The Deregulator

Drop The Regulations!

Phil Gramm and Financial Services Deregulation

One of the reasons that the stock market crash of 1929 caused so many banks to fail during the Great Depression was that banks had invested their deposits in speculative stocks during the bubble years of the 1920s. When the stock bubble burst, the banks lost their money, and the government had to step in and start insuring our bank deposits to make banks safe again. Another reform was to prevent banks from getting involved in speculative securities. If banks were too important to let fail and the government was going to insure our deposits, the government wanted to regulate the kinds of risks that banks would be allowed to bear. Force the banks to bear their own risks and not pass them on in the securities market, and they’d be careful not to enter into risky mortgages with people who can’t afford them, right?

This worked great for the next 50 years, until the stock market bubble years of the 1990s, when there was so much money to be made in the market that bank lobbyists and friendly legislators got together to remove the regulations that prevented banks and securities firms from getting too intermingled in each other’s businesses. McCain economic advisor and former Senator Phil Gramm was one of the leaders of this effort. In fact, the legislation which deregulated the financial services industry was named the Gramm-Leach-Bliley Act. Yes, President Clinton signed the bill, there’s blame to go around.

So mortgage banks (IndyMac) were freed from the usual free market risk/reward incentive to be careful about who they gave mortgages to, because they could simply pass the risks on to investment firms (Bear Stearns, Lehman Bros.) who could bundle enough risky mortgages together to make they seem safe to investors. Everything would be fine unless a whole lot of mortgages defaulted, and THAT will never happen!

Phil Gramm removed the very regulations that prevented banks from assuming too much risk and then went to work for one of the biggest mortgage banks in the world (UBS). And this is the result of Gramm’s deregulation: The banks assumed too much risk, failed, and are now running to the taxpayers to save them from their own bad mortgage decisions. And once again, the banks are too important to let fail.

Now McCain wants to deregulate the health insurance industry just like his advisor Gramm deregulated the banks. Oh, and Gramm's name is floated all over the place to be McCain's Secretary of the Treasury. Sound good to you?

Those Pigs Didn't Oink

From MSNBC's First Read:

Those pigs didn’t oink: Notice how the McCain campaign tried to change the subject yesterday? It cut its first Tony Rezko ad, which tied Obama to the “corrupt Chicago machine”; it angrily denounced the New York Times on a conference call with reporters; and it brought up Obama’s tenuous ties to ‘60s radical William Ayers on that same conference call. But unlike two weeks ago, when the McCain camp’s “lipstick on a pig” and “sex-ed for kindergartners” TV ad dominated the political discussion, those weapons of mass distraction got very little attention yesterday. The economy and the current Wall Street crisis have become THE story, and nothing right now is going to stop that. All the cable outlets will be covering the Paulson/Bernanke hearings as big news today -- making subject-changing efforts much more difficult.

The media is finally starting to cover the story of how McCain would rather distract us all than discuss the issues -- losing issues for him. Hopefully, the media will continue to ignore his attempt at diverting our attention, and continue to cover the important stuff. A big win for American voters, whatever party we support.

McCain Still Wants To Deregulate Health Insurance?

Quote from an article John McCain wrote for the CURRENT issue of Contingencies, the magazine of the American Academy of Actuaries (look at the top right column of page 30):

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

Deregulate? After the week Wall Street has had, after Lehman Brothers and Merrill Lynch and AIG have collapsed, he wants to do to the health care industry what his former chief economic advisor, Phil Gramm, did to the mortgage and banking industries. Yikes.

Presidential Appointments

I’m not talking about the Supreme Court. I’ll leave that to your imagination. I’ve been thinking lately about all of the presidential appointments you never hear about, up and down the executive branch. Some you’ve heard of, some you haven’t.

Remember Monica Goodling? She was a young graduate of televangelist Pat Robertson’s Regent University Law School. She was appointed by the Bush administration to hire career people at the Justice Department. Not political appointees. Career people. Prosecutors and immigration judges. The people who don’t go away when the next administration comes in (as do US attorneys and other political appointees). It’s illegal to hire career people based on political leanings, campaign donations. Remember the famous line, "Why do you want to serve George W. Bush?" And my favorite: when an applicant stated that he admired Condoleezza Rice, she frowned in disapproval and said, "But she’s pro-choice." Entertaining, yes. But also illegal.

Philip A. Cooney, the chief of staff for the White House Council on Environmental Quality, removed or edited to downplay references to manmade global warming in scientific climate research documents. Cooney was an oil lobbyist with an economics degree, no training in environmental science whatsoever.

George C. Deutsch, appointed as a press aide in NASA’s public affairs office in Washington. He too had no scientific training. In the course of his job, Deutsch added the word "theory" to every mention of the Big Bang on NASA’s web site. A NASA scientist, Dr. James Hansen, along with others, complained of "intensifying efforts by political appointees in NASA, including Mr. Deutsch, to "control more closely his lectures and Web presentations." His resume credentials were never checked and it turned out that he had never graduated from college, so he had to resign.

I’m not writing this post to debate abortion rights or global warming or how the earth was made. My point is that the president gets to appoint a thousand nameless, faceless people who make all kinds of decisions for us – they are the people who run all of the departments. I don’t want another Chief Justice John Roberts, I don’t want another Michael Brown (FEMA), and I sure don’t want a thousand Monica Goodlings appointed in departments across the country. Well, John McCain has made his first appointment: Sarah Palin. Basically, Monica Goodling all over again. Except that Monica Goodling at least has a law degree. If you don’t want a thousand Monica Goodlings, don’t vote for John McCain.

What Happened To The Guy?