McCain/Gramm's so-far unexposed hypocrisy on the Fannie/Freddie bailout and McCain's Keating 5 bailout scandal 20 yrs ago

and McCain's Keating 5 bailout scandal 20 yrs ago

The Fannie Mae / Freddie Mac bailout Treasury Secretary Paulson announced this weekend already is estimated to cost the taxpayers at least $50 billion. IMO, when it's all over, the tab the average American is going to pick up for Phil Gramm's legislation repealing the Depression-era Glass-Steagall Act is likely to be more on the order of the hundreds of billions the last "banking deregulation" cost taxpayers.

That was the Savings and Loan fiasco in which McCain was one of five Senators caught intervening on behalf of a shady banker who'd given them over a million dollars in campaign contributions.

IMO, McCain is sweating the inevitable resurfacing during the next 60 days of his Keating 5 scandal, a situation very similar to the developing scandal McCain tried to get out in front of on Face The Nation. The same three basic ingredients are there:

(1) Financial lobbyists being put in charge of financial legislation under Republican rule; This time, it was McCain's economic guru and probable choice for Treasury Secretary Phil Gramm who as Senator pushed through "deregulation". His legislation made trillions of dollars in profits for interests that lobbied for "deregulation", at the cost of the soundness of the financial system and, eventually, government bailouts of mortgage holders (banks and hedge funds) at taxpayer expense.

(2) Banking "deregulation" that led to overleveraging of highly imprudent loans, big paydays to private interests, and an inevitable deleveraging meltdown that put tens of thousands of homeowners out on the street; and

(3) "Socialization" of the bank losses by government action that focused on helping, not dispossessed homeowners, but the very financial interests that BENEFITED from "deregulation",

Here are (A) a closed=caption capture of part of Sunday's Face the Nation, and (B) snips from a great encyclopedia article on the Keating 5 scandal.

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(A) Face The Nation Sunday Sep 07

JOHN MCCAIN: I think we've got to keep people in their homes. There's got to be restructuring. There's got to be reorganization. There's got to be some confidence that we've stopped this downward spiral. It's hard. It's tough. But it's also the classic example of why we need change in washington.

It's an example of cronyness, special interests, lobbyists, a quasigovernmental organization where the executives were making hundred- some million dollars a year while things were going downhill, going to hell in a hand basket. This is the kind of cronyism and corruption that has made people so justifiably angered....

SCHIEFFER: You're talking about they're going to have more regulation. Is that what you're saying?

MCCAIN: More regulation, more oversight, more transparency, more of everything....

Congress passed these laws that allowed these massive loopholes to be there. So obviously it's got not only to be fixed but it's a system. It's an example and a symptom of a system where we're so close to the special interests that somehow in washington we're so close that somehow the average american is totally disregarded."

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(B) From http://eh.net/encyclopedia/article/mason.savings.loan.industry.us :

"The S&L Crisis of the 1980s

... Congress ... passed two laws (the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn-St. Germain Act of 1982) that not only allowed thrifts to offer a wider array of savings products, but also significantly expanded their lending authority. These changes were intended to allow S&Ls to "grow" out of their problems, and as such represented the first time that the government explicitly sought to increase S&L profits as opposed to promoting housing and homeownership. Other changes in thrift oversight included authorizing the use of more lenient accounting rules to report their financial condition, and the elimination of restrictions on the minimum numbers of S&L stockholders. Such policies, combined with an overall decline in regulatory oversight (known as forbearance), would later be cited as factors in the later collapse of the thrift industry. ...

The level of thrift failures at the start of the 1980s was the largest since the Great Depression... Even after interest rates had stabilized and economic growth returned by the mid-1980s, however, thrift failures continued to grow. One reason for this latest round of failures was because of lender misconduct and fraud. ... When Lincoln Savings and Loan headed by Charles Keating ... came under regulatory scrutiny in 1987, Senators Dennis DeConcini, John McCain, Alan Cranston, John Glenn, and Donald Riegle (all of whom received campaign contributions from Keating and would become known as the "Keating Five") questioned the appropriateness of the investigation. The subsequent Lincoln failure is estimated to have cost the taxpayers over $2 billion. By the end of the decade, government officials estimated that lender misconduct cost taxpayers more than $75 billion, and the taint of fraud severely tarnished the overall image of the savings and loan industry. ...

