Cross-posted at my site The Public Record.
John McCain has been purging lobbyists from his campaign trying to reclaim the mantle of political reformer, but there’s one lobbyist whose role as a key economic adviser makes him almost untouchable despite ties to the sub-prime debacle, links to the Enron disaster and alleged evasion of ethics rules.
Former Sen. Phil Gramm, who was listed as a lobbyist for banking giant UBS as recently as December 2007, has emerged as what Fortune magazine calls “McCain’s econ brain,” filling McCain’s acknowledged void on economic expertise (“I don’t know as much about the economy as I should”).
Recognized as one of McCain’s closest friends in politics, Gramm began advising McCain in 2005 when the Arizona senator indicated he planned to run for President. Gramm, a Texas Republican, also was credited with helping salvage McCain’s campaign from disarray in 2007.
More recently, McCain reportedly turned to Gramm for help in fashioning a March 26, 2008, policy speech on the mortgage crisis – a plan that critics faulted for providing only modest help for families facing foreclosures.
Now, however, Gramm’s work for the Swiss-based investment bank UBS is coming under scrutiny as contradicting McCain’s policy that bars lobbyists from his campaign.
Gramm started work at UBS as a vice chairman in January 2003, immediately after leaving Congress. A month earlier, he had shifted $2 million in campaign contributions from the Friends of Phil Gramm Political Action Committee to a UBS PAC, a move that let the bank increase its visibility with lawmakers.
"I think [UBS] understands the importance of having access to lawmakers, and the presence of Gramm and the PAC could accomplish this goal," commented John Samples, director of the libertarian Cato Institute's Center for Representative Government, in late 2002.
"While the amount given by Gramm to start the PAC is relatively small when compared to other PACs, it's important seed money for UBS,” Samples wrote in an article for Wall Street Letter on Dec. 9, 2002.
The money transfer was seen as both benefiting Gramm’s new boss and advancing his anti-regulatory agenda as he moved to the private sector.
“Much like its competitors in the brokerage industry, [UBS] is most interested in preventing Congress from passing legislation that would restrict the industry,” an unnamed lobbyist told Wall Street Letter. "The firms want to make sure they don't get hit with another version of Sarbanes-Oxley," the tougher corporate disclosure law passed after the Enron collapse.
In 2002, Gramm, whose wife Wendy served on Enron’s board of directors, had opposed Sarbanes-Oxley, which was designed to hold executives accountable for inaccuracies in financial reports like those that hid Enron's mounting debt.
The Wall Street Letter also quoted a former Securities and Exchange Commission official as saying that UBS’s goal in tapping Gramm was “to establish a sustained, long-term effort to cultivate influence in the nation's capital by contributing money to candidates on a consistent basis.”
This former SEC official, who also had turned to lobbying, added: "You can't be in the game of political influence for the short term. This is a good start for” UBS, relying on Gramm, a long-time fixture of Washington politics.
Texas Financial Scheme
In his work at UBS, Gramm also made use of his deep roots in Texas politics.
