Maybe McCain thinks the "fundamentals" of the economy are "strong" because he's been listening to Phil Gramm for far too long.
And Mr. Gramm is, it turns out, one of the chief architects of our current economic disaster.
McCain and Gramm: two peas in a pod
First, let's remember what exactly is the relationship between these two men:
Politico
McCain and Gramm have a long political history. The two became close when they worked together as senators to defeat Hillary Rodham Clinton’s 1993 health care plan, holding meetings at hospitals and clinics across the country.
In 1996, McCain was national chairman of Gramm's unsuccessful presidential bid.
In 2000, the duo had a rare parting when Gramm backed his home-state governor, George W. Bush, for president instead of McCain. But they’ve reunited in this presidential race.
Gramm stood by his former Senate colleague in his worst days last summer when his campaign went broke and his candidacy was all but written off by political observers.
Gramm, who had joined the campaign in March as a domestic policy adviser, was among those who helped cut staff and shrink the budgets. He traveled with McCain in Iowa, New Hampshire and South Carolina and stumped for him in Georgia.
Or as CNN put it: McCain's econ brain. Economic conservatives take heart: Phil Gramm is influencing the candidate's platform.
How did Gramm create our current economic crisis?
Phil Gramm led the effort to pass the Gramm-Leach-Bliley Act of 1999.
What's this?
Huffington Post
the Gramm-Leach-Bliley Act of 1999 . . . permitted banks, stockbrokers and insurance companies to merge, overturning one of the major regulatory achievements of the New Deal.
How did the Gramm-Leach-Bliley Act affect the housing market?
NYT
Basically, a major piece of deregulation, the Gramm-Leach-Bliley Act, overturned most of the laws that had kept commercial banks and investment banks separate. This made it much easier for monster-size banks to lay down enormous bets on the direction of housing prices.
When these bets turned out to be wrong, the losses to the banks and their stockholders were staggering.
Mother Jones
(Thanks to Cronesense)
As Mother Jones reported in June, eight years ago, Gramm, then a Republican senator chairing the Senate banking committee, slipped a 262-page bill into a gargantuan, must-pass spending measure. Gramm's legislation, written with the help of financial industry lobbyists, essentially removed newfangled financial products called swaps from any regulation. Credit default swaps are basically insurance policies that cover the losses on investments, and they have been at the heart of the subprime meltdown because they have enabled large financial institutions to turn risky loans into risky securities that could be packaged and sold to other institutions.
But haven't the banks been issuing subprime mortgages for a long time?
Yes, but it's about HOW MANY:
Research
. . . the total subprime or B&C originations (loans) have grown from $65 billion in 1995 to $332 billion in 2003 . . . The subprime loan securitization rate has grown from less than 30 percent in 1995 to over 58 percent in 2003.
And let's not forget, this housing crisis is actually exactly what President Bush promised when he outlined his policies of the "ownership society" in his 2004 convention speech:
Thanks to our policies, home ownership in America is at an all-time high. Tonight we set a new goal: 7 million more affordable homes in the next ten years, so more American families will be able to open the door and say, "Welcome to my home."
Well, we got them in their homes. We just couldn't keep 'em there.