Last week, UBS announced a 2nd Quarter loss “due to restructuring charges.” The banking giant is raising $3.45 billion in a stock sale.

Partly owned by the Swiss government (for years prior to the crisis, if memory serves), UBS was one of the biggest losers in the financial crisis. After a huge expansion into riskiest businesses at the peak of the market, they have had steep losses and enormous write-downs. Since then, they have laid off tens of thousands of workers. (Aside from UBS’ tax problems).

One such worker who has escaped such an ignominious firing is former Texas Senator Phil Gramm. He was hired in 2002 to “advise clients on corporate finance issues and strategy.”  This was around the same time that UBS acquired Enron’s energy trading operations. Recall Gramm’s wife Wendy was on the board of Enron, which was up til then the US’s biggest bankruptcy. You can insert whatever revolving door complaint about polticos you want here, but by now its almost besides the point.

Gramm’s position at UBS is “vice chairman” — dubbed “the greatest job in business” for its combination of high status and low work rate.  It is a do nothing patronage role that is reward for all the Wall Street friendly legislation Gramm has sponsored. At least, they used to be considered Wall Street friendly, prior to their leading to the Street imploding.

To me, the more significant issue is how respected Gramm’s radical deregulation philosophy was — at least at the time — by the biggest of global investment houses. His philosophy rationalized the irresponsible investing behavior of these big banks.

I almost feel bad for Gramm. His cognitive dissonance and now discredited philosophy must be of little comfort to him in his twilight years.

Meanwhile, plenty of folks at UBS have told me he is an embarrassment to the firm.

Which raises the question: What exactly does Gramm do for UBS these days? Other than hang around as a reminder of bad decision making and his scheme of radical deregulation, does he really add anything to their bottom line?  Or are they simply too embarrassed to throw the bum out?

If anyone can advise me as to why he is still gainfully employed at a large investment house that is suffering from enormous losses, I am all ears.

>

NOTE: Prior to his resignation as Chairman, I asked many of the same questions about Robert Rubin and Citigroup.

>

Previously:
Phil Gramm: A Deregulator Unswayed (November 17th, 2008)

http://www.ritholtz.com/blog/2008/11/gramm-deregulator-unswayed/

Amity Shlaes Does Not Know What a Recession Is (July 12th, 2008)

http://www.ritholtz.com/blog/2008/07/amity-shlaes-does-not-know-what-a-recession-is/

Sources:
UBS Expects Second Quarter Loss
JOHN KELL
WSJ, June 26, 2009,

http://online.wsj.com/article/SB124596697612556543.html

Phil Gramm’s UBS Problem
Daniel Gross
Slate, July 7, 2008, at 5:58 PM ET

http://www.slate.com/id/2194933/

Senator Phil Gramm to join UBS Warburg
UBS, October 7, 2002

http://www.ubs.com/1/e/media_overview/media_americas/releases?newsId=58925

Category: Bailouts, Politics, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

30 Responses to “Why Does UBS Still Employ Phil Gramm ?”

  1. ella says:

    Because he is so well connected to powerful members of Congress. Thus he can influence votes that mean $$$$$$$ to UBS.

  2. Still? Even after his party lost the White House, Senate and House of reps?

  3. Marcus Aurelius says:

    Because he’s a corporate sycophant — apparently, he’d kiss a pig’s dirty ass for a very small fraction of the short-term profit to the firm, if any, to be made in doing so. You never know when you’ll need a guy like that.

  4. Mike in Nola says:

    I’m sure Gramm is tortured by his “conscience” all the way to the bank.

  5. [...] UBS is afraid to unload Phil Gramm because of the teabagging community Jump to Comments I am sure it will be a cause for another faux outrage should a useless old corrupt fuck be thrown ou…: I almost feel bad for Gramm. His cognitive dissonance and now discredited philosophy must be of [...]

  6. Wes Schott says:

    ….payback, pure and simple – Phil is cashin’ in

  7. super_trooper says:

    Some magic going on here. You posted the blog “By Barry Ritholtz – June 30th, 2009, 7:30AM”, still someone is able to comment 6 days before……” ella Says: June 24th, 2009 at 9:19 am”
    I’ve seen movies about this phenomenon, and they rarely have a great ending.

  8. BrendanHenry says:

    His continued employment is a way of incenting future legislators to play ball for banks while in office for an eventual payoff after they retire.

