sources-including the President's Working Group on Futures Markets, and then-chairman of the Federal Reserve, Alan Greenspan, who believed it contributed to market volatility.
Efforts to reverse the policy became moot when Gramm's amendment on that December evening gave the exemption the force of law-at a time when his wife served on the board of the one company that would ultimately most abuse it.
The impact of the "Enron loophole" has been enormous. Since its passage, the Senate Permanent Subcommittee on Investigations has concluded that the loophole contributed to inflated energy prices for American consumers. In 2006, its report found credible expert estimates that the loophole-by encouraging speculation-accounted for $20 of the price of a barrel of oil, then at $70. In 2007, the same committee blamed the loophole for excessive speculation by hedge fund Amaranth Advisors that led to the distortion of the natural gas market.
After Enron's demise, Wendy Gramm ultimately participated in a $13-million settlement personally paid by Enron directors for insider trading, when they collectively sold some $276,000 worth of stock early in the company's decline. Consumer advocacy group Public Citizen has reported that Enron paid Wendy Gramm between $915,000 and $1.85 million from 1993 to 2001 in salary, attendance fees, and stock options.
Last September, Michigan Democratic Sen. Carl Levin introduced legislation to close the loophole, citing two congressional reports blaming it for excessive speculation that has "unfairly increased the cost of energy in the United States."
In announcing his legislation on the Senate floor, Levin noted that the Enron loophole was "inserted at the last minute, without any opportunity for debate, into commodity legislation that was attached to an omnibus appropriations bill ... in the waning hours of the 106th Congress.
"The loophole has helped foster the explosive growth of trading on unregulated electronic energy exchanges," Levin said. "It also rendered the U.S. energy markets more vulnerable to price manipulation and excessive speculation with resulting price distortions."
Asked about Levin's legislation, Phil Gramm expresses ignorance. "I don't know what provision in the law he's talking about."
Gramm apparently has long been touchy about the subject. When Enron collapsed, law professor Greenberger remarked to an interviewer that "all that [unregulated electronic energy trading] was made permissible by Gramm." A few days later, the phone rang.
"He called me up at my home to tell me I was wrong," Greenberger says. "I was sitting in my study preparing for classes. He started arguing with me that I was wrong. I said, if you insist on believing that, then you don't know what your own legislation did. I had to terminate the call because he would have kept me on the phone forever."
Similarly, Gramm today denies any linkage between the subprime crisis and his deregulatory legislation. "I wouldn't blame [swaps] for the problem. You could make the argument that without them, things would have been worse," he says. Congress should "look at the lessons of the subprime problem and learn what we can learn-loan generators and how they are compensated, what banks ought to be required to find to lend a variable rate," he says. "I'd be open to look at those things."
Says Greenberger, "I am quite confident Phil Gramm didn't understand what his legislation did. It was written by the banks and hedge funds."
Increasingly, many Wall Street titans agree that Gramm's efforts should be reversed. In May, Richard C. Griffin, founder of the $20 billion hedge fund Citadel Investment Group, told The New York Times that "fixing" Wall Street would require more regulation.
"Investment banks should either choose to be regulated as banks or should arrange to conduct their affairs to not require the stopgap support of the Federal Reserve," Griffin said. He also told the Times he sees a need for "new government oversight of the arcane world of credit default swaps, a business with a notional value and risk of $50 trillion."
Said the Times: "It was the interlocking relationships between thousands of investors and banks over credit default swaps that pushed the Fed to help rescue Bear Stearns."
Gramm isn't one to engage in mea culpas, regardless of the evidence against him. Take for example, his reaction when California was plunged into an energy crisis in 2001 by Enron traders manipulating the energy markets. Mimi Swartz recounts in her book, Power Failure, that Gramm exploded to the Los Angeles Times:
"As [Californians] suffer the consequences of their own feckless policies, political leaders in California blame the power companies, deregulation and everyone but themselves, the inevitable call is now being heard for a federal bailout. I intend to do everything in my power to require those who valued environmental extremism and interstate protectionism more than common sense and market freedom to solve their electricity crisis without short circuiting taxpayers in other states."
Greenberger predicts that the fallout from Gramm's legislation will continue to grow, with capital drying up for all kinds of borrowing, including student loans. Meanwhile, Wall Street firms have begun considering a voluntary clearinghouse system for swaps and derivatives, an acknowledgement, Greenberger says, that some sort of policing is lacking.
Ironically, one of the big losers in the subprime mortgage crisis has been UBS, Gramm's new employer, which has announced losses of $19 billion and acknowledged that number could grow.
Gramm was recently quoted in The Washington Post as saying he was unaware that the company had invested in subprime mortgage instruments. "That's like Claude Rains [in Casablanca] saying he was 'shocked, shocked' to find out gambling was occurring in his establishment," says UT's Galbraith.
Perhaps Gramm has been distracted by politics. Since last July, of course, he has been investing considerable time in another enterprise-the McCain campaign.
Crony capitalism is not the only arena in which Gramm's record might tarnish McCain's campaign. While McCain has promised to end congressional earmarks, Gramm, the legislator, once bragged, "I'm carrying so much pork, I'm beginning to get trichinosis." And there's the question of whether McCain, who wants to appeal to moderates and independents, needs political coaching from a man who once told The Dallas Morning News, "I know a political zealot when I see one. I am one."
Yet ideologically the two largely agree, whether it's on free trade or slashing government services. Given Gramm's free market philosophy, in a McCain administration he can be expected to continue his push for privatization of important government functions, particularly Social Security. McCain now says he would favor "maybe giving people the option" of personal retirement accounts, opting out of the Social Security system.
If a federal appointment fails to materialize for Gramm, there is always Texas. Much like the late Lt. Gov. Bob Bullock, Gramm has nurtured a "farm team" of younger Republican elected officials with whom he confers frequently.
Says Texas Secretary of State Phil Wilson, who served as state director of Gramm's Senate office, "Gramm in many ways really built the Republican Party in this state. He would actively recruit candidates to run. He would go to a fundraiser for anybody who would ask. He would do endorsements for people who were elected officials or who wanted to be elected officials, from county commissioner to state rep. to state senator."
More importantly, he showed them how to raise money. "By being there to help them raise the money, that spoke in volumes about credibility, because you can't run an effective campaign without being able to do television advertising," Wilson notes. Republican U.S. Rep. Jeb Hensarling of Athens is another former Gramm staffer, as is Republican nominee for Congress Pete Olson, who is challenging Rep. Nick Lampson for Tom DeLay's old seat.
