It Was John McCain Who Helped Cause the Wall Street Meltdown

John McCain (photo below, right) is a funny guy. He must know that when he turns the truth on its head, any sane listener will realize what’s going on. Yet he keeps doing it. It reminds me of the old Pee-Wee Herman (photo below, left) ploy: “I know you are but what am I?”

John McCainHermanSo while the whole world must know that McCain is one of the chief architects of this week’s Wall Street meltdown, he had the incredible chutzpah to blame Barack Obama! Not only that, but he said Obama had caused the collapse by doing the bidding of lobbyists. Imagine that coming from a candidate who has scores of lobbyists running his campaign, while Obama has none!

Everybody in America must know McCain’s record by now. He has been a Washington wheeler-dealer for more than a quarter of a century. And he is the one who has been doing the bidding of Big Business lobbyists (not to mention the bidding of crooks like Charles Keating). As chairman of the Commerce Committee, he was one of the chief advocates in the Senate for more and more deregulation. And his close friend and economic adviser is Phil Gramm (photo below), who is perhaps America’s best known advocate of unchecked stock market speculation.


Here’s a case in point. In an article published by the Baltimore Chronicle and Sentinel in May, investigative reporter Jason Leopold detailed the steps by which John McCain’s bosom buddy Gramm helped push America’s financial system down the road to disaster. Leopold didn’t say that, of course, because the system had not yet collapsed, but he spelled out the devious maneuvers that this slippery political hack used to remove the safeguards on commodities trading.

Danny Schechter, a media activist, critic, independent filmmaker, TV producer, author and lecturer on media issues, accuses the mainstream media of suppressing the real causes of the financial collapse. Quoted by Stephen Lendman in the Chronicle and Sentinel today, Schechter identifies a long list of contributing factors, including “multiple imploding bubbles: housing, mortgage finance… and a whole menu of levered-up, high-risk securitized assets amounting to financial alchemy; largely outright fraud…”

Schechter cites “huge amounts of corruption and a government hiding how bad it is – complicit in it as well.” How did the government become “complicit” in the massive looting of American taxes? First by removing the regulations and requirements for transparency that would have impeded the plunderers’ illicit activities. And as Leopold’s article in May made all too clear, Gramm and McCain spearheaded the assault on these safeguards.

Leopold was commenting on a $307 billion farm bill opposed by McCain, who claimed to be fighting “wasteful subsidies.” But Leopold argued that what really stuck in McCain’s craw was a provision in the bill that would close “the Enron loophole.” In a move to stall the runaway speculation that was driving up the price of oil, the bill included regulation of energy futures trading. And it was Gramm who had created the loophole back in 2000 as a favor to his pals at Enron. (You remember Enron, don’t you? It was the center of one of the biggest financial scandals in recent history.)

Leopold said that to clear the way for Enron’s infamous price gouging of California utility customers, Gramm, who was then a Republican senator, slipped a provision into the Commodities Futures Modernization Act that exempted from regulation energy trading on “electronic platforms” (such as the Internet). Then, over the next year, Enron – with Gramm’s wife Wendy serving on its board of directors – worked to create false electricity shortages in California, bilking consumers out of an estimated $40 billion. (Leopold added that in 1993, as chairman of the Commodity Futures Trading Commission, Wendy Gramm had pushed through a key regulatory exemption removing energy derivatives contracts and interest-rate swaps from federal oversight.)

How did Gramm get the “Enron Loophole” through Congress? By trickery. With the Republicans in charge of Congress and Gramm chairing the Senate Banking Committee, the exemption on electronic trading was approved without a Senate hearing. Then the provision was added to the 11,000-page Commodities Futures Modernization Act on the night before Congress was due to go on recess for Christmas. That may have been why nobody opposed it – nobody spotted it in time.

Before the loophole was created, trading in commodities in the U.S. was limited to exchanges such as the New York Mercantile Exchange (Nymex), which are regulated by the Commodities Futures Trading Commission to guard against price manipulation. The loophole allowed commodities trading in “dark markets,” and was a prime cause of soaring oil prices, with the resulting spike in gasoline prices.(Unregulated markets are known as “dark markets” because of the absence of oversight. At the height of the oil price spike, CBS News chief investigative correspondent Armen Keteyian reported that hundreds of millions of barrels of oil futures contracts were being traded electronically every day in public “pits” all over the world. The lack of oversight made it virtually impossible for American regulators to detect excessively large deals that could lead to price manipulation.)

Gramm was a staunch defender of this type of trading. Leopold pointed out that in April 2002, the Texas senator blocked an amendment by Sen. Dianne Feinstein, D-California, that would have closed the loophole. Even after Enron collapsed, Gramm continued to resist congressional efforts at tightening up the rules. Despite the accounting scandals at Enron, WorldCom and other major companies, Gramm objected to the Sarbanes-Oxley corporate reform bill designed to hold executives accountable for inaccuracies in financial reports.

Gramm became a lobbyist after leaving the Senate, and remained a close McCain ally. When McCain launched his presidential campaign, he had Gramm at his side as chief economic adviser. There was a brief hiccup in their relationship when Gramm called Americans “a nation of whiners” and proclaimed that the recession was all in our heads. McCain briefly exiled Gramm from his campaign, but he’s back, and as close to McCain as ever.

In February, Fortune Magazine’s editor-at-large Shawn Tully wrote:

Economic conservatives should take heart. McCain’s chief economic adviser – and perhaps his closest political friend – is the ultimate pure player in free market faith, former Texas Sen. Phil Gramm. … Most of [McCain’s] current positions are vintage Gramm indeed.

That was in February, and it would’ve been true as recently as a few days ago, but it seems John McCain has seen the light. He is now calling for strict government regulations and promising to clean up Wall Street if he is elected U.S. President. Of course, he will do no such thing. You know, and I know that words are wind. As they say in Jamaica, “A promise is a comfort to a fool.”