03/24/2009 05:12 am ET | Updated May 25, 2011

Phil Gramm Takes No Blame

Former Senator Phil Gramm published a piece in Friday's Wall Street Journal exculpating himself from any serious role in the credit crisis-and his fell Republicans, of course. It was government bleeding hearts who did it all.

This is of course now the accepted line of the Republican stalwarts, mouthed by policymakers and some well-placed media pundits alike. Encouraging Fannie Mae to make some mortgages to low income Americans apparently somehow forced investment bankers to borrow forty times their capital, cajoled credit agencies to give almost anything a triple-A, made Washington Mutual and Countrywide give countless interest-only mortgages to individuals they knew could not pay unless housing prices kept soaring, and gave the green signal to Citigroup, Lehman Brothers, Merrill and so on to borrow short (commercial paper) and lend long (CDOs).

What's with these guys? Do they care not a bit for logic or the future of the system? Are they constitutionally incapable of taking any responsibility?

Here's one of Gramm's jokes. He argues it couldn't have been the deregulation bill that he co-authored back in 1999 -- and that Bill Clinton happily signed, by the way -- that led to any of this. The bill allowed commercial banks and investment banks to merge, remember -- mostly to allow older line commercial banks to act like investment banks. To prove his case, Gramm writes smugly that it was the sole investment bank, Lehman, that went under, not the diversified conglomerate JP Morgan. Did Gramm suddenly forget about the travails of those other highly diversified banking conglomerates, Citigroup or, now, Bank of America -- both beneficiaries of his deregulationist good graces?

When you are desperate to defend yourself, this transparent gambit is what you come up with. Also, when you are merely preaching to the converted. JP Morgan was simply smart enough to avoid many of the mindless, greedy trades -- it had nothing to do with diversity. So was the non-bank Goldman Sachs.

The main reason investment banks are now becoming bank holding companies is to get the FDIC insured deposits that are stable. They want federal regulation to protect them.

Gramm now works for the investment banking arm of UBS, the Swiss bank. UBS may have to fork over the names of 52,000 depositors who may have been trying to avoid paying their incomes taxes in the U.S. No doubt, Gramm will blame government for that, too. After all, if America didn't have any income taxes at all, UBS wouldn't have been forced to hide all that money illegally.

Gramm's deregulationist spirit is all over this crisis.