hilzoy

by hilzoy

Recently, two more articles about Phil Gramm, “McCain’s Economic Brain“, have appeared. MSNBC had reported a week ago that Gramm was a paid lobbyist for UBS, one of the banks most heavily involved in the subprime scandal, until six weeks ago. Now Newsweek adds this:

“NEWSWEEK has learned that UBS is also currently the focus of congressional and Justice Department investigations into schemes that allegedly enabled wealthy Americans to evade income taxes by stashing their money in overseas havens, according to several law-enforcement and banking officials in both the United States and Europe, who all asked for anonymity when discussing ongoing investigations. In April, UBS withdrew Gramm’s lobbying registration, but one of his former congressional aides, John Savercool, is still registered to lobby legislators for UBS on numerous issues, including a bill cosponsored by Sen. Barack Obama that would crack down on foreign tax havens. “UBS is treating these investigations with the utmost seriousness and has committed substantial resources to cooperate,” a UBS spokesman told NEWSWEEK, adding that Gramm was deregistered as a lobbyist because he spends less than 20 percent of his time on such activity. Hazelbaker said the McCain campaign “will not comment on the details … of ongoing investigations and legal charges not yet proved in court.””

A new article in the Texas Monthly Observer is even more interesting, and worth reading in its entirety. It begins:

“In the early evening of Friday, December 15, 2000, with Christmas break only hours away, the U.S. Senate rushed to pass an essential, 11,000-page government reauthorization bill. In what one legal textbook would later call “a stunning departure from normal legislative practice,” the Senate tacked on a complex, 262-page amendment at the urging of Texas Sen. Phil Gramm.

There was little debate on the floor. According to the Congressional Record, Gramm promised that the amendment—also known as the Commodity Futures Modernization Act—along with other landmark legislation he had authored, would usher in a new era for the U.S. financial services industry.(…)

With the U.S. economy now battered by a tsunami of mortgage foreclosures, the $30-billion Bear Stearns Companies bailout and spiking food and energy prices, many congressional leaders and Wall Street analysts are questioning the wisdom of the radical deregulation launched by Gramm’s legislative package. Financial wizard Warren Buffett has labeled the risky new investment instruments Gramm unleashed “financial weapons of mass destruction.” They have fed the subprime mortgage crisis like an accelerant. While his distracted peers probably finalized their Christmas gift lists, Gramm created what Wall Street analysts now refer to as the “shadow banking system,” an industry that operates outside any government oversight, but, as witnessed by the Bear Stearns debacle, requiring rescue by taxpayers to avert a national economic catastrophe.”

One part of that bill was what’s called the ‘Enron Loophole’:

“The impact of the “Enron loophole” has been enormous. Since its passage, the Senate Permanent Subcommittee on Investigations has concluded that the loophole contributed to inflated energy prices for American consumers. In 2006, its report found credible expert estimates that the loophole—by encouraging speculation—accounted for $20 of the price of a barrel of oil, then at $70. In 2007, the same committee blamed the loophole for price manipulation of the natural gas market by a single hedge fund, Amaranth Advisors.”

But Gramm’s legislation also seems to have legalized what are known as ‘credit default swaps’:

“Prior to its passage, they say, banks underwrote mortgages and were responsible for the risks involved. Now, through the use of credit default swaps—which in theory insure the banks against bad debts—those risks are passed along to insurance companies and other investors.

Maryland law professor Greenberger believes credit default swaps “were a key factor in encouraging lenders to feel they could make loans without knowing the risks or whether the loan would be paid back. The Commodity Futures Modernization Act freed them of federal oversight.”

Before passage of the modernization act, the Commodity Futures Trading Commission was attempting to regulate the swaps market through rule-making. The modernization act, Gramm noted in his remarks on the Senate floor, provided “legal certainty” for the growing swaps market. That was necessary, Greenberger says, because at the time, “banks were doing these trades in direct violation of federal law.””

