April 2, 2008
McCain's Economic Advisers Draw Fire
Washington Post: Democratic Opponents Are Plotting Attacks On Phil Gramm And Carly Fiorina
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Sen. John McCain, R-Ariz., left, is accompanied by former Texas Sen. Phil Gramm at a campaign event in Myrtle Beach, S.C., in January. (AP Photo/Charles Dharapak)
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One of them helped deregulate the financial services industries in the 1990s, and now sits in the corporate suites of Swiss banking giant UBS, which yesterday announced $19 billion in investment losses tied to the crumbling U.S. real estate market.
The other pushed one of the most aggressive and controversial mergers of the technology boom, then was sacked by the disenchanted board of Hewlett-Packard.
Former senator Phil Gramm, with his aw-shucks Texas drawl, may at first blush have little in common with Carly Fiorina, the telegenic former chief executive of Hewlett-Packard. But they share a bond: Both are leading economic advisers of Sen. John McCain (Ariz.), the presumptive Republican nominee for president, and both have reputations as the kind of aggressive capitalists that may be sliding from favor as the nation's economy edges toward recession.
Democratic opponents are already plotting attacks on two advocates of what Robert Reich, a former Clinton labor secretary, described as "dog eat dog capitalism," an economic philosophy that works well when the economy is on the upswing but may not play so well in a trough. "McCain is counting on people having very short memories and not connecting some pretty obvious dots here," said Jared Bernstein, an economist at the Economic Policy Institute, summing up a growing liberal critique of McCain's economic team.
To economists across the political spectrum, much of the criticism is unfair oversimplification. But even some advisers close to McCain said they wonder if such lightning-rod public figures should be so closely identified with his candidacy. "I, for one, have thought about it a lot," said one McCain adviser, who spoke on the condition of anonymity. "And that's all I will say."
The spiraling crisis in the credit and housing markets has kept Gramm in focus, fairly or not. His employer, UBS, revealed yesterday that investment losses tied to the U.S. housing market reached $37 billion over the last six months. For the last three months, UBS posted a $12 billion loss.
Gramm, UBS's vice chairman, said yesterday he was "totally unaware" of his bank's massive holdings of securities tied to subprime mortgages, but, he added, "I'm confident we'll recover."
More to the point may be Gramm's aggressive efforts when he was chairman of the Senate Banking Committee to deregulate the banking and financial services industry. That culminated in passage in 1999 of a sweeping financial services law that tore down the Depression-era Glass-Steagall wall separating regulated commercial banks from largely unregulated investment banks. And little regulation was put in to replace it.
"We are here today to repeal Glass-Steagall, because we have learned that government is not the answer," Gramm declared at the time. "We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom."
To many liberal economists, Gramm's efforts set the stage for the current crisis. Lending by noncommercial banks has soared, to about 70 percent of total lending. Investment banks, including Bear Stearns, grew too large to be allowed to fail. And, said James K. Galbraith, a University of Texas economist, investment banks helped create the exotic financial instruments that turned subprime mortgages into tradable securities.
"Phil Gramm's career was as the most aggressive advocate of every predatory and rapacious element that the financial sector has," Galbraith said. "He's a sorcerer's apprentice of instability and disaster in the financial system."
Gramm denied the charge, saying financial services deregulation has mitigated the impact of the credit crisis by giving investment and commercial banks a broader business foundation to withstand the downturn. The commercial bank J.P. Morgan Chase could not have swooped in to salvage Bear Stearns without deregulation, he said.
"People who want greater involvement in the markets always see in any crisis the need to expand government control," he said. "That always happens."
Gramm has some unlikely defenders. Robert Litan, a Brookings Institution economist who advised the Clinton administration on financial industry deregulation, said that if anything, the crisis might have been mitigated if Gramm had gotten more of his way when he opposed the Community Reinvestment Act in the 1990s.
Gramm maintained that the act, which allowed regulators to review a bank's record on lending to the poor before approving financial industry mergers, allowed advocacy groups to effectively blackmail banks into making risky loans in poor communities. But the Clinton administration prevailed in saving the CRA.