Still, Gramm's first foray into lobbying at the state level bombed: His efforts to sell so-called "dead peasants" insurance to the Teacher Retirement System of Texas went nowhere. Under the dead peasants scheme, UBS would have sold TRS annuities and life insurance policies on retired teachers and kept the proceeds when teachers died.
His company's proposal to sell the Texas Lottery is still alive. His protégé Perry (Aggies Gramm and Perry became close when both bolted the Democratic Party in the early 1980s) startled legislative leaders in 2007 when the governor proposed selling the lottery to private investors for between $14 billion and $20 billion. By investing that money, UBS argues, the state could earn hundreds of millions more in interest than the $1 billion earned annually now.
Perry first learned of the idea from Wilson, who, according to The Dallas Morning News, passed along Gramm's interest in the subject. There are other UBS connections as well: The investment bank employs Perry's son, Griffin, and retains former Perry spokesman Ray Sullivan as a lobbyist.
In 2007, lawmakers ignored the lottery sale idea. But Lt. Gov. David Dewhurst gave interim charges to both the State Affairs and Finance committees to study the proposal. And Texas House Appropriations Chair Warren Chisum, a Republican from Pampa, has told reporters "[proponents of the sale] are already here visiting with folks to lay out their case." Senate State Affairs Chairman Robert Duncan, the Lubbock Republican who plans to hold hearings in August, confirmed this, saying lobbyists are "circling their wagons since the issue is in play."
A huge obstacle will be making the numbers work-which, according to a recent report by campaign watchdog Texans for Public Justice-would require a huge expansion of gambling operations.
UBS estimated that the Texas Lottery could be worth between $10 billion and $16 billion if per capita sales increased 2 percent a year; a 7 percent annual growth would make the lottery's value as high as $24 billion. But the group's report noted, "These projections assume that Texas could match the per capita sales rates of lotteries in Maryland, Georgia, and Virginia. Yet part of what drives higher sales in those states are games now prohibited in Texas. ... The UBS proposal also suggests the Texas Lottery could boost sales by moving into interactive television and the Internet." In short, the Wall Street consensus is that maximizing the value of the Texas Lottery requires an expansion of gambling into new games and new venues, and even into cyberspace.
While convincing the Legislature to expand gambling is an enormous crapshoot, if anyone is connected enough to do it, it's Gramm. No one can tout a free market ideology that happens to benefit friends and family better than he.
On January 10, Gramm introduced Perry at the annual banquet of the Texas Public Policy Foundation, a conservative think tank.
At first blush, Gramm's homage might seem to be the obligatory appearance of a dutiful husband (Gramm's wife, Wendy, serves as the foundation's board chair), or a loyal Perry friend.
Gramm's remarks at Austin's Sheraton Hotel to a friendly crowd of 500 loyal conservatives revealed just how deeply involved and powerful the former senator remains in the Perry administration and the Republican Party, both in Texas and nationwide. Pronouncing Perry the "greatest governor" of his lifetime, Gramm ticked off a list of reasons that spoke volumes about not only his subject, but himself.
Predictably, he praised Perry for no new taxes and passage of the Republican redistricting bill.
More revealing was his praise of Perry for seeking "private sector solutions" to government problems. Translation: cha-ching.
Perry was equally effusive about Gramm when he responded to his old friend's introduction. "Americans made a huge mistake in 1996," he declared. "I can't fathom where we would be ... had Phil Gramm led this country for eight years."
When it comes to the economy, a McCain victory in November might make that dream come true.
Patricia Kilday Hart has written about Texas politics since 1981, as a staff writer in the Capitol bureau of the Dallas Times Herald and as writer-at-large for Texas Monthly. Since 1989, she has co-authored Texas Monthly's "Ten Best, Ten Worst Legislators."
I can't help but think how wonderful it is that we have so much information available to us now to review the historical record of public figures. Phil Gramm, McCain and the other conservatives are constantly harping on "revisionist history" but it is difficult for them to run from their records of destructive positions in this election. This article is a great example of the hypocrisy that exists among current positions and historical records. I agree with Chris Matthews - the Republicans are shedding their uniforms and running from the battle field now that their policies are proving to be more devastating than we had feared.
Should we now privatize Social Security? Should we do for the health care system in the US what we have done for the banking system, deregulate it and let the market forces rule, as McCain suggested in Contingencies, a journal for heath care actuaries? I see another McCain flip flop on the horizon....
Posted by BoyBlue on September 20, 2008
laura schlotterPhil Gramm created a monster. I wonder how he sleeps at night.chuck
Posted by laura schlotter on September 17, 2008whs806
We need not worry about our islamic enemies with traitorous morons like bush, graham, cheney, and the rest of the republickin goon squad doing there very best to destroy america as quickly as possible! I'm sure bin looney is just lol!
Posted by chuck on July 13, 2008
Gramm and his wife are the king pins behind the sub-prime mortgage mess as well as the commodity legislation letting banks, institutions, hedgefunds, and speculators buy unlimited quantities of oil contracts. A real patriot, especially the way he slipped it into an appropriations bill in 2000 that Bill Clinton wanted the way Pork Legislation is passed. You know the rest of the story, boom / bust in the housing market, oil prices have gone wild, the Fed bailed out Bear Stearns, printed gobs of money, the dollar tanked, and congress is about ready to rescue the housing mess with more money that US taxpayers will pay.
Posted by whs806 on July 05, 2008
Lucky44This is so bad you get a slimey feeling just looking at the photos in the article. These are not WE people, they are ME people. Political personal agendas with no concern for people in the U.S. or the World. Only personal profiteering. Did you see anyone in the photos that has done an honest days work in the past 20 years?
Posted by Lucky44 on July 02, 2008
Gramm is a RINO (republican in name only). His true self emerged with sub-prime mortgage legislation developed by his wife's law firm in DC. But congress would not pass it so it was attached to an appropriations bill that Bill Clinton wanted (like pork legislation) and Clinton signed it. The same legislation legalized unbridled trading in oil futures by banks, trust funds, hedge funds, and speculators. You know the rest of the story!
Posted by whs806 on July 02, 2008
patHey Mike, you apparently don't understand the commodities market at all. Oil isn't brought to market. It is traded by speculators bidding on paper contracts for delivery of oil at a future time. There is also spot prices as well. Now, the price of oil is set by investors selling these contracts to those who believe that the price will go higher and they will re sell the contract at a higher price. Only 30% of people who buy these contracts actually bring oil to the market. So now please go back to school, especially econ 101 because market forces of supply and demand do not set the prices of anything traded on in the commodities market. The traders do, and they bet on consumers demand. However, the consumer and producers are third parties to this price setting. Tell me how that correlates to supply and demand.
