Update: John McCain for Sale: The K Street Candidate

Posted by AzBlueMeanie:

The Washington Post published a front page investigative report on Saturday suggesting possible unlawful coordination between the McCain campaign and an independent political committee:

"For weeks, Republican presidential candidate John McCain had been hammered for supporting the Air Force’s February decision to award a $40 billion contract for refueling tankers to Northrop Grumman and its European partner. Democrats, labor unions and others blamed the senator for a deal they say could move tens of thousands of jobs abroad.

McCain’s advisers wanted to strike back against key Democratic critics. But they did not mount an expensive advertising campaign to defend the candidate’s position. They called a tax-exempt nonprofit closely aligned with the senator from Arizona, seeking information and help.

Citizens Against Government Waste (CAGW) partnered with Northrop and one of its consultants to produce a vitriolic advertising campaign defending the tanker deal.

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Although the campaign and the group deny any cooperation, CAGW’s willingness to jump into the tanker controversy illustrates what some experts describe as potentially improper political activity by nonprofits, an issue that is gaining attention as the presidential contest heats up.

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CAGW’s advertising campaign falls into a murkier space. The group’s work on the Northrop deal offered indirect support of McCain on a highly controversial issue while costing his campaign nothing. It never explicitly mentioned McCain’s name.

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Because of their tax-exempt status, nonprofits, or 501(c)3s, are not supposed to engage in political activity. They are allowed, however, to set up a separate political arm — known as a 501(c)4 — that may donate money to candidates and lobby on policy issues as long as political activity is not its primary purpose. The Internal Revenue Service is charged with enforcing the rules.

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Formed in 1984, CAGW has long promoted McCain’s image as a taxpayer advocate. Since 2006, the nonprofit’s board of directors has included Orson Swindle, who also works on veterans issues as a volunteer for the McCain campaign.

CAGW has a lobbying arm, the Council for Citizens Against Government Waste, that has twice supported McCain for president. Its PAC has donated $11,000 in cash to McCain or a PAC under his control since 2004 — 20 times as much cash as it has given any other candidate, records show.

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A new McCain policy on lobbying activity by his aides prohibits campaign officials from participating in any political group known as a 527, "or other independent entity that makes public communications that support or oppose any presidential candidate." The campaign did not respond directly to a question about whether the policy applies to Swindle, who is on the boards of CAGW and its lobbying arm, which endorsed McCain."

This follows closely on the heels of the reported possible unlawful coordination between McCain campaign advisers Sens. Joseph Lieberman and Lindsey Graham, and another "independent" political committee, Vets for Freedom, from which Sens. Lieberman and Graham requested leave from their positions as directors last week after the group aired attack ads against Senator Barack Obama. 

The McCain campaign conflicts of interest policy actually requires these individuals to resign from the McCain campaign, not to take a leave of absence from the independent political committee.

This again demonstrates what I have previously said: "Mr. Campaign Finance Reform" is a complete and total fraud.  McCain’s campaign finance reforms applied to everyone else but him; he is somehow exempt from his own rules.  And the McCain campaign’s so-called zero tolerance (sic) conflicts of interest policy is so chock full of loopholes for his favored advisers that it is meaningless.

Newsweek this week published a report on McCain co-chair Phil Gramm and the UBS bank scandal:

"According to McCain spokeswoman Jill Hazelbaker, the co-chair position affords Gramm "broad input into the structure, financing and conduct of the campaign." She added that Gramm, who has a doctorate in economics, is also "a valued voice on economic policy." Gramm is not a paid McCain adviser, but his day job—vice chairman of a U.S. division of Zurich-based financial giant UBS—could pose new tests for a candidate who has promised high ethics standards and ditched advisers who failed to meet them.

UBS has recently written off huge losses in subprime-mortgage-based securities, and last week liberal bloggers noted that Gramm was a registered UBS lobbyist on mortgage-securities issues until at least December 2007.

NEWSWEEK has learned that UBS is also currently the focus of congressional and Justice Department investigations into schemes that allegedly enabled wealthy Americans to evade income taxes by stashing their money in overseas havens, according to several law-enforcement and banking officials in both the United States and Europe, who all asked for anonymity when discussing ongoing investigations. In April, UBS withdrew Gramm’s lobbying registration, but one of his former congressional aides, John Savercool, is still registered to lobby legislators for UBS on numerous issues, including a bill cosponsored by Sen. Barack Obama that would crack down on foreign tax havens. "UBS is treating these investigations with the utmost seriousness and has committed substantial resources to cooperate," a UBS spokesman told NEWSWEEK, adding that Gramm was deregistered as a lobbyist because he spends less than 20 percent of his time on such activity. Hazelbaker said the McCain campaign "will not comment on the details … of ongoing investigations and legal charges not yet proved in court.

McCain’s campaign is already distancing itself from some of Gramm’s other work for UBS: his involvement in attempts to sell financial products known as "death bonds," which BusinessWeek described last summer as one of "the most macabre investment scheme[s] ever devised by Wall Street."

"Who’s to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain’s presidential campaign and advises the Republican candidate on economic matters. He’s been mentioned as a possible Treasury secretary should McCain win. That’s right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

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For starters, the legislation contained a provision—lobbied for by Enron, a generous contributor to Gramm—that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. (For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron’s energy futures contracts from government oversight. Wendy later joined the Houston-based company’s board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.)

But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It’s like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm’s bill—which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers—a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.

In essence, Wall Street’s biggest players (which, thanks to Gramm’s earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. "Tens of trillions of dollars of transactions were done in the dark," says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing." Betting on the risk of any given transaction became more important—and more lucrative—than the transactions themselves, Partnoy notes: "So there was more betting on the riskiest subprime mortgages than there were actual mortgages." Banks and hedge funds, notes Michael Greenberger, who directed the cftc‘s division of trading and markets in the late 1990s, "were betting the subprimes would pay off and they would not need the capital to support their bets."

These unregulated swaps have been at "the heart of the subprime meltdown," says Greenberger. "I happen to think Gramm did not know what he was doing. I don’t think a member in Congress had read the 262-page bill or had thought of the cataclysm it would cause."

Let’s just say that Phil Gramm is not a man anyone would trust with their own money, so why in God’s name would anyone trust him with the nation’s economic or fiscal policies?  And this is the scam artist McCain wants to appoint Secretary of the Treasury?  This demonstrates the lack of character and judgment of John McCain that he surrounds himself with such ethically challenged lobbyists.