John McCain and the company he keeps... by gimleteye

Yesterday, the US EPA—the nation’s top environmental agency-- decided that regulating the movement of polluted water from one water body to another: from a river or stream, by pump, to canal or to Florida's Everglades is not a federal responsibility.

“In a decision with national implications that appears to defy a 2006 ruling by a Miami federal court judge, the EPA announced it would not require federal permits for “transfers” of water from one body to another for water-supply, flood-control, irrigation and other common purposes—no matter how dirty that water might be.” (Miami Herald, “EPA refuses to limit dirty-water transfers”, June 10, 2008)

The State of Florida, through its water management district in South Florida, approved. Why would that be?

The answer is simple: top business leaders in Florida long ago decided to fuel future growth of cities and suburbs by moving water from so-called surplus areas to areas that overdeveloped, tapping out cheaply available fresh water supplies.

Moving water through costly energy and engineering-intensive industrial water supply and polishing infrastructure is a political gold mine, with spigots all along the way. This spigot effect of growth depends on avoiding the costs of pollution; the same is also true of Wall Street.

Congress and the White House allowed the proliferation of toxic debt to move from one body—like a pool of mortgages containing lots of liar loans—to another body—like derivatives and insurance measured in the trillions, putting ratings agencies in the same role as EPA: on the side of polluters as a matter of political expediency and reward.

There is nothing, then, coincidental in the emergence of Florida’s Al Hoffman as a top fundraiser for McCain’s presidential campaign or of former Senator Phil Gramm, as top economic advisor. (For more on Hoffman, read our archive feature: "housing crash")

Hoffman was a major Florida developer: his company, WCI Communities Inc., a high flyer in the run up to the housing bust. Like other multi-millionaires minted from development, Hoffman salted away enough from platted subdivisions and condo mishaps, cratering now in someone else's balance sheet, to skate through the aftermath. In 2003, Hoffman crowed to The Washington Post that suburban sprawl was "an unstoppable force." Last year, his former company could scarcely find a buyer.

In 1998 and 2002, Hoffman was finance chair for Jeb Bush campaigns as governor. He was also finance co-chair of the 2000 George W. Bush campaign. In 2001 Governor Jeb Bush appointed Hoffman to be chairman of the state’s business planning organization, The Council of 100. Hoffman lead the Council to the outcome that Governor Jeb Bush had decided long before: to promote state policies enabling the transfer of water supply from one area of the state to another.

Of the EPA decision yesterday, an environmental attorney told The Miami Herald: “Instead of stepping in to tighten clean-water protections and clean up the pollution the EPA has now chosen to legalize it. It is shameful.”.

So, too, is it shameful that the Federal Reserve opened its window to private banking and financial institutions, mainly operated by Republican loyalists, is essence allowing them to flush their tens and hundreds of billions in losses into the public realm. The Bush White House calls the direct loans to private banks a necessary step for the stability of the nation's financial system. The free flow of toxic debt, with scarcely any regulation at all, occurred under Republican policies and triggered the worst credit crisis since the Great Depression. Banks are now scurrying to foreign governments—some hostile to democracy—for infusions of capital to shore up their balance sheets.

One of the key players behind the Wall Street greed leading up to the crisis of the US economy is another McCain advisor, former Texas Senator Phil Gramm. While Senator and chairman of the powerful US Senate Committee on Banking, Housing, and Urban Affairs, Gramm presided over and later lobbied for relaxation of supervision and regulatory oversight of the nation’s financial engineers, including hedge funds and the magical confections of debt and insurance arrangements on toxic debt that rained billions in fees and commissions on their originators. Between 1992 and 2000, he received over $1 million in campaign contributions from Wall Street.

Gramm, today, is a vice-chairman of UBS, the European bank hardest hit with untold billions in losses from investments in the US mortgage and derivatives markets. According to Bloomberg, UBS shareholders have lost nearly half their value this year. (“UBS Falls After Saying More Mortgage Losses Possible”, May 28, 2008, Bloomberg)

EPA’s rubber stamping of pollution, allowing unsustainable growth policies in important states like Florida to move forward, is to the environment as the willful federal abrogation of supervision of exotic debt instruments is to the world economy. Allowing polluted water to move from one water body to another, without limits or interference by laws, is no different from what is occurring in the vast, trillion dollar credit markets under unparalleled pressure.

That the Republican Party, the presumptive party of fiscal conservatism, presided over the deterioration of meaning and contracts and law is astounding. So when Senator John McCain claims that his presidency will be different—that he is "a fiscal conservative"—he invites incredulity.

In the 1980’s, Senator McCain nearly ruined his political career by rushing to defend Charles Keating, a big campaign contributor and then a powerful banker wrapped up in fraud and racketeering charges during the Savings and Loan debacle. With Hoffman and Gramm at his side today--McCain can hardly claim he learned from experience. We are certainly poorer for it.