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Thursday, November 19, 2009

Phil Gramm and Alan Greenspan: Perfect Together

*If there ever were two individuals responsible for our financial crisis, Greenspan and Gramm are kindred spirits. Greenspan managed to convince Gramm (I'm sure without ANY armtwisting whatsoever) that laws that were created to protect american taxpayers after the stock market crash which led to the Great Depression, should be dismantled because this was a new economic world order and our banking system would not be able to compete with the rest of the world with such stringent regulations. While I agree to some degree with that assessment, I do not agree with their result, i.e. the profligation of those laws heavily benefitted Wall Street and members of Congress such as Gramm himself who has since gone on to work for the likes of UBS while his wife sat on the board of ENRON, remember them? Did their actions benefit ordinary american consumers? Hardly. Immediate gratification and short term sightedness have not benefitted any of us. If I was foolish enough to get a 30 year mortgage on a house that cost $500,000 with some exotic derivative instrument, and now my house is worth $400,000, then who has benefitted? Only Wall Street and Greenspan, who now consults for PIMCO, and of course Gramm AND his wife. When are these people going to go to jail? NEVER, as long as Congress stays the same. If the recent outcome of the Bear Stearns collapsed hedge fund perpetrators are any indication (Cioffi et al were found not guilty), then americans really have no recourse whatsoever when their trusted servants and fiduciaries pilfer their life savings and the future of their heirs.

Wall Street Faces ‘Live Ammo’ as Congress Aims to Unravel Banks
Nov. 12 (Bloomberg) -- Seven Wall Street lobbyists trooped to Capitol Hill on Nov. 9, hoping to convince Representative Paul Kanjorski’s staff that his plan to dismantle large financial firms was a bad idea.
They walked out with a sobering conclusion, according to the accounts of two attendees who requested anonymity because the meeting was private. Not only was Kanjorski serious, he planned to offer the legislation as early as next week -- and it just might pass.
Today marks a decade to the day that President Bill Clinton signed the repeal of the Depression-era Glass-Steagall Act that split investment-banking from lending and deposit-taking. The repeal allowed the creation of Citigroup Inc., the financial colossus now propped up by $45 billion in taxpayer rescue funds. Financial firms are scrambling to prevent Congress from re- imposing the act.

Gramm’s View
Geithner testified on Oct. 29 that regulators need authority “to force the major institutions to reduce their size or restrict the scope of their activities” if they become too risky. The Obama administration hasn’t said whether it would support letting regulators preemptively shrink the size of large, healthy companies.
Phil Gramm, the former Republican Senator from Texas who co-wrote the act that undid Glass-Steagall, said, “I’ve never seen any evidence to substantiate any claim that this current financial crisis had anything to do with Gramm-Leach-Bliley.”
“In fact, you couldn’t have had the assisted takeovers you had,” Gramm, now a vice chairman at the investment bank division of UBS AG, Switzerland’s biggest bank by assets, said in a Nov. 10 telephone interview. “More institutions would have failed.”

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