There’s a decent explanation of credit default swaps here. As I understand it, the basic idea is this:

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by hilzoy

Geraldine Ferraro wrote a horrible op-ed in the Boston Globe. She says a number of things about the effects of sexism on the Clinton campaign, which I do not propose to consider here. But she also claims that the concerns of Reagan Democrats have not been heard:

“As for Reagan Democrats, how Clinton was treated is not their issue. They are more concerned with how they have been treated. Since March, when I was accused of being racist for a statement I made about the influence of blacks on Obama’s historic campaign, people have been stopping me to express a common sentiment: If you’re white you can’t open your mouth without being accused of being racist. They see Obama’s playing the race card throughout the campaign and no one calling him for it as frightening. They’re not upset with Obama because he’s black; they’re upset because they don’t expect to be treated fairly because they’re white. It’s not racism that is driving them, it’s racial resentment. And that is enforced because they don’t believe he understands them and their problems. That when he said in South Carolina after his victory “Our Time Has Come” they believe he is telling them that their time has passed.

Whom he chooses for his vice president makes no difference to them. That he is pro-choice means little. Learning more about his bio doesn’t do it. They don’t identify with someone who has gone to Columbia and Harvard Law School and is married to a Princeton-Harvard Law graduate. His experience with an educated single mother and being raised by middle class grandparents is not something they can empathize with. They may lack a formal higher education, but they’re not stupid. What they’re waiting for is assurance that an Obama administration won’t leave them behind.”

I’m going to accept Ferraro’s claims about Reagan Democrats for the purposes of this post, not because I believe them to be true, but because I’m interested in the state of mind that would lead her to write this. I’m sure that some such people exist — when Ferraro says that they have stopped her on the street, I have no reason to doubt her. I am also sure that her all Reagan Democrats are not as she describes them, both because no such simple picture could cover such a diverse group of people, and because hers seems to me slanted in some specific ways. But leaving aside the accuracy of her sociology, and focussing on Reagan Democrats as she imagines them:

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by hilzoy

From the NYT:

“Senator John McCain, the presumptive Republican presidential nominee, distanced himself from the Bush administration on Tuesday by vowing to work more closely with Russia on nuclear disarmament and by calling for a reduction in tactical nuclear weapons in Europe.

In what his campaign promoted as a major speech on nuclear security policy, Mr. McCain told a largely friendly crowd at the University of Denver that he supported a legally binding accord between the two nations to replace verification requirements in the Strategic Arms Reduction Treaty, or Start, which expires in 2009. The Bush administration has refused to accept such binding limits on nuclear weapons, which the administration’s critics say has created paranoia in Moscow.”

You can read the full speech here. This is one of those times when it really helps to know the context. For starters, McCain does not have a very strong record on nuclear disarmament. He did vote for Nunn-Lugar and START II, but he also voted against the Comprehensive Test Ban Treaty and against making it a precondition of our deal with India that it not contribute to nuclear proliferation. And while in this speech he comes out against the development of nuclear bunker-buster bombs, he fails to mention not only that funding for that project was cut three years ago, but that he voted against those cuts at the time.

Moreover, McCain’s other policies would make the ones he announced yesterday a lot harder. Ilan Goldenberg gives the short version on Democracy arsenal: “McCain’s basic plan is to slap the Russians smack across the face and then ask them for a favor. Somehow I don’t think that will work.” The longer version is below the fold.

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by hilzoy

As a lot of people have noted, John McCain is opposed to Sen. Jim Webb’s bill expanding veterans’ educational benefits. Brian Beutler writes about John McCain’s record on veterans’ health care:

“Times have changed since McCain needed veterans services so urgently. And for many of those thirty-five years, McCain, the presumptive GOP presidential nominee, the candidate who talks the best talk on veterans issues, has demonstrated a tendency to work against veterans’ interests, voting time after time against funding and in favor of privatizing services–in other words, of rolling back the VA’s improvements by supporting some of the same policies that wrecked Walter Reed.

