The Real Legacy of the 'Reagan Revolution'

McCain campaign co-chair Phil Gramm is right: We have "become a nation of whiners." But who is whining more than the bankers that former Sen. Gramm's financial deregulation legislation benefited? The very bankers who now expect a government bailout, such as those at UBS Investment Bank, where Gramm found lucrative employment.

As chair of the powerful Senate Banking Committee, Gramm engineered passage of legislation that effectively ended the major regulatory restraints applied to the financial industry in response to the Great Depression. The purpose of the Gramm-Leach-Bliley Act -- co-authored by Gramm, passed in 1999 by a Republican-controlled Congress and signed by President Bill Clinton -- was to liberate the banks, stockbrokers and insurance companies from restraints imposed on their activities more than seven decades ago. It was legislation that the financial community, which contributed heavily to Gramm's campaigns in the previous five years, desperately wanted and obviously has abused. So why now bail these institutions out?

Hows about some "tough love" for those bankers suddenly in trouble? You know, the sink-or-swim approach of "welfare reform" that Gramm and Clinton applied to poor people to end their addiction to government handouts. Or, perhaps a heavy dose of "faith-based" personal responsibility initiatives to get those knaves who messed up our entire housing market back on the straight and narrow. Sounds ridiculous I know, because nothing but the bleeding-heart, big-government, throw-money-at-the-problem approach will do when it comes to salvaging corrupt corporations.

That is the real legacy of what has been ballyhooed as the "Reagan Revolution," which Clinton went along with, but which found its full flowering in the administration of George W. Bush. The bookends of the Bush years are the Enron debacle and the federal bailout of bankers drunk on their own greed. And no two people in this country are more responsible for enabling this sordid behavior than the power couple Phil and Wendy Gramm.

Enron, lest we forget, was their baby. Then-Sen. Gramm sponsored the Commodity Futures Modernization Act of 2000, which allowed Enron's scamming to happen. As Ken Lay, who was chair of Gramm's election finance committee, put it quite candidly when asked for the secret of Enron's success, "basically, we are entering or in markets that are deregulating or have recently deregulated."

Part of that deregulation involved rulings of the U.S. Commodity Futures Trading Commission, then chaired by Wendy Gramm, who upon retiring from that post became a highly compensated member of the Enron board of directors, serving for eight years. She even was on the board's audit committee during the time of the corporation's despicable financial shenanigans. While on the Enron board, Wendy Gramm also chaired an anti-regulatory think tank that received funding from Enron and other corporations that benefited directly from the policies her institute espoused.

My point here is not to expose the dubious ethics of the Gramms' various business ventures but rather to question why Sen. John McCain turned to Phil Gramm for leadership in his presidential campaign. Indeed, until his verbal gaffe, Gramm was highly visible and rumored to be the choice for secretary of the treasury should McCain win.

McCain has long promised voters that he learned the hard lessons provided by his being one of the infamous Keating Five in the nefarious savings and loan scandal that cost taxpayers hundreds of billions of dollars. Yet he chose as his campaign co-chair a former senator whose push for government deregulation facilitated the far deeper scandal we now are experiencing. Here is a man whose legislation created what financial guru Warren Buffett termed "financial weapons of mass destruction."

Why in the world would you designate as your key economic adviser someone who left the Senate to become an officer of the bank that is at the very center of this mess, a former senator who not only secured highly paid employment with a banking giant that benefited from legislation he helped pass, but who then lobbied Congress for even more of the deregulatory breaks that got the bank into such deep trouble?

The answer cannot simply be that McCain doesn't care much about economics, as he himself has indicated. Perhaps that would explain his having voted for all of the measures pushed through the Senate by Gramm. Perhaps it even would explain McCain's having been chair of Gramm's own failed presidential bid. But indifference to economics does not explain the prominence of Gramm in the McCain campaign as the top economic adviser during these past months of the U.S. financial crisis. Indifference to the folks losing their homes is a more plausible explanation.

Robert Scheer is the author, most recently, of "The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America," published by Twelve Books.

Comments

[californiadreamer]

Every day it becomes more clear that this country has a very small percentage of citizens enjoying most of the wealth while the rest of us struggle to buy food for the table and gas for the cars so we can go to work for the corporations that provide the very few with such enormous wealth. Problem is, the super rich have co-opted a powerful segment of the population such as the media and politicians with enough material rewards that they don't want to lose that they temper and modify their complains. Who wants to cook the goose that lays the golden eggs? Until there is so sort of upheaval that wakes up the sleeping masses, then nothing will change. Just as with Clinton, we will vote for Obama as the lesser of two evils and see some slight changes in some areas such as national defense, but in general not much will change. The rich will continue getting richer and a small professional class will live on the handouts. The rest of us will scramble for the crumbs that fall from the table. And we will go gently into that dark night.