    Saudi Arabia plays the same game with state department officials. If they are sufficiently pro-saudi while at the state department, on retirement they end up with large salaries at Saudi- endowed foundations.

  9. The 1st part of the post accidentally launched last week and it took me a few minutes to notice.

    When I took it offline, and resheduled the post, the comment stayed with it.

  10. danm says:

    Wouldn’t letting him go just open up a Pandora’s box? Like having to explain everybody’s judgment and competency?

    Also, the US might have kicked out the GOP but the ROW is stuck with the after shock. Many of us have elected the closest thing we could get to a Neocon and we’re still stuck with it for a few years.

  11. E says:

    Gramm is both a lobbyist with access to legislators on the minority side of Congress, and a figurehead for Op-Ed/journalists at WSJ, Forbes, etc., who can produce favorable PR for UBS due to his presence.

  12. Mr. C. Cheese says:

    The Gramms are good people been over to there spread many times. Phil was doing the right thing, making sure ‘the right people’ made some good money. Take easy you guys, when you guys finally make it, you’ll understand.

  13. VennData says:

    Instead of focusing on how Gramm that thought the financial crisis was “only mental…”

    http://www.washingtontimes.com/news/2008/jul/09/mccain-adviser-addresses-mental-recession/

    …let’s talk about the dating issue on comments, very GOP of you super_trouper. Or we can change the subject and wonder how Wendy Gramm’s not in jail for being on the board of Enron…

    http://www.apfn.org/enron/gramm.htm

    … and headed the flawlessly run, CFTC under some no-name GOP President in the last generation.

    The Gramms: America’s Kirchners.

  14. [...] Picture: Barry Ritholtz notes that Phil Gramm is still employed by the bank UBS and asks: “What exactly does Gramm do for UBS these days? Other than hang around as a reminder of bad decision making and his scheme of [...]

  15. VennData says:

    … not to mention USB’s little problem with the US government, lawsuit-wise…

    http://articles.latimes.com/2009/feb/20/business/fi-ubs20

    … where they help tens of thousands of un-patriotic American conceal assets from the IRS, taxes that go to protecting our nation and the free world. Maybe that’s the role of the “Vice Chairman.” Maybe that’s how the marble-mouthed Gramm helps UBS to obfuscate the truth on these traitors to the United States, while our troops fight an die.

  16. The Curmudgeon says:

    I think danm is correct. Letting Gramm go would be like writing down some bad CRE loans to their true value. Keep him on the balance sheet and you can pretend it is still a good investment.

  17. “Meanwhile, plenty of folks at UBS have told me he is an embarrassment to the firm.”

    Phil Gramm is the least of the firm’s problems. You only touched upon a scant few of the scandals and lawsuits that have gone on over there in the last few years. UBS is an embarrassment, period. Anyone who is still working there had a full year head start from when the problems became obvious (fall 07) to when the market crashed (fall 08) to find a new place to work. Current employees have no right to complain about anything at this point.

  18. wally says:

    This is the face of corruption.

  19. larster says:

    Maybe Barbour and Gramm tag team Republican govs with exciting investment opportunities for state pension funds. They can always use McCain as a closer.

  20. greg says:

    Why was he allowed to be in politics from 1979 to 2002? I think sir, he depends on the kindness of strangers. Please read the last line with a southern drawl.

  21. [...] by Alexandra on June 30, 2009 Check out the board members of UBS, Barry. You’ll get your answer there. It seems that there is a group of people who are recycled all over the place. So Phil Gramm [...]

  22. DeDude says:

    Remember that for the leadership personally what he did was great. He gave them the opportunity to get some huge bonuses that they could store away somewhere safe. Yes, there is going to be a couple of lean years, for some of them. But all in all this whole mess is only a catastrophe for the owners (stockholders), the leadership will come out just fine. So how could they kick out that big old sugar daddy and still look in the gold-rimmed mirror every morning.

  23. Andy T says:

    It should also be noted that Wendy Gramm was not only on the board of Enron, but was ALSO the CFTC Chairman for several years before joining Enron!

  24. Gene says:

    A modification of Shakespear’s Hamlet:

    Barry:
    Senator Gramm, how like you this play?

    Senator Gramm:
    The blogger doth protest too much, methinks.

