Gramm Guilty of Sparking Subprime Mess

Ex-senator still has clout despite dire deregulation
By Kate Rockwood,  Newser Staff
Posted Jul 26, 2008 5:10 PM CDT
Phil Gramm resigned as campaign co-chairman Friday, July 18, 2008, after his comments that the United States had become a "nation of whiners" who constantly complain about the state of the economy.    (AP Photo)
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(Newser) – Former Senator Phil Gramm helped create the subprime meltdown, yet faces no punishment—and could even become treasury secretary if John McCain wins in November, David Corn writes in Mother Jones. Eight years ago, a Gramm bill stopped the feds from regulating insurance policies that protected Wall Street securities. These policies, or "swaps," ended up at "the heart of the subprime meltdown," one expert said.

"Tens of trillions of dollars of transactions were done in the dark," said one professor. "No one had a picture of where the risks were flowing." Yet after leaving the Senate, Gramm landed a lucrative job at UBS, a bank that bought an investment house thanks to Gramm's deregulation. But Corn sees poetic justice: UBS wrote down $37 billion this spring, and blamed most of it on swaps that sent its debt obligations out of control.