"If they wanted a merger approval, they had to show they were making a conscious effort to make loans to subprime borrowers," Litan said. "If the CRA had not been so aggressively pushed, it is conceivable things would not be quite as bad. People have to be honest about that."
Gramm, as a former Senate colleague, has an older, deeper connection to McCain, but Fiorina may soon be more closely identified with him. Since McCain installed her last month at the Republican National Committee, the once-high-flying chief executive has held conference calls, made near-daily television appearances and become the face of McCain's economic team.
"John McCain understood the positive role of government in incenting and motivating innovation," Fiorina said yesterday in an interview, recalling their first meeting in 2000.
But until recently, Fiorina's claim to fame was 5 1/2 rocky years at Hewlett-Packard, where she battled the company's founding families to push forward with a $19 billion purchase of Compaq Computer in 2002, then failed to create the profitable computer giant she had promised. In February 2005, she was publicly ousted by HP's board, but not before she ordered the first of a series of leak investigations that would spin into a highly publicized scandal.
Alarmed by leaks of boardroom deliberations to reporters covering the technology industry, HP authorized investigations that would ultimately involve private investigators lying to phone companies to obtain personal phone records, bogus e-mails to reporters complete with tracer software to track forwarding, even a plan to infiltrate newsrooms with spies posing as clerical workers and cleaners.
Those efforts were tied most directly to Hewlett-Packard's former chairwoman, Patricia C. Dunn, but in her 2006 memoir, Fiorina wrote that she had ordered the first investigation a month before her ouster following a Wall Street Journal report on an impending corporate reorganization.
Fiorina said yesterday that all she had done was ask the company's outside legal counsel, Larry W. Sonsini, to interview all of the board members about the leaks, a process that took two weeks. She regretted using the term "investigation" in her book.
"It is factually inaccurate to connect me to the spying scandal at HP," she said.
As for the Compaq merger, Fiorina said she has been more than vindicated for her aggressive management.
"The results have validated the wisdom of the decision and the timing of the move," she said.
By Jonathan Weisman
© 2008 The Washington Post Company
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Since McCain has admitted he knows nothing about Economics anyway, it is not really surprising that "Bagdad John" would pick people to "advise" him who have the same level of intelligence he has!
One wonders who his "advisers" would be on international affairs, domestic affairs, and on the wars begun by the Great Emperor Bush II that he will inherit. Fox News is already arguing that McCain''s comments about 100 years in Iraq are being taken "out of context" by the evil, cowardly Whimpo-crats Obama and Clinton, even though "Bagdad John" has mentioned staying in Iraq for 100 years at least 10 times this year!
Perhaps McCain should hire an "advisor" as to when he should keep his mouth shut; someone like "Wild Bill Clinton!
SIG HEIL, BUSH!!!!
sig heil, (more of the same) McCain????
Posted by jack3213 at 12:23 PM : Apr 02, 2008
Why are you blaming the MESSENGER ?
McCain at 72 years of age is well within the age of reason - in fact from some of his remarks he appears to have exceeded it...
Posted by SgtRDS
And Senator Oreo is George Soros''s Lackey.
Posted by mudrose at 01:58 PM : Apr 02, 2008
And mudrose is a right wing racist.
;-)
Still contemplative ...
Lawnjockey suggests Thunderthighs get off Sheryl One Square and get a life ...
Thunderthighs calls a spade a spade.
And yet, the contrarian effect to allow industry consolidation--and then a type of monopoly that sought exemption from the Sherman Antitrust Act. How is it that competition and freedom is served by allowing reckless business activites that result in a meltdown? Regulation of an industry protects the consumer--even if is constrains growth it provides stability of the markets.
Posted by IOWEIGN at 01:26 PM : Apr 02, 2008
That''s funny!!
The man may not understand economics, but he understands very well how to kissy up to the rich and curry favors.
We can''t afford to have a clown like this as president.
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Posted by finewoven at 02:58 PM : Apr 02, 2008
+ report abuse
How in the WORLD can you think THAT is funny. Sad? Yes. Scary? Yes. But Funny? I hardly think so. This man doesn''t have a CLUE about the Economy and he has as advisers two of the "Trickle Down" masters.
