By Kevin Chiu
Embattled U.S. Senator Chris Dodd, the chairman of the senate banking committee, released his financial reform package at a press conference and it appears it will be one of the last significant actions the Congressmen will be making in Washington, D.C. Dodd, who announced late last year he will not be seeking re-election to Congress was brought down in the wake of the “Friends of Angelo” scandal.
The Connecticut lawmaker had been at the forefront of denouncing companies for ruining “our financial markets.” But when it was widely reported that Dodd got preferential treatment with lower mortgage rates from former Countrywide CEO Angelo Mozilo any aspirations Dodd may have had for the White House were all but destroyed.
More than any other acting political figure in Washington, Dodd may illustrate what is so wrong with American politics today. Apparently either Dodd didn’t get the memo or he is clearly out of touch. Study after study shows Americans are opposed to much of what Washington lawmakers are doing, and Dodd either lacks the ability to see it or is clearly a man marching to the beat of only his own drum.
The taint of dirty money angers people, especially when it comes to their government leaders.
As the chairman of the senate banking committee, Dodd has wielded major influence and power in the nation’s capitol and been backed for re-election six times by powerful banking lobbyists. Some of the world’s largest hedge funds, which invested heavily in the mortgage backed-securities and derivative market blamed for the housing crisis are from his home state of Connecticut.
But after negotiating in the senate with fellow committee members from both parties the Democratic congressman wasn’t able to muster a majority to influence any sort of vote on financial reform in the senate. The House has already passed a bill.
Dodd’s plan would overhaul financial rules and empower the Federal Reserve to break up large firms that pose a threat to national economic stability. But empowering the Fed to carry out more responsibilities seems ludicrous. The Fed was clearly asleep at the wheel in relationship to the magnitude of the financial crisis and did little to alleviate it until it nearly destroyed the U.S. economy.
As a lame duck Congressmen, it’s difficult to tell whether Dodd’s proposal is to aid his banking cronies or to improve the nation’s financial regulations. “The failures that led to this crisis require bold action,” Dodd said at his Washington news conference. “We must restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them.”
The proposal aims to strengthen oversight on Wall Street, would create a nine member panel of financial regulators led by the Treasury Department to identify financial risks to the system and would include a version of the Volcker Rule, forcing regulators to ban some forms of trading, including hedge funds.
The taint of dirty money that Dodd received in the form of two mortgages from Countrywide was apparently too much for fellow Congressmen to handle. The “Friends of Angelo” program’s existence was never in dispute. Dodd’s preferential treatment or the public perception that he at least was getting special treatment for being a highly placed powerful government official was too much for other members of Congress to ally themselves with.
In real terms the mortgages saved Dodd little, but damaged his credibility at a time when more Americans than ever lack confidence in government leaders. The discount saved Dodd just $2,000 in interest payments a year on one mortgage and $700 a year on the other. But the damage done rewrote and forever stained his record as a lawmaker.