Posted by pat on July 02, 2008
The vote in the senate was 90 Yea and 8 Nea for the Gramm-Leach-Bliley Act of 1999. Looks to me this is another article by a person that does not want to print all the facts -- there were a boat load of Democrates that voted for the bill!
Posted by Dave F on July 01, 2008
Wally ReeseThank you Patricia Kilday Hart for elucidating what I knew was happening but had no factual basis for my suspicion. The rot runs deep and will take more than a change of leadership in the oval office to cure. Give us more. Kudos to the editor and publisher daring to publish such blasphemy. You deserve a Pulitzer.
Posted by Wally Reese on June 30, 2008
JerryMainstream journalists don't report it because they can't summarize in 2 sentences or 15 seconds on air. Blindly saying "supply and demand" is much easier than real research. Fact: demand has been dropping each month for the past 18. Supply has remained steady or increased. But there's more to the story. Supply of light sweet crude is limited. There's plenty of other oil, but it's harder to get to and refine. But the real supply and demand has been on the commodities exchanges. A few uber-traders are racking up insane profits on speculation. Goldman Sachs, Bear Stearns, UBS (Gramm) and others are making fistfuls of money. Is it any wonder that their "analysts" see constant "upward price pressures?" These guys are the snake oil salesmen of a century ago. They are not analyzing the market, they are driving investors. Thanks, Phil. Thanks for nothing.
Posted by Jerry on June 24, 2008
RKI find it interesting that UBS AG is Obama's third largest contributor of campaign money. They must be hedging thier funds. LOL
Posted by RK on June 22, 2008
Russell H. ClaybrookPatti, you have turned over a huge rock in the muck of this country's political cesspool.
Great take on the unending succession of greedheads fostered by the party on the right, where plundering the public trust has become requisite, a badge of honor.
With Phil Gramm manipulating the cash flow for McCain, the GOP contender will have a formidable warchest as he rolls toward the general election in November. As you suggest, Gramm could turn into a liability for McCain, but never underestimate the power of cold, hard cash.
One other interesting note--two Bear Stearns managers were arrested at their homes this morning, Juneteenth, on charges of securities fraud and conspiracy. They allegedly duped Barclays Bank PLC into believing that the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Master Fund was increasing in value at a time when its shares actually were plummeting, according to the Associated Press.
This Hedge Fund was spawned post-deregulation. Barclays charged that it had become "a repository for risky, poor-quality investments."
I believe it was taxpayer cash used to bail out Bear Stearns long enough for it to be acquired by JP Morgan Chase.
I read with amusement today that several Bear Stearns managers were arrested at their homes on June 18.
Posted by Russell H. Claybrook on June 19, 2008
Phillip PastranoMike, copy and paste these two links onto your browser and just read it all. Since you only trust the words of those educated in economics and law, I will leave my own comments out of this post.
Posted by Phillip Pastrano on June 12, 2008
JetAs to the first poster there is plenty of oil, we are just running low of sweet light crude. As well there are less heavy sour crude refineries. There are currently tankers loaded with Iranian oil sitting in the gulf. I can think of many reasons for high fuel prices. The first is the London loophole. Secondly we have the falling dollar. Third, we dont have enough refineries and import 1,144k barrels of fuel a day.
As for free markets, I call BS. De-regulation caused the securities mess [sup-prime]and all kinds of highly leveraged alphabet soup paper to be created. No one really knows how many turds are floating around the derivatives section. Hedge funds are taking their money out of securities and are putting it into commodities driving up prices there. Privatization is just another predatory scam cloaked under the guise of 'doing things cheaper'
Thanks for a well written informative article Ms Hart.
Posted by Jet on June 09, 2008
Centrifugal3Gramm has plenty of common sense, he has figured out how to make himself and friends wealthy at the expense of the rest of us.
But a major problem here is the philosophies of the two major parties, with us, the ignorant masses, caught in between. We have devolved back to the same situation, if not the same conditions, if you will check your history, of the late 19th and early 20th century before the great depression. The Republicans were in charge, and the big powers then, Railroads, Energy, and Steel had a stranglehold on the economy. Even Republican Theodore Roosevelt saw the danger and started anti-trust attempts. The big crash was inevitable and so was the reaction. Too far in the other direction...socialism,taxes to support it, and regulations on regulations, misnamed as the democrats. We need a party in this country somewhere in the middle of these two that has clearly defined principles that look out for the little people and don't squash commerce. Probably an impossibility. Greed for both power and money always seem to corrupt either direction. We are about to see this cycle again. The start of a solution is to
vote incumbents in office more than two terms out, once this pattern is established, require legislation for term limits or vote them out after one term, and establish term limits long enough that there is no reason to run for office more than once, cutting out campaign donation corruption and lobbying corruption, and it cuts out most of the pork. No need to return a candidate based on his promises of pork to his constituents...he ain't going back anyway, so he might as well be remembered for doing a good job for everyone and not count on getting rich as a politician.
A pipe dream though...people love the shallow entertainment of political sports...trying to return their familiar candidate or "team" to office, and sis boom bah...win, win, win!! I'm so smart!! I picked the winning team!!
The public has been so dumbed down by Television that we may never realize politics is not a sports contest whose outcome has no real relevance, but instead is a contest for our true and real existence.
Posted by Centrifugal3 on June 08, 2008
Nicolette LadoulisExcellent article. Very informative. Thanks. This quote was the best: University of Texas economist James Galbraith says Gramm is "not against government at all. His career has been finding ways to make money for his friends. It's a predator relationship. [Government] is his food supply."
I'm not too involved but, please, someone who is connected, tell someone to emphasize this message to voters. We're all being duped by Republican and conservative rhetoric. Republican government is big government and unfairly keeps prices high, even according to the Cato institute. The US government spends more (% GDP) on health care than countries with more efficient systems of universal healthcare (that works well). Incredible the lies we'll believe these days.
Posted by Nicolette Ladoulis on June 08, 2008
StockpixPhil Graham has always been a mean hearted SOB. McCain puts a smirking face on what looks to be an administration that is likely to so monetarily Darwinian that it will make W's real nastiness look wildly compassionate.
Posted by Stockpix on June 04, 2008
Why hasn't the main stream media picked up on the connection between Phil Gramm and skyrocketing prices at the pump? If the speculation associated with his "Enron loophole" accounted for $20 out of a $70 barrel of oil in 2006, it means that it's accounting for $39 out of a $135 barrel of oil now. Fuel prices that are 30% higher than they should be hurt everyone.
Posted by Lucy Frost on June 04, 2008
althusiusWho knew that Enron was just a warm up for the main event? Will Phil Gramm have a hand in the collapse of the global financial system? If you can imagine a doctorate in economics and the common sense of a jack ass, think Phil Gramm.
