We recently mentioned former Senator Phil Gramm when talking about McCain’s ties to lobbyists. Gramm is the one who successfully broke down the wall between commercial banking and investment banking which effectively let banks get in on all the great wheeling and dealing happening in the investment sector. Also, he is the one who said, on the eve of the passing of Bill Clinton’s 1993 budget, “I want to predict here tonight that if we adopt this bill the American economy is going to get weaker and not stronger, the deficit four years from today will be higher than it is today and not lower. When all is said and done, people will pay more taxes, the economy will create fewer jobs, the government will spend more money, and the American people will be worse off.”
Of course, Gramm is national campaign general co-chair for the McCain team, and a “top economic adviser” to the wannabe prez according to this article at the Washington Times. McCain has also inferred that he might make Gramm Treasury Secretary should the GOP win the White House in November. You might want to read that whole article at the Times, because if your own individual economic situation at home is deteriorating due to the pressures of the credit crunch, home mortgage crisis, energy prices skyrocketing, this proposed future Secretary of the Treasury has some advice for you.
It’s all in your head.
McCain has denounced Gramm’s comments and has claimed that “Gramm doesn’t speak for me. I speak for me.” But, isn’t it traditionally the the job of a campaign’s co-chair to speak for the candidate?
Gramm infers that this economic meltdown is all psychological, a word that McCain has himself used when talking about Americans’ perceptions of the economy. See, we’re basically all just victims of the media, which apparently loves gloom and doom. OK, so perhaps he’s right there, but when you’ve cut everything that isn’t a necessity from your monthly budget and you still can’t make ends meet because you just got less than a half a tank of heating oil and it cost $600, that’s not imaginary. It’s not imaginary that due to the increase in energy prices, everything from food to delivery services is going up in price. It’s not imaginary that when the housing bubble burst a huge chunk of equity was gone in a matter of months from most people’s homes.
So what exactly does Gramm say about this? Here you go:
“You’ve heard of mental depression; this is a mental recession,” he said, noting that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. “We may have a recession; we haven’t had one yet.””We have sort of become a nation of whiners,” he said. “You just hear this constant whining, complaining about a loss of competitiveness, America in decline” despite a major export boom that is the primary reason that growth continues in the economy, he said.
It’s interesting that these quotes from Gramm came out just before McCain’s scheduled trip to Michigan (symbolic home of the American automobile) because imaginary or not, people right now just don’t feel like they have a lot of money. When people don’t feel like they have a lot of money, they stop buying things like cars. The sudden surge in gasoline prices hasn’t helped American car manufacturers who have made most of their money on trucks in recent years. Now with SUV sales plummeting and regular car sales also in decline, GM’s share price recently closed at a 54 year low and a comment from Merrill Lynch noted that a GM bankruptcy was “not impossible.” GM CEO Rick Wagoner reacted to the comment and said that GM is just fine, but the auto manufacturer is cutting thousands of jobs and trying to sell at least one of its brands. When GM production slows, it doesn’t just affect GM, it affects many more companies like American Axle, which just announced it is is eliminating 400 white-collar, salaried jobs in addition to another 2000 union-represented hourly factory jobs under a deal it reached with the UAW. You’ll note in that article that the rest of the workers approved a deal that would cut their hourly wages by 40 percent.
All in the imagination, I guess
Meanwhile, Chrysler is battling bankruptcy rumors of its own. Sales are down 22 percent this year so far, 36 percent in June alone, and the company recently had to actually raise the prices of its automobiles and started drawing on a $2 billion line of credit from its parent company and Daimler.
Really? I mean, it could just be imaginary.
Just today, the stock market is down because General Electric’s earnings report came in as expected, but the future didn’t look bright enough. GE is, of course, the company that brings good things to life. Unfortunately, it couldn’t materialize a nice uptick in the market today for those of us who have lost 20-30% on our 401K’s in the past year or two.
Oh yeah. My 401K. How much money have I lost this year? Lots. I see it every time I log in to check what my current investments are worth (or not worth, as the case may be). But it must be in my imagination that I’ve lost that money. Perhaps I can call the investment firm and tell them that I really have much much more in there and any difference they see is just in their imaginations, and I’d appreciate it if they rectify the situation. Yeah, that will work.
I’m sick to death of people trying to tell us how great the economy is based on one or two growth statistics. Believe me, I’m ready for some good news as much as the next person, but so far I’m just not seeing it. I’m not feeling it. And until I really feel like I’m not economically treading water and I can take a breath, start saving again, and actually maybe have a dollar or two left over at the end of the month, I guess I’m just going to let my imagination get away with me.
UPDATE: It looks like Obama’s taking the Gramm ball and is running with it. Thanks to Stephen for sending me the following link to a politico article: http://www.politico.com/news/stories/0308/9246.html.
According to federal lobbying disclosure records, Gramm lobbied Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006. During those years, the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages.
For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS’s American subsidiary. In the past year, UBS has written down more than $18 billion in exposure to subprime loans and other risky securities and is considering cutting as many as 8,000 jobs.
Uh oh. McCain’s co-chair and top economic adviser directly linked to the current housing crisis? Something’s about to hit the fan if this gets in the mass media.