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Phil Gramm Wrote McCain's Economic Policy
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| Phil Gramm Wrote McCain's Economic Policy
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| Tom from T.O. |
Nigga Pleez, this villain whose deregulation partly caused this catastrophe wrote McCain's current economic platform?
article by JK Galbraith
"Futures markets exist to permit commercial interests to hedge their business risks. For a fee, a farmer (or oil producer) can put a floor under the price at which his product will sell. The forward price is normally a bit lower than the current price, but the contract protects the farmer from a catastrophic price slump—such as may occur in (for instance) bumper years. Speculators buy the futures on the chance that the market price will be substantially higher. They make a respectable profit on what is in effect an insurance function, and a killing in years of drought, flood, and war.
This system works reasonably well so long as speculators do not actually control or manipulate prices. For if they can drive prices way up, they can obviously cash in while the farmer (who has presold his crop) cannot. Strict regulation by the Commodity Futures Trading Commission (cftc) is supposed to prevent that.
But thanks to Phil "nation of whiners" Gramm—the former Texas senator who was until recently John McCain's top economic adviser (see "Foreclosure Phil")—futures market regulation went to hell. Under the "Enron loophole" pushed through by Gramm in 2000, energy futures were allowed to escape all federal and state regulation. Gramm embedded that loophole in a surprise 262-page rider, drafted at the behest of Wall Street and Enron, in an 11,000-page appropriations bill on a Friday evening two days after the Supreme Court handed down its Bush v. Gore ruling and as Congress was rushing home for Christmas. In a separate bit of absurdity, in January 2006, the Intercontinental Exchange (ice) of Atlanta, which trades benchmark US oil futures (West Texas Intermediate or wti), came to be treated by the cftc as a British market (the "London loophole") so that US regulators do not even track what is going on. (Even more surreal, the cftc was going to allow trades of US oil futures on terminals located in America to be "regulated" in Dubai; political pressure put an end to that idea in July.)
Worse still, Gramm's Commodity Futures Modernization Act of 2000 also opened the way for growth in deregulated "credit default swaps"—a way in which financial institutions "insured" that bad loans would not cause them losses. This, combined with other deregulatory moves by the cftc, broadened the "swaps loophole," an enormous backdoor into the commodities markets, basically permitting speculators making bets off the commodities exchanges to be treated as "commercial interests"—like say, farmers—and hence avoid the scrutiny (including limits on the size of their bets) normally applied to financial players. Thus today, when officials like Treasury Secretary Henry Paulson say that speculation is not a factor in the commodity markets, they're not counting hedge funds and investment banks as speculators—even though that's what they really are.
http://www.motherjones.com/news/fea...peculators.html |
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| arizonasternfan |
| who cares? And you live in Canada, you should care even less |
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| Tom from T.O. |
Quote: Originally posted by arizonasternfan
who cares? And you live in Canada, you should care even less |
You don't care? You must be voting for McCain and you voted for Bush twice, right? |
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| Tom from T.O. |
“You will go down as the greatest chairman in the history of the Federal Reserve Bank,” declared Senator Phil Gramm, the Texas Republican who was chairman of the Senate Banking Committee when Mr. Greenspan appeared there in February 1999.
Mr. Greenspan’s credentials and confidence reinforced his reputation — helping him to persuade Congress to repeal Depression-era laws that separated commercial and investment banking in order to reduce overall risk in the financial system.
“He had a way of speaking that made you think he knew exactly what he was talking about at all times,” said Senator Tom Harkin, a Democrat from Iowa. “He was able to say things in a way that made people not want to question him on anything, like he knew it all. He was the Oracle, and who were you to question him?”
In 2000, Mr. Harkin asked what might happen if Congress weakened the C.F.T.C.’s authority.
“If you have this exclusion and something unforeseen happens, who does something about it?” he asked Mr. Greenspan in a hearing.
Mr. Greenspan said that Wall Street could be trusted. “There is a very fundamental trade-off of what type of economy you wish to have,” he said. “You can have huge amounts of regulation and I will guarantee nothing will go wrong, but nothing will go right either,” he said.
Later that year, at a Congressional hearing on the merger boom, he argued that Wall Street had tamed risk.
“Aren’t you concerned with such a growing concentration of wealth that if one of these huge institutions fails that it will have a horrendous impact on the national and global economy?” asked Representative Bernard Sanders, an independent from Vermont.
“No, I’m not,” Mr. Greenspan replied. “I believe that the general growth in large institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically — I should say, fully — hedged.”
The House overwhelmingly passed the bill that kept derivatives clear of C.F.T.C. oversight. Senator Gramm attached a rider limiting the C.F.T.C.’s authority to an 11,000-page appropriations bill. The Senate passed it. President Clinton signed it into law.
http://www.nytimes.com/2008/10/09/b...all&oref=slogin |
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