Posted by althusius on June 03, 2008
Savings & Loan Crisis + McCain + Greenspan + Enron = Current Financial Crisis MamasForObama.net
Fri, 09/26/2008 - 08:14 - elaine The following article, from the Daily Kos web site, is one of the best-written I have seen on the current financial crisis. John McCain, his economic advisers and his party's policies are all smack in the middle of it. Read it and weep, folks -- or get angry instead, and vote for REAL change come November.
James Bond's wealthy nemesis may have had an obsession with gold, but he judged, quite correctly, that if people keep putting your plans awry, that was likely their intent.
In 1982, the same year John McCain entered the Senate, a bill was put forward that would substantially deregulate the Savings and Loan industry. The Garn-St. Germain Depository Institutions Act was an initiative of the Reagan administration, and was largely authored by lobbyists for the S&L industry -- including John McCain's warm-up speaker at the convention, Fred Thompson. The official description of the bill was "An act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans." Considering where things stand in 2008, that may sound dubious. It should.
Seven years later, the S&L industry was collapsing. What was the cause? Garn-St. Germain handed the S&Ls a greatly expanded range of capabilities, allowing them to go head to head with full service banks, but it didn't give them the bank's regulations. Left to operate in an anarchistic gray area, S&Ls chased profits, indulged in amazing extravagances, and cranked out enough cheap mortgages to fuel a real estate boom. They also experimented with lots of complex, creative -- and risky -- investments, even though they didn't have the economic models to really determine the worth of the things they were buying. The result was a mountain of bad debts and worthless "assets." Does any of that sound eerily (or nauseatingly) familiar?
It wasn't a foregone conclusion. In 1985, three years after the deregulation of the S&Ls, the chairman of the Federal Home Loan Bank Board saw that the situation was already looking shaky, with the potential to become much worse. He instituted a rule to limit the amounts and types of investments S&Ls could carry on their books in an effort to head off disaster. However, many savings and loans -- among them Lincoln Savings & Loan Association of Irvine, CA, which was headed by a fellow named Charles Keating -- promptly ignored these rules.
Now enters a familiar cast of characters. First to pop up was the universally beloved Fed-chief-to-be, Alan Greenspan. Greenspan argued against the loan board's new rules, and persuaded Reagan to appoint one of Keating's pals to the board to blunt the requirements. A quintet of senators, among them John McCain, began having meetings with both the management at Lincoln and the regulators at the loan board. ] Alan Greenspan also helped out with a letter to the regulators, asking that Lincoln be exempt from the new rules. With their help of Greenspan and their pet senators, Lincoln was able to stay in business an additional two years, at the end of which they failed -- taking the life savings of 21,000, mostly elderly, investors with them.
How involved was John McCain? McCain and Keating had known each other since 1981 and had become fast friends. Of all the "Keating Five," it was McCain who moved into the life of the Lincoln S&L chief. The two men vacationed together multiple times, with the whole McCain clan (babysitter included) heading out for Keating's private Caribbean property on Keating's private jet. McCain didn't think to actually report these trips, or pay for them, until the investigators were breathing down his neck. And McCain took his payment in the form of more than just vacations. Keating and other members of Lincoln's parent company padded McCain's pockets with $112,000 in campaign contributions.
In John McCain's biography, he called his meetings with Keating and regulators "the worst mistake of my life," though from the text you'd think this was a spur of the moment decision, not something that McCain did repeatedly over a space of years. Still, you might think that a "worst mistake" would stay fresh in his memory.
It certainly didn't fade quickly for the country. Following the S&L crisis, the Resolution Trust Company was formed to swallow up the debt of Lincoln and 746 other S&Ls gone wild, and taxpayers were left with the $125 billion bill. The resulting budget deficit forced cutbacks in other programs. The artificial real estate boom collapsed and housing starts fell to their lowest levels in decades. Finally, the whole nation settled in for a period nasty enough that three years later someone could still campaign around the idea "It's the economy, stupid."
Even so, by 1999 Phil Gramm -- who had entered the Senate two years after McCain and quickly become the economic guru of the Keating Five maverick -- put forward the Gramm-Leach-Bliley Act. This Act passed out of the Senate on a party line vote with 100% Republican support, including that of John McCain. (To be fair, the bill eventually passed again with a wide margin following revisions in the House.)
This act repealed part of the Glass-Steagall Act. This may sound like a bunch of Congressperson soup, but the gist of it is that Glass-Steagall was put in place in 1933 to control the rampant speculation that had helped cause the collapse of banking at the outset of the depression, and to prevent such consolidation of the banks that the nation had all its eggs in one fiscal basket.
Gramm-Leach-Bliley reversed those rules, allowing not only more bank mergers, but for banks to become directly involved in the stock market, bonds, and insurance. Remember the bit about how S&Ls failed because they didn't have the regulations that protected banks? After Gramm-Leach-Bliley, banksdidn't have that protection either.
Gramm wasn't done. The next year he was back with the Commodity Futures Modernization Act, which was slipped into a "must pass" spending bill on the last day of the 106th Congress. This Act greatly expanded the scope of futures trading, created new vehicles for speculation, and sheltered several investments from regulation.
As with both Gramm-Leach-Bliley and Garn-St. Germain, large parts of this bill were written by industry lobbyists. This famously included the "Enron Loophole" that exempted energy trading from regulation and was written by (big suprise) Enron Lobbyists working with Gramm. Not coincidentally, Senator Gramm, the second largest recipient of campaign contributions from Enron, was also key to legislating the deregulation of California's energy commodity trading.
Thanks to this fortunate trifecta of Gramm-crafted legislation, Enron was able to create "EnronOnline" and trade electricity in California with absolutely no oversight or transparency. They quickly worked out how to game the system. Previously, there had been only one Stage 3 rolling blackout in the history of California. Within months, the system had been manipulated by traders to generate 38 such blackouts and wholesale electrical prices had gone up more than 3000%. Despite production capacity equal to four times the demand during winter, energy traders even engineered a blackout in mid-January.
During the confusion of these deliberate "shortages" and "price spikes," the California administration of Gray Davis -- blind to speculator manipulations because of the walls erected by Gramm's legislation -- was forced to sign energy contracts at enormous rates. There was little choice, because most of California's public utilities were on the brink of bankruptcy from the rising wholesale prices.
In a single year, Gramm's legislation allowed speculators to bring the state to its knees. Enron alone looted California of $11 billion. The manipulations of the energy market were also a major factor in Davis getting the hook, helped usher the governator into power, and they still have repercussions in California's budget battles today. By the end of that year, the depth of Enron's deception could no longer be hidden, and the whole company came crashing down in the largest bankruptcy in history -- at the time. This brought more billions lost in mutual funds and pension funds across the country, and played a major role in the economic downturn of 2001.
