Continuing our general discussion on the trouble Republicans seem to have had lately in dealing with reality, we now get this truly jaw-dropping article by the New York Times today concerning fanatical deregulator Phil Gramm.
Gramm, you probably remember, was one of John McCain's chief economic advisers, at least until he went on TV and said the country was only in a "mental recession" and called Americans "a nation of whiners."
Now, looking back at his career in Washington and as a lobbyist for UBS, Gramm sees nothing wrong with what he hath wrought. More details below the fold.
Phil Gramm is a fan of free markets. And when he says "free", he really does mean free, as in "free to do whatever you so please to make a buck, no matter what the consequences."
Phil Gramm does not see anything wrong with predatory lending. Indeed, he thinks such a think does not (and cannot) exist:
"Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action."
So who is to blame for the subprime crisis? Lenders? Of course not. The answer is clearly Democrats and poor people:
He blamed others for the crisis: Democrats who dropped barriers to borrowing in order to promote homeownership; what he once termed "predatory borrowers" who took out mortgages they could not afford.
Oh, those poor, unfortunate mortgage brokers! Being "preyed upon" by vicious applicants! Forced to give out loans against their will!
And of course, Democrats and their crazy idea of an "ownership society". Really, what kind of idiot would propose such a thing? Oh... never mind.
And of those lawmakers who proposed to more closely regulate those subprime lenders?
But looser regulation played virtually no role, he argued, saying that is simply an emerging myth.
"There is this idea afloat that if you had more regulation you would have fewer mistakes," he said. "I don’t see any evidence in our history or anybody else’s to substantiate it." He added, "The markets have worked better than you might have thought."
Now you'd think it would be easy to stop there and realize the kind of willfully blind person we're dealing with here, but no, he's not done yet.
As Devilstower brilliantly pointed out on Sunday, a big part of the financial crisis revolved around these nebulous Credit Default Swaps we've been hearing so much about lately. By the time of the crisis, the notional value of these swaps was worth more than, literally, all the money in the world.
In the years after his wife, Wendy, left as the head of the Commodity Futures Trading Commission, some people proposed that these opaque instruments that not even Ph.D's understood might, just might, need some sort of oversight. Gramm would have none of it. He vehemently fought against any sort of regulation of derivatives. He had some help from Alan Greenspan and Larry Summers (Summers' involvement is particularly scary considering Obama is mulling over him for Treasury Secretary, capcrime has a good diary about this).
But it was Gramm who ramrodded the legislation through Congress:
Finally, he had extracted enough. In December 2000, the Commodity Futures Modernization Act was passed as part of a larger bill by unanimous consent after Mr. Gramm dominated the Senate debate.
"This legislation is important to every American investor," he said at the time. "It will keep our markets modern, efficient and innovative, and it guarantees that the United States will maintain its global dominance of financial markets."
At least for a few more years, right?
And I haven't even brought up the Gramm-Leach-Biley Act, which repealed the Glass-Stegall Act separating investment banks from commercial banks. Which worked out great, because when your bank's investment banking division gorged itself on mortgage backed securities and credit default swaps and then tanked, it took the commercial part of the bank (which held your deposits) with it. Exhibits WaMu, Wachovia, and so on. Of course, luckily, (most of) your money was insured by the FDIC, which wouldn't exist if Phil Gramm had his way.
But does Gramm concede this rampant deregulation may have played a part in all this mess? His answer, I kid you not:
"They are saying there was 15 years of massive deregulation and that’s what caused the problem," Mr. Gramm said of his critics. "I just don’t see any evidence of it."
P.S. This is just a highlight, long as it might be. You really need to read the whole article to let the pure evil of this guy sink in.