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Swiss bank accounts. Just the term brings with it a mysterious, dangerous air. A place for shadowy assassins to pick up their pay. International agents collecting on acts of extortion. Dusty hordes of Nazi treasure.

However, Swiss giant UBS has admitted to something just as illegal, and a good deal more tawdry. They have been using their operations in the US to lure wealthy Americans into plopping their millions into UBS accounts, where they can evade taxes.

The U.S. government has been probing UBS with help from sources such as a former UBS banker, Bradley Birkenfeld, who last year pleaded guilty to helping a California real estate mogul evade millions of dollars of taxes. Birkenfeld told investigators that UBS personnel went to elaborate lengths to help U.S. clients stash money in secret Swiss accounts.

UBS is complaining that, shortly after the Bush administration came to town in 2001, they signed a get out of jail free card with the IRS; a contract that authorized UBS to hide their clients' identities as long as UBS promised they would follow the rules. Now UBS is holding to the principled position of no-takey-backseys.

"The IRS seeks to repudiate its own contract and demands the production of the very account information that the IRS agreed would remain confidential," wrote UBS lawyers

Even though UBS admits that they might have dented the rules a little.

As many as 60 Swiss-based private bankers who were not licensed to operate in the U.S. traveled to the United States with encrypted laptop computers to maintain client secrecy and got training on how to avoid detection by U.S. authorities, according to the statement filed Feb. 18.

What would cause UBS to feel that they could operate in such a way? And why would the IRS sign an agreement giving them the status to act as a proxy for the government?

Surely it wasn't because the the man who is now the vice chair for investments at UBS was then a Texas Senator, friend and adviser to Bush, and chairman of the Senate Banking Committee, Phil Gramm.

Let's wind the tape back a bit. In 1999, Gramm pushed through the Gramm-Leach-Bliley Act, which passed on the last day before the Christmas break as an attachment with no debate in either the House or Senate. That bill destroyed most of the protections that had been put in place after the bank failure of the 1930s.

This act repealed part of the Glass-Steagall Act. This may sound like a bunch of Congressperson soup, but the gist of it is that Glass-Steagall was put in place in 1933 to control the rampant speculation that had helped cause the collapse of banking at the outset of the Depression, and to prevent such consolidation of the banks that the nation had all its eggs in one fiscal basket.

Gramm-Leach-Bliley reversed those rules, allowing not only more bank mergers, but for banks to become directly involved in the stock market, bonds, and insurance.

The very next year, Gramm was back again with the Commodity Futures Modernization Act. This bill was passed as an attachment to a "must pass" spending bill on the very last day of the 106th Congress. That bill earned Gramm the position as one of the key players in deregulating derivatives.

"I think we would do well to remember the Lincoln adage that to ask a society to live under old and outmoded laws--and I think you could say the same about regulation--is like asking a man to wear the same clothes he wore when he was a boy." -- Phil Gramm

The CFMA provided protection for such clever creations as the Credit Default Swap, fostered a huge and growing market for derivatives of all types, and explicitly wrote into law the "Enron loophole" that allowed energy traders to manipulate the price and availability of electricity in California a few months later. In exchange, the banks poured more than $1 million into Gramm's campaign coffers.

A year after that, UBS got it's special agreement with the IRS, and a few months later Phil Gramm stepped down from the Senate early to take his spot as a vice-chairman for investment banking with UBS. While still in his position at UBS, Gramm would become a registered lobbyist for additional changes in banking law. In 2007, he became chief economic adviser and co-chair of the campaign for his long time friend, John McCain. Gramm also wrote McCain's economic plan. Had McCain won the election, Phil Gramm might very well be Secretary of the Treasury today, if he was willing to take the pay cut, were it not for a couple of unfortunate comments.

"We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline," the former Texas senator said. "You've heard of mental depression; this is a mental recession."

Gramm was defended for his statements by that favorite non-economist of the right, Amity Shlaes, who is always so dead right in her analysis of the economy.

...to liken the current moment to the Great Depression, or even the early 1980s, as Campaign Economists have, is to whine, just as Gramm said.

However, Americans in general weren't so quick to accept that the misery they were experiencing, and the grim forecast looming over the country, was just in their heads.

Gramm was unrepentant. Just this past summer Phil Gramm sat down for a friendly chat about the economy that he, more than any other single person, helped to create. Though he was proud of his actions, there were certainly things going on that Gramm didn't like. In particular, he was upset because CEOs and Wall Street bankers were underpaid.

Most of his former colleagues probably can't fathom why Wall Street bankers make tens of millions of dollars in salaries and bonuses each year. How would he justify these fat pay days? "It's simple," he lectures, sounding very much like the Texas A&M economics professor that he was in the 1970s: "In economics, we define labor exploitation as paying people less than their marginal value product. I recently told Ed Whitacre [former CEO of AT&T, who retired with a $158 million pay package] he was probably the most exploited worker in American history because he took Southwestern Bell, which was the smallest of the former Bell companies, and he turned it into the dominant phone company on earth. His severance package should have been billions."

Ladies and gentlemen, Phil Gramm. Exemplar of Republican economic policy and the author of our economy.

If leaders are so completely responsible for corporate success that they deserve all the credit (and money) when a company succeeds, does the same apply when they are abject failures? If so, UBS should send Gramm the bill for leading their investment wing into massive losses.

When they're done, can we send Gramm the bill for our economy?

 Original published on Daily KOS