There are plenty of culprits, but one candidate for lead perp is former Sen. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown.
Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America?
Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.
Home - CFTC
And inGramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v.
President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar R-Ind.
Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. But only an expert, or a lobbyist, could have followed what Gramm was saying. Herewith, a step-by-step outline of the subprime risk betting game.
Commodity Futures Modernization Act (CFMA)
Assuming housing prices will only go up, and that investors will want to buy mortgage loan packages, makes as many subprime loans as it can. Packages subprime mortgages into bundles called commodities futures trading commission modernization act debt obligations, or cdosthen sells those cdos to eager investors.
Thinking ruger mini 14 tapco default risk is low, agrees to cover more money than it can pay out, in exchange for a premium.
No one loses—as long as no one tries to cash in on the insurance. For starters, the legislation contained a provision—lobbied for by Enron, a generous contributor to Gramm—that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. For Commodities futures trading commission modernization act, Enron was a family affair.
But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. The lobbyists for major commercial banks and investment banks and hedge forex ny vd went wild.
They all wanted to be trading without the government looking over their shoulder.
Whether or not Gramm had bothered to ponder the potential downsides of his commodities legislation, having helped set off an industry free-for-all, he reaped the rewards. He would soon be lobbying Congress, the Fed, and the Treasury Department for ubs on banking and mortgage matters. Gramm declined to comment for this article.
John McCain has relied on him for policy advice, especially, according to the campaign, on housing matters. InMcCain told a Wall Street Journal columnist that Gramm was his economic guru. Media accounts have identified Gramm as a contender for the top slot at the Treasury Department if McCain reaches the White House. As a thriving bank exec and presidential adviser, Gramm has defied a prime economic principle: Bad products are driven out of the market.
In John McCain, he has gained an important customer, so his stock has gone up in value. David Corn is Mother Jones ' Washington bureau chief. For more of his stories, click here.
He's also on Twitter and Facebook. Mother Jones is a nonprofit, and stories like this are made possible by readers like you. Donate or subscribe to help fund independent journalism.
Text - H.R - th Congress (): Commodity Futures Modernization Act of | dakoxok.web.fc2.com | Library of Congress
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