Don't Mess with Phil Gramm

By Cocheo, Steve | ABA Banking Journal, July 2001 | Go to article overview

Don't Mess with Phil Gramm


Cocheo, Steve, ABA Banking Journal


The Texas senator will push right back if you rile him. He dislikes CRA grants, higher deposit insurance ceilings, and too much government

Phil Gramm rises from a leather-covered chair in an office that could do double-duty as a museum of things Texan. There's a cactus over here, a bust of Sam Houston there, an honorary Texas Rangers badge there, and several vintage firearms. Gramm, a senior U.S. senator, is getting ready to go back to a critical budget vote. But the longtime Texan and avid hunter can't resist getting in one last potshot. He squeezes it off at one of his favorite targets, the Community Reinvestment Act.

"Does your magazine accept outside articles?" he asks, flipping through a copy of the May edition of ABA Banking Journal. He allows that he has "discovered" an economist who has put together an exhaustive study that conclusively shows that CRA doesn't do what its backers say it does.

"If I can get him to turn it into English and cut it down, maybe I'll have him send it to you," he says.

Since when do Senate Banking Committee chairmen play literary agent for economists?

"Who's this author, anyhow?" we ask.

Gramm cracks a smile.

"My son," he says.

Indeed, Marshall K. Gramm, one of the Texas Republican's two sons, who recently became an assistant economics professor at Tennessee's Rhodes College, chose mortgage discrimination and CRA as the subject of his doctoral dissertation at Texas A & M University. But when the elder Gramm, 59-a former economics professor himself -- claims to have a personal interest in CRA, in addition to his well-known public opposition to the law, his son's authorship is not what he's referring to.

Instead, he harks back to the April day in 1999 when National People's Action-a coalition of community groups-bussed hundreds of members to Gramm's home in Washington on a Sunday afternoon to make their feelings known.

Gramm, at home that day, was not amused. He called the police.

"They paid to have some 375 people flown to Washington, put up at the Renaissance Hotel, sent in on air-conditioned buses, so they could trample on my little flowers and knock on my windows saying, 'Wendy, we know where you live'," Gramm recalls with disgust. Wendy Lee Gramm, former chair of the Commodity Futures Trading Commission, is Gramm's wife.

"Well, I know where they live," says Gramm, with the air of a man who won't be trifled with. "This issue was already important to me because of clear issues of right and wrong. Their behavior made it personal." Ultimately, the Gramm-Leach-Bliley Act incorporated the "CRA in the Sunshine" provisions, which require reporting by both banks and community groups of amounts and uses of donated funds under CRA agreements.

Inside Washington's Beltway, CRA lends itself to discussions where participants deal in dry-as-dust maps and charts, plus politically correct speech.

Gramm is tired of people dancing around things they won't utter.

"The law simply says that banks have an obligation to lend money in the areas where they collect deposits," says Gramm. "It says nothing about inner-city versus general lending. It says nothing about lending based on any kind of ethnicity or gender basis. It says absolutely nothing about making cash payments to community groups or protesters."

Gramm believes that the revised CRA regulatory process hammered out by the Clinton-era regulators encouraged improper and possibly illegal practices.

Gramm insists that, while he is no fan of CRA, his primary complaint is not against CRA lending. "It's against cash payments to community groups--payments that have no basis in the law," he insists. Gramm equates these payments with protection money.

Read CRA agreements, says Gramm, "and you find they are basically quid pro quo arrangements where Bank A agrees to pay Community Group B, in return for which Community Group B agrees to withdraw its objections to the merger. …

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