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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
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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.

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.
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)
Former Texas Sen. Phil Gramm, left, stumps for Republican presidential hopeful, Sen. John McCain, R-Ariz., at a campaign event in Myrtle Beach, S.C.
Former Texas Sen. Phil Gramm, left, stumps for Republican presidential hopeful, Sen. John McCain, R-Ariz., at a campaign event in Myrtle Beach, S.C.   (AP Photo/Charles Dharapak)
Phil Gramm pulled a sly legislative maneuver that led to the subprime mortgage meltdown, argues David Corn in Mother Jones. Now McCain has mentioned Corn as a possible Treasury secretary.
Phil Gramm pulled a sly legislative maneuver that led to the subprime mortgage meltdown, argues David Corn in "Mother Jones." Now McCain has mentioned Corn as a possible Treasury secretary.   (AP Photo/Gerald Herbert)
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John McCain • Treasury Department • Enron • subprime crisis • Phil Gramm

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