Lessons From Crash and Resurrection
2. Phil Gramm: One of the most dangerous, devious and dark figures in the financial world is former Texas Sen. Phil Gramm, who was chairman of the Senate banking committee. An example of Phil Gramm's duplicity was described by syndicated columnist Froma Harrop:
Another Gramm contribution was the "Enron loophole," which prevented federal oversight of Enron's electronic energy trading. Such favors proved very expensive to consumers but profitable to the Gramms. Enron CEO Ken Lay chaired Gramm's 1992 re-election campaign, and wife Wendy Gramm spent years on the Enron board, earning as much as $1.8 million, according to Public Citizen, a consumer advocate.
Phil Gramm--John McCain's economics mentor and former McCain campaign co-chairman--has been in the pockets of financial industry lobbyists for years and is a fierce opponent of government oversight and regulations of the financial markets. On Dec. 15, 2000, just before Congress took off for Christmas vacation, Gramm slipped a 262-page amendment into the appropriations bill. It "forbade federal agencies to regulate financial derivatives that greased the skids for passing along risky mortgage-backed securities to investors," wrote Harrop. The appropriations bill was approved with no one in Congress reading the Gramm amendment, let alone understanding the ramifications. And, says Harrop, "that, my friends, is why everything's falling apart."
3. The Securities and Exchange Commission (SEC): "The Securities and Exchange Commission can blame itself for the current crisis," wrote Julie Satow in The New York Sun. "That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns and Merrill Lynch. The SEC allowed five firms--the three that have collapsed plus Goldman Sachs and Morgan Stanley--to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults."