Gramm resigned in July after offering these words of consolation to Americans who have been suffering from foreclosures, job losses, high gas prices and rising food costs:
"You've heard of mental depression; this is a mental recession" he told the Washington Times. "We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, ´America in decline´ … We've never been more dominant; we've never had more natural advantages than we have today."
Gramm didn't become that arrogant overnight. Back in 1996 he thought enough of himself to run for President, and John McCain was his campaign chairman! The night before he formally announced his candidacy, Gramm spoke to a glittering crowd in a Dallas hotel where he took in $4.1 million. That set a record for the largest amount raised in a single campaign event.
He told the crowd: "Thanks to you, I have the most reliable friend you can have in American politics, and that's ready money." How inspirational!
Gramm must have kept his light under a bushel on the campaign trail because he came in fifth on the Republican side of the Iowa Caucuses, and ended up with only one delegate to show for the $20 million he spent. In political terms, his "reliable friends" didn´t amount to a bucket of warm spit!
Even without becoming president, Gramm still inflicted terrible damage on the economy. In 1999, he happened to be Chairman of the Senate Banking Committee just when the finance, insurance, and real estate industries were spending $200 million lobbying Congress to deregulate the banks. They targeted their campaign contributions to the leaders of Congressional banking committees, and Phil was there.
He introduced the Gramm-Leach-Bliley Act. When it became law, it repealed the Depression-era banking reform law called the Glass-Steagall Act.
In the run-up to the stock market crash of 1929, bankers invested vigorously in the market, loaned money to speculators to invest, and even loaned their depositors' money to companies in which they were invested. When the market imploded, 11,000 banks failed, and millions of Americans went broke overnight. A lot of them blamed bankers.
The Roosevelt Administration enacted the Glass-Steagall Act to create a firewall between commercial banks and investment (corporate securities) banks because the volatile mixture of the two helped fire the speculative frenzy in the stock markets.
The Act also established the Federal Deposit Insurance Corporation (FDIC) which allowed ordinary Americans to put their money into accounts that were federally insured and detached from stock market risks. For many Americans, the Glass-Steagall Act was the New Deal.
Seven decades later, Phil Gramm got rid of that banking reform law at the request of investment bankers, although the FDIC still exists.
Phil took charge again in 2000. Congress was trying to pass a 10,000 page, $384 billion omnibus spending bill just before Christmas break, and Senator Gramm clandestinely slipped in a 262-page amendment entitled the Commodity Futures Modernization Act. (CFMA) The entire bill passed and was signed into law by lame-duck President Bill Clinton.
The CFMA effectively made the market for exotic derivatives off-limits to regulatory agencies like the SEC. Two of these financial instruments, credit default swaps and collateralized debt obligations, led directly to the sub prime real estate debacle and the banking credit crisis of today.
Phil Gramm´s legislation created a shadow banking system that operates outside any government oversight. Unfortunately, it leads to financial disasters that often require government (taxpayer) rescue in order to avert a national economic catastrophe.
After all his hard work undermining the economy, Gramm left the Senate in 2003 and joined the Swiss banking firm, UBS. However, he remained in Washington,DC so he could lobby Congress, the Federal Reserve and the Treasury Department for more banking deregulation laws.