The Wendy Card

Phil Gramm, the senior senator from Texas, is known as a deft opportunist, a man who instinctively sniffs out television cameras and fashions headlines out of molehills. So no less than perfect choreography -- all the ruffles and flourishes, including the requisite saber-crossing Aggies -- was expected when Gramm returned to College Station in late February to formally announce his long-telegraphed bid for the presidency.

Gramm's speech had already been pretested, delivered a week earlier to lukewarm response before the Republican elite of New Hampshire at a banquet and beauty contest featuring Gramm and other early GOP hopefuls. Even so, the 1996 campaign season's first formal announcement drew a clutch of reporters from across the country to Texas -- along with throngs of cheering supporters from the campus of Texas A&M, where Gramm had taught economics before being elected to Congress.

For his audience, Gramm indulged the tendency of presidential aspirants to spin out a vision of the ever-elusive American Dream. But it wasn't his story he told.

"My wife's grandfather came to this country as a contract laborer to work in the sugar cane fields of Hawaii. Her father became the first Asian-American ever to become an officer of a sugar company in the history of Hawaii," Gramm explained in the nasal drone that hearkens to his Georgia roots.

"And my wife, Wendy, under President Reagan and President Bush, served as chairman of the Commodity Futures Trading Commission, where she regulated the trading of all commodities and commodity futures in America, including the same cane sugar that her grandfather came to this country to harvest.

"That's America in action."
And that story is Phil Gramm in action, duly noted by the Texas reporters present who have watched Gramm campaign many times before. It was an unmistakable signal that Gramm, taking his first plunge into a national campaign, believes it is time to play the Wendy card. When he was just a candidate for office in Texas, including his two successful Senate bids, Gramm's Asian-American wife was relatively invisible during his campaigns. Longtime state politicos, aides of past Gramm opponents and reporters who have covered him for years cannot remember Gramm ever showcasing Wendy as he did in his announcement speech.

Wendy Lee Gramm's consistently low profile in the past has fueled murmurs that Gramm, in a tactical move, made a conscious effort to keep her far in the background, fearing his wife's ethnic background would not play well with Texas voters. Why, after all, would his successful wife's immigrant roots not have epitomized the American Dream equally well in 1978, when he first ran for the U.S. House -- or in 1984 when he vied for the Senate?

In the Gramm television ads aired during his first Senate race against Democrat Lloyd Doggett -- the ones that usually show the candidate romping with his family -- the Gramms and their two sons were seen fishing, but Wendy Gramm's face was never shown. The ads drew criticism from Asian-American groups, who charged that Gramm was hiding his wife because of her Korean ancestry.

Several reporters who covered Gramm's first Senate race say they rarely saw Wendy Gramm during the campaign, although her husband had already been elected several times to the House from East Texas. Asked then if he were purposely keeping his wife in the background, Gramm denied any such intent and accused others of trying to inject race into the campaign. In Gramm's next Senate race, against Democratic sacrificial lamb Hugh Parmer, Wendy Gramm appeared more often with her husband, though no special attention was drawn to her, or her life story.

But one thing is now clear -- in his first nationwide bid, Phil Gramm has decided that Wendy's time as a valuable political commodity has come. The packaging and sale of Wendy Lee Gramm by her husband's campaign has already begun.

Wendy Gramm is being made available for select interviews with major national publications. (We didn't make the cut. "Isn't going to happen. Lotta people ahead of you in line," explained Howard Opinsky, a newly hired Gramm campaign minion.)

She is a novelty. If her husband wins, the nation would see double firsts -- the first Asian-American first lady, and the first pair of economists to take up residence in the White House.

The story of Phil and Wendy's initial meeting has been spun out with huge success, sucked up as a warm and fuzzy anecdote by virtually every newspaper publishing a Gramm profile recently, although it seems the story has been embellished a tad. Politics being marketing, it is perhaps understandable that the tale has evolved, changing in one small but critical detail that, perhaps coincidentally, makes it play better in the press.

The Gramms first met in 1969 when Wendy Lee was interviewing for a job in the economics department at Texas A&M, where Phil Gramm was already on the economics faculty. After her job interview, held during an industry conference in New York, Gramm walked the applicant to the door and helped her with her coat. As Phil Gramm now tells the story, "I said, 'As a single member of the faculty, I'm especially interested in your coming to Texas A&M.' And she looked up at me and said, 'Yuck.'"

The story, Gramm goes on to explain, is told to show that he doesn't always make good first impressions but is very persistent: the two did marry within four months of Lee's arrival at A&M.