But that was only the second act. The combination of Gramm-Leach-Bliley and the Commodity Futures Modernization Act was a toxic cocktail whose total damage was greater than the sum of its parts.
The first Act promoted bank buyouts and mergers that reached such an insane pitch that the average consumer could only keep up by tracking the changing names on their checks and credit cards. Mercantile buys Ameribanc and Mark Twain. Firstar buys Federated and First Colonial. US Bancorp buys Mercantile and Firstar. And, because it allowed brokerages and insurance companies to mingle with banks, the Act cemented a trend that was already (and illegally) underway in which all those terms had become rather quaint. Is Wachovia a savings bank, an investment bank, a brokerage, or an insurance provider? The answer is "yes."
In allowing financial institutions to grow to Godzilla-sized proportions, Gramm-Leach-Bliley helped ensure that we would have financial entities that were "too big to fail." Rather than choosing to enforce rules that kept these institutions apart, the deregulators chose to create monster bankeragasurances whose downfall (and existence) was enough to threaten the whole system.
But if Gramm-Leach-Bliley removed the limits on size and scope, these new institutions still neededfuel. With many financial transactions operating on razor thin margins, and increasing automation sapping the profits from trading of all sorts, they needed a new way to generate the funds required to swallow their brethren in the merged fiscal corporation pond. For that, the Commodity Futures Modernization Act was a godsend.
Among those instruments which the CFMA sheltered from regulatory scrutiny was something called the "credit default swap." A kind of insurance one bank could exchange with another, credit default swaps supposedly made it safe for banks to take on ever riskier forms of debt. The Act didn't invent these swaps, though they were relatively new. Instead, by placing them in a state where they were not only unregulated but almost perfectly opaque, credit default swaps were turned into the perfect vehicle to fuel a Wall Street revolution. No one had any idea what these things were actually worth, they were traded "over the counter" without being administered by any exchange, and even the SEC could monitor their existence only indirectly.
Who would cheer for a new kind of financial instrument that was difficult to understand, invisible to regulators, and impossible for even the whizziest of Wall Street whiz kids to value? Guess.
More recently, instruments that are more complex and less transparent--such as credit default swaps, collateralized debt obligations, and credit-linked notes--have been developed and their use has grown very rapidly in recent years. The result? Improved credit-risk management together with more and better risk-management tools appear to have significantly reduced loan concentrations in telecommunications and, indeed, other areas and the associated stress on banks and other financial institutions.
--Alan Greenspan, 2002
Get that? Greenspan loved credit default swaps. He opined again and again that such instruments would be the salvation of the industry by spreading around risks. To the mighty Greenspan, both their complexity and their lack of transparency were good things, since swaps would only be handled by the big boys who knew how to play with fire.
When questioned about his support of Gramm's legislation, John McCain called his friend (and by then, campaign co-chair) Gramm "one of the smartest people in the world on the economy" and pointed out that Greenspan also favored the acts Gramm and his coalition of lobbyists had authored. If both Gramm and Greenspan were on his side, McCain couldn't possibly be in the wrong.
Except, of course, that he could.
From the beginning, there were plenty of people in the financial community whose opinion of these unregulated credit swaps was not as rosy as that of Gramm, Greenspan, and McCain. Chief among those speaking in opposition was SEC Chairman, Arthur Levitt. Levitt argued that what the industry needed was more transparency, especially when it came to complex instruments like default swaps, and he testified to this before Gramm's Senate Banking Committee.
"In my judgment, the risk of this regulatory approach is simply unacceptable for America's investors."
--Arthur Levitt, 1999
Gramm paid no attention.
Credit default swaps did allow the banks to share risks. So much so, that banks raced each other in an effort to find more risks. They made it possible for the down payment on homes to become 3%, 1%,0%. Skip the credit check, avoid the employment requirements, damn the torpedoes, full speed ahead! We've got a credit default swap, we can do anything!
The encouragement and "safety" that credit default swaps provided made the sub-prime mortgage market possible. Just as with the deregulation of S&Ls in the 1980s, the market was suddenly flooded with easy credit. The result was a real estate boom, soaring home prices, and a plague of "Flip that House!" shows on cable.
As the banks piled up crappy mortgages, they heaped on ever more of the credit default swaps -- and they still had no idea how to value the things. Worse, they began to trade the swaps themselves as if they were an investment, treating them like something worth holding instead of a big bundle of cartoon bombs whose fuses were already lit. Since very few loans were falling into default at the time, owning a default swap seemed like a way to collect fees without ever paying out. Banks wanted more, and more, and more.
A secondary market for trading swaps exploded into existence, and swaps were traded with absolutely no consideration for the nature or quality of the underlying investment. Swaps changed hands a dozen or more times, growing in "value" as they went. Worse still, no one regulated who could buy a swap, so it was (and is) perfectly possible for a company to acquire swaps that theoretically cover billions of dollars in loans, even if that company doesn't have a red cent on hand to cover those swaps should the loans default.
How big did this market become? Here's business correspondent Bob Moon and host Kai Ryssdal on American Public Media's Marketplace from back in the spring.
BOB MOON: OK, I'm about to unload some numbers on you here, so I'll speak slowly so you can follow this.
The value of the entire U.S. Treasuries market: $4.5 trillion.
The value of the entire mortgage market: $7 trillion.
The size of the U.S. stock market: $22 trillion.
OK, you ready?
The size of the credit default swap market last year: $45 trillion.
KAI RYSSDAL: That's a lot of money, Bob.
As in three times the whole US gross domestic product, Bob. And the truth is that Moon probably underestimated. The unregulated and poorly reported credit default swaps may have actually passed $70 trillion last year, or about $5 trillion more than the GDP of the entire world.
So, are you starting to get an idea of just how big a genie Phil Gramm and his pals unleashed?
With some regularity over the last eight years, fiscal whistle blowers have tried to raise their hands and register a protest. Um, sirs? Is it altogether a good idea to run up debts exceeding all the assets it's even possible to hold? But so long as no one actually had to pay off on the swaps, the party went on. Even usually conservative (in the fiscal sense) companies like AIG started to worry that they were being left behind and leapt headlong into the swap pool.
Shortly after Greenspan's departure in 2006, the Federal Reserve took the unusual step of issued a joint statement along with the SEC to warn about the risks associated with credit default swaps. But by that point, the damage was already severe. If swaps lost their value, most of those who had played the game would find their giant firms abruptly valued in pocket change. The only solution was to cover the problem with still more swaps and keep moving.
