A Deregulator Looks Back, Unswayed

By ERIC LIPTON and STEPHEN LABATON
NYT

WASHINGTON — Back in 1950 in Columbus, Ga., a young nurse working double shifts to support her three children and disabled husband managed to buy a modest bungalow on a street called Dogwood Avenue.

Phil Gramm, the former United States senator, often told that story of how his mother acquired his childhood home. Considered something of a risk, she took out a mortgage with relatively high interest rates that he likened to today’s subprime loans.

A fierce opponent of government intervention in the marketplace, Mr. Gramm, a Republican from Texas, recalled the episode during a 2001 Senate debate over a measure to curb predatory lending. What some view as exploitive, he argued, others see as a gift.

“Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action,” he said. “My mother lived it as a result of a finance company making a mortgage loan that a bank would not make.”

(More here. Here's a follow-up piece on Gramm...)

Gramm and the ‘Enron Loophole’

By ERIC LIPTON
NYT

In 2000, Senator Phil Gramm played a central role in writing the Commodity Futures Modernization Act, a law that would open the door to unregulated trading of credit default swaps, the financial instruments blamed, in part, for the current economic meltdown.

But there was another aspect of this legislation that, earlier this decade, helped produce another financial meltdown: the collapse of Enron, the Texas energy company.

The commodity futures act, in addition to allowing unregulated trading of financial derivatives, included language advocated by Enron that largely exempted the company from regulation of its energy trading on electronic commodity markets, like its once-popular Enron Online. The provision came to be known as the Enron Loophole.

E-mail written by Enron executives and lobbyists — which became public as part of a federal investigation after Enron collapsed — shows how top Enron officials closely monitored negotiations on the bill. They paid particular attention to Mr. Gramm, who before a final agreement in late 2000 was trying to press other key figures on Capitol Hill and at the White House to agree to concessions that would further curtail regulation of trading.

Enron’s primary concern was that Mr. Gramm’s insistence at getting these additional free-market concessions — most of which were unrelated to Enron’s business — might scuttle the whole deal, killing Enron’s chance of getting the loophole it sought.

(Continued here.)