[FreedomBeforeDemocracy]

You are correct that the rich are getting richer, and probably at a faster pace than the poor. But that's okay. The poor are getting richer too. To me it doesn't matter how much richer Bill Gates is than me. What matters is are we doing better. If you look at personal wage stats or household wage stats over a two-three period, I can see how you think things are worse. But look at those stats over the long run. Things are always trending up. You can also go back to many times in the past and see the same thing. You can always find the short term down trend in the cycle, but overall, in the long run the trend is up.

[TZ]

It really does appear to be socialism and welfare for the wealthy, but for the common man, well, he gets to live in that wonderful utopia of the free market, where suffering the consequences of bad luck or bad judgement is good, that's how the free market works! At least our ultra elites can count on the government/taxpayer to bail them out, after all they have the most to lose, and therefore need the most help, right?

[pandag]

Amen!

[laocoon]

All government is a form of socialism. All government functions involve spreading risks and spreading costs. what is police protection except a form of socialism. we mostly all pay taxes and the police provide services per need. Mr. Gramm's summer property is broken into 67 times this year, the police respond to his needs for property protection. Usually the rich need more property services than the poor. but it is all a form of spreading risks or costs among the general population. the republican mostly like the socialism where the rich tend to have more needs met by our collective will and resources.

[FreedomBeforeDemocracy]

I don't believe police are about spreading risk. They are more about being neutral "executors" of our laws relative property protection (including one's life). Maybe firemen could be considered "socialism", but they too protect property. Although their public existence is due to infrastructure concerns, not the law.

It's true the rich that the rich need more property services than the poor. But then again, they also pay a lot more taxes.

[FreedomBeforeDemocracy]

You are correct. Since you see how giving the government more power just hurts the little guy, are you finally willing to take some of the government's power away?

[fireW]

Mr. Scheer is correct in tracing the current debacle to the sorry Reagan legacy. This is not the first time by any means; The S&L fiasco of the '80s cost the public half a trillion dollars paid over decades thanks to the teleprompt­er-parroti­ng fossil's "vision" of a government with (optimally) no regulatory oversight. Why would the banks now, after running rampant without accountability, not expect a taxpayer bailout. They always have before thank to corrupt guardians of the republic like Gramm.

Anyone with an ounce of integrity or sense of right and wrong is then labelled a whiner by the insufferably arrogant Repub criminals. Take a look around and pretend the empire isn't crumbling . . .

[Durango]

Isn't it remarkable how the Corporate Media have simply "forgot" about the Savings and Loan fiasco?

Just like they forgot about Enron and the California Energy Crisis.

What do all these catastrophes have in common? Deregulation.

But you will be damn if you here about it in any network news cast.

[johnwinner]

It may be time for Americans to realize that they are living in a state government by the corporations, for the corporations, of the corporations - Fascism as defined by Benito Mussolini. (It is a pity the word 'fascist' was so misused sinced the '60s; but this is the real meaning of it.) In such a state, people who work are mere fodder for the machinery producing wealth for the corporate elite. As such, we are disposable. We are even allowed a modicum of free speech only because what we say is unimportant. Our lives are without value.
I hope the ascendency of Barack Obama can change that; but we should prepare ourselves for the possibility that the Fascist revolution is now complete.
At any rate, anytime you meet those who voted Reagan Bush et al. who now complains of their lost homes, lost jobs, lost pensions, and higher prices to pay with their shrinking incomes, remind them that, when votes still counted, they voted for this And tell them to quit complaining, 'cause like the rest of us, they don't matter any more..

[Bloggerrogr]

Perfect! Don't change a word. This post is so spot on, I don't need to read further...

[TheHandyman]

I hate to disillusion you, but Obama has on board most of the ultra-conservative economic advisors that advised Clinton and Clinton was a proponent of Reaganomics. Obama is and will be more of the same because he is beholding to the Corporatocracy from whence he gets his campaign money. McSame is just stupider about what his economic policies will be because he and his friends think that the People are stupid and don't count. Oh, wait, some 45% of the People say they are going to vote for him so maybe McSame and Company are right.

And voting for Obama will only yeild a slightly differnt results. My, oh, my, whatever to do? Evil, or lesser evil. How about electing some who isn't contaminated by it all, say Ralph Nader and Matt Gonzales. Oh, that's right, they can't win. If everyone who thight that voted their interests instead of the myth, they could go in a new direction.

[Annette]

Not going to happen. To vote for Nader, Barr, the greens, my cat, or the crazy neighbor down the street isn't going to get them elected. All it does is indicate that you are voting for an astrisk. Nader cannot get elected because he does little other than whine. Between elections he makes speeches that tell you how wonderful Nader is ( I went to one at my local college, for an hour Nader told us that he was great, he has all answers, and that everyone except Nader is a crook. I have never trusted people who want to tell you how great they are. Obama isn't perfect, who ever said he is? I agree with him on some issues and disagree on others. I can't find anything much to agree with McCain on. I do know that Obama has a chance to win and Nader doesn't. Politics is the art of the possible. You do the best you can. Nader is not possible, plus he is even older than Ron Paul and McCain. I don't think I want him as president, too inflexible, too doctrinaire. I would prefer a person who is practical. I will stick with Obama.

