Los Angeles Personal Injury Lawyer - Senator Phil Gramm

UBS Misled Customers

Paul Kiesel — Thu, 26 Jun 2008 16:32:54 GMT

Two subsidiaries of the Swiss bank UBS, earlier today, were accused of misleading investors about how safe auction rate securities were. The complaint was filed by William Galvin, Massachusetts' top securities regulator, and he accuses UBS Securities and UBS Financials Service of aggressively selling the instruments to customers at a time when large money managers were losing faith in them and a top UBS executive was dumping them from his personal holdings.

There are many similarities in UBS's business practices as there were at Countrywide, as both companies pushed the sales of "products" without telling their customers of their vulnerabilities or the amount or risk attributed to each product (i.e. Countrywide in proliferating subprime mortgages; UBS in pushing "cash alternatives" when employees were dumping them).

According to the New York Times, Mr. Galvin, "is seeking to get the UBS units to return investors' money and reimburse who had to sell at a loss."

Also, former senator Phil Gramm, who was a key player in the surge of subprime mortgages and CDOs, and who also worked as lobbyist for UBS, has yet to speak on either Countrywide's pending legal matters, it acquisition by Bank of America, or the trouble UBS faces (financial and legal) in the coming months. Mainly, Mr. Gramm has remained quiet in reagrds to the foreclosure/credit crisis, as he continues to advise Senator McCain on his presidential campaign's economic policies/initiatives.

Originally posted at InjuryBoard by Paul Kiesel

$800 Billion in Mortgages are at Moderate to High Risk of Defaulting

Paul Kiesel — Tue, 24 Jun 2008 20:20:23 GMT

The New York Times, on February 23, 2008, published an article that elaborated on a Bank of America sponsored housing relief package that was being proposed to Congress, in order to curb further losses for lenders and homeowners. After reexamining the article, two things catch my eye 1. Nearly $800 billion in mortgages are at risk of defaulting over the next five years (a ballpark figure proposed then and a dollar amount still viewed as being accurate now) and 2. It's startling to see how little has been accomplished since Bank of America suggested to Congress that a Federal Homeowner Preservation Corporation would be created in order to buy up billions of dollars in troubled mortgages at a deep discount. Hope Now has continued to flounder, and Alt-A types loans will have interest rate resets later this summer, bringing in another wave of defaults and foreclosures, on top of the subprime problems the housing market will continue to face.

First, it would be impossible for our government, in its current state, to create an entirely new agency, in a reasonable amount of time, that is devoted solely to the cause of buying underwater mortgages and then brokering a deal directly with the holder of the mortgage, in order to buy the loan at current market value. Too many homeowners will have lost their homes by then, and there will be that many more homeowners in danger of losing their homes by the time a program is established. In fact, knowing what the White House has put forth over the last ten months, and its urgency, it appears that it's doubtful that a program could start from within an existing agency. Congress needs to come up with a better short term resolution, to mitigate foreclosures, and then go back to the table and find a long term solution.

Some type of plan needs to occur that puts more responsibility on the lenders, not the government and not the homeowners who were put into Option ARM or Alt-A loans through a variety of predatory lending tactics, like TILA form ambiguities.

The lenders have wanted less oversight for many years, and they finally got it about eight years ago, thanks to Senator Phil Gramm's Commodity Futures Modernization Act, therefore, they should take a brunt of the responsibility for the economic hardships they caused.

Originally posted at InjuryBoard by Paul Kiesel

The Subprime Mess and Phil Gramm: An Experiment in Deregulation

Paul Kiesel — Tue, 24 Jun 2008 16:12:58 GMT

In 1933, a few years following the stock market crash, Congress passes the Glass-Steagall Act, in hopes that regulating banks will help prevent market instability, particularly amongst Wall Street banks. The purpose of the act is to separate commercial banks that focus on consumers from investment banks, which deal with speculative trading and mergers.

The Glass-Steagall Act provided the proper oversight and entity separation that would prohibit banks and other financial companies from merging into giant trusts (conflict of interests) -- giant trusts or corporations being more powerful, naturally, and having the seemingly limitless capital to lobby their corporate interests, however, with a very myopic scope (particularly when it comes to factoring in potential losses -- most banks, as seen in contemporary times, chose not to anticipate losses in the mortgage market; they presumed home prices would continue to appreciate).

In 1999, former Senator Phil Gramm (who is, incidentally, Senator John McCain's economic adviser and cochairs his presidential campaign) set out to completely gut the Glass-Steagall Act, and did so successfully, replacing most of its components with the new Gramm-Leach-Bliley Act: allowing commercial banks, investment banks, and insurers to merge (which would have violated antitrust laws under Glass-Steagall). Sen. Gramm was the driving force behind the Gramm-Leach-Bliley Act, as he had received over $4.6 million from the FIRE sector (Finance, Insurance and Real Estate donations) over the previous decade, and once the Act passed, an influx of "megamergers" took place among banks and insurance and securities companies, as if they had been eagerly awaiting the passage of Gramm's Act. Everything in between Glass-Steagall and Gramm-Leach-Bliley (i.e. Savings and Loan crisis/bust) was, in large part, the incubation period for what would take place over the nine years that would follow the passage of Gramm's Act: an experiment in deregulation.

Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.

In 2003, Gramm left the Senate to join UBS, which had acquired investment house PaineWebber due to his deregulation bill. At UBS, Gramm lobbied Congress, the Fed and the Treasury Department. During Gramm's tenor at UBS and as a lobbyist, Congress passed the Responsible Lending Act, billed as an anti-predatory-lending measure, but was called the "Loan Shark Protection Act" by consumer advocates, as it was designed to preempt stronger state laws against anti-predatory lending. The Fed largely ignored the underlying and growing problems within the subprime mortgage/housing markets, as Bernanke famously acknowledged the housing market in April, 2007 as, "[showing] signs of softening," but said that a "sharp slowdown," is unlikely. Then, according to Mother Jones magazine, Henry Paulson became the Treasury Secretary in July, 2007, when, "In 2005, [at] Goldman [he] securitized $68 billion in residential mortgages and $23 billion in 'other assets' primarily related to CDOs," (Mother Jones, August, 2008). With such self-interest, and a lack of the nation's interest, we can see how this subprime mess was allowed to escalate to such great proportions.

Some justice was served, however, this spring, as UBS became one of the subprime debacle's biggest losers, having to write down $37 billion -- the same amount as their previous four years of profits combined. UBS also made the public aware that two-thirds of its losses were due to reckless investing in collateralized debt obligations (CDOs).

Now, Gramm has a second chance of extending his out-of-touch and ill-performing policies, as Senator John McCain appointed Gramm to be his "economic expert" and cochair of his presidential campaign, last year. Also, it is likely that if Senator McCain were to win in November, Gramm would be our next Treasury Secretary, which means more of the same deregulatory mess and the continuation of failed and insidious economic policies.

Originally posted at InjuryBoard by Paul Kiesel