"Foreclosure Phil" Gramm's "New Deal" Economics
Phil Gramm was Presidential candidate John McCain's economic advisor until a few days ago. If you have been with me since the start of this blog, you are well aware of my disdain of deregulation of our financial markets including the overturning of the Glass-Steagall Act. If you listened to the Michael Greenberger interview I posted on here a few months ago, you also heard reference to the overturning of Glass-Steagall and the Gramm-Leach-Bliley Act. That Gramm would be Phil Gramm. It was never my intent to post any follow up detailed posts but now Gramm, an economist, has shown his terrible understanding of economics so I'm going to. But mostly I'm going to because this is an example of everything that is currently wrong with Washington: lobbyists, corporate personhood, dismantling effective government, destruction of the will of the sovereign at the expense of corporations, revolving doors of politicians and business, lack of regulation in markets and business, elitists deciding what is best for citizens based on pedaled influence, corporate welfare and on and on and on.
What recently got Gramm in trouble were the following comments in an interview with the Washington Times:
"You've heard of mental depression; this is a mental recession," he said, noting that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. "We may have a recession; we haven't had one yet."
"We have sort of become a nation of whiners," he said. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline" despite a major export boom that is the primary reason that growth continues in the economy, he said.
I've commented on the following before but this is a very important concept that is is clearly not understood by mainstream prognosticators. Under our marriage of democratic self-rule and economic capitalism, the long term benefactor to economic vitality must first and foremost be the sovereign and not capital. It is when capital trumps labor over the long term that free markets are turned upside down. Yet, this is pointed to as an economic boon by most current 'free marketeers' and 'free traders'. I am very much a free marketeer and free trader but I know a ruse perpetrated by personal gain, ignorance or deceit when I see it. The broad generational acceptance of this myth has many forms and is a major source of what ails the global economy today. Since Gramm and other elitists embrace this myth, whether for personal gain or through ignorance, the current round of free trade agreements were negotiated under the significant influence of purveyors of capital and not the sovereign. What a surprise that the 'regulations' or rules surrounding these agreements benefit capital or as Gramm notes, corporations.
Ironically, it is just such an environment where socialism and government involvement in the broader economy always has heightened potential to bloom. In other words, much of the current beliefs of many economists, all of Wall Street and many dogmatic politicians are a self-fulfilling prophecy of exactly the opposite outcome than is desired. Maybe I am being naive. Maybe what I should say is what should be desired in a democracy. Or, as I recently told a friend who is a supporter of this current economic fallacy, his misplaced beliefs actually lead to the creation of the nanny state he very much despises. What does that mean? Many of those with the position that the government shouldn't be bailing out private enterprise are complicit in creating an environment where bailouts are necessary. You are seeing the proof of all of this today as we see the new "New Deal" socialized state unfold right before our very eyes. History is littered with this very fact and is one reason I remain so confident economic and social volatility is going to increase substantially - especially in emerging markets. It's not a wonder a vast majority of economists can't forecast. They don't even understand the topic for which they are forecasting. Gramm is a poster child for this economic genocide so pervasive in American leadership today. But, as does everything else, so too shall this mindset pass.
Gramm tells us that we're all whiners. Get real buddy. I have never heard anyone whine about a future of uncertainty. I'm sure the millions of people from all walks of life facing economic uncertainty, be it in the U.S. or elsewhere, are very concerned or even severely distraught.
Maybe Phil Gramm would like to be on the losing side of the capital equation and live in a shelter for six months after losing his personal belongings. Or, be dumped on the street without a job and burdened with the financial responsibility of caring for young children. While our egos would have us believe otherwise, there is a large dose of luck and uncontrollable factors in everyone's economic standing. And, success can surely be fleeting. A little sensitivity to the difficulties of life and the human condition surely would be more than appropriate for the chief economic advisor to a potential President of the United States. On that note, in another outcome of capital trumping the sovereign, I am so tired of listening to this bullshit of personal responsibility for citizens in distress while predatory schemes, unsavory antics and lack of law, or enforcement of law, protecting citizens created much of this mess. And, those who are complicit are generally given a free pass while those often taken advantage of are left to slide down the shit hole of Wall Street greed. Hey, that's free markets. If you think it enough, I'm sure you'll believe it.
