As the crisis of the American financial system deepens, former Texas Senator Phil Gramm is a consensus choice as one of its chief culprits. In recen
February 21, 2009


As the crisis of the American financial system deepens, former Texas Senator Phil Gramm is a consensus choice as one of its chief culprits. In recent weeks, the New York Times, Time and Nobel prize-winning economists alike have suggested a warm seat awaits Gramm in Dante's inner circle. Which is why on the very day the UBS vice-chairman's firm was sued by the Justice Department for its role in a mushrooming tax evasion scandal, Gramm took to the pages of the Wall Street Journal to blame others for the economic calamity he helped create.

As ThinkProgress noted, Gramm in his extreme makeover pointed the finger at the right-wing's usual suspects. In Gramm's revisionist history, Fannie and Freddie, the Community Reinvestment Act and, above all, the poor are responsible for the nation's economic plight. Three months after the New York Times concluded "deregulator looks back, unswayed," Gramm insisted the 1990's deregulation crusade he led had nothing to do with it:

"I believe that a strong case can be made that the financial crisis stemmed from a confluence of two factors. The first was the unintended consequences of a monetary policy, developed to combat inventory cycle recessions in the last half of the 20th century, that was not well suited to the speculative bubble recession of 2001. The second was the politicization of mortgage lending."

Gramm's fingerprints, of course, have been all over the financial meltdown and steep downturn gripping the U.S. economy over the past year. In his role as an adviser to John McCain's presidential campaign, Gramm famously decried the "mental recession" and mocked the United States as a "nation of whiners." But it was his "Enron Loophole," codified in the 2000 Commodity Futures Modernization Act, which not only enabled the Enron disaster but opened "the door to unregulated trading of credit default swaps, the financial instruments blamed, in part, for the current economic meltdown." And the Texas Senator's machinations in the Senate to create the 1999 Gramm-Leach-Bliley Act helped produce the subprime mortgage cataclysm, including catastrophic losses at UBS since joining the company in 2002.

Which brings us to a final irony of Gramm's extreme makeover. As it turns out, before he became a UBS vice-chairman in 2002, a company which this week agreed to pay a $780 million criminal fine and admitted to conspiring to defraud the IRS, then Senator Phil Gramm helped lead the 1990's Republican war to gut the Internal Revenue Service. Perrspectives has the details.

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