Phil Gramm’s Culpability, Acknowledged

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Phil Gramm won’t be able to wash this stink off of him.

Time magazine has published a list called “25 People to Blame for the Financial Crisis” and second on the list is our buddy Phil, the man who headed the Senate Banking Committee during the federal government’s deregulatory bonanza in the late ’90s. Gramm passed or affected two key pieces of legislation that eventually helped create the financial meltdown we are experiencing today. The first of the two was the 1999 Gramm-Leach-Bliley Financial Services Modernization Act, which repealed the Depression-era Glass-Steagall Act and allowed financial institutions to merge like crazy and ignore longtime regulations and limitations. The second was something that Mother Jones uncovered in summer 2008. Here’s Time:

[Gramm] also inserted a key provision into the 2000 Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. Credit-default swaps took down AIG, which has cost the U.S. $150 billion thus far.

Right. As David Corn reported for Mother Jones, Gramm’s sly move gave rise to an entire industry of financial products, like credit default swaps, that acted like insurance for the toxic mortgage-backed securities that got passed around Wall Street. Investors who thought they were protected made more and more and worse and worse financial bets, all away from regulatory oversight. Eventually, it caught up with them.

The result is the mess we’re in today. And it appears the public is able to trace culpability all the way back to Gramm, because in voting on Time‘s website, Gramm has been fingered by readers as the most guilty party in this disaster. To read more about credit default swaps and how “Foreclosure Phil” created our crisis, see David’s article here.

DOES IT FEEL LIKE POLITICS IS AT A BREAKING POINT?

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It sure feels that way to me, and here at Mother Jones, we’ve been thinking a lot about what journalism needs to do differently, and how we can have the biggest impact.

We kept coming back to one word: corruption. Democracy and the rule of law being undermined by those with wealth and power for their own gain. So we're launching an ambitious Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption, and asking the MoJo community to help crowdfund it.

We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We want to dig into the forces and decisions that have allowed massive conflicts of interest, influence peddling, and win-at-all-costs politics to flourish.

It's unlike anything we've done, and we have seed funding to get started, but we're looking to raise $500,000 from readers by July when we'll be making key budgeting decisions—and the more resources we have by then, the deeper we can dig. If our plan sounds good to you, please help kickstart it with a tax-deductible donation today.

Thanks for reading—whether or not you can pitch in today, or ever, I'm glad you're with us.

Signed by Clara Jeffery

Clara Jeffery, Editor-in-Chief

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