Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

February 21, 2009

GRAMM SHOULD NOT BE ALLOWED OUT TO PLAY.... Time magazine, highlighting some of those most responsible for the economic crisis, recently singled out former Sen. Phil Gramm (R-Texas), and for good reason. Few deserve as much blame as the former chairman of the Senate Banking Committee.

Gramm "played a leading role in writing and pushing through Congress the 1999 repeal of the Depression-era Glass-Steagall Act, which separated commercial banks from Wall Street," Time explained. "He also inserted a key provision into the 2000 Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. Credit-default swaps took down AIG, which has cost the U.S. $150 billion thus far."

More recently, as part of his audition to be John McCain's Treasury Secretary, Gramm said the nation was only in a "mental recession," and that the United States is really a "nation of whiners." Soon after, Gramm quietly disappeared for a while.

Now, however, Gramm seems to believe he's a credible public figure again. He had an op-ed in the Wall Street Journal yesterday, explaining how twisted worldview and painful culpability isn't such a big deal.

His defense was as predictable as it was tiresome:

[M]ortgage lending was becoming increasingly politicized. Community Reinvestment Act (CRA) requirements led regulators to foster looser underwriting and encouraged the making of more and more marginal loans. [...]

Countrywide Financial Corp. cloaked itself in righteousness and silenced any troubled regulator by being the first mortgage lender to sign a HUD "Declaration of Fair Lending Principles and Practices." Given privileged status by Fannie Mae as a reward for "the most flexible underwriting criteria," it became the world's largest mortgage lender -- until it became the first major casualty of the financial crisis. [...]

Yet it is amazing how well the market for credit default swaps has functioned during the financial crisis.

Yes, Gramm's pitch includes discredited Republican talking points about CRA and Fannie Mae, followed by a defense of credit default swaps.

Two things. First, Gramm's completely wrong.

Second, Gramm's return from exile is entirely too soon. For a man principally responsible for helping destroy our economy, we'd all benefit if Gramm just went away for a very long while.

Steve Benen 8:00 AM Permalink | Trackbacks | Comments (32)

Bookmark and Share

It's those darn poor people wantin' homes! It's all their fault! Are we ever going to be over that?

Posted by: Personal Failure on February 21, 2009 at 8:11 AM | PERMALINK

Let's not forget Mrs. Gramm either, Phil's conflict of interest spouse. As Phil was deregulating the banks, she served on Reagan's Task Force on Regulatory Relief. As Phil went about deregulating the commodity market, she was chairwoman of the U.S. Commodity Futures Trading Commission. Phil was one on the largest recipients of Enron cash (surprise!) and Wendy pushed through an Enron-wishlist ruling that exempted energy futures contracts from regulation--and only days later she was appointed to Enron's board of directors. She even served on Enron's audit committee -- oops!

These two have to be America's First Couple of Corrupt Republican Respectability.

Posted by: R. Porrofatto on February 21, 2009 at 8:20 AM | PERMALINK

It's not a stretch to say that Gramm is crackers. As with transfats, the financial meltdown can be measured in "Gramms" contributed by Phil.

Posted by: Shag from Brookline on February 21, 2009 at 8:20 AM | PERMALINK

Sheesh Steve. It sounds like you want accountability or something. How's that ever going to work? Next thing you know, people like Gramm would have to work for a living - work for a boss, and be held accountable for his performance.
Who could possibly demean him like that? He's a very serious person.
So what if he's been wrong about everything since kindergarden?

Posted by: JoeW on February 21, 2009 at 8:25 AM | PERMALINK

When he announced his run for President, he said something like "we're going to find out if an ugly man can be President of the United States." My thought at the time was, your problem isn't that you're ugly on the outside; it's that you're ugly on the inside.

In all fairness to the guy it does appear that in his personal life at least he isn't a racist. But I think that's the only nice thing I can think of about him.

Posted by: larry birnbaum on February 21, 2009 at 8:26 AM | PERMALINK

And yet, this man was only a few million votes away from having a complete run of the place over @ Treasury!

My gawd, I cant' believe McCain got 46% of the vote.

Posted by: palinoscopy on February 21, 2009 at 8:31 AM | PERMALINK

Yet it is amazing how well the market for credit default swaps has functioned during the financial crisis. - Gramm

And the opium market is doing just fine as well.

Posted by: Danp on February 21, 2009 at 8:37 AM | PERMALINK

the former "meanest senator" has never been shy to claim that his person philosophy of political economy is the law of the jungle, and the food chain model of the predator.

i'd hafta say gramm is way way way beyond racism (or sexism). gramm is a goddam animal. and rabid, to boot.

