'Journal Editorial Report': Democratic Barons on the Ropes

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This is a rush transcript from "The Journal Editorial Report," October 23, 2010. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," Democratic barons in trouble. Some of the party's longest serving and most powerful House members are fighting for their political lives. We'll preview the races to watch. And the battle for the Senate goes down to the wire as some key contests tighten in the final stretch.

Plus, the Christy clones. Republican candidates and even a Democrat or two are taking up the New Jersey governor's reform mantle. Can they replicate his Garden State victory?

And former Countrywide CEO Angelo Mozilo settles with the SEC for his role in the mortgage mess. What about the friends of his in high places? Will Congress ever name names?

Welcome to the "Journal Editorial Report." I'm Paul Gigot.

First up this week, Democrats barons on the ropes. You may not know all of their names, but they run Washington. And in just over a week, some of the longest serving and most powerful Democrats in Congress could be out of a job after facing their toughest reelection challenges in years. The endangered list includes South Carolina Congressman John Spratt, a 14-term incumbent who chairs the House Budget Committee; and Ike Skelton of Missouri, who has served 34 years in Congress and is chairman of the House Armed Services Committee; Jim Oberstar of Minnesota is also locked in a tough fight to maintain his seat of 36 years. He's chairman of the House Transportation Committee.

So joining us to talk about all this, Wall Street Journal columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

Dan, we keep hearing this is a wave election, a big event, the kind we don't see often. But what explains the vulnerability of a guy like Ike Skelton. He hasn't gotten less than 86 percent since 1982.

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Ike Skelton's problem is there's a percentage that's considerably higher than that. He voted with Nancy Pelosi 95 percent of the time. And it's really fascinating because Skelton, head of the Defense Committee, is very conservative guy, pro- defense, pro-Iraq, pro-Afghanistan.

GIGOT: Brought the B-2, everybody believes, to Wideman (ph) Air Force Base, the B-2 bomber.

HENNINGER: Yes. And he's running against Vicky Hartzler, a formidable candidate. He's saying she's not sufficiently pro-military. Bill Clinton came out there to campaign for him. Sarah Palin has been out there to campaign for her. His problem is, he's in a district that voted in 2008 for John McCain. Obama's —

GIGOT: By 60 percent.

HENNINGER: By 60 percent. And Obama's approval rating in that state is 36 percent. So he may lose having voted with Pelosi 90 — this is a perfect story of what the Democrats did. They, you know, forced guys like Skelton to vote with them on Obama-care, stimulus, and cap-and-trade. And now, they are paying the price, just as they were warned for the entire past year.

GIGOT: Hartzler is a former teacher and business woman, first time candidate, so she has that freshness, too, which is a real contrast with somebody who's been in the House for 34 years.

Kim, what about John Spratt, the Budget Committee chairman in South Carolina? Republicans have said for years, we can beat this guy, and they never really even come close. And this time, they have a shot. What are the dynamics in the race?

KIM STRASSEL, WASHINGTON COLUMNIST: You've got a Republican named John Mulvaney, again, new, flesh, out there running, and he is a state Senator. And he's out there talking, again, just like Dan said, about health care votes, about stimulus, about cap-and-trade. This, too, is a district that's conservative.

And one of the problems that these guys have, not just Mr. Spratt, Mr. Skelton, Mr. Oberstar, is that what they're saying in their defense at the moment is, look, you need to keep us, we're very powerful, and moreover, we've seen you, through our many years here, that we are in tune with the district and we're conservative.

GIGOT: Right.

STRASSEL: And what the opponents are saying and what voters are saying is, wait a minute, wait a minute, if you're as powerful as you are and you are in tune with this district, why were you not stopping Nancy Pelosi? There's a bar being set for them that's somewhat higher than some Democrats out there. And they're saying, you had a responsibility to step up and you didn't.

GIGOT: Let's take a look at an ad that the National Republican Campaign Committee who is running in John Spratt's district.

(BEGIN VIDEO CLIP)

AD NARRATOR: For years, Congressman John Spratt was listening to South Carolina, but since Nancy Pelosi took over, he's become a rubber stamp. The cap-and-trade energy tax, Spratt voted yes. The Wall Street bailout, Spratt yes. The wasteful stimulus bill, you bet you. And Obama's health care bill, Spratt, yes, yes, yes, every time. John Spratt, he's not our congressman anymore. He works for her.

(END VIDEO CLIP)

GIGOT: Yes, James, a lot of the — in the past, a lot of these candidates, who are culturally conservative, some are pro-gun, endorsed by the NRA. They can say I'm for these cultural issues, I'm a cultural conservative. I'm one of you, OK, in the conservative districts. This time, they could vote liberal on economic issues. This time, the litmus test issues are all economic.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yes, they —

GIGOT: So they're exposed. They don't get — who cares about guns this time. They're not even an issue.

FREEMAN: Yes, a lot of these — most the people you showed in that opening graphic are not left wingers. And I think it's bigger than Nancy Pelosi. Obviously, a lot of people trying to — a lot of House Democrats trying to save themselves now, saying I won't vote for Pelosi for speaker again. But if it's a Democratic majority, it's going to be an enabler for an Obama White House. So I think that voters are sophisticated looking at this, saying we don't care about seniority. At the end of the day, we don't want the Democratic agenda as it currently is operating to keep going.

