Economic Slump Underlines Concerns About McCain Advisers
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Former senator Phil Gramm, with his aw-shucks Texas drawl, may at first blush have little in common with Carly Fiorina, the telegenic former chief executive of Hewlett-Packard. But they share a bond: Both are leading economic advisers of Sen. John McCain (Ariz.), the presumptive Republican nominee for president, and both have reputations as the kind of aggressive capitalists that may be sliding from favor as the nation's economy edges toward recession.
To economists across the political spectrum, much of the criticism is unfair oversimplification. But even some advisers close to McCain said they wonder if such lightning-rod public figures should be so closely identified with his candidacy. "I, for one, have thought about it a lot," said one McCain adviser, who spoke on the condition of anonymity. "And that's all I will say."
The spiraling crisis in the credit and housing markets has kept Gramm in focus, fairly or not. His employer, UBS, revealed yesterday that investment losses tied to the U.S. housing market reached $37 billion over the last six months. For the last three months, UBS posted a $12 billion loss.
Gramm, UBS's vice chairman, said yesterday he was "totally unaware" of his bank's massive holdings of securities tied to subprime mortgages, but, he added, "I'm confident we'll recover."
More to the point may be Gramm's aggressive efforts when he was chairman of the Senate Banking Committee to deregulate the banking and financial services industry. That culminated in passage in 1999 of a sweeping financial services law that tore down the Depression-era Glass-Steagall wall separating regulated commercial banks from largely unregulated investment banks. And little regulation was put in to replace it.
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http://www.washingtonpost.com/wp-dyn/content/article/2008/04/01/AR2008040102860_pf.html When Gramm chaired the Senate Banking Committee, he wrote and passed deregulatory legislation in more than one industry, establishing himself as a pre-eminent foe of government regulation. McCain’s March 26 speech recommended further deregulation of the banking industry as his response to the mortgage crisis.McCain and Gramm have been friends for more than a decade. McCain chaired Gramm’s 1996 presidential run and Gramm says the two men speak every day. McCain reportedly has hinted Gramm might serve as his Treasury secretary.
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But even before lobbying emerged as an issue, some of his own advisors told the Washington Post last month that they questioned how Gramm’s legislative record might affect McCain’s campaign.
After Gramm passed a law easing regulation of energy-commodity trading, California experienced a sharp run-up in energy costs. The energy-trading company Enron was blamed and soon collapsed.
In 1999, Gramm successfully undid the Depression-era Glass-Steagall Act, removing the decades-old wall between commercial banking, which was heavily regulated, and investment banking, which was not. The Gramm-Leach-Bliley Act did not extend significant new regulation to investment banking.
http://www.msnbc.msn.com/id/24844889 
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