In August 1989, Congress passed the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), a measure that both bailed out the industry and began the process of re-regulation. FIRREA abolished the Federal Home Loan Bank Board and switched S&L regulation to the newly created Office of Thrift Supervision. It also terminated the FSLIC and moved the deposit insurance function to the FDIC. Finally, the Resolution Trust Corporation was created to dispose of the assets held by failed thrifts, while S&Ls still in business were placed under stricter oversight. Among the new regulations thrifts had to meet were higher net worth standards and a "Qualified Thrift Lender Test" that forced them to hold at least 70 percent of assets in areas related to residential real estate.

By the time the S&L crisis was over by the early 1990s, it was by most measures the most expensive financial collapse in American history. Between 1980 and 1993, 1,307 S&Ls with more than $603 billion in assets went bankrupt, at a cost to taxpayers of nearly $500 billion. ..."

lobbying for the deregulation of the mortgage industry.

And if any of you trolls think that Gramm is not continuing to advise McCain on economics, you are very wrong.

http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html ?

This is the kind of nonpersonal stuff that needs to be pointed out hugely. Needs its own billboard. How they fucked the homeowners and it was planned that way.

On edit: How they fucked the homeowners and taxpayers. God, these people are slime. We don't need to worry about a pregnancy. We have plenty of fodder for anyone to see how they have been screwed over and over by pukes. The trouble is, pregnancy story is sexier. The America people are very stupid if they let the tabloid stuff be the deciding factor instead of policy decisions.

creation of secretive hedge funds with Gramm-Leach-Bliley in 1999. At least that legislation was pushed through a Republican-dominated Congress out in the open. But the very next year, while practically nobody was looking but lobbyists, Gramm sneaked a likely even more devastating "deregulation" into unrelated legislation at the last minute.

At the end of Y2K Gramm-Lugar sponsored legislation exempting hedge funds and banks from regulation of their most highly leveraged products. Hundreds of unvetted pages of derivatives "deregulation" were inserted into a must-pass Budget bill while the nation was distracted with Presidential Election Theft.

From http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html :

"But Gramm's most cunning coup on behalf of his friends in the financial services industry--friends who gave him millions over his 24-year congressional career--came on December 15, 2000. ... Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore.... As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists ... the measure had been considered dead--even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted.

... only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps ... Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Because of the swap-related provisions of Gramm's bill--which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers--a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.

In essence, Wall Street's biggest players (which, thanks to Gramm's earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. "Tens of trillions of dollars of transactions were done in the dark," says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing." Betting on the risk of any given transaction became more important--and more lucrative--than the transactions themselves, Partnoy notes: "So there was more betting on the riskiest subprime mortgages than there were actual mortgages."

Banks and hedge funds, notes Michael Greenberger, who directed the cftc's division of trading and markets in the late 1990s, "were betting the subprimes would pay off and they would not need the capital to support their bets." These unregulated swaps have been at "the heart of the subprime meltdown," says Greenberger. ... In 1998, Greenberger's division at the cftc proposed applying regulations to the burgeoning derivatives market. But, he says, "all hell broke loose. The lobbyists for major commercial banks and investment banks and hedge funds went wild. They all wanted to be trading without the government looking over their shoulder."

the Republican Treasury Secretary gives Wall Street what it's been screaming for all year: a blank check for the main agencies on whom hedge funds and big banks lay off bad mortgage bets.

Of course, as banks and hedge funds continue to get paid up front for bad loans, foreclosed homeowners don't get their houses back. That would take still another, much less likely, government bailout

See today's Wall Street Journal, at http://online.wsj.com/article/SB122079276849707821.html?mod=googlenews_wsj