But when Wendy Gramm told the story to a Washington Post interviewer back in 1986, when she was making waves as a top red-tape buster at the federal Office of Management and Budget, it contained a slight variation: "I didn't say it, but I thought, 'Oh, yuck,'" she recalled.

It is a detail of little consequence, easily changed to make the tale read better. (When we called to ask Gramm campaign functionary Opinsky about the discrepancy, we didn't even make the cut to talk to him. "Howard seems to be away from his desk right now," we were told. "He'll have to call you back." He didn't.)

In other respects, Wendy Gramm's image is being carefully shaped by a campaign clearly intent on keeping the candidate's wife -- a successful, bright professional with her own impressive credentials -- from falling into the trap that has snared Hillary Rodham Clinton. Viewed by many of the president's opponents as being brash and overly aggressive, Mrs. Clinton has suffered lower approval ratings than her husband, a rare feat for a first lady.

The public has learned so far that 50-year-old Wendy Gramm likes to rollerblade, an as-yet unknown White House sporting preference.

She and Phil have two teenage sons -- Marshall and Jeff -- and their rearing has consumed much of Wendy Gramm's time away from the office. She is not a darling of the Washington cocktail scene, instead making those appearances necessary for her, or her husband's, career. Perhaps most important, she does not consider herself like Hillary Rodham Clinton, and wouldn't use the job of first lady to become a shadow member of the Cabinet.

Wendy Gramm says she doesn't mind stepping back to let her husband's presidential ambitions stand on their own.

"I've been helping Phil all along; I will continue to do that," she told the Daughters of Liberty Republican Women's Club in Houston earlier this year. "But I make no bones about the fact he is the candidate. He is the one who wants the job."

Asked the specific difference between herself and Hillary Rodham Clinton, for example, Wendy Gramm told the Houston Chronicle, "She has blond hair, I have brown hair."

She then added simply: "We have different views."
Asked by the New Republic for an example of something she and her husband disagree over, Wendy Gramm sighed and complained about how loudly her husband yells at Aggie football games.

"There are things that we disagree about, but they're not real substantial," she continued. "Like whether or not we should eat at Burger King."

But the facile answers she is lobbing at selected reporters understate Wendy Gramm's own substantial track record of public service. And much of what she has done offers no comfort to Democrats and public advocacy groups already cringing from the Republicans' 1994 congressional landslides.

In truth, Wendy Gramm in many ways is the epitome of the American Dream. Smart, funny, successful in her own right -- those are among the descriptions offered by people who don't agree with Wendy Gramm's politics, or necessarily care for her husband. She shares a Wellesley education with current first lady Hillary Rodham Clinton and holds her own track record of formidable job titles, including several key federal regulatory jobs.

Whatever her grandfather's toils in the sugar cane fields, Wendy Gramm herself is now comfortably ensconced in the elite of America, traveling in circles of power and prestige. She has passed through the revolving door of federal office and now sits on the boards of major corporations. She bagged more than $20,000 in fees during one recent reporting year just for giving lectures and writing guest columns for the Wall Street Journal.

If she becomes first lady, business interests and fans of unfettered free markets will have not one, but two, avid backers in the White House.

As she scaled the heights of her profession, Wendy Gramm conspicuously carried the free-market banner with her, and that has benefited both her and her husband politically.

Born in 1945 in Hawaii to Joshua Lee and Angeline AnChin Lee, Wendy Lee got her education during the tumultuous '60s, graduating with a bachelor's degree in economics from Wellesley in 1966. She received her economics doctorate from Northwestern University in Evanston, Illinois, five years later.

When she took a teaching post at A&M in 1970, she has said, Wendy Lee planned to spend only five years in Aggieland -- where some guy with a thick Southern accent wanted to help her with her coat -- then go teach at a small liberal arts college somewhere. Instead, she married Gramm, the couple had two sons, and she stayed on the A&M faculty for nine years, starting as an assistant economics professor and rising to associate.

It was Wendy Lee's first marriage and Phil Gramm's second. Gramm had amicably divorced his first wife before meeting Wendy Lee.

When her husband was elected to Congress in 1978, Wendy Gramm followed, and she began landing a string of increasingly important, if arcane, federal posts. Being married to a U.S. congressman and then senator undoubtedly did not hurt her job prospects, but Wendy Gramm flourished mostly by marching in step with Ronald Reagan's crusades to cut red tape and get government off people's backs.

She has regularly espoused an unfettered market as the solution to almost any of the nation's problems you'd care to name. The answer for struggling mothers who need day care so they can support their families? Forget government programs or parental leave, she says, and look to free markets and a strong economy. What about helping minorities climb the economic ladder? Forget affirmative action or quotas, she says. The answer is free markets and a strong economy. Federal deficits? Environmental protection? Free markets and a strong economy.

