Economists: Gramm To Blame For The Current Crisis
Economists: Gramm To Blame For The Current Crisis
In recent days, Sen. John McCain (R-AZ) has been promising to “put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street.” This is an interesting development for McCain, who before this week was a champion of deregulation.
It is doubly interesting though, because McCain voted for the bill that deregulated Wall St. and allowed such “reckless conduct” to occur in the first place. And one of the bill’s architects was McCain economic adviser, former Sen. Phil Gramm (R-TX).
In 1999, Congress passed the Gramm-Leach-Bliley Act, which abolished “all of the significant rules put in place at the time of the Great Depression designed to prevent a repeat.” Specifically, this act “destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.”
Yesterday, a group of economists, including Nobel Prize winner Joseph Stiglitz, slammed Gramm for having a “mentality that doesn’t understand the nature of systemic risks in financial systems,” and said that his bill helped create the current financial turmoil:
Economic experts say that Gramm and others are to blame for the current crisis that is shaking Wall Street.
Gramm’s successful effort to pass banking reform laws in 1999, which reduced decades-old regulations separating banking, insurance and brokerage activities, helped to create the current economic crisis.
“As a result, the culture of investment banks was conveyed to commercial banks and everyone got involved in the high-risk gambling mentality. That mentality was core to the problem that we’re facing now,” Stiglitz says.
Lakshman Achuthan, managing director of the Economic Cycle Research Institute, said that “we were setting up this bonfire years ago — the deregulation, the inordinate amount of liquidity given to the system all set the stage for the bubble and the bust.”
So McCain is promising to put an end to the “reckless conduct” that he voted to allow, while being advised by a team that still believes rampant deregulation is the way to go.
3 Responses to “Economists: Gramm To Blame For The Current Crisis”
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The Bush team couldn’t do a root cause a-nalysis if it’s veritable life depended on it.
The Republican F Troop is headed by retired General Gramm, and staffed by Paulson and Bernake.
They sold rubber arrows as financial protection. Now that institutions hold worthless instruments, the taxpayer gets to buy them back. Simply amazing.
With a choice of war or health care, I have to buy some investment banks worthless paper? A pox on all their houses, the White House, the Capital, etc….
September 20th, 2008 at 9:51 amWhile McCon points fingers at Obama’s relationships to past Fannie Mae CEO’s Johnson & Raines, Ragin’ Arizona has his own ties.
Kenneth Duberstein served on the Fannie Board from 1998-2007. He Chaired the Assets & Liabilities Committee. During his term, the Board approved severance agreements with both CEO’s.
I’m glad some of these backroom names are coming out. Citizens have a chance to see how corrupt and incestuous our federal bureaucracy is. The good ole boys know how to look after each other.
September 20th, 2008 at 9:57 amDemocratic ads should be run with a video/audio of McCain’s comment about running the Social Security System like the Banking System along with a video/audio quoting the comments of these economists along with Gramm’s criticism of American voters being “whiners”. McCain raised the issue of blame by stating he’d fire Cox, so Democrats should let Americans know exactly who is to blame for the banking collapse and how the lack of oversight of the private sector leads to disaster.
September 20th, 2008 at 10:23 am