Sen. McCain Taking Advice on Housing & Energy from a Key Player in the Subprime Crisis and Rising Gas Prices
Phil Gramm is one of Sen. McCain's oldest friends and closest advisors. He shapes Sen. McCain's economic policies. Both are strong proponents of the deregulation that fueled the subprime crisis and skyrockecting gas prices. Phil Gramm's fingerprints are on major legislation deregulating the banking and energy industries and he lobbied on behalf of one of the biggest banks in the subprime mortgage crisis while a part of Sen. McCain's campaign. We don't need another president whose policies are determined by the industries the government is supposed to police.

Phil Gramm is One of Sen. McCain's Most Trusted Economic Policy Advisers

Sen. McCain Is Proud to Have Phil Gramm Supporting Him. "I'm proud of my fiscal record.  I'm proud of the efforts to cut spending.  I'm proud to have people like Phil Gramm...and the strongest fiscal conservatives in our party that are all supporting me.  That's for a reason." [John McCain on CNN, 1/20/2008]

Gramm Is One of Sen. McCain's Chief Economic Advisers. Fortune reported in February that Gramm is John McCain's "chief economic advisor -- and perhaps his closest political friend." The McCain campaign named him the general co-chair of the McCain Presidential Campaign. [Fortune, 2/19/2008; McCain Campaign Press Release]

Sen. McCain: As President "I Would Rely On" Gramm. During the January 24 Republican debate in Florida, John McCain said, "But I as president, as every other president, rely primarily on my secretary of the Treasury, on my Council of Economic Advisers, on the head of that.  I would rely on the circle that I have developed over many years of people like Jack Kemp, Phil Gramm, Warren Rudman, Pete Peterson, and [think tank] The Concord Coalition." [New York Post, 1/26/08, emphasis added]

Gramm's Deregulation Efforts Played A Major Role in the Subprime Mortgage Crisis

Gramm Sponsored Legislation That Increased Risky Investments in the Banking Industry

Sen. McCain Adviser Phil Gramm Eliminated The Wall Between Commercial and Investment Banking; Allowing Commercial Banks to go Without Important Regulations. As the chair of the Senate Banking Committee, Phil Gramm drafted the Gramm-Leach-Bliley Act that allowed taxpayer insured banks to become a major player in the home mortgage crisis. The law deregulated the banking industry by repealing the Glass-Steagall Act, which separated well-regulated commercial banks from unregulated investment banks. The repeal of the Glass-Steagall Act allowed FDIC insured banks to make risky investments prohibited the bank runs of the great depression. [Politico, 3/28/08; MSNBC, 5/27/08; Pearlstein, Washington Post, 5/7/2008]

Mother Jones: Gramm "Pulled A Sly Maneuver In the Senate That Helped Create Today's Subprime Meltdown." Writing in Mother Jones, David Corn reported, "Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm.  Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown." [Mother Jones, 5/28/08]

Gramm  Blamed For Sub-Prime Crisis. The Washington Post reported, "To many liberal economists, Gramm's efforts set the stage for the current crisis.  Lending by noncommercial banks has soared, to about 70 percent of total lending.  Investment banks, including Bear Stearns, grew too large to be allowed to fail." [Washington Post, 4/2/08]

And Gramm Has Been A Staunch Opponent of Predatory Lending Protections

Gramm Lobbied "To Roll Back" Rules Addressing Predatory Lending Tactics. Politico reported, "According to federal lobbying disclosure records, Gramm lobbied Congress, the Federal Reserve and the 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." [Politico 3/28/08]

Associated Press: Gramm Helped Kill AntiPredatory Lending Legislation. The Associated Press reported, "In 1999, Democrats, inspired by a groundbreaking antipredatory lending law in North Carolina, sought a federal equivalent...Republicans, who controlled Congress, blocked the antipredatory legislation, arguing it would interfere with legitimate lending. [Associated Press, 3/19/08]

Gramm Refused To Schedule Hearings on Predatory Lending as Senate Banking Committee Chairman. The Houston Chronicle reported, "Heartbreaking tales of lost homes, lost savings and unethical loan officers dominated Senate hearings last week into unethical practices in the high-risk mortgage industry ...Sen. Phil Gramm, R-Texas, chairman of the committee until Democrats took over the Senate in June, had declined to schedule hearings, saying predatory lending had not been legally defined.  He briefly attended Thursday's hearing, urging senators to act cautiously on any legislative proposals." [Houston Chronicle, 7/29/01]

Gramm Described As An "Advocate Of Every Predatory And Rapacious Element" In Financial Sector. University of Texas economist James K. Galbraith said, "Phil Gramm's career was as the most aggressive advocate of every predatory and rapacious element that the financial sector has."  Galbraith continued, "He's a sorcerer's apprentice of instability and disaster in the financial system." [Washington Post, 4/2/08]

Gramm Hoped To Remove Predatory Lending Protection In 2001. In 2001, American Banker reported, "Sen. Gramm also said he hopes to remove a predatory lending amendment from bankruptcy overhaul legislation that would make companies that purchase high-cost loans from bankrupt originators liable if the loans are found to violate existing fair-lending laws." [American Banker, 4/4/01]

Gramm Rejected "Predatory Lending," Instead Blaming "Predatory Borrowers." In 2001, American Banker reported, "When Senate Banking Committee Chairman Phil Gramm paid a visit to a Credit Union National Association conference... he slammed those who, he said, take advantage of the current bankruptcy system.  ‘In Washington the buzzword today is predatory lending, but there are predatory borrowers,' Sen. Gramm said.'" [American Banker, 3/5/01, emphasis added]