Posted by: neill on February 21, 2009 at 8:44 AM | PERMALINK

Reviving Phil Gramm goes beyond cluelessness-- I'm thinking now that Republicans are just absolutely out of alternatives. Devil and/or deep blue sea, take your pick.

Posted by: MattF on February 21, 2009 at 8:52 AM | PERMALINK

Granted. But can you please inform us on all the names of the democrats and republicans in the Congress and in the Clinton White House who assisted Gramm in enacting all this? There are plenty of other heads out there that need to roll. This has been a disaster, a very bipartisan disaster.

Posted by: lou on February 21, 2009 at 9:15 AM | PERMALINK

As long as the 'chattering classes' take him seriously he will once again become 'respectable'. If there were any brains among them Gramm's name would never be seen in print again, nor his voice or face heard or seen. Of course, the same could be said about so many other Rethugs.

Posted by: rich on February 21, 2009 at 9:19 AM | PERMALINK

I think the talking points thing might be a bit organized. Last night on the PBS yelling heads show, Conservative Barbie was pushing the CRA line, too.

Posted by: dr2chase on February 21, 2009 at 9:39 AM | PERMALINK

Just remember one thing. Phil has greater problems than this on his mind right now.

The bank that Phil shilled for was UBS. UBS just announced that they have to reveal the US owners of some 52000 accounts who used them to evade the IRS for the last nine or so years.

Phil was brought on in 2000 to UBS for his influence and connections.

I don't think it was a coincidence.

Posted by: Former Dan on February 21, 2009 at 9:45 AM | PERMALINK

As far as Gramm's criticism of the CRA goes, see

Governor Randall S. Kroszner
At the Confronting Concentrated Poverty Policy Forum, Board of Governors of the Federal Reserve System, Washington, D.C.
December 3, 2008

". . . Some critics of the CRA contend that by encouraging banking institutions to help meet the credit needs of lower-income borrowers and areas, the law pushed banking institutions to undertake high-risk mortgage lending. We have not yet seen empirical evidence to support these claims, nor has it been our experience in implementing the law over the past 30 years that the CRA has contributed to the erosion of safe and sound lending practices. . .

Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis. . .

When we conducted this analysis, we found essentially no difference in the performance of subprime loans in Zip codes that were just below or just above the income threshold for the CRA.9 The results of this analysis are not consistent with the contention that the CRA is at the root of the subprime crisis, because delinquency rates for subprime and alt-A loans in neighborhoods just below the CRA-eligibility threshold are very similar to delinquency rates on loans just above the threshold, hence not the subject of CRA lending . . ."

Phil makes a lot of assertions that aren't backed up by facts. Gov. Kroszner, in contrast, relies heavily on data and observed facts.

So who ya gonna believe, Phil Gramm or Federal Reserve Governor Randall Kroszner? You be the judge. (Phil will probably call Gov. Kroszner a radical liberal, oh well, sticks and stones).

Posted by: pj in jesusland on February 21, 2009 at 9:54 AM | PERMALINK

Individual villains, of course, must be exposed and denounced, but it is the essence of the modern conservative agenda and underlying philosophy that is ultimately at fault. Unless that ideology is discredited any gains to be made will be temporary and illusory. We didn't get to this point quickly or because of the actions of a few individuals; ostracizing, or incarcerating some of the more egregious offenders is barely even a start.

Posted by: Michael7843853 on February 21, 2009 at 10:15 AM | PERMALINK

No...Gramm shouldn't just "go away." He should be put away for the incredible damage he has done to our economy by pushing those banking changes.

and the Swiss are going to give up a few names as a face saving move, but if you think we will ever get the full list of wealthy tax payers who have used UBS and other "havens" to shield their assets from US taxation, you are nuts.

There isn't much legally that can force the Swiss to give up that information and the ONE thing the Swiss have to their benefit is all the money they hold in their banks. As soon as they start a major release of information about their account holders, the stampede to other international "safe havens" would level the Alps. They've defended their turf for centuries No reason why things should change now.

Posted by: dweb on February 21, 2009 at 10:29 AM | PERMALINK

But... but... but... how can distinguished white males with no desire but to do the best for themselves ever have anything to do with anything wrong? It has to be them trouble-makin' brown and black folks - they've been nothing but trouble for us innocent white guys...

And that is the real Republican position on everything that's gone wrong.

Posted by: TCinLA on February 21, 2009 at 10:56 AM | PERMALINK

Calling Gramm - or any Republican - an "animal" is an insult to animals. When was the last time an animal lied to you, cheated you, stole from you, or was anything but straightforward, loving, honest and honorable?

