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Architect of Financial Meltdown Proud of His Failures

Published 11/18/08 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

Former Senator Phil Gramm, now an investment banker and lobbyist with UBS, is still unmoved from his position as a leading proponent of market deregulation, according to The New York Times.

In spite of obvious evidence to the contrary, Gramm still believes that deregulation is the solution and that any more government regulatory pressures would have made the current financial collapse even worse. Gramm used his expertise (a PhD in Economics from the University of Georgia in 1967) and position on the Senate Banking Committee to push his “free-market” ideology for a generation in the halls of Congress. The result of his exploits has been the boom-bust cycle endemic in the American economy since the Reagan White House.

Gramm and his likeminded cohorts in the Senate became very influential by sticking to proposals of deregulation. Their “business-minded” ideology also ensured that each was the recipient of millions of dollars in campaign financing from major Wall Street firms who stood to gain from a lack of government oversight.

It should be noted that Gramm (a Republican Senator from Texas) was at the height of his influence during the Clinton administration. With all of the favorable allusions made by the Clinton administration during the Democratic presidential campaigns it is easy to overlook the fact that it was former President Clinton who helped continue the charge toward deregulation of the financial markets (not to mention his efforts to support “free-trade” and other ruinous policies).

Gramm studied the Great Depression during his professional career in economics, and taught classes on the subject at Texas A&M University. With what one could assume to be a very sound background in research it is surprising that Senator Gramm (or for that matter Fed chairman Bernanke) would so grossly misunderstand the circumstances of that collapse. We are currently primed for a similar fall, yet Gramm is actually proud of what he accomplished in his time in the United States Senate.

Gramm believes that his moves to open unfettered derivatives markets would leave the United States with a modern, innovative economy that would maintain “global dominance of financial markets.”

With volumes of evidence against him, disproving his theory – a theory backed by Alan Greenspan, Arthur Levitt, Lawrence Summers and others – that deregulation should be the primary objective of a economic policy, Phil Gramm is unmoved. All of the aforementioned “free-marketers” have since recanted, even the stoic Alan Greenspan, yet many remain unmoved by the evidence showing their experiment with unbridled markets to be a failure.

Americans need to stop electing officials that facilitate the detriment of the United States. Our officials are hired to work for us, yet they are more apt at serving their own best interests. We need to hold elected officials more accountable for their actions, instead of allowing them to deplete our country from within.

Source New York Times:

A fierce opponent of government intervention in the marketplace, Mr. Gramm, a Republican from Texas, recalled the episode during a 2001 Senate debate over a measure to curb predatory lending. What some view as exploitive, he argued, others see as a gift.

...

On Capitol Hill, Mr. Gramm became the most effective proponent of deregulation in a generation, by dint of his expertise (a Ph.D in economics), free-market ideology, perch on the Senate banking committee and force of personality (a writer in Texas once called him "a snapping turtle"). And in one remarkable stretch from 1999 to 2001, he pushed laws and promoted policies that he says unshackled businesses from needless restraints but his critics charge significantly contributed to the financial crisis that has rattled the nation.

...

In two recent interviews, Mr. Gramm described the current turmoil as "an incredible trauma," but said he was proud of his record.

He blamed others for the crisis: Democrats who dropped barriers to borrowing in order to promote homeownership; what he once termed "predatory borrowers" who took out mortgages they could not afford; banks that took on too much risk; and large financial institutions that did not set aside enough capital to cover their bad bets.

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