Sen. McCain Got Advice from Gramm on Housing Policy While He Lobbied Against Mortgage Relief

Gramm Consulted by Sen. McCain on Housing Policy While He Was Serving As A Lobbyist On Banking & Housing Policy. "Senator Gramm was one of dozens of folks whom Senator McCain has consulted on the housing issue, including Carly Fiorina and Meg Whitman from eBay," said McCain spokesman Brian Rogers. "They've been friends for years, and he values Senator Gramm's advice." MSNBC reported that former-Senator Phil Gram, Sen. McCain's national campaign co-chair, was being paid by a Swiss bank to lobby Congress on the housing policy while advising Sen. McCain on issues directly related to his lobbying activities. [Politico, 3/28/08; MSNBC, 5/27/08]

Gramm Lobbied for Swiss Bank UBS Against Mortgage Relief. As Vice Chairman of the investment banking division and a major lobbyist for UBS, Gramm lobbied the federal government against mortgage relief for victims of the home mortgage crisis. [Politico, 3/28/08; Senate Lobbying Disclosure Forms, accessed 6/12/08]

• UBS, Reported $37 Billion in Losses. Swiss bank UBS, reported $37 billion in losses and announced lay offs for 5,500 workers. The Daily Deal reported that "The lender is Europe's biggest casualty of the global credit crisis after bad investments, much of it in low-grade U.S. mortgages, led it to write down $37 billion." [New York Times, 5/7/08; The Daily Deal, 5/23/08]

• Yet Gramm Claims He Was Unaware Of UBS's Involvement in the Crisis. Gramm says he was "totally unaware" of his Swiss bank's massive holdings of securities tied to subprime mortgages. [The Washington Post, 4/2/2008]

American Banker: Gramm's Role In Sen. McCain Campaign "Should Give Comfort To Bankers." American Banker reported, "Observers say that Mr. Gramm's connection with the campaign should give comfort to bankers unsure of how Senator McCain would view financial services issues." [American Banker, 3/11/08, emphasis added]

Gramm Also Helped Speculators Accelerate Increases in Gas Prices

Gramm Deregulated Energy Futures Creating "Enron Loophole" Sending Energy Costs Soaring

Gramm Passed Wrote Deregulation Bill Called the "Enron Loophole." In 2000, Gramm wrote and passed the infamous "Enron loophole," that allowed speculators to drive up oil and electricity. The legislation deregulated energy-commodities trading, exempting it from oversight by the Commodity Futures Trading Commission, and was known as the "Enron loophole" because of the intense lobbying Enron did on the issue. As a result, Enron was able to drive up California energy costs widely blamed for energy shortages throughout the state. [MSNBC, 5/27/08; Concord Monitor, 6/10/08; Pearlstein, Washington Post, 5/7/2008; NPR, "Fresh Air"April 3, 2008]

• Senate Finds "Enron Loophole" Contributed to Inflated Prices for American Consumers. The Senate Permanent Subcommittee on Investigations concluded that the loophole contributed to exaggerated energy prices for consumers. In 2006, the loophole accounted for $20 of the price of a barrel of oil, then at $70. In a Senate committee hearing in 2008, Michael Masters, Portfolio Manager of Masters Capitol Management, LLC estimated that 31% of the crude oil price is due to speculators. Crude is currently trading over $130 a barrel, meaning speculators would be responsible for more than $40 of the price of a barrel. [Texas Observer, 5/30/08; Masters Testimony, Committee on Homeland Security and Government Affairs, 5/20/08]

• Phil Gramm's Wife Advocated Exempting Energy Futures from Oversight; Then Joined Enron's Board. Wendy Gramm, who served on the Commodity Futures Trading Commission from 1988 to 1993, advocated exempting electronically traded energy futures from government oversight-exactly what her husband's "Enron loophole" did. [Texas Observer, 5/30/08]

• Gramm Had Close Connections to Enron in the 90s. Phil Gramm maintained a cozy relationship with Enron. His wife Wendy served on the company's Board of Directors - earning $50,000 a year. Wendy Gramm reportedly received between $915,000 and $1.85 million in salary, attendance fees, and stock options as a board member. Enron's CEO Ken Lay chaired Gramm's '92 reelection campaign. [Texas Observer, 5/30/08]

McCain Is Following Gramm's Advice

Olbermann: Sen. McCain Campaign Confirmed Gramm Helped Shape Housing Policy. Keith Olbermann reported, "The Sen. McCain campaign confirmed that Gramm had input on the speech and that McCain consulted Gramm specifically on the housing issues." [MSNBC, "Countdown with Keith Olbermann," 5/27/08]

Sen. McCain Opposed Farm Bill Because it Regulated Energy Futures. Sen. McCain opposed the recent $307 billion farm bill because it contained a measure that would end deregulated speculation and attempted to close Gramm's "Enron Loophole." [Concord Monitor, 6/10/08]

Fortune: Sen. McCain's "Current Positions Are Vintage Gramm." According to Fortune, "But economic conservatives should take heart.  Sen. McCain's chief economic adviser - and perhaps his closest political friend - is the ultimate pure play in the free market, former Texas Senator Phil Gramm.  If Sen. McCain follows Gramm's counsel, and most of his current positions are vintage Gramm indeed, his policies as president would represent not just a sharp departure from the Bush years, but an assault on government growth that Republicans have boasted about, but failed to achieve, for decades." [Fortune, 2/19/08]