Posted by: TCinLA on February 21, 2009 at 10:59 AM | PERMALINK

As a Texan, Phil Gramm knows his face is gett'n longer! -Kevo

Posted by: kevo on February 21, 2009 at 11:09 AM | PERMALINK

"Guns don't kill people, people kill people"; "conservatism didn't fail, it was failed"; "US interrogation practices are fine except for a few 'bad apples'"; "credit default swaps worked just fine until poor people screwed them up."

The right loves shifting the blame away from the obvious. The conservative culture of victimhood is very much alive and well.

Posted by: petorado on February 21, 2009 at 11:11 AM | PERMALINK

The Gramms Have Come A Long Way
since they both taught economics at Texas A&M - and were Democrats.

Does anyone know their history, between modest professorhood and raving rightwing Republican greedheads? What happened?

Posted by: Zandru on February 21, 2009 at 11:27 AM | PERMALINK

Is Gramm part of the UBS bank plan to hide bank accounts from the IRS?

I've tried to get that plan at my local credit union and failed.


Posted by: Glen on February 21, 2009 at 11:40 AM | PERMALINK

Granted. But can you please inform us on all the names of the democrats and republicans in the Congress and in the Clinton White House who assisted Gramm in enacting all this? There are plenty of other heads out there that need to roll. This has been a disaster, a very bipartisan disaster.

Absolutely. But I think people are concentrating more on the Republican side of things because they're (mostly) the true believers. You can complain about the Democrats being wimpy for going along with it, but if they went along with those policies just to get along, they'll go along with better policies, too.

As Michael7843853 said above, it's the ideology that needs to be refuted, not the individual people.

Posted by: Mnemosyne on February 21, 2009 at 12:44 PM | PERMALINK

It's time to investigate and get to the bottom of this banking, insurance, and mortgage meltdown. The same names keep coming up. Gramm's lobbying influence with the banking and mortgage industry and deregulation of Fannie Mae and Freddie Mac and his subsequent position at UBS are more than a coincidence. Get the complete history of Mr. & Mrs. Gramm out there in the main stream press. Remind americans of Phil Gramm's "nation of whiners" comment and his and McCain's denial of the recession and their insistence that "the fundamentals of the economy are sound" last September. Gramm was McCain campaign's chief financial advisor, and they had both worked to deregulate the banking and insurance industries. McCain accepted soft money donations from AIG to his nonprofit, established after his loss in 2000 and headed by his 2008 campaign manager. McCain subsequently voted to bail out AIG-- twice. The political stink of greed rises from this global financial crisis, and the familiar names seem to float to the surface.

Posted by: Carol A. on February 21, 2009 at 1:11 PM | PERMALINK

huff post has some excellent pushback to the "there's more than enough blame to spread around argument"....


Posted by: dj spellchecka on February 21, 2009 at 1:29 PM | PERMALINK

Clinton signed the bills with strong bipartisan support. So, in all fairness, they were all asleep at the wheel. It is disingenuous to single out Gramm.

Posted by: Dutch on February 21, 2009 at 1:41 PM | PERMALINK


and CRA, Freddie Mae, Barney Frank, Paulson, Bernanke, Countrywide, Freddie Mac, Bush, WaMu, Wall Street, fraudulent Orange County mortage lenders, etc., etc.

Anyone who pins this on Phil Gramm is dumber than a can of worms.

Posted by: Greg Ransom on February 21, 2009 at 2:08 PM | PERMALINK

Yeah Gramm is bad, but last I checked he can't sign bills into law. It took Bill Clinton for that. And let's list all the Democratic Senators that helped Gramm along the way. I wish Obama would appoint all the Senate Democrats to some post or another. Those clowns are almost as bad as the Republicans.

Posted by: jvoe on February 21, 2009 at 2:45 PM | PERMALINK

But hanging one of these idiots in the town square will get the rest of these crook's attention. Somebody has to be sacrificed in these desperate times. I nominate Gramm.

Posted by: Glen on February 21, 2009 at 4:01 PM | PERMALINK

Yup. When we bring back the guillotine, Gramm should be first.

Posted by: Robespierre on February 21, 2009 at 8:31 PM | PERMALINK

Phil Gramm: "The fundamentals of the CDS market are strong."

Posted by: Led on February 21, 2009 at 10:21 PM | PERMALINK

Repeal of Glass/Segal and the CRA represents Repuplican and Democrat incompetence. Rather than presume political parties have genius captains at the helm, what about the idea that Gramm, Clinton, Frank, Dodd, are all just too mentally limited to be given such awesome power? Our checks and balances didn't work here did they?

Greed, incompetence, committee chair warmers, and many others are to blame. Now we must live with the consequences: financial Armageddon.

Posted by: GME on February 23, 2009 at 6:20 PM | PERMALINK



Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM

buy from Amazon and
support the Monthly