So, Bernie Madoff has become public enemy number one, the perfect example of a money-grubbing monster.

It is no surprise that the press are descending on Madoff like mad dogs. He is an easy target for the public to channel their anger to over the economy.

It’s unfortunate, not only for Madoff, who has probably been seeing much more of himself in the news than he would like, but also for the rest of us. With all the attention on Madoff, it appears that one of the major players in creating the economic mess in the first place, along with the major player in being unable to do anything of substance to fix it, seems to be getting away unscathed. They deserve as much attention and obsession as Madoff.

Remember Phil Gramm? He was the silly McCain economic advisor who called the United States a nation of whiners. While I bet he’s the one now whining that Barack Obama is president, his wrongdoing was working ardently for the sake of investment bankers while he served in the Senate.

Gramm was not just a lobbyist who pushed for deregulation of the investment banking community. Rather, he was the chairman of the Senate Banking Committee, which granted him unimaginable power over the United States‘ attitude toward shady investment methods. For example, by attaching a 262-page amendment to a spending bill, Gramm opened the door for the widespread use of financial tactics that have taken much of the blame for the economic downturn.

‘ Senator Gramm’s long-winded amendment to an omnibus spending bill, which was, in reality, a huge bill that was longer than anything a Senator could actually read and understand before voting on it, deregulated a variety of financial instruments, most notably the Credit Default Swap (CDS).

The CDS is basically a craps game in which the players gamble on whether a person faults on a home or business. It became a $62 trillion craps game ‘- greater than the gross domestic product of the entire world. And when the dice went cold, kaboom.

So, after opening the floodgates for years of an incredibly risky investment system as a senator, can you guess what company Gramm moved into after leaving the Senate? He became a vice chairman for UBS, a Swiss investment bank. By August, it had lost some $43 billion related to the sub-prime crises. Do they appreciate his work now?

If Phil Gramm’s amendment single-handedly created a torrent of foolhardy investment tools, then former Treasury Secretary Paulson’s bailout might be responsible for prolonging the financial crisis.

A recent report in the New York Times found that many banks are simply refusing to hand out more loans as Paulsen had hoped would happen if he infused the banks with millions, if not billions of dollars. The Times article quoted John C. Hope III, the chairman of a New Orleans bank that received $300 million from the federal government.

‘Make more loans?’ Hope said to the Times in an interview. ‘We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.’

This sentiment sums up all that is wrong with Paulson’s poorly designed and even more poorly implemented bailout. The government did not actually force the banks to do anything.

The United Kingdom, however, can thank the leadership of Prime Minister Gordon Brown, who forced banks to give up seats on their boards, to stop making dividend payments to shareholders and to stop executive bonuses, among other concessions. Most importantly, though, the government and banks made a legal agreement that they lend money to homeowners and small businesses.

In the United States, the opposite happened. Shareholders will still get dividend payments, executives will still get their bonuses and the government has no voting interests in any banks nor does it have seats on any boards.

Hope’s cavalier statement says it all. Why should the banks put the public sector before themselves just because they were asked?

Secretary Paulson was unable, or as a former CEO of Goldman Sachs, unwilling, to force anything from the banks. Without a requirement to actually increase lending, who would refuse billions of dollars to pocket, as the Times’ article found to be the case? He should not disappear into the fog as a departing Bush official. He may be responsible for incredible damage to the United States and the connected global economy.

For Phil Gramm, it cannot be argued that he is not to blame, at least partly, for the growth of
risky and stupid investment tools, games that hurt. Bernie Madoff will get what he deserves when his jury comes back with a guilty verdict. There are many others who need to be held responsible by the new administration for the damage they did to the American economy. Gramm and Paulsen are only a start.

Nick Milano is a collegian columnist. He can be reached at nmilano@student.umass.edu.