Then a funny thing happened. After years in which banks had handed out loans willy-nilly, guarded by the indestructible swap, people and companies started to really default on those loans. Credit slowed, home prices fell, and the whole snake started to eat itself tail first. Suddenly, credit default swaps were not sources of limitless cash. It turns out that an insurance policy -- even a secret, unregulated policy -- is occasionally expected to pay. Speculators started to look at the paper they were holding and for the first time realized it could all be worthless. Worse, it could (and did) represent a massive debt; one that no one had the funds to cover.
When Bear Stearns fell apart last March, it was only suspected that a big part of the effort in saving the giant investment bank was keeping their holdings in credit default swaps from unraveling and spreading to other institutions. Naturally, part of solving this problem involved creating a new credit default swap to cover Bear Stearn's potential debt. But the all-purpose swap was starting to lose its power. Shortly after Bear Stearns went belly up, AIG reported the largest quarterly loss in the company's history, taking a $11 billion hit on revaluing its holdings of swaps. The party was definitely coming to a close.
When AIG finally collapsed this week, there was no doubt about the primary cause of its failure. The previously well grounded company had "gotten itself involved with something called credit default swaps." Point of irony alert: Arthur Levitt now serves on the AIG board... or at least he did until the government had to take over most of AIG to salvage the company from the very idiocy Levitt had warned of in 1999.
This week, the Bush administration announced the beginnings of a plan to salvage what remains of the financial markets. At first glance, it appears that the plan will consist mainly of creating a kind of "garbage pit," a fund or group of funds -- cousins of the Resolution Trust that was created during the S&L crisis -- into which those people who have dabbled in bad debts can toss their problems. Only this time the cost to the taxpayers is at least $700 billion... and a big bite out of representative democracy.
The expansion of unregulated Savings and Loans in the 1980s brought on the collapse of that industry, a crippling of the economy, and left taxpayers holding the bag. Maybe that was only happenstance. Those pushing for the Garn-St. Germain Depository Institutions Act may not have known what they were doing.
The deregulation of the California electricity market, along with the protections provided to Enron through Phil Gramm's lobbyist-written legislation brought blackouts, fiscal and political chaos, and left taxpayers holding the bag. But the people who engineered that event -- people like Gramm and Greenspan -- had already seen what happened with the S&Ls. They should have known better. Still, perhaps that was only coincidence.
The sub-prime mortgage crisis that has not only come so close to utterly destroying the markets, but has ruined the value of many people's homes and left millions with mortgages they can't pay, was also the outcome of the deregulation created by these men. The very predictable outcome. When taxpayers are left holding the bag for $1 trillion this time around, it's hard to believe it's any sort of accident.
This is enemy action. This is a bullet deliberately fired into the economy by men willing to exercise their ideology regardless of the cost to taxpayers. Men who have every expectation that they can plunder the system again and again, while the public picks up the tab. John McCain may not have had his finger directly on the trigger, but he was there. He assisted. These were his personal friends and philosophical comrades. He may not be the high priest, but he has been a loyal acolyte in the cult of deregulation.
It may come as a surprise to the champions of deregulation, but nobody likes regulation. The restrictions that were placed on banks, S&Ls, and other institutions in the 1930s weren't put there because someone thought it would be fun. They were put in place because they addressed problems that had just been clearly and painfully revealed. They were put in place because they were necessary.
It's bad enough if John McCain didn't know that. It's far worse if he did.
And then we have Guru number 2, Phil "you're all a bunch 'o whiners" Gramm, the man McCain extols as an economic genius:
When Senator Phil Gramm and his wife Wendy danced, it was most often to Enron's tune.
Mr. Gramm, a Texas Republican, is one of the top recipients of Enron largess in the Senate. And he is a demon for deregulation. In December 2000 Mr. Gramm was one of the ringleaders who engineered the stealthlike approval of a bill that exempted energy commodity trading from government regulation and public disclosure. It was a gift tied with a bright ribbon for Enron.
Wendy Gramm has been influential in her own right. She, too, is a demon for deregulation. She headed the presidential Task Force on Regulatory Relief in the Reagan administration. And she was chairwoman of the U.S. Commodity Futures Trading Commission from 1988 until 1993.
In her final days with the commission she helped push through a ruling that exempted many energy futures contracts from regulation, a move that had been sought by Enron. Five weeks later, after resigning from the commission, Wendy Gramm was appointed to Enron's board of directors.
According to a report by Public Citizen, a watchdog group in Washington, ''Enron paid her between $915,000 and $1.85 million in salary, attendance fees, stock options and dividends from 1993 to 2001.''
As a board member, Ms. Gramm has served on Enron's audit committee, but her eyesight wasn't any better than that of the folks at Arthur Andersen. The one thing Enron did not pay big bucks for was vigilance.
There's a lot more you can say about the Gramms and Enron, and not much of it good. But Phil and Wendy Gramm are just convenient symptoms of the problem that has contributed so mightily to the Enron debacle and other major scandals of our time, from the savings and loan disaster to the Firestone tires fiasco. That problem is the obsession with deregulation that has had such a hold on the Republican Party and corporate America.
Enron is so 2001, right? Something out of the past. Except it really isn't. It's yet another example of the GOP's deregulation fetish of the past quarter century, which seems to result every, single time in a bunch of people losing their savings and the taxpayers being on the hook for billions. Sure, the big boys have to take some heat --- why some of them are down to their last 100 million or so. But seeing as they've been swallowing a fire hose of money for the past seven years, I think they'll pull pull through. The rest of us have to stay up nights wondering what the hell the next few years are going to bring us.
And John McCain has been out there selling this crap the whole time, vacationing with Keating, being best buds with Gramm and drooling over Alan Greenspan like a Hannah Montana fanboy. If anyone expects change from this guy they are living in a total dreamworld. He's one of them.
If you like useless expensive wars, financial scandals, stock market crashes, foreclosures and economic instability as far as the eye can see, vote Republican. They've got everything you need.