  25. James says:

    To me, the more significant issue is how respected Gramm’s radical deregulation philosophy was — at least at the time — by the biggest of global investment houses.

    ————————

    With all due respect, Barry, deregulation had a lot of bipartisan support at the time. For example, Gramm-Leach-Bliley Act was not only passed by Congress, it was passed by both parties in Congress overwhelming. In the Senate the vote was 90 yes, 8 no, 1 no vote (John McCain). The Democrats voted 34 to 6 in favor including: Biden, Daschle, Dodd, Kennedy, Kerry, Reid and Schumer. See: Govtrack

    In the House, the legislation received similar strong bipartisan support with 362 yes, 57 no, 15 no votes. The Democrats voted 151 yes, 50 no, 4 no votes. See: Govtrack2.

    Bill Clinton signed it into law on November 12, 1999. Here’s what he had to say about it at the signing: “You heard Senator Gramm characterize this bill as a victory for freedom and free markets. And Congressman LaFalce characterized this bill as a victory for consumer protection. And both of them are right. And I have always believed that one required the other.” See: Resource.org

    Here’s what Chris Dodd had to say about it as recently as March 2007:

    “I am proud to have had Tom’s and the Chamber’s support on some of the most important pieces of legislation with which I have been associated. Laws like the Private Securities Litigation Reform Act; the Y2K litigation reform act; the Class Action Fairness Act; the Gramm-Leach-Bliley Act, which has helped bring our financial services sector into the 21st century; and the Terrorism Risk Insurance Act, which in the aftermath of 9/11 has played a crucial role in keeping our economy strong.” See Dodd Web site

    ~~~

    BR: Yes, I mention most of those things in the book, and also rain down blame on Dems like Clinton, Rubin, Summers and Schumer.

    But I am asking about why a foreign bank employs a former US Senator. I don’t really care about the politics, as I know what politics does to your brain. LITERALLY

  26. Mannwich says:

    Because the Tyranny of the Incompetent (hat tip: leftback) is more than alive and well. It’s thriving in here in the good ‘ol U.S. of Banana Republic.

  27. constantnormal says:

    Once upon a time, the Swiss jailed banking executives for “crimes against a bank” — mainly malfeasance that cost the bank significant amounts of money. (ref: Paul Erdman)

    I keep hoping to read that Phil Gramm has been similarly jailed, but my guess is that he has brought in sufficient tax evasion monies from his cronies so as to cause the Swiss authorities to overlook him (lest they be embarrassed and Swiss bank secrecy get torn to shreds if he talks). I’m sure that he has ample reserves of his own ill-gotten Enron loot stashed away in Swiss banks, safe from prying IRS eyes.

    That’s what I think.

  28. tradeking13 says:

    He was let go but no one ever told him and due to a glitch in payroll, he still receives a paycheck. They just need to fix the glitch.

  29. dss says:

    Old disgraced pols never die, (Gingrich, Guiliani, DeLay, etc) as they are too useful to throw them onto the ash heap, no matter their public pronouncements (mental recession) or promotion of failed policies (deregulation).

    As long as they stay out of jail, they will be useful to someone as the GOP lies in wait until they can regain power (Cheney, Rumsfeld).

    If nothing else, these useful idiots can be counted on to repeat the RNC talking points on cable news, saber rattle occasionally, and be generally depended upon to criticize the Democrats even if they sound like idiots; the next day their quotes are treated like little golden nuggets to be cherished and replayed over and over. These disgraced idiots, who are given unearned and unwarranted amounts of respect have to be kept in reserve to be trotted out when needed to carry the water for their party.

    Only sexual scandals render the worst of them radioactive, but even guys like David Vitter, R (loves diapers), is still in congress, still getting attention, and gets treated as a serious person by the media.

    It is a reflection of how low our standards have fallen that these assclowns can have a cushy job, are shown respect by the media and continue to pollute the political scene. Between the politicians and the banksters, it boggles the mind that those who commit the most egregious offenses are paid the most! And now many of our politicians are banksters and our banksters politicians! And the average joe foots the bill.

    The official Adulterer’s Club of Elected Officials is growing so large that it might need it’s own caucus.

  30. Rich in NJ says:

    Phil Gramm will always be epitomized by this mindbogglingly disingenuous quote that he made during the debate leading up to the defeat of the Clinton health care plan:

    “No government run health care, but don’t take away my momma’s Medicare.”