I think it's interesting, two of the endangered barons, Frank and Kanjorski —

GIGOT: Barney Frank of Massachusetts and Paul Kanjorski of northeastern Pennsylvania, both of whom are the number-one and two Democrats on the Financial Services Committee.

FREEMAN: That's right. They are in danger, not only in the history of the financial crisis, but for their —, these are the two essentially architects in the House of the financial services reform—

GIGOT: I thought that was supposed to be popular.

FREEMAN: It was supposed to be. When people figured out — it's now a political failure, along with a policy failure. Voters figured out this does not end bailouts. And it's interesting, those two guys are not getting any credit for it.

HENNINGER: But there is part of the wave going on here as you mentioned. In Paul Kanjorski's district, it is 60 percent registered Democrats.

GIGOT: Right.

HENNINGER: And a Franklin Marshal poll last week said 67 percent of the voters think it's time for Kanjorski to be retired.

GIGOT: Wow.

HENNINGER: So, I mean, there's that as well. They feel that these guys have been around too long.

GIGOT: Kim, let's turn to the Senate races. We keep reading that they're tightening and I think they are from our sources. Some of the polls are tightening in Pennsylvania, tightening towards the Democrat, Joe Sestak. In Kentucky, tightening with Rand Paul, the Republican, losing some of his lead. But in the west coast, Carly Fiorina, in California, and Dino Rossi, in Washington State, are catching up at least a little bit on their Democratic incumbents. What do you see the reason for this tightening?

STRASSEL: Well, the tightening that you're seeing on both sides, this is about voters tuning in. We're now less than two weeks out from the election and what you've seen in a lot of the races are people who were undecided. And now their finally saying, OK, now I've picked my spot and it's going one way or the other.

What you are not seeing, and I think this is important, is necessarily some big, new momentum on the Democratic side, which is what they've been hoping for. The key number out there, you look at all of the Democratic candidates who are running, what you do not see, and this is a problem for them, is them breaking that 50 percent number. And for a party that's on its back foot in an election, they need to be doing better than that. And that's going to be the thing to watch from now until November 2nd.

GIGOT: The Democrats are saying, we've got our enthusiasm back, we've got our mojo back and our base is really coming out now, you know, finally — they were sullen at least two years, or at least a year, but now they're fighting and they're going to come out on Election Day. Are you seeing that?

STRASSEL: No, if you saw that, then you'd be looking down at places like Blanche Lincoln in Arkansas. She wouldn't be losing by 15 or 20 points. You'd be looking at Ohio and Lee Fisher, running against Rob Portman there, making some sort of a surge. You wouldn't see folks like Ken Buck kind of appearing to be pulling ahead a little bit in Colorado. So, you're not seeing this across the board. Again, I think in the few races that are there, you're seeing more Democrats tune in, but this is not a major change in dynamics.

GIGOT: What you see in the Senate races every year is that a lot of them come right down to the wire. It's going to be close, but sometimes they all break in one direction. They did for the Democrats last time. Maybe it will be different this time.

When we come back, the Christy clones. Gubernatorial candidates are across the country are trying to capture some of the New Jersey governor's magic. Can his reform agenda propel Republicans to victory in other blue states?

(COMMERCIAL BREAK)

GIGOT: Call them the Christy clones, Republican gubernatorial candidates and even a Democrat or two who are running on an agenda similar to the one that got Chris Christie elected in the bluest of blue states last November. Like Christie, these candidates are campaigning on lower taxes, spending cuts, and public employee pension reform.

Kim, who are the guys, and what are they saying?

STRASSEL: Well, you've got a whole bunch everywhere. You have Bill Brady up in Illinois, Scott Walker in Wisconsin, Tom Foley out in Connecticut, Meg Whitman out in California, Terry Branstad in Iowa. What — the guys getting the most mileage out of these are Republicans who are running in blue states. Some of the voters there might not normally always gravitate to them, but they are receptive to this message, that someone's going to come in, clean house, and stop these budget crises, cut the size of government, stop raising taxes and deal something with out of control issues like public pensions and medical expenses.

GIGOT: One of the things fascinating to me, when Chris Christie was running for candidate, he wasn't even Chris Christie.

(LAUGHTER)

(CROSSTALK)

GIGOT: Because he was pretty muted in the campaign themes he ran on. And then he took office and became the guy we've seen in office, really, taking on the unions and so on. Now, a year later, the other candidates aren't afraid to sound like him when they are he a running for office.

FREEMAN: Yes. No, he's changed the discussion. And you know, that sorted to happen at the end of his campaign. I actually talked to him late in the campaign and I got a better feeling that we might have a reformer here. But I think that's the beauty of the Christy phenomenon is, keep in mind, he really hasn't gotten all of this done in New Jersey yet. He's in there slugging.

GIGOT: No. That's right.

FREEMAN: But he has a Democratic legislature. We don't know whether he's going to get the pension reform done. But he's made it OK to talk across America about saying all of these back-room deals that were cut to take care of public employees, maybe we ought to renegotiate them.

GIGOT: It's fascinating. And even some Democrats, Dan.

HENNINGER: Yes.

GIGOT: I mean, even Mario Cuomo, his son, Andrew, is running for governor here. A prