Senator Phil Gramm slipped into this must-pass spending bill a 268-page bill, the Commodity Futures Modernization Act, which had been kicking around for about a year. The House had passed one version of it, but there were a lot of different versions. And the point of it was really to do a lot of different types of deregulation. It included something called the Enron loophole, which allowed Enron to sell energy futures on a deregulated basis, which helped lead to the California energy crisis the following year and the subsequent collapse of Enron.
But another portion of the bill deregulated these financial instruments called “swaps.”
When UBS, which is the biggest Swiss banking company, lost—I don’t know, I forget the number now—$38 billion or so on the subprime crisis, it put out an internal report for public consumption explaining how this had happened, and they noted that it had happened, in part, because the securities that they lost money on, connected to these subprime loans, had been backed by their trading in swaps.
Sunday, July 20, 2008
'Foreclosure Phil' Gramm
According to Journalist David Corn in How John McCain's Closest Economic Advisor Helped Engineer the Morgage Crisis: