Number 4 CNN Top Ten Culprit is named- Texas Senator and Republican Phil Gramm
Texas Senator Phil Gramm served as a Democratic congressman from 1978-1983, as a Republican congressman from 1983-1985, and as a Republican senator from 1985-2002. Gramm’s most recent post was serving as economic adviser to John McCain during McCain’s presidential campaign. McCain severed ties with him in the summer of 2008 after Gramm made insensitive remarks about people whining and complaining about the economy.
In late 1999, Gramm was a major supporter of a new law passed under President Clinton that allowed banks to merge with investment and insurance companies. Gramm claimed that the move would promote competition within the market. What Gramm didn’t explain was that the 1999 legislation overturned a Depression Era law that made it illegal for big companies to merge because the resulting mega-companies would represent too large a piece of the pie in the market. If one of these mega-companies failed, it would threaten the health of the entire financial market and thereby the overall economy (sound familiar?). This law from the Depression Era was considered out-dated, and the new bill passed without a single “no” vote. In other words, it was bi-partisan legislation, so no finger-pointing is necessary here.
One year later, Gramm was at it again. In late 2000, he was touting legislation that would deregulate those mega-firms created under the 1999 bill he adored. Some financial analysts believe the passage of these to two bills was the one-two punch that delivered the knock-out to our economy. This legislation created an atmosphere of penalty-free risk taking—in other words unhindered, all-out greed was unleashed on Wall Street. Companies could risk, risk, risk and spend, spend, spend because the companies were believed to be fail-proof. Why were they fail-proof? Because they were too big to fail. Seriously, that was the mindset of the Wall Street fat cats until reality set in. Or did it? These CEO’s are so out of touch that they take luxury weekends with bailout money and show up to congressional hearings in their private jets! Even when their kingdoms are crumbling around them, they seem to be able to practice an astounding depth of denial.
Is it really possible that our economy could be so vulnerable as to be taken down by the passage of only two pieces of legislation? Progressive economist James Galbraith of the University of Texas says, “Yes.” Gramm was respected as an economic authority in Washington. Law makers in both parties on Capital Hill in 1999 and 2000 trusted his opinions and followed his advice.
Gramm still contends that the two bills only served to open up competition between companies and in no way contributed to the current sad state of the economy. Could it be that “opening up competition” is just another way of saying “absolute deregulation”?
Both parties on Capital Hill are now largely in agreement that deregulation went too far.
Where is Gramm now? He is currently employed by a big financial firm in Switzerland.