McCain is well rid of his campaign co-chairman and chief economic adviser Phil Gramm, who has been a Samson of the U.S. financial system, not a Pillar. He designed the 1999 takedown of the Glass-Steagall Pillar. It's just too bad, if you support Obama, to see such a juicy target removed. Remember Gramm's incoherent answers in Stephen Moore's devastating interview in the June 28 Wall Street Journal :
I broach the next subject delicately. His accusers charge that he nearly single-handedly torpedoed the housing and financial market when he wrote the laws that took down the Depression-era barriers between investment and commercial banks. Was it a bad idea in retrospect?
"The law has come under fire from the same people whose solution to every problem is always more and more government control of the economy," he says. "Broadening the base of financial institutions had nothing to do with the subprime problem. There's every evidence that the markets were made more stable by the diversification. J.P. Morgan could not have bought Bear Stearns and prevented a meltdown without Gramm-Leach-Bliley."
- "Broadening the base" of financial institutions meant letting investment banks play with government-insured commercial banks' money. That should have meant extending Federal Reserve and FDIC oversight to investment banks, to protect insured deposits.
- J. P. Morgan would not have bought Bear Stearns without the Federal Reserve's capital infusion. This was an inevitable government-sponsored takeover of the first casualty of Gramm's reckless removal of financial-market protections that had served the nation well.
- The reach of the Federal Reserve has effectively been extended to cover investment banks, to repair a U.S. financial system that was in tatters, whatever Gramm says about the mortgage-market-collapse-induced recession's all being in our mind.
Moore's interview continues:
Mr. Gramm's biggest worry about Wall Street is that, in the wake of the Enron scandal and now the subprime meltdown, the regulatory pendulum has swung too far toward more government meddling -- which could put America's financial-market supremacy at risk.
"It used to be that it was a sign of your importance in the world to be listed on the big board," he warns. "Now many of the largest IPOs in the world are occurring on other markets. In the six years that I have been a banker, I have seen decisions made to open functions in London rather than New York because of a better regulatory climate. Every American should worry a lot about this. We have benefited enormously from New York being the financial capital of the world because we had a more efficient regulatory structure than other nations did."
- Gramm was the biggest government meddler of them all, knocking out a basic principle of financial oversight.
- The insolvency of Fannie Mae and Freddie Mac is the outcome of Gramm-facilitated failure of government to honor and enforce basic financial standards in the mortgage banking and securitization industry. The Bush Administration's rescue effort was inevitable.
- The regulatory pendulum is swinging back because the havoc created by Gramm's vision is so obvious -- as with the S&L crisis, speculators take home their winnings at the table while taxpayers an d their grandchildren shoulder the government's coverage of the losses.
- New York's position as the financial capital of the world has been eroded because the precarious balance between regulation and innovation was destroyed.
- The government temple of finance that will be rebuilt in the wake of Gramm's destruction will be bigger than ever.
- Gramm has done more to increase the financial regulatory reach of the U.S. Government than any other person in history.
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