[Cybershaman]

Been there, done that, didn't work.

[FearlessFreep]

Don't put all your eggs in one basket.

[pandag]

Thank you, very well said, however tragic the truth is. Sometimes I almost wish I were as stupid as the folks who believe everything they hear on Fox News, they do not suffer the awareness of what has actually happened these last 8 years, perhaps their lives are happier in the fantasyland they inhabit. Our lives have been hit hard & we live with the fear & anger of knowing how much worse it will probably get. We know all the deaths should have never happened in a war that should have never been. We have protested against the lies and tried to reason with people that think we "need to be there for democracy" that totally misses what actually happened after 9/11. And yes it started with Reagan and GWB has ended it with the help of Scalia & the Supreme Court the first time around & just plain lunacy the second time around. We can protest all we want, those in power could care less.

[FreedomBeforeDemocracy]

Corporations are not living, breathing entities (despite their legal status as “persons”). They are simply a way for individuals to voluntarily associate for business purposes, like partnerships. They just have varying rules of organization.

Most corporations have little to zero influence on the government. You are worried about the corporations that are so financially powerful that they can get government to make unfair rules (like say tax breaks) by giving financial incentive to politicians. The problem isn’t the corporation as a legal entity, or even entirely the powerful multi-national that tries to shift the rules in its favor. The problem is all the power progressives wish to give to the government. That is the corruption. It’s the centralization of the power that’s the problem.

Fascism was all about the centralization of power through socialism. Mussolini was a socialist. The ascendency of Barack Obama will promote this. Unfortunately for us, so will the ascendency of John McCain.

Reagan wasn’t perfect, but he worked to decentralize this power, as did the Republican congress (for the first few years). Limiting the power of the central government will limit their power to support corruption, corporate or otherwise.

[tompoe]

Corporate welfare is a very exclusive club. It does not permit all Republicans to participate. There are literally millions of republican entrepreneurs eating dirt, today. There are literally millions of republican retirees, or soon to be retirees, that will watch corporate welfare in action, as their retirement accounts are drained by the exclusive club members of corporate welfare. These millions are truly stupid Americans. We'll see them at the polls this November, voting for more of the same treatment when they vote republican tickets. These millions truly give the phrase, "stupid is as stupid does". Gramm, McCain, and all the Keating Five boys will testify to the unbelievable idiots in America.

[BADEN]

They broke it.
They own it.

No excuses.

Sheeple did this.
Sheeple are paying for it.

[bmora]

It may or may not be hard to beleive that Gramm taught economics at Texas A&M. He was an Aggie after all.

[bgregs]

Oh well, I guess that I can't like EVERYTHING about the school....­.

[Chavez08]

Neoliberal economic theory is pushed in all colleges since Reagan hostage-traded his way into the White House. Besides, an Ivy League college degree in America almost assures forfeiting of your ability to think critically.

[Annette]

Taught economics at Texas Agricultural and Mining school. Spent his time in the Senate raking it in from corp and working hard to deregulate. Got most of the laws overturned that were put in place to prevent another depression. Well it will be interesting to see if the Republicans have brought us a second great depression.

What is interesting is that consistantly over the last 100 years the economy does better under Democrats than under Republicans.

[NewsView]

But how did Phil Gramm get so many people to SIGN his legislations? It takes two to tango, and I would like to know who the other "partners in crime" are.

[astockton]

At Texas A & M he interviewed Wendy for a teaching job. He says he made up his mind then and there that he was going to marry her someday, and told her so. Wendy's reaction? "Yuck!" What a coincidence--that's what most of America says about Phil Gramm.

[bgregs]

I'm so freaking tired of the privatize the profits, socialize the risks that the wingnuts are supporting!!

[brainuser]

Republicams believe in the Silent Hand, until it becomes too loud. Then it's scurry to get in line for a handout. What part of regulation don't they understand, those members of the supposed party of fiscal responsibility?

[Aramingo]

Sometimes the Silent Hand gives us a reach around

[californiadreamer]

and sometimes the silent hand chokes us to death. Hopefully, with Obama's election, and control of the House and Senate, there will be momentum toward taxing the super rich, reducing the military budget, and addressing health care and the national debt. I am afraid, however, it might be too late and Obama will have to deal with recessionary trends in the economy that will thwart some of his programs and he will have to protect himself politically. The electorate should then focus on members of Congress in 2010 who are not able to answer the complaints in their districts. As we vote out the bad apples who are in the pockets of the corporate interests, we put more pressure on Obama to continue to push an agenda that favors the 99% of Americans who are in or will be in economic distress. The voting booth could be the equivalent of the guillotine in a new American revolution that cuts off the heads of the ruling class.