Click on the allegation of your choice:
- Savings & Loan Scandal
- Helped get a convicted drug dealer out of jail
- Laundered Illegal Campaign Contributions to Bob Packwood
- Funded a Sleazy Movie -- - Draft Dodger
- Petty Abuses of Power: illegal hunting, getting staffer out of the army
- Character -- - Quotes -- - Sources
Quotes"The most dangerous place in Washington is between Phil Gramm and a camera" -- something reporters say
"Anybody with $2.1 billion has to be taken seriously." -- Gramm, about Ross Perot
"If you're willing to pay the price, you can beat anybody at anything." - Phil Gramm
"He's always willing to rise above principle. He's got every quality of a dog except loyalty." -- Dave McNeely, political columnist for the Austin, Texas American-Statesman
"You can love him or hate him, but when you're dealing with him, there are 2 things you've got to remember: #1, he's smarter than you are. #2, he's meaner than a junkyard dog." -- Marvin Leath, former Gramm colleague
"I'm carrying so much pork [home to Texas] I'm beginning to get trichinosis." -- budget hawk Phil Gramm
"Voters vote for people they like. Now Phil, I know his mother likes him. I know Wendy likes him. I think his dog likes him. And I like him. I've named four." -- Buddy Roemer
Sleazy Film Financier
Gramm's brother-in-law, George Caton, says he watched a film called "Truck Stop Women" with Gramm back in 1974, which got our champion of family values interested in investing in this kind of movie. Gramm admits that $7,500 of his money somehow wound up financing a never-completed, R-rated movie called "Beauty Queens" but he denies that he had any interest in funding pornography.
That may be true. They press hyped this up as supporting a "porn" film, which is a ridiculous overstatement. The fact is, Gramm got taken; "Beauty Queens" was never made, and the money went to finance a raucous and stupid anti-Nixon movie (which never made a dime.) (Gramm is said to have watched and like the result.)
But it is clear that Gramm had no compunctions about making money off an off-color film. This makes his current sucking up to the Christian right all the more offensive. And his evasive responses when asked about this scandal are disturbingly typical of Gramm's responses to other charges and allegations.
Savings and Loan ScandalTexas S&L owner Jerry D. Stiles, who has been convicted of bank fraud in the S&L scandals, advanced $117,000 interest free for a construction crew that came from Texas to Maryland to build Gramm a vacation home. There were no written estimates or contracts. Months later, Gramm paid back just $60,000 and Stiles paid the rest. About the same time, Gramm ushered through a bill that allowed sick Texas S&L's (such as the ones Stiles owned) to stay open. He later urged regulators to give Stiles waivers -- even after they found irregularities that led to Stiles' conviction -- and advised Stiles on new banking regulations. The Senate investigated Gramm but ruled that the $57,000 Stiles paid was a "cost overrun", not a payment.
Getting A Drug Dealer Back On the Streets
In 1979, letters signed by Phil Gramm on his congressional stationery were sent to the parole board, asking for an early release for a man, Bill Doyle, who had been repeatedly convicted on drug dealing and weapons charges. Doyle was released soon after Gramm's letter, and has been sent back to prison 3 times since on new drug charges or for failing drug tests.
Gramm first claimed never to have heard of the man. When Mother Jones magazine produced letters with Gramm's signature, his office released a statement by a secretary claiming that she sent the letter out without his knowledge, forging his signature. We find this hard to believe.
Like most of the candidates for President this year, Phil Gramm was of age to fight in Vietnam -- and avoided it. Gramm used five deferments for college and marriage to stay in America while the Dickey Flatts of the world were fighting, and getting killed, overseas.
Rival Bob Dornan, a fighter pilot in the 1950s who went to Vietnam as a press photographer, calls Gramm "a Vietnam-era draft evader undeserving of the role of president." Would he call Gramm a draft dodger? "Yeah. Anybody born prior to 1952 who was physically fit had a choice. You either did something or sent someone else there in your place."
Laundering Illegal Campaign Contributions for Bob Packwood:Gramm was head of the Republican's Senate campaign fundraising effort in 1992. Bob Packwood's diary describes a meeting on March 6, 1992 where Gramm promised to funnel $100,000 in party "soft" money to Packwood's campaign. The limit for party contributions to a candidate, $17,500, had already been given at that point. (Packwood narrowly won reelection while vastly outspending his opponent.)
"What was said in that room would be enough to convict us all of something," Packwood wrote in his diary. Packwood now says that the diary entry was "totally wrong." Gramm says the diary "reflects an obvious misunderstanding of the election law..." But the simpler explanation is that Packwood's diary, which he never expected to see the light of day, and fought like a demon to keep private, is telling the truth. In his fight, Packwood warned that making the diary public would ruin senators other than himself -- and no one has reported any other diary allegations as serious as theis one against Gramm.
Gramm's extraordinary success in fundraising was his stepping stone to this presidential campaign -- a lot of Republicans owe him favors. (Just like Jerry Brown did earlier for Democrats). But Gramm owes a lot of favors to big money donors, and his career has been marked by his willingness, even eagerness, to pay back his donors with political rewards.
Abuses of Power
Gramm has a disturbing pattern of pulling strings to get his way. Few of the examples are crucial, but they add up to a continuing character defect. For example
- Pulling strings for illegal hunting near his Maryland resort home.
7 game wardens say that Gramm, a hunting buddy and a major contributor used his clout so all 3 could continue illegal duck hunting over ponds baited with grain. Gramm's beach home borders the Blackwater National Wildlife Refuge.
Tax lobbyist J.D. Williams, a friend and contributor of Gramm's, had been feuding with game wardens since being arrested for hunting over baited fields two years before, and now he had been heard threatening wildlife officials that with Gramm's clout, any official who gave him trouble is "going to be counting seals in Alaska."
Gramm called a meeting with Williams and Frank Dunkle, director of the U.S. Fish and Wildlife Service, for a chat about wildlife law enforcement on the Eastern Shore. Dunkle warned Gramm that his property was under surveillance for baited hunting, and issued a new policy - applying only to the Blackwater refuge - forbidding wardens from enforcing waterfowl laws on neighboring properties. 7 months later, the director of the Blackwater Refulge was transferred unwillingly, not to Alaska but to Georgia's Okefenokee Swamp, and another wildlife official who had refused to transfer him was also reassigned.
Character:We haven't found any yet. We'll let you know. Actually, he showed some guts and open mindedness by marrying a woman of Korean descent. It's a sad fact that this may cost him more votes than his sleaze.
Sources:Cloud, David S. "Gramm deal questioned." Congressional Quarterly Weekly Report v50, n48 (Dec 5, 1992):3750.
Time Daily Online, May 18, 1995 p1, citing the New Republic that week. (re: Porn film)
"Gramm Denies Diverting Funds to Packwood Camp", NY Times news service, San Francisco Chronicle, Spetember 9, 1995 pA2
"Phil's Felon", Will Saletan, Mother Jones, January 1995
"Justice Dept. to Review Packwood Case", San Francisco Chronicle, September 15, 1995
"Hunting Rules Eased for VIPs", Susan Baer (Baltimore Sun), San Francisco Examiner, April 2, 1995 pA-8
"Gramm Linked to Illegal Hunting", Jim Drinkard, Associated Press, May 1, 1995
"Gramm Says Aide Used His Name in Early Parole of Drug Dealer", Thomas Edsall (Washington Post), San Francisco Chronicle, pA12
"Gramm Admits Plucking Aide From Air Force", San Francisco Chronicle, June 1995, pA18
"Dornan: Is He Just Running To Deny Gramm The Nomination?",
BACK TO SKELETON CLOSET
Paid for by Real People For Real Change and not authorized by any candidate or candidate's committee.
