Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action.
-- former U.S. Senator Phil Gramm, Nov. 16, 2008
The reason I bring up the former senator from Texas is that Gramm has been brought on as a senior economic adviser to Republican presidential candidate Ted Cruz.
This isn't a promising development for Cruz, or the prospect that should he become president he will come up with sensible policies to address the U.S.'s economic challenges. Why do I say that? Because of what happened in the 1990s and early 2000s when the U.S. listened to Gramm.
But first, a more recent trip down memory lane. Gramm, remember, was brought on as an adviser to the presidential campaign of John McCain in 2008. As the economy was stumbling that summer, Gramm said:
You’ve heard of mental depression; this is a mental recession. We may have a recession; we haven’t had one yet. We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline.
At that point, the financial crisis was gathering headway: foreclosures had doubled in the span of a year, 1.6 million more people were unemployed than a year earlier, the stock market had plunged 25 percent and the nation was already eight months into the worst recession since the Great Depression. McCain, in a vain effort to rescue his campaign, had to immediately disavow the remarks. Gramm, meanwhile, refused to retract his comments. He was gone from the McCain campaign a few days later.
Not to put too fine a point on it, but I believe -- as do many others -- that Gramm was one of the major figures who helped set the stage for the crisis. My book "Bailout Nation" included a list of “Who is to Blame for the Crisis” that put Gramm at No. 3 after former Federal Reserve Chairman Alan Greenspan and the Fed itself. I'm not alone: Time magazine placed him at No. 2, while CNN ranked him No. 7.
Just to be clear, Gramm was but one player in the debacle and blame for the financial crisis is spread far and wide, extending to major figures in both political parties.
But Gramm is the topic today, so let's start with a list of particulars.