WMAL-AM

October 14, 2008

Had America Only Listened

You know how reluctant I am to take credit for my many, many, many contributions to America. So it is with the utmost hesitation that I acknowledge that had our nation’s government and business leaders followed my example we would not be in the dire financial straits we find ourselves in today.

As a freshman Member of Congress in 1987-88 I was assigned to the House Agriculture Committee and delegated to the thankless job of drafting legislation to tighten up the regulatory powers of the CFTC.

CFTC? What the hell is that, asked the reliably uninformed Andy Parks on our morning broadcast.

CFTC stands for the Commodity Futures Trading Corporation, an obscure federal agency that has traditionally been to corn futures and pork bellies what the SEC is to the stock market. When I arrived in 1987 the CFTC was under fire for lax policies governing the practice of placing “puts” and “calls” on various commodities traded on the Chicago Board of Trade and other indices in the U.S. Without getting too technical it was a way for investors to bet on whether the cattle market or the silver market would move up or down. We now refer to this as “hedging” and the means by which we hedge “derivatives” because the value derives from something other than the actual commodity. In other words, you are not buying gold, you are buying the direction(up or down) gold will take over the next few weeks or months.

This quickly became a great way for speculators to make money in a hurry and even more quickly a very corrupt practice needing some governmental oversight which I am pleased to say my colleagues and I provided in the late 80’s.

I left congress in 1995 and until yesterday never knew in 1998 that  the empowered CFTC, concerned about the runaway nature of financial derivatives(hedges, swaps, futures, etc.), moved to regulate these new products.

Guess who said no way? President Bill Clinton, Treasury Secretary Robert Rubin(now an advisor to Obama), Fed Chair Alan Greenspan, and the powerful Republican Chair of the Senate Banking Committee, Phil Gramm, whose wife Wendy just happened to have been the Chairperson of the CFTC.

So, not surprisingly, the effort to  regulate  derivative trading was quashed in an 11,000 page budget bill that skulked through Congress in the middle of  the contested 2000 presidential election.

The damage was done with full bi-partisan support and influence from both ends of Pennsylvania Avenue.

Had reform minded Congressman Fred Grandy still been on the case it might have been a much different story.

Sorry, America.

I went into radio and the rest of you went into the economic crapper.

You wound  up with a dysfunctional financial system and I wound up with Andy Parks.

I’d call that a push.

posted by Fred Grandy on 10/14/2008 10:33:33 AM