During a March 2005 Senate budget debate, McCain voted to kill an amendment that would have “increase[d] veterans medical care by $2.8 billion in 2006.” That amendment lacked an assured funding stream, but lest one mistake this incident for a maverick’s stance against budget-busting, there’s more. Just a year later McCain voted against an amendment that would have “increase[d] Veterans medical services funding by $1.5 billion in FY 2007 to be paid for by closing corporate tax loopholes.” Two days after it failed, he voted to kill “an assured stream of funding for veterans’ health care that [would] take into account the annual changes in the veterans’ population and inflation to be paid for by restoring the pre-2001 top rate for income over $1 million, closing corporate tax loopholes and delaying tax cuts for the wealthy.” That amendment died quietly, forty-six to fifty-four.

In September 2006 McCain voted to table an amendment to a Defense appropriations bill that would have prevented the department from contracting out support services at Walter Reed. The amendment was indeed tabled–by a vote of fifty to forty-eight, the sort of margin a true veterans’ senator might have been able to flip if he really cared about veterans’ healthcare.

“John McCain voted against veterans in 2004, ’05, ’06 and ’07,” says Jeffrey David Cox, who spent twenty-two years as a VA nurse before moving to the American Federation of Government Employees, where he serves as secretary-treasurer (AFGE represents employees of several federal agencies, including the VA). Cox is right. Under Bush, McCain has voted for measures that target so-called Priority-7 and Priority-8 veterans (those whose injuries are not service-related and whose incomes are above a low minimum threshold) for annual fees, higher co-pays and even suspended enrollment. Priority-7 veterans without dependents earn more than $24,644 annually. Priority-8 veterans without dependents earn an annual minimum of $27,790.”

I am wary of using this as a political issue if the facts aren’t there. On the other hand, if the facts are there, then it ought to be a political issue. So, even though I trust Brian Beutler, I decided to check.

I put the wonky results, with links to all the roll call votes, below the fold. Short version: during the last four years (all I checked), McCain has supported basic appropriations for vets. However, when there are two competing proposals, he generally chooses the cheaper one, and often, when only one proposal to increase benefits is available, he opposes it. But, as Beutler says, this doesn’t seem to be because he is in general in favor of fiscal discipline: in 2006, in particular, he voted against several bills that actually tried not just to increase spending on vets, but to pay for it, in one case voting for an identical bill that was not paid for.

If you think that we ought to be spending more money on veterans’ benefits and health care, it’s not a very good record. (Brandon Friedman thinks it’s part of a larger pattern. I think he’s right, though I haven’t marched through all the bills I’d need to look at to lay it out.)

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by hilzoy

There are approximately a million stories today about Congressional Republicans’ reactions to their loss of what should have been a safe district in Mississippi. Josh Marshall responds:

“When you step back for a second, what’s weird is that we even see the Mississippi special election result as a surprise. The Republican party is tightly defined around George W. Bush. And his job approval has not consistently gotten out of the low thirties (deep crisis numbers) for almost two years. And amazingly, over that period, the congressional party has made little attempt to get out of under his mantle.”

The fact that Congressional Republicans have been going along with Bush for so long, even after the 2006 elections, is pretty amazing. As Matt Yglesias notes:

“After the spanking the GOP took in the midterms, conventional wisdom held that congressional Republicans would tell Bush that either he was going to embrace Baker-Hamilton and moves toward winding-up the Iraq War, or else he was going to face mass defections. The shrill blogger set, reading recent history, accurately predicted that no such thing would happen and we were right.”

Not on the war, not on S-CHIP, not on anything. It’s pretty astonishing behavior for a group of people whose jobs depend on getting people to vote for them.

[UPDATE: throughout what follows, by ‘Republicans’ I mean Republicans in Congress’, not rank and file GOP members. I should have been clearer about that. END UPDATE]

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