Setting the Record Straight

September 24, 2008

Meltdown II to Follow

Meltdowns and McCain
     As the federal government considers bailing out the financial meltdown on Wall Street, some care should be given to the fact there in all likelihood be another Wall Street meltdown after this one cools, a residual meltdown if you will. And voters should know of John McCain’s role in enabling the meltdown and how it reflects on how much he cares about such matters.
     About a week before the federal government bought AIG, the massive insurance company at the head of the current financial markets meltdown, the company settled a huge lawsuit brought by shareholders over the actions of a former chairman. (Ironically, most of the $100 million settlement was covered by—you guessed it, liability insurance.) Just days before, many of the investment banks in the meltdown were sued by investors.
     More central to the point in Meltdown II, shareholders sued pharmaceutical company Merck for failing to disclose the trouble they were about to get in because of one of its drugs that was the target of massive class-action lawsuits. Shareholders have brought class-action suits against Oracle for misleading them, others are suing Yahoo and on and on. This is not an uncommon type of lawsuit.
     Shareholders collectively lost billions in the meltdown of the Wall Street investment banks and related institutions and just about all of them should be expected to file multi-billion suits against the same firms for not disclosing to them over-leveraged positions and other actions that preceded the meltdown.
     As for McCain’s role? All of this financial mess was made possible by repeal of the Glass-Steagall Act, which had been passed as a result of the stock market crash of 1929 that touched off the Great Depression. It prevented regular banks from engaging in most of the mergers that created today’s giants and engaging in the type of business as investment banks and other institutions offered.
     The repeal came exactly a decade after the savings-and-loan meltdown that followed a similar Republican-led law to allow those institutions to engage in full-service banking activities. What was it George Santayana said? (Irony No. 2–The S&L scandal that followed the meltdown came to be known as the Keating Five, to which McCain was tied and later wrote was “the worst mistake of my life.”) 
     Paying no attention to that meltdown, the McCain campaign’s first financial adviser, Phil Gramm, led the effort in Congress to pass a law that now bears his name—Gramm-Leach-Bliley Act (all GOP—and repealed Glass-Steagall.
     The bill passed the Senate by a veto-proof 90-8. One of the senators who did not feel it important enough to cast a vote on a groundbreaking piece of legislation—a rarity for a senator—was Sen. John McCain, R-Ariz. Since he had announced he would have voted for the bill, he apparently paired his vote with a fellow Republican who opposed it.
     And, although McCain is now saying the campaign is about issues, just a few days ago his campaign adviser had said the campaign was about personalities, not issues. What does McCain care about?




  1. “Give me the right to issue and control a nation’s money and I care not who governs the country.” –Mayer Amschel Rothschild

    Comment by rjjrdq — September 24, 2008 @ 9:57 am | Reply

  2. I completely agree. I’m with Jim Rogers on this one – dismantle the Fed and fire everyone. Making Paulson and Bernanke the Kings of the universe will cause stagflation for a generation.

    Comment by sparrowshead — September 24, 2008 @ 9:58 am | Reply

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