Sen. Dodd Looks to Distance Himself From Financial Firms
Tuesday, July 21, 2009
Sen. Christopher J. Dodd has been a friend to the nation's largest financial firms for nearly three decades, and they have been his most generous donors. But now he finds himself in political trouble, and is trying to prove the relationship is over.
In recent months, Dodd, chairman of the Senate banking committee, has traded quiet advocacy of measures favored by financial companies for a vocal crusade to rein in those very firms, whose excesses are widely blamed for the economic crisis. He has stopped accepting donations from banks supported by federal bailout money. And he has spent $500,000 on campaign ads that bash credit card companies as "loan sharks" and paint financial lobbyists as crybabies who think Dodd is "a big meanie" because he won't take their calls.
It remains to be seen how the Connecticut Democrat's makeover will play back home, where voters have been disillusioned by a steady drip of negative reports about Dodd's relations with the rich and powerful. In a state dominated by Democrats, polls show him trailing a little-known Republican challenger ahead of next year's Senate election.
But in Washington, Dodd's effort to burnish his populist credentials is shifting the balance of power at a critical moment, according to banking industry representatives, consumer groups and political analysts. As Congress begins to debate a historic overhaul of the agencies that regulate the nation's financial system, the powerful chairman has pushed through new limits on credit card companies and is throwing his weight behind the creation of a new agency to protect consumers, an idea bankers bitterly oppose.
Dodd denies shifting his philosophy on the financial industry in a bid to court voters. Over the years, he has championed consumer protection measures along with legislation that permitted banks to expand their geographic reach and business activities and, in the case of Wall Street investment banks, win federal protections. Dodd acknowledges that the near-meltdown of the financial system last fall proved that "firewalls" in the system he helped to erect "didn't work as well . . . as you'd like." After long fostering "creativity" in the banking industry, he said his goal now is to see that "the architecture is in place" to prevent a future collapse.
In an interview in his Senate office, Dodd likened the tension in his job to a statue outside the Federal Trade Commission building that depicts a man controlling a balky horse. "I want a muscular financial services sector," he said. "But I want a muscular restraint so that it doesn't run wild."
With the Democrats in control of Washington, Dodd is leading two of the Senate's most important panels. As banking chairman, he will shape financial system changes that President Obama has proposed. And this week, he was wielding the gavel when the Senate health committee became the first congressional panel in a generation to approve a major overhaul of the nation's health-care system.
But a Quinnipiac University poll shows Dodd's approval rating falling from nearly 60 percent in May 2007 to 33 percent this spring. In a head-to-head matchup, Dodd trails former congressman Rob Simmons, a Republican who lost his seat in 2006. Stuart Rothenberg, editor of the Rothenberg Political Report, calls Dodd the most vulnerable Democrat in the Senate.
Focusing on Consumers
Dodd, a gregarious Irish charmer with a patrician pouf of white hair, began to see his popularity in Connecticut plummet in 2007 after he moved his family to Iowa for a disastrous run for president and then was pounded by disclosures about his connections to the financial world. There were the allegations last year that he had received a favorable interest rate when he refinanced his home with Countrywide Financial, which classified him as a "Friend of Angelo," referring to company founder Angelo R. Mozilo, who has since been charged with fraud in connection with risky lending. And there were negative reports in the Connecticut media related to his friendship with a board member at the investment bank Bear Stearns who was convicted of insider trading in 1993. Dodd denies he was involved in any impropriety in either instance.
Dodd was also stung by the flap over millions of dollars in bonuses paid to executives at American International Group, the troubled insurance giant, which has offices in Connecticut and has routinely held fundraisers for the senator. The White House asked Dodd to reword a legislative proposal so the bonuses could be paid, he said, and the public ended up focusing its outrage on Dodd, not the Obama administration.
With his popularity deteriorating, Dodd has focused with new fervor on consumer protection issues, alarming financial industry lobbyists. He has long sided with consumer groups on issues such as imposing tighter limits on credit card companies and opposing changes that make it harder for consumers to erase debts in bankruptcy. But he also has supported the growth of the financial industry, playing a critical role in several pieces of legislation that led to the rise of financial conglomerates such as Citigroup.
In 1991, Dodd introduced a measure at Wall Street's request to allow the Federal Reserve to make emergency loans to investment banks, creating a federal safety net. He was an early advocate for legislation allowing banks to expand across state lines, clearing the way for the emergence of national franchises such as Bank of America. The bill finally passed in 1994. In 1999, he brokered a critical compromise to allow banks to sell securities and insurance, legalizing the merger of banking giant Citicorp with Travelers, an insurance and securities conglomerate.