Copyright 1999 Real People For Real Change
Presidential Candidate Phil Gramm -- The Dark Side
- "The most dangerous place in Washington is between Phil Gramm and a camera" -- something reporters say
- "Anybody with $2.1 billion has to be taken seriously." -- Gramm, about Ross Perot
- "If you're willing to pay the price, you can beat anybody at anything." - Phil Gramm
- "He's always willing to rise above principle. He's got every quality of a dog except loyalty." -- Dave McNeely, political columnist for the Austin, Texas American-Statesman
- "You can love him or hate him, but when you're dealing with him, there are 2 things you've got to remember: #1, he's smarter than you are. #2, he's meaner than a junkyard dog." -- Marvin Leath, former Gramm colleague
- "I'm carrying so much pork [home to Texas] I'm beginning to get trichinosis." -- budget hawk Phil Gramm
- "Voters vote for people they like. Now Phil, I know his mother likes him. I know Wendy likes him. I think his dog likes him. And I like him. I've named four." -- Buddy Roemer
Groupthink : Two Party System as Polyarchy : Corruption of Regulators : Bureaucracies : Understanding Micromanagers and Control Freaks : Toxic Managers : Harvard Mafia : Diplomatic Communication : Surviving a Bad Performance Review : Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime : PseudoScience : Who Rules America : Neoliberalism : The Iron Law of Oligarchy : Libertarian Philosophy
War and Peace : Skeptical Finance : John Kenneth Galbraith :Talleyrand : Oscar Wilde : Otto Von Bismarck : Keynes : George Carlin : Skeptics : Propaganda : SE quotes : Language Design and Programming Quotes : Random IT-related quotes : Somerset Maugham : Marcus Aurelius : Kurt Vonnegut : Eric Hoffer : Winston Churchill : Napoleon Bonaparte : Ambrose Bierce : Bernard Shaw : Mark Twain Quotes
Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient markets hypothesis : Political Skeptic Bulletin, 2013 : Unemployment Bulletin, 2010 : Vol 23, No.10 (October, 2011) An observation about corporate security departments : Slightly Skeptical Euromaydan Chronicles, June 2014 : Greenspan legacy bulletin, 2008 : Vol 25, No.10 (October, 2013) Cryptolocker Trojan (Win32/Crilock.A) : Vol 25, No.08 (August, 2013) Cloud providers as intelligence collection hubs : Financial Humor Bulletin, 2010 : Inequality Bulletin, 2009 : Financial Humor Bulletin, 2008 : Copyleft Problems Bulletin, 2004 : Financial Humor Bulletin, 2011 : Energy Bulletin, 2010 : Malware Protection Bulletin, 2010 : Vol 26, No.1 (January, 2013) Object-Oriented Cult : Political Skeptic Bulletin, 2011 : Vol 23, No.11 (November, 2011) Softpanorama classification of sysadmin horror stories : Vol 25, No.05 (May, 2013) Corporate bullshit as a communication method : Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law
Fifty glorious years (1950-2000): the triumph of the US computer engineering : Donald Knuth : TAoCP and its Influence of Computer Science : Richard Stallman : Linus Torvalds : Larry Wall : John K. Ousterhout : CTSS : Multix OS Unix History : Unix shell history : VI editor : History of pipes concept : Solaris : MS DOS : Programming Languages History : PL/1 : Simula 67 : C : History of GCC development : Scripting Languages : Perl history : OS History : Mail : DNS : SSH : CPU Instruction Sets : SPARC systems 1987-2006 : Norton Commander : Norton Utilities : Norton Ghost : Frontpage history : Malware Defense History : GNU Screen : OSS early history
The Peter Principle : Parkinson Law : 1984 : The Mythical Man-Month : How to Solve It by George Polya : The Art of Computer Programming : The Elements of Programming Style : The Unix Hater’s Handbook : The Jargon file : The True Believer : Programming Pearls : The Good Soldier Svejk : The Power Elite
Most popular humor pages:
Manifest of the Softpanorama IT Slacker Society : Ten Commandments of the IT Slackers Society : Computer Humor Collection : BSD Logo Story : The Cuckoo's Egg : IT Slang : C++ Humor : ARE YOU A BBS ADDICT? : The Perl Purity Test : Object oriented programmers of all nations : Financial Humor : Financial Humor Bulletin, 2008 : Financial Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related Humor : Programming Language Humor : Goldman Sachs related humor : Greenspan humor : C Humor : Scripting Humor : Real Programmers Humor : Web Humor : GPL-related Humor : OFM Humor : Politically Incorrect Humor : IDS Humor : "Linux Sucks" Humor : Russian Musical Humor : Best Russian Programmer Humor : Microsoft plans to buy Catholic Church : Richard Stallman Related Humor : Admin Humor : Perl-related Humor : Linus Torvalds Related humor : PseudoScience Related Humor : Networking Humor : Shell Humor : Financial Humor Bulletin, 2011 : Financial Humor Bulletin, 2012 : Financial Humor Bulletin, 2013 : Java Humor : Software Engineering Humor : Sun Solaris Related Humor : Education Humor : IBM Humor : Assembler-related Humor : VIM Humor : Computer Viruses Humor : Bright tomorrow is rescheduled to a day after tomorrow : Classic Computer Humor
The Last but not Least Technology is dominated by two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt. Ph.D
Copyright © 1996-2021 by Softpanorama Society. www.softpanorama.org was initially created as a service to the (now defunct) UN Sustainable Development Networking Programme (SDNP) without any remuneration. This document is an industrial compilation designed and created exclusively for educational use and is distributed under the Softpanorama Content License. Original materials copyright belong to respective owners. Quotes are made for educational purposes only in compliance with the fair use doctrine.
FAIR USE NOTICE This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to advance understanding of computer science, IT technology, economic, scientific, and social issues. We believe this constitutes a 'fair use' of any such copyrighted material as provided by section 107 of the US Copyright Law according to which such material can be distributed without profit exclusively for research and educational purposes.
This is a Spartan WHYFF (We Help You For Free) site written by people for whom English is not a native language. Grammar and spelling errors should be expected. The site contain some broken links as it develops like a living tree...
You can use PayPal to to buy a cup of coffee for authors of this site
Last modified: January 06, 2020