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The problem is that eventually the scales are tipped so heavily in favor of the rich AND powerful, that creative solutions are crushed, because the huge and powerful monopolies won''t stand for the competition.
Why do you think that we are still getting 25/30 miles per gallon (max) out of our vehicles. Because big oil killed any innovation years ago and have continued to do it.
Censor this CBS/"BillORights"!
RM: And now he wants them to be made permanent. He is%u2026He%u2019s pandering to the right and it defies the media happy talk that they like about John McCain%u2026
JS: Okay %u2026whatever%u2026
RM: %u2026but how else to do you explain going after the John Hagee endorsement, going after the Rod Parsley endorsement%u2026
JS: Okay%u2026You know what? Let%u2019s see, let%u2019s see%u2026the Democrats%u2026
RM:%u2026changing his mind on torture, changing his mind on the tax cuts%u2026
JS: Rachel%u2026 Good lord%u2026
RM: I%u2019m sorry, but the facts don%u2019t meet%u2026don%u2019t meet your storyline here, but the storyline ought to change to conform to the facts, rather than denying the facts.
JS: Rachel, if you compare, let me just say this. Compare the rigid ideological views of Barack Obama and Hillary Clinton with the Democratic Party. The most progressive people in the Democratic Party. Compare that to what John McCain did with the Republican Party. There is no comparison. McCain has gone more towards the middle over the past four years than either of those two. That%u2019s just the bottom line.
RM: That%u2019s absolutely incorrect.
JS: He refused to tell Tim Russert that he made a mistake voting against%u2014he was one of two Republicans that voted against Bush%u2019s tax cuts. Conservatives will tell you that two things that Bush did right%u2026
RM: And then he changed his mind about them, Joe.
JS: No, he hasn%u2019t changed his mind.
RM: He says he wants them to be permanent now%u2026
JS: He told Tim Russert on Meet the Press in New Hampshire when his life%u2026political life was on the line that he made the right call. He was glad he voted against them.
(cont)
Rachel Maddow tried to point out the fallacies in Joe Scarborough%u2019s glowing, fact-free praise of John McCain on MSNBC%u2019s Race For The White House.
Clueless Joe continues to spew this ridiculous media narrative that John McCain is a %u201Cmaverick,%u201D completely disregarding the myriad of flip flops the aging Arizona senator has made over the past year. Rachel tries to put him in his place, reminding him that McCain has been pandering to the right on all the major issues including permanent tax cuts, immigration and torture, but all Scarborough does is tell her that she doesn%u2019t understand the Republican party. True dat, since she is the lone voice of reason and we all know that facts have a liberal bias. Scarborough loves to steamroll Mika Brzezkinski on his morning show, but as you%u2019ll see from this video, his bullying style gets him nowhere with Maddow.
(cont)
Posted by jack3213 at 12:23 PM : Apr 02, 2008
Who defines what being loyal is ?? Cuz to me, Repugs are very Disloyal to the USA and most seem to be Terrorists ..... Very F* Sad. Cheers!
Clinton this,
McCain that,
Obama this,
Clinton that,
McCain this,
Obama that,
The best prostitutes certainly get the most media attention!
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by blackspirit3
April 3, 2008 3:39 PM PDT
- THE CLINTONS HAD A LIST OF THINGS TO ACCOMPLISH WHILE IN THE WHITE HOUSE.
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Reply to this comment
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See all 23 Comments- The only president ever impeached on grounds of personal malfeasance
- Most number of convictions and guilty pleas by friends and associates*
- Most number of cabinet officials to come under criminal investigation
- Most number of witnesses to flee country or refuse to testify
- Most number of witnesses to die suddenly
- First president sued for sexual harassment.
- First president accused of rape.
- First first lady to come under criminal investigation
- Largest criminal plea agreement in an illegal campaign contribution case
- First president to establish a legal defense fund.
- First president to be held in contempt of court
- Greatest amount of illegal campaign contributions
- Greatest amount of illegal campaign contributions from abroad
- First president disbarred from the US Supreme Court and a state court.
WHAT DID THEY FORGET TO DO?