Happy Enron Anniversary, Wendy Gramm

Eighth anniversaries are “Bronze Anniversaries,” and there have been few events more brazen than the collapse of the Enron Corporation. It happened eight years ago, and this groundbreaking cataclysm would not have been possible without the assistance of Wendy Gramm, PhD.

As Chairman of the Commodity Futures Trading Commission (CFTC), Dr. Gramm ended governmental oversight of energy derivatives traded by Enron and other companies. Six days after leaving government, she was named to the Enron board of directors, where she headed the Audit Committee and was paid a million or two by the rogue corporation.

McCain Responds to the Budget Proposal

Senator John McCain, speaking for Republicans because Rush Linbaugh was busy, presented his party’s fiscal year 2010 federal budget counter-proposal in words of two letters, all of them spelled “N-O.”

Déjà Vu All Over Again

 

Neil Irwin and David Cho of the Washington Post report this historical note:

In the 1920s, a firm called First National City Bank started repackaging bad loans from Latin America and selling these to investors as safe securities. These investments collapsed in grand fashion after the 1929 stock market crash and eventually led to a new wave of securities regulation. National City Bank became Citibank, which in turn became a major unit of Citigroup.

No wonder Citigroup keeps changing its name.

 Doctrinaire Republican market-worshippers “deregulated” those depression-era securities protections eight years ago. Were the consequences so surprising?

“Those who cannot learn from history are doomed to repeat it,” said George Santayana. If Santayana is too difficult for our leaders, perhaps they can heed the words of philosopher Lawrence Peter “Yogi” Berra: 

“You can observe a lot just by watching.”
” A nickel isn’t worth a dime today.”
“You’ve got to be very careful if you don’t know where you’re going, because you might not get there.”

 

Full disclosure: For three years back in the last century, writer Mike Licht held a scut job at the compliance office of Citicorp Investments.

Note: While many adages are attributed to Mr. Berra, not all have been verified, and half the lies they tell about him aren’t true.

 

Did Phil Gramm Lose His Christmas Bonus?

Swiss Banking giant Union des Banques Suisse (UBS, un établissement financier mondial, fondée 1747) will not pay annual bonuses to top executives, report Ben White and David Jolly in the New York Times. Does that include UBS Vice-Chairman William Philip “Phil” Gramm, PhD., the man who deregulated the world economy into catastrophy?

Bush Housing Crisis Policy 4 — Too Big to Ignore

Continued from Inventive Interventions

September 2008.

Uh-oh. What’s that rumbling noise? The very earth is shaking! An earthquake? The sound of stomachs on the floor of the New York Stock Exchange? No. It’s AIG.

What is an AIG? American International Group, a collection of businesses. Some sell insurance. Some sell conventional investment instruments. But the biggest business of AIG is selling something kinda like insurance, kinda like a security. Not insurance or equities, of course; those are regulated. Who can make big bucks off those? AIG sells credit default swaps, CDSs, agreements that AIG will buy your debt-based securities if they lose money.

Now that’s a relief. Who cares if the subprime mortgages underlying securities go bad just because loan officers are giving mortgages to anyone who breathes and claims to have a job? In a world of skyrocketing housing and securities prices, AIG swaps pieces of paper called CDSs for money and prospers.

AIG credit default swaps fan the flames of the hot housing and finance markets. Build more houses; sell more houses with subprime mortgages; bundle bales of mortgages; sell slices of mortgage bundles as securities; trade mortgage-backed securities to each other, union and government retirement funds, mutual funds, world markets, world governments. U.S. Mortgage-backed securities are hot! They can’t go bad; they’re guaranteed by AIG-issued CDSs, and those AIG swaps are backed by . . . um, backed by . . . uh-oh.

Phil Gramm Aboard Foundering Swiss Bank

What could be more secure than a Swiss bank? Perhaps a Swiss bank without former Republican Senator (and McCain economic adviser) Phil Gramm on the board.

Who’s Whining Now?

Former Senator William Philip “Phil” Gramm, PhD., has stepped down as co-chairman of Senator John McCain’s Republican presidential campaign. As Larry Rohter of the New York Times explains:

Mr. Gramm, a multimillionaire banker, has been under fire since last week, when he dismissed concerns about the troubled economy by referring to “a mental recession.” He also said the United States had become “a nation of whiners . . . .”

Senator McCain distanced himself from those remarks, and Professor Gramm resigned from the campaign. “It is clear to me that Democrats want to attack me rather than debate Senator McCain on important economic issues facing the county,” he whined in a written statement.