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John McCain, Phil Gramm and the Republican establishment are acting as if they had nothing to do with the Housing Crisis that led to today’s takeover of Fannie Mae and Freddie Mac. The down payment by taxpayers to clean up this mess is the $100 Billion the government committed to cover future losses. The media is framing this as a politically neutral event and McCain made the following statement this morning.

“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 cronyism, special interest, lobbyists. A quasi-governmental organization, where the executives were making hundreds of — hundred some billion dollars a year, while things were going downhill, going to hell in a handbasket,” Mr. McCain said, adding that the two companies need “more regulation, more oversight, more transparency, more of everything, and frankly, a dramatic reduction in what they do.”

One has to admire the balls of a politician like McCain to make such a statement as if he and his inner circle weren’t the “cronies, special interests and lobbyists” who fought “financial regulation and oversight” tooth and nail for the past ten years. One more Big Lie.

Consider the evidence

• 1994-At the behest of the banking industry Phil Gramm, with McCain’s support, killed the Fair Credit Reporting Act

In 1994, Mr. Gramm single-handedly killed a bill that would have required credit bureaus to quickly fix errors on a person’s credit report. Mr. Gramm called it a “bad bill” that imposed costs on the credit bureaus.”He was very focused on cost to financial institutions and not very focused on costs suffered by consumers,” said Travis Plunkett, legislative director for the Consumer Federation of America

• 1999-The Gramm-Leach-Bliley Act, authored by McCain’s principle economic advisor, Phil Gramm is the law that deregulated banking and allowed the explosion of inancial derivatives that led to the current credit crisis. John McCain voted for the bill.
• 2000-Phil Gramm created the Commodities Future Modernization Act. John McCain voted for the bill

Gramm slipped an Enron-backed provision into the Commodities Futures Modernization Act that exempted from regulation energy trading on electronic platforms.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. 

• 2004-The SEC voted to require Hedge Funds to simply register with the agency. Gramm and McCain both argued that since hedge fund investors were high net worth individuals, there was no need for such regulation. The SEC order was overturned on a technicality.

In 2002 Gramm left the senate and became Vice Chairman of UBS the Swiss Bank that was a major player in the sub-prime market. Even as the Housing crisis became apparent this year, McCain maintained his anti-regulatory bias. In March at the height of the crisis he made a speech with this rather bizarre assertion.

“In financial institutions, there is no substitute for adequate capital to serve as a buffer against losses. Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.“

McCain now says we need more regulation, but the truth is that he has fought it for 10 years and it’s time for Obama and Biden to call him on that.