Foreclosures – The Biggest Financial Crisis In Years

Posted on July 28, 2008
Filed Under Repo Homes | 1 Comment

Who is to be blamed for foreclosures – the biggest financial crisis in years? The blame game goes on while foreclosures have the last laugh.

Former senator Phil Gramm, a McCain election advisor was also a lobbyist for a Swiss bank. He pulled some ropes in the senate that has largely been responsible for the foreclosure crisis of today. About eight year ago anti regulatory measures were started which ultimately caused havoc. Instead of being exposed and penalized he is being considered for the post of treasury secretary in the case of a possible win by McCain. It has been alleged that he screwed up this financial mess and yet there is a good chance that he will end up being in charge of the economic policy of USA!

Gramm’s association with finance has been for a long time. In the 1990’s when he was chairperson of the Senate banking committee he turned down various requests by Arthur Levitt the chairperson of Securities and Exchange Commission for more funds to keep a check on Wall Street. The workload during this time shot up by 80% but the working strength increased by only 20%.

Gramm also contradicted another rule of SEC that would have stopped accounting firms from getting too intimate with the companies they audited. Levitt recalls that Gramm even threatened his department with cutting off funds if such a rule was adopted.

In 1999 Gramm was the architect of a banking deregulation bill that has become history. He eradicated the fire walls that had been created between commercial and investment banks, insurance and securities firms that had been made during the post Depression period. A merger mania set in forming the basis and roots of the foreclosure crisis of today.

Gramm was the friend of the financial servicing industry. They gave him millions during his congressional career spanning 24 years. On 15th December 2000 the situation was tense on two counts – the budget showdown with Clinton and the Republicans and on the other hand the controversy between Bush and Gore. The stage was set for the shrewd senator to twist the system around his fingers. Gramm slipped in a measure running into 262 pages named Commodity Futures Modernization Act. Few at that time had the time or the inclination to read it. None had an idea of what was going on – the perfect ground for planting the seeds of the foreclosure crisis of today. The act guaranteed that neither the SEC nor CFTC got involved in regulating new financial products.

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