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probably finalized their Christmas gift lists, Gramm created what Wall Street analysts now refer to as the “shadow banking system:’ an industry that operates outside any government oversight, but, as witnessed by the Bear Stearns debacle, requiring rescue by taxpayers to avert a national economic catastrophe. While the nation’s investment bankers are paying a heavy price for their unbridled greed \(in billions of dollars of writevice president at UBS AG, a colossal, Swiss-owned investment bank, the post, no doubt, a thank you for assiduously looking out for Wall Street interests during his 23 years in public office. Now, with the aid of his longtime friend Arizona Sen. John McCain, Gramm may be looking at a quantum leap in power and influence. Gramm serves as co-chair of the McCain 2008 presidential campaign. As one of the candidate’s chief economic advisers, he is mentioned as a possible secretary of the treasury in a McCain administration. Their friendship was forged in the Senate as they worked against the Clinton health care proposal, and cemented when McCain served as national chairman of During McCain’s rocky road to the nomination, it was Gramm as much as anyone who helped smooth the way. Last July, when it looked as though McCain’s campaign would go bankrupt, Gramm, who once called money “the mother’s milk of politics:’ advised him to slash his costs and assisted him with fundraising. Throughout the marathon primary season, Gramm has made numerous appearances with McCain and served as an ambassador to conservative groups. This spring, when conservative commentators attacked McCain as too liberal, McCain shored up his conservative bona fides by \(according to bringing Gramm to a meeting with the editorial board of The Wall Street Journal. But ask Gramm about his influence with McCain and it’s clear that the former senator has not lost his talent for political spin. “My position [with the campaign] is, I am the senator’s friend:’ he aw-shuckses in a telephone interview. “It would be a mistake to call me an economic adviser” Calling himself “a private citizen:’ Gramm claims ignorance of McCain’s appearance two days earlier on Jon Stewart’s The Daily Show. “I’m so out of it, I don’t even know who Jon Stewart is,” he says in his trademark Georgia drawl. It’s hard to imagine that anyone remotely connected to politics is unaware of Stewart, but the remark fits well with the homespun persona that Gramm has carefully crafted for public consumption. Despite his false modesty, Phil Gramm remains a powerful force in Republican politics. Here in Texas, his many protgsmost notably Gov. Rick Perry, the beneficiary of a whopping $612,000 in campaign donations from Gramm’s Senate campaign reservesgive him significant reach in Lone Star public policy. Gramm might be interested in downplaying his role with the McCain campaign because, while the alliance might help with conservatives, it’s at odds with the maverick image McCain has worked so hard to project. Gramm is more closely aligned with the kind of influence-peddling represented by the Keating Five scandal, in which McCain intervened with federal regulators on behalf of a campaign contributor with a failing savings and loan. The scandal shredded McCain’s reputation and convinced him of the efficacy of reform. In Gramm, McCain has chosen for a campaign adviser a former senator who espouses free market, conservative principles, but whose actions in public office served wealthy contributors and even himself. Exhibit A: Gramm’s cozy Enron Corp. connections. Not only did CEO Ken Lay chair Gramm’s 1992 reelection campaign, but Gramm’s wife, Wendy, earned $50,000 a year as an Enron director from 1993 to 2001 \(not counting the company’s aggressiveand ultimately self-defeatingpolitical agenda to escape government scrutiny. That Gramm is now advising the Republican nominee for president on economic matters “shouldn’t give people a lot of comfort,” says University of Maryland law professor Michael Greenberger, a senior official at the Commodity Futures Trading Commission in the late 1990s. “Gramm has been a central player in two major economic crisesthe credit crisis and the incredibly high price of energy. … He’s got his fingerprints all over legislative efforts that led to this.” Nonetheless, Gramm holds fast to his ideology. “I’ve never seen any evidence that opening up competition among banks and insurance companies in any way contributed to this,” he says with the patience of the college prof he once was. “You’ve got a lot of people trying to rewrite history. You’ve got people with an ax to grind. They always wanted more government regulation, and when you have a problem, they want the government to regulate more.” His critics say that Gramm’s anti-regulatory rhetoric failed the bulk of his constituentswhich included thousands of hapless Enron employees who lost their life savingsbut lavishly rewarded a few wealthy pals, like Ken Lay. University of Texas economist James Galbraith says Gramm is “not against government at all. His career has been finding ways to make money for his friends. It’s a predator relationship. [Government] is his food supply.” When Gramm retired from the U.S. Senate in 2002, Texas Democrats celebrated that a powerful nemesis would no longer be a force on the national scene. Wrote Molly Ivins: “Gramm both looks like a snapping turtle and has the personality of one. When he ran for president in 1996 and finished fifth in Iowa, all the profiles written of him included the line ‘Even his friends don’t like him.'” She concluded: “We’ll sure miss that sweet style.” Clearly Molly’s jubilation was premature. It’s easy to understand why Democrats were so eager to say goodbye to Gramm, who began his political career when he was elected to Congress in 1978 as a Democratand then quickly broke ranks with his party. Gramm often jokes that he “didn’t go to Washington to be loved, and was not disappointed:’ In his telling, his lack of popularity stemmed from his uncompromising stand on issues. Democrats who served with him, however, felt deeply MAY 30, 2008 THE TEXAS OBSERVER 5