Mon, 23 Feb 2009 20:23:46 +0000 – By Liz PeekFinancial Columnist
Why is Senate Banking Committee Chair Chris Dodd taking on not only the banking community but also President Obama? Could his efforts to distance himself from the financial industry that he has overseen for 24 years and from an administration that is off to a shaky start be a sign of things to come for Democrats facing reelection in 2010?
Dodd set off another run on the bank stocks Friday by encouraging speculation that the country's biggest financial institutions were headed for nationalization. Speaking on Bloomberg Television's "Political Capital with Al Hunt", Dodd's comments that "it's possible it (nationalization) may happen" undermined efforts by White House Press Secretary Robert Gibbs who was across town trying to defuse the issue. The result? Another plunge in the stock prices of Citigroup -- down 20 % and Bank of America -- off 12%. The market took its cue from the beleaguered sector, selling off another 100 points to the lowest level since 2002.
Dodd's dodgy associations may be one reason that he has emerged as a major thorn in the side of the new administration. He is so intent on distancing himself from the financial collapse and the banking community that he has repudiated the tempered approach favored by President Obama. This could turn out to be good politics.Dodd's controversial interview was not the first occasion on which he has crossed paths with the Obama team. He also bucked the White House economics gurus when he slipped a Wall Street pay cap proposal into the stimulus bill at the eleventh hour. The amendment, which lays out an unworkable plan to rein in Wall Street bonuses, is viewed as punitive by many in the banking community and as counterproductive to Geithner's efforts to work with financial leaders.
It is probably not accidental that Dodd's renegade activities follow a slump in his popularity. He approaches his upcoming Senate race with the worst ratings of his entire career. In a recent Quinnipiac poll, more than half of those queried said they would not vote for Dodd's reelection, a far cry from the 70%+ voter support Mr. Dodd enjoyed four years ago. At least two Republicans have already said they are considering running against Dodd in 2010.
Among other things, Connecticut's voters are not happy with Dodd's "Friend of Angelo" status. Though he has made public the documents detailing his mortgage with Countrywide Financial, formerly run by Angelo Mozilo, and has claimed that he received no special favors, voters continue to connect the Senator with the subprime lender. A Senate Ethics Committee investigation into the matter is ongoing.
Adding to Senator Dodd's woes is that over the weekend it emerged that he took contributions -- some $27,500 according to The Connecticut Post -- from accused scam artist Allen Stanford. Stanford spread his largesse to numerous Democrats and Republicans -- including presidential candidates Obama and McCain, but Dodd's name on the list is another black eye as he approaches his next campaign.
Dodd's dodgy associations may be one reason that he has emerged as a major thorn in the side of the new administration. He is so intent on distancing himself from the financial collapse and the banking community that he has repudiated the tempered approach favored by President Obama. This could turn out to be good politics.
Investors -- and voters -- have not been reassured by the new administration. Thirty five days on we have trillions of dollars newly committed to spending initiatives designed to restore confidence and economic growth, but the impact has been diluted by an administration seen tripping over its own feet.
The stock market fell nearly 10% during Obama's first month in office, and the economic indicators, which had begun to moderate, have uniformly turned south once again. The Index of Leading Indicators turned higher in December and January, boosted by an uptrend in consumer sentiment, rising money supply and a blip up in orders for nondefense capital goods. It's a pretty good bet that consumer sentiment -- beaten up partly by the alarming hectoring we have heard nonstop from the president -- will lead the Leading Economic Indicators index lower in February.
Ironically, the one quality that nearly all Americans celebrated in our new president -- leadership -- seems to have fizzled like a firecracker in the rain. His efforts to reach out across the aisle suddenly required reaching across bothaisles -- no president has arms that long. The efforts of the Democratic-controlled Congress to wrest control from the White House bloomed gloriously during the horrific fight over the stimulus plan. The leadership in the House spurned any sort of bipartisan effort to create the bill and at times appeared intent on undermining it altogether.
Perhaps it is simply that Senator Dodd is covering his tracks. The country is angry -- angry at bankers, at mortgage defaulters and increasingly at their legislators. But the Senator may also sense that being a team player with the Obama administration may not prove the best strategy for those defending their seats next time round.