US Senator Christopher Dodd recently surprised some Congressional-watchers by declining to take over the chairmanship of the Health, Education, Labor and Pensions (HELP) Committee following the death of his colleague, Senator Edward Kennedy, and instead remain head of the Banking Committee.
As leader of the committee, Dodd has been under withering criticism for the lack of oversight of the financial services industry leading to the current global financial crisis. He is certainly not helped by the facts that he:
- Received $13.2 million in political contributions from Wall Street since 1989;
- Received more money from Fannie Mae and Freddie Mac than any other US legislator, calling them “viable and strong” institutions just two months before they collapsed and were taken over by the government;
- Refinanced two homes with mortgages under favorable terms through the now obliterated Countrywide Financial;
- Amended the financial bailout bill to provide $165 million to AIG in bonuses, but, following public outcry, professed to not know how the amendment ended up in the bill;
- And then some.
Can a legislator with such past close ties to Wall Street realistically morph into its stern legislator? Can he lead a regulatory reform process with legitimacy and without conflicts?
Here’s an indication of some of the binds that Senator Dodd is in. First, he is up for a tough re-election next year. He has inched up since the dregs of his 33 percent approval rating in April, but still trails his opponent, Rep. Rob Simmons, 48-39 percent according to a recent Quinnipiac University Poll. If he is to improve his ratings and win the election, he must demonstrate his leadership by ushering forth significant, meaningful financial reform early next year, if not sooner.
However, achieving significant, meaningful reform suggests that Dodd will have to push for legislation against the wishes of several banks. But waging a tough election battle means having bazookas of cash which, in Dodd’s case, will likely come from those several banks. Indeed, in the first three months of this year, Dodd raised around $1 million, according to federal campaign disclosure records. As Mother Jones points out, “almost a third of that money—at least $299,000—came from banking and investment executives, financial industry trade groups, and finance-oriented political action committees (PACs). An additional $68,000 came from lobbyists, many with clients on Wall Street. “
Cash is not the only obstacle standing in the way of regulatory reform. Party politics will also play a critical role, and not just in the form of Republicans (though they’ll surely sink their teeth into Dodd any chance they get). The senator actually has critically different views from President Obama and Treasury Secretary Geithner about an over-arching “super-regulator” of the US financial system. Whereas the Treasury Department proposed giving the Federal Reserve greater oversight powers, Dodd is leery of placing too much authority in the hands of the Fed and opening them up to more extensive, intrusive Congressional and public inquiry. Instead, Dodd would prefer establishing an entity similar to the Financial Services Authority of the United Kingdom. Alas, whether he can come to common ground with the Democrats on that issue – and then move on to getting agreement from opposing Republicans –remains too far to be seen.
All of this is on the heels of last month’s news that Dodd underwent surgery for prostate cancer. While he does not expect the cancer to affect his work in the Senate, the personal changes and emotional reactions which come from fighting cancer are well documented. How this impression might manifest itself in the financial reform debate in the United States is unknown.
So, what does all of this mean for Asia? Governments and businesses in the region have been closely observing the US financial regulatory overhaul for lessons and guidance on stabilizing their own systems. One wishes that there was a logical, straightforward instruction manual to put something new together. Even if it’s an IKEA instruction manual, it’s still a start. But is it possible?
In the incredibly thoughtful, well-researched book Paris 1919: Six Months That Changed the World, the author, Margaret Macmillan, details with affecting clarity how the Treaty of Versailles which fundamentally altered the landscape of Europe, riled up Japan, and arguably laid the groundwork for the rise of Hitler and WWII, was profoundly grounded on the quirks, moods, chance meetings, and whims of US President Woodrow Wilson, UK Prime Minister David Lloyd George, and French Prime Minister Georges Clemenceau. For instance, one morning, Lloyd George was in a bad mood so a discussion ended poorly with unintended outcomes. Clemenceau thought Wilson was a drag (everyone laughed behind his back at those Fourteen Points) but sometimes he was feeling amused enough to have a nice meal together and they found common areas of interest. And so on and so forth. Even when great moments are thrust onto shoulders, they are still human shoulders which will shape them based on events of the moment, not necessarily visions of the future.
And so Christopher Dodd goes forth to legislate reform of the US financial system. One wishes him strength and lucidity at this time, and the hopes that – even if it does look like an IKEA chart – the resultant reform will be a structurally sound template, relatable and principled, based on a clear vision which trumps the all too human foibles and circumstances which created it.
Originally published at Malmora Blog and reproduced here with the author’s permission.