Where is Phil Gramm hiding? The former Republican senator from Texas, who wrote the radical banking deregulation of the 1990s and was rewarded for his efforts to enrich the banks with a plum job at Switzerland-based UBS, has not been heard from since his bank got nailed by the G-men. Or, as The New York Times put it, UBS now has the distinction of being “the first big global bank in more than two decades to have a subsidiary plead guilty to fraud.”
Surely Gramm, who retired from the bank last year, must know something about the nefarious activities conducted over a timespan when he was helping to manage the firm. This latest scandal, involving the rigging of a major trusted banking interest rate, might finally test the theories that he has long written into law that assume banks are best when regulated by themselves—a now obviously dumb idea.
As the Wall Street Journal reported on Thursday: “U.S., U.K. and Swiss authorities alleged a vast conspiracy led by UBS AG to rig interest rates tied to trillions of dollars in loans and other financial products, indicating the practice was far more pervasive than previously known.” But what did Gramm know about this criminal behavior at a bank he helped govern, and when did he know it?
In a deal brokered with the criminal division of the U.S. Justice Department, UBS was also fined $1.5 billion in the massive Libor interest-rate-fixing scam that evidenced a pattern of deep corruption across a score of top banks. But Gramm, the man most responsible for the repeal in 1999 of 60 years of sensible banking regulation that enabled the financial industry to run wild, has not responded to a single question from the mainstream media concerning UBS’ criminal behavior. I assume he has been queried, given his important prior contribution to the sorry state of banking. .....................(more)