Of course wise men before us were alert to the fact that politicians and elitists often used words in a consciously dishonest way. As a result, generations are often conditioned to accept phrases such as "free trade" or "free markets" as a synonym for whatever the elitists are peddling at that particular moment. Funny but I don't hear those favorite of Wall Street terms coming out of New York anymore. Now, it's that we need to save the crown jewels of our economy, Wall Street, using my money. First of all, the crown jewels of our economy do not reside in New York and secondly, I think all of these executives and those complicit need to give back all of their pay for the last ten years because I'm going to have to bail them out. Of course, I would prefer to let them rot like everyone else but all that will do is guarantee my own demise by nearly guaranteeing economic collapse.
If you want to read a brutal appraisal of Foreclosure Phil's involvement in this mess, I'd highly recommend you read award-winning journalist David Corn's article in the most recent Mother Jones titled 'Foreclosure Phil'. You'll get your award after reading his story. Your award will be insanity.
The only thing worse than Corn's article or Greenberger's prior interviews is the following video. It appears Phil Gramm's support of policies set to destroy the U.S. financial system goes back many decades either directly or through family ties. Keith Olbermann is one journalist that has picked up on this fact and has recently reported it. Some may view Olbermann as partisan but the facts of the story aren't really open to interpretation. And, this story has been reported time and again from nearly every news outlet. It's rather ironic that Gramm's wife somehow was appointed to a government position that involved regulation of the financial markets while Gramm held powerful positions of financial oversight in Congress. I guess we should be grateful the 'free markets' determined that Gramm and his wife were the two most qualified people in the whole of the U.S. of A. to head these government roles. That she was on regulatory watch while the Enron mess unfolded and then went to work for Enron is surely a coincidence. That is, unless you believe there is some truth to Olbermann's reporting. Similarly, I'm sure it is equally a coincidence that Phil Gramm headed powerful finance positions in Congress then after retiring, somehow landed as a lobbyist at UBS - the poster child for financial stupidity. Of course, I'm sure Gramm posted his resume on Monster.com and was selected based on his qualifications against other similarly qualified candidates. Aren't 'free markets' grand? Am I saying it enough for you to believe it yet?
Very worthwhile Olbermann report on Enron & Gramm
If all of this isn't enough and you want to hear more about Gramm's involvement in other messes as well as his involvement in the unregulated Credit Default Swaps mess, then you can listen to an excellent interview with David Corn on Democracy Now! Also taking part in this video interview is a former investment banker who adds some very relevant commentary.
I seriously doubt McCain's release of Gramm was only because of the recent insensitive statements. More likely it had to do with the implosion in financial markets and the increasing awareness that McCain's chief economic advisor seemingly is significantly complicit in creating it. With major news sources starting to bring this to light, McCain's team surely knew Gramm would be a major liability when the general election hit full stride. How would McCain have responded in a publicly televised debate to a broadside on this topic? And, just weeks ago Gramm was considered an insider's bet for the next Treasury Secretary should McCain win the Presidential election. Just like our current Treasury Secretary that headed a major Wall Street firm while said industry was busy dismantling the American economy. Most assuredly this recent gaffe was a convenient means of foreclosing on Foreclosure Phil.
In closing, this post has no motivation in politics. But then if anyone is reading this and can only think about is some partisan perspective, they are so lost as to reality that nothing else matters anyway. This should be viewed as an educational editorial as what is going on in financial markets and how banks created their own demise with the help of politicians from both parties.
Dogmatic political views are quite silly anyway. The reality is fundamentals determine actions of politicians. Regardless of whether Obama or McCain is elected, the President will be faced with the same fundamentals. And, therefore, the market will demand the same of both men. They will either respond as the markets require or they will be voted out of office. Fundamentals contribute mightily to the greatness of Presidents be that through change demanded by the electorate or crisis that creates a demand for leadership . This crisis has major contributors in both political parties. Most Americans realize this given the polling shows a disdain for all politicians that are refusing the enforce the will of the sovereign. That said, this crisis involves our complicity as well.
Just as has happened time and again, trends never last forever. And, the party of king capital trumping labor is over and so too is the prevailing mindset that supports such an environment. It's simply that the purveyors of this scheme don't realize it yet. They will when markets dismantle Wall Street's current incarnation. It doesn't matter who is elected President, this fact isn't going to change and neither are the market demands due to this fact. And, this is a very, very powerful seed for long-term economic prospects in the U.S. Not so good for emerging markets. More on that in my next post.