Whether they agree with her politics or not, virtually everyone Gramm dealt with vouches for her intellect, ability and effervescence.

"I never worked for a better person, and I worked for a lot of people I respected," says former Gramm aide Kate Hathaway.

John Stassen, outside counsel for the Chicago Board of Trade, which Wendy Gramm once oversaw as a government regulator, calls her "a very impressive person and a very gifted lady."

An ardent foe of regulation in her own right, friends and former colleagues say, Wendy Gramm was a natural fit for the Reagan/Bush era. Like the two presidents, she believed that unfettered entrepreneurial genius was the cornerstone of the nation's success -- and a strong economy the balm for most social ills.

That "genius" would ultimately produce a few troubling failures, like the multibillion-dollar bailouts of failed S&Ls, massive trade deficits, bouts of crippling interest rates and unemployment, and scandalous frauds perpetrated by corporate takeover artists.

But despite the carnage of the financial frenzies of the '80s, Wendy Gramm was, and by all available accounts remains, a foursquare advocate that America can be great -- and people like her can rise from immigrant roots to the loftiest social heights -- only if private corporations and free markets are left unrestrained to work their will.

During her 13 years on the federal payroll, Gramm held a series of titles guaranteed to induce yawns. She toiled in jobs that seem important only to the quibbling power cliques of Washington, but which actually profoundly affect everyone from elderly retirees to Hawaiian sugar cane workers.

Gramm did not surface in mainstream news reports often. Usually, her brief forays into the sunlight exposed only the surface ripples of much deeper rip tides pulling at the nation. But within the exclusive corridors of commerce and economic power, Gramm was a well-known, and well-liked, watchdog.

"Her philosophical outlook jibed pretty well with the nature of this industry," says John Damgard, president of the Future Industry Association, the trade group for brokers and dealers in commodities and futures markets Gramm oversaw for four years. "We're looking to keep the government off our backs and out of our business, and Wendy saw to that."

Gramm's career in curtailing government began in earnest in 1985, when she followed her boss, Jim Miller, from the Federal Trade Commission to the White House Office of Management and Budget (OMB). Reagan, riding high off his whomping of Democrat Walter Mondale, was pressing on with his administration's efforts to cut back federal regulation.

Miller hired Gramm to run the Office of Information and Regulatory Affairs. By title, the job sounds deathly dull. In practice, it was one of the most powerful positions in Washington, affecting federal rules governing everything from worker safety to the conduct of the national census. The task of Gramm and her staff was to review and pass judgment on virtually every single proposed federal rule before it could go into effect. Critics say she used the position to stamp out the good with the bad, hamstringing crucial new regulations that would have protected consumers and the environment.

Gary Bass, executive director of OMB Watch, a public advocacy group, says Gramm's academic background was reflected in the way she approached new regulations. She emphasized cost-benefit analysis, he says, which is a nice way of saying you have to prove people are being killed before you enact a rule to protect them.

"During her tenure, she stressed things like basing risk assessments on epidemiological studies," Bass says. "Meaning, you have to have dead babies before you regulate -- or bodies."

Gramm's reluctance to approve new regulations slowed federal efforts to limit asbestos exposure, study Agent Orange problems among Vietnam veterans and control pollution.

"You couldn't regulate until you could show that the substance you wanted to regulate was actually causing death and injury to an exposed population," says David Vladeck, director of the litigation group for Public Citizen, one of the myriad Ralph Nader-inspired watchdog groups.

Since researchers cannot, of course, intentionally expose people to a suspected killer -- such as a toxic substance -- just to prove their point, Gramm's standards made it impossible to pass new regulations governing hazards that might take 20 years before their toxic effects actually claimed a life.

And under Gramm, her critics say, the office was uncharacteristically secretive about its activities. Gramm and her staff met privately with business lobbyists to discuss proposed rules that might affect them, but she never accorded the same access to consumer and environmental protection groups.

Proposed regulations would enter OMB and disappear for years, critics say, with no word to their supporters -- or the people whose lives might be changed by them -- as to what had happened.

"We were cut out of the loop completely. The place was like a fortress," Bass says. One example he cites was the government's response to toxic shock syndrome. Women were dying, and evidence existed that tampons played some role in the illness.

The Food and Drug Administration, Bass says, simply wanted warning labels printed on tampon boxes -- to at least alert buyers to the potential danger. But the proposed rule languished for four years as Gramm's office dragged its feet. Finally, he says, tampon makers decided to start printing the warning labels voluntarily.

