'Enron Phil' And Whiner Nation: McStain Has An Adviser Problem

No sooner than the last problems regarding former Sen. Phil Gramm, R-Texas, as McStain's economic adviser had calmed, did "Enron Phil," as he is known in some circles, stick a big fat Gucci in his oral cavity Friday.

Gramm, a senator from 1985 through 2002 and a House member before then, wrote much of the deregulatory legislation that made accounting travesties like those at Enron and Arthur Andersen possible. Something one can't say is that the man hasn't got plenty of chutzpah.

Bloomberg News reports:

Gramm, a vice chairman of UBS Securities LLC, said in an interview with the Washington Times that despite the sluggish economy, high oil prices, job losses and the mortgage crisis, growth in the U.S. has stayed around 1 percent.

``You've heard of mental depression; this is a mental recession,'' Gramm told the paper. ``We may have a recession; we haven't had one yet.''

``We have sort of become a nation of whiners,'' Gramm said in the interview. ``You just hear this constant whining, complaining about a loss of competitiveness."

McStain had to do rapid damage control. More from Bloomberg:

Republican John McCain rejected comments by economic adviser and former Texas Senator Phil Gramm that the U.S. is in a ``mental recession'' and is a ``nation of whiners.''

``Phil Gramm does not speak for me. I speak for me, so I strongly disagree,'' McCain told reporters after a town hall meeting in Belleville, Michigan, today. ``I believe that the person here in Michigan that just lost his job isn't suffering from a mental recession.'' Nor are people whining, he said. ``America is in great difficulty.''

And more still:

Asked about reports McCain was considering Gramm as his Treasury secretary if elected, McCain said: ``I think Senator Gramm would be in serious consideration for ambassador to Belarus.''

``I'm not sure how the people of Minsk'' would feel about that, McCain said.

Let's take a walk down memory lane where "Cracker" Gramm is concerned. (Yeah, I know that's politically incorrect, but he's also known thusly in some circles, actually being from Georgia, not Texas.)

This is a man who went to college and grad school largely on programs for disadvantaged people, and got a doctorate in economics. He got a professorship at state-funded Texas A&M University. Once ensconced in Aggieland, he decided to kick the ladder down on those trying to follow in his footsteps. After he got into Congress as a right-wing Democrat (quite a feat for an Aggie professor), he consistently voted to cut the very programs that made his success possible. By 1984 he was running for senator as a Republican. All the while, he had never made a dime in the private sector. His primary income had always originated from taxpayers.

As mentioned before, he was the author of much deregulatory law that made debacles like Enron and Arthur Andersen possible. While he was a senator, Enron heaped largess upon his campaigns, and his wife, Wendy, served on Enron's board of directors while hubby was in the Senate.

There is plenty more Gramm family pond scum. But suffice it to say that I'd like to get Phil Gramm into a room with some of the Enron workers who saw their life savings incinerated by white-collar crime, and see what happens after he tells them that they are a bunch of "whiners."

To hook back: No matter how much McStain backpeddles on this one, a pattern of bad judgment about advisers and confidants is emerging. Gramm was picked to be economic adviser. Did McCain not know about the slimy ghosts of Enron Phil's past?

And recall Charlie Black, PR man for assorted Third World despots, who recently said something to the effect that a terrorist attack on the U.S. this year would be very advantageous to McStain. So far, Black is still with the GOP campaign. Between Charlie and Phil, this says a lot.

To read more on the Gramm family/Enron connection, click here for a 2002 article in The Nation.

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Subprime crisis a reflection of larger debt-investment problems; possibly comparable to Enron derivatives

Jim Jubak explains the incestuous relationship between credit-rating agencies and banks, and how the subprime crisis has left a lot of emperors’ new clothes exposed:

It's important to understand that bond professionals don't want to think badly of the job done by the credit-rating agencies. The bankers pay the rating agencies' fees. (Bet you didn't know that. Yep, the issuers of debt are the ones who pay the bills.) The bankers literally sit across the table from the rating agencies. The banks poach anybody on the other side of the table that they think has the talent to work for them. And the banks rely on the credibility of the rating agencies to sell their debt offerings. It's a pretty cozy club.

But the subprime debacle has been big enough to disrupt the club. Buyers of packages of subprime mortgages and derivatives based on these packages that have been burnt by rising defaults on these mortgages and falling prices for the debt they hold have angrily wondered if banks issuing the debt disclosed all the risk. And the banks have passed the buck, saying, that they relied on the ratings from the three agencies.

As a result, Jubak said, this is part of why not just the ratings agencies in particular, but Wall Street in general, hasn’t reacted faster to the subprime crisis and its possible larger economic effects, specifically the problems with mortgage-based securities.

Several issues here.

First, where is a Democratic Congress, in failing to push for new regs out of either the SEC or FDIC to eliminate this incestuousness?

Probably waiting for “new Democrat” financial donors, which it has often been since the Clinton days.

This would be like Ford or GM paying Consumer Reports for their car ratings. It’s ridiculous.

It’s ridiculous it took the subprime crisis to expose this, if “expose” is the right word for something still generally flying well beneath the Big Media radar.

Beyond that, there’s the fact that these particular securities, known as collateralized debt obligations, are big turkeys in their financial performance. And, to the degree small investors have gotten talked into them, they could take a bit of a bath.

And, these are very complex debt-based securities. Jubak says many people, not small-time buyers, but even bigger pros, can’t analyze them well. He even draws Enron-type comparisons.

It’s ridiculous nothing has yet been done.

Cross-posted at Socratic Gadfly.

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