A staunch defender of laissez-faire economics, Gramm's challenge as
CFTC chair was keeping the agency from over-regulating.
"The natural instinct for a government agency," Gramm says, "is to
regulate more, to amass more power and expand its jurisdiction. I fought
against that. I fought to be more efficient, to do more with less.
"I would also appeal to their interests. I would tell them that as
regulators we need regulatees. If we over-regulate, we kill off business and
the market goes overseas. If the market goes overseas, we have nothing left
to regulate, and U.S. consumers would be at an enormous disadvantage."
Gramm took control of the CFTC just after the 1987 stock market crash,
and her free-market theories slammed up against the views of the agency's
bureaucrats. They wanted to assert more control over the markets.
Regulatory aggression, Gramm felt, would undermine the innovation and
flexibility that markets require to adapt and prosper.
"There are a lot of people who respond to problems by saying we have
to regulate, we have to pass more laws," Gramm says. "And a lot of people
were making crazy claims that the commodities futures market caused the
crash. The evidence didn't support this. So I jumped right into the policy
debate. I testified before Congress 15 times within my first six months at the
CFTC. My role was to keep people from overreacting and killing off the
markets with unnecessary laws."
[CONTINUED BELOW]
To instill free-market attitudes, Gramm engineered a course for agency
workers that explained how regulations stifle innovations, experimentation
and creativity. She invited top commodities brokers to speak and
laissez-faire economists to present seminars. Eventually, she convinced
agency workers to back free-market innovation and loosen the reins on
commodity brokers.
Economic progress, Gramm believes, requires that markets have the
space to flex, twist, bulge and yawn. Strap a market into a regulatory
straitjacket and it shrivels into something like the Cuban or North Korean
financial systems.
"Then you would have a case where Washington was grabbing too much
power and telling you how to run your business and to run your life," she
says.
Gramm's passion for economics and free markets may have evolved
from her family history. Both her maternal and paternal grandparents
emigrated from Corea to Hawaii in the early 20th Century. They worked the
sugar cane fields, saved their earnings and built comfortable but simple
lives.
Her father too labored in the sugar industry and saved enough money to
attend a mainland college. He graduated with an engineering degree and
returned to Hawaii to design processing equipment for the same sugar
company that had hired his father to toil in the fields. Eventually he became
the firm's vice president, becoming the first Asian to hold a management
position in the Hawaiian sugar industry.
PAGE 3
Wendy Lee Gramm, husband Phil Gramm -- a U.S. Senator from Texas who was a leading contender for the 1996 Republican Presidential nomination -- and sons Marshall and Jeff.
"A lot of people were making crazy claims that
the commodities futures market caused the crash."