Ultimately, not just public advocacy groups like OMB Watch but the House of Representatives became fed up with Gramm's stalling and stealth. Many members believed Gramm was intentionally gutting the regulations needed to enact programs they had passed.

"As President Reagan envisioned it, he wanted this [office] to be a bottleneck to strangle health and safety regulations," Vladeck says. "Wendy was the new Darth Vader of regulation. She ruthlessly enforced the regulations in a way that stifled a number of very important health and safety rules."

Playing political hardball, the House voted overwhelmingly in August 1986 to cut off funding for Gramm's office. The office's two-year delay in approving a rule limiting exposure to asbestos particularly irked Congress.

Gramm met with key congressional leaders and negotiated peace, promising her office would be more open in its handling of controversial regulations. The House backed off, and restored her budget. But Bass says the promised openness never came, and Gramm continued her cozy relationship with business lobbyists while shutting out other points of view.

"It didn't work," he says. "She was supposed to log meetings she had with folks outside of the government. She was supposed to log telephone communications. None of that was done. Things continued as a black hole, a highly secretive organization."

Quantifying the cost of Gramm's tenure is a difficult task, Vladeck says -- not as neatly performed as Gramm the economist would have demanded during her tenure.

Some health risks take years to develop, but under Gramm, if no immediate cost or problem could be shown, new regulations were doomed.

"This was a highly political job, and her purpose was to thwart health and safety regulations. I think to the abiding detriment of the American people, she did a good job," Vladeck says. "The one thing I will say in her defense is that she was handed a thankless task. And she did it with relish."

Whoever disliked her, Wendy Gramm had one all-important fan, who called her his "favorite economist." And in 1988, Ronald Reagan handed Gramm the biggest job of her public career, naming her to chair the Commodity Futures Trading Commission (CFTC).

The five-member commission, served by a staff of about 600, regulates the nation's futures markets -- places like the Chicago Board of Trade and Chicago Mercantile Exchange, where billions of dollars fly back and forth as investors and traders bet on the future value of things like pork bellies, wheat, the stock market, and the Japanese yen. The commission is often accused of being a lapdog for the futures industry, which is often accused of being nothing more than a massive gambling operation.

Indeed, Kate Hathaway, Gramm's former chief of staff at the CFTC, points out that the agency has a significantly different role than its regulatory cousin overseeing the stock markets, the Securities and Exchange Commission (SEC). The CFTC's first job, she says, is to protect the operation of the markets, not the interests of customers.

Before and since Gramm's tenure, the CFTC has had to fight for its life, beating back efforts to merge its responsibilities with the SEC or other federal agencies that might be more aggressive in policing the futures markets. Those efforts usually come after another major scandal has surfaced, and Gramm's time at the CFTC would include a couple of those.

The CFTC has won those fights and continued to exist in great measure because the futures industry prefers to be regulated by the CFTC. Industry heavyweights like the Chicago Board of Trade and the Mercantile Exchange prefer what they call "self-regulation," with the government keeping out of the way as much as possible. For the most part, CFTC has allowed that, and during her time Gramm agreed with that approach.

"She has always been a strong believer that government can't interfere with the markets, and she's always been a strong believer in self-regulation with the minimum amount of government intrusion," says Thomas Russo, a former securities lawyer and now chief legal officer of Lehman Brothers Inc.

Two incidents most visibly marred the CFTC during Gramm's stewardship and spawned new calls for the agency to be merged with the SEC.

The first she inherited: the stock market crash of 1987, during which the Dow Jones average dropped more than 500 points on Black Monday. In his analysis of the causes of Black Monday, former Treasury Secretary Nicholas Brady partially laid the blame on the futures markets.

Many stock traders also trade in stock futures, which are essentially side bets on whether the market will go up or down. The stock market and futures markets, therefore, naturally offer investors ways to hedge their bets. Such speculative hedging, some believed, helped compound the depth of the stock market crash as the two markets dragged each other down. (Industry types do not call such happenings market crashes. They call them market "breaks.")

Damgard, head of the Futures Industry Association, scoffs at Brady's contention and says it was merely offered as political justification for attacking the CFTC.

"[Brady] attempted to use the market break of '87 to somehow support the argument that futures were responsible," Damgard says. "With all due respect to Mr. Brady, he was really of a past era and didn't know better."

Nonetheless, the situation created heat for Gramm, who took over the CFTC chairmanship when the agency was already under fire for not doing more to police the futures markets. The pressure increased in 1989, when the FBI indicted 46 people at the Board of Trade and Mercantile Exchange, capping an undercover probe. Four undercover FBI agents had spent three years actually trading in the exchange pits, tape-recording other brokers as they ripped off customers, broke trading rules and padded their own profits.

Market officials and boosters tried to downplay the probe, saying a few dozen crooked traders are to be expected on exchanges with thousands of members. They chided the FBI for spending so much time and money on the investigation. But mostly they bristled at the notion that the FBI would invade their private regulatory sanctum in such an insidious fashion, something the CFTC would not -- in fact could not -- do.

"It is not the role of federal regulatory authorities to hire double agents, and I don't believe Congress has provided them money to trade futures contracts surreptitiously," says the Board of Trade's Stassen.

But while industry officials tried to downplay its significance, the sting sent deep rumbles through the futures markets, and screaming headlines across the country gave humble folks another reason to believe the markets were a fixed game where the meek dare not tread.

Gramm was present, standing next to Attorney General Dick Thornburgh and other officials when the indictments were announced in August 1989, but she had not known about the probe until just a few days before it was made public. Although the CFTC staff had helped the FBI with its investigation, the scandal again raised questions about whether the agency was tough enough to keep up with the helter-skelter markets.

Gramm, observers say, did not see the scandal as impetus for great changes in market regulation, and she fought for those beliefs.

"She supported the fact that an overreaction would be more damaging to the markets than anything else," Damgard says.

Gramm, who had to undergo reconfirmation for her post in 1990 and defend the agency's very existence, proved an able ambassador. Of course, being married to the then-rising Republican senator from Texas didn't hurt.

Between Phil Gramm's lobbying and politicking in Congress and Wendy Gramm's own efforts, the couple -- both avid deregulators -- fought to save the one regulatory agency which happened to be in the family.

Joanne Medero, general counsel for the CFTC at that time and now an attorney in private practice, says Gramm was able to meet with the Treasury's Brady and allay his fears about the CFTC's effectiveness. Gramm, Medero says, agreed that the CFTC would give some of its regulatory authority to the Federal Reserve Board, and the CFTC was allowed to stay in business and keep the rest.

Industry types, naturally, were pleased with the outcome. It meant the CFTC would survive another day, and that an ideological soul mate would continue to run it.

"Wendy was certainly nobody's captive, and certainly nobody's fool," Damgard says. "She stood up for the free markets, which certainly put her on the same wavelength as most of the members of our industry."

Bill Clinton's defeat of George Bush drove Wendy Gramm off the public payroll. She stepped down from her CFTC post just before Clinton took office, clearing the way for his nominee.

"I have worked in the government. It was fascinating, but I retired," Gramm later told a Houston Republican women's group.

Since then, Gramm has reaped the bounty that often flows to recent holders of prominent government positions, having accepted appointments to several corporate and academic boards, some of which bring her in regular contact with potential founts of support for her husband's presidential ambitions.

Gramm, for instance, now sits on the board of Iowa Beef Processors Inc., kingpin industry of a state holding an early and pivotal presidential caucus. She also sits on an advisory committee for the University of Iowa.

Shortly after leaving office, Gramm joined the board of Houston-based Enron Corp., an oil and gas giant and traditional backer of Republican candidates. (Enron can always seem to use a few former Republican administration officials hanging around. The company also landed former Secretary of State James Baker III and former Commerce Secretary Robert Mosbacher as consultants.)

In early 1994, Gramm was appointed to the board of the Chicago Mercantile Exchange, which she once oversaw. Her appointment was hailed as "a delight" by Merc chairman John Sandner.

The jobs pay more in access and clout than they do in money. Wendy Gramm travels now in lofty circles of power and money, things which certainly cannot hurt her husband's chances.

She has also continued as an avid promoter of free markets. Writing in the Wall Street Journal, she has argued that recent financial disasters caused by trading in derivatives should not spawn overzealous government regulation. In another Journal opinion piece, Gramm maintained that a strong economy is the most fun-damental of women's issues.

In early 1994, Gramm was invited to join the Shadow Financial Regulatory Committee, a self-appointed group of financial insiders who issue their own proclamations on how government regulation will affect the banking and securities industries. Gramm has emerged as a minor spokesman for efforts to keep the government from strengthening regulation of derivatives, even though trading in the complex financial instruments plunged Orange County into bankruptcy.

How Wendy Lee Gramm will play before American voters remains up to the skill of her husband's image makers. Political junkies are already engaged in real -- if low-key -- debates over whether the country is ready for an Asian-American first lady. Both Gramms downplay her race as an issue in the campaign, convinced that voters will see the successful, conservative Wendy Lee Gramm for what she is.

"My wife," Phil Gramm told the Chicago Tribune, "is as American as apple pie."

David Pasztor is a staff writer for the Dallas Observer, a sister paper of the Houston Press.


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