Back in January, John McCain admitted to the Wall Street Journal editorial board he “doesn’t really understand economics.” He told the editors, though, that he was nevertheless reliable because his former Senate colleague, Texas’ Phil Gramm, was his chief economic advisor — McCain had even brought Gramm along for the meeting — and the man he turns to as an economic expert.
It’s tempting to think that who presidential candidate pick as advisors is irrelevant — it’s he or she who’s in power who’ll make the decisions, not his or her top aides. But I think this approach is mistaken, especially when the candidate concedes ignorance in an important policy area. The advisor’s beliefs become the candidate’s beliefs. Confronted with challenges once in office, the advisor’s recommendations are likely to become the president’s official policy.
With that in mind, let’s take a good look at former Sen. Phil Gramm, someone McCain has hinted might be his Treasury Secretary if elected.
Paul Krugman noted last week that most reasonable people seem to realize that we’re in serious need of financial reform and expanded regulation. That is, except, Gramm, who’s championed financial deregulation for years. “I’d argue that aside from Alan Greenspan, nobody did as much as Mr. Gramm to make this crisis possible,” Krugman said.
Lisa Lerer explains in a terrific Politico piece that Krugman’s take isn’t the least bit hyperbolic.
The general co-chairman of John McCain’s presidential campaign, former Sen. Phil Gramm (R-Texas), led the charge in 1999 to repeal a Depression-era banking regulation law that Democrat Barack Obama claimed on Thursday contributed significantly to today’s economic turmoil.
“A regulatory structure set up for banks in the 1930s needed to change because the nature of business had changed,” the Illinois senator running for president said in a New York economic speech. “But by the time [it] was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.”
Wait, it gets worse.
A year after the Gramm-Leach-Bliley Act repealed the old regulations, Swiss Bank UBS gobbled up brokerage house Paine Weber. Two years later, Gramm settled in as a vice chairman of UBS’s new investment banking arm.
Later, he became a major player in its government affairs operation. According to federal lobbying disclosure records, Gramm lobbied Congress, the Federal Reserve and Treasury Department about banking and mortgage issues in 2005 and 2006.
During those years, the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages.
For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS’s American subsidiary. In the past year, UBS has written down more then $18 billion in exposure to subprime loans and other risky securities and is considering cutting as many as 8,000 jobs.
Confronted with a fire, John McCain is taking advice from an arsonist. If elected, he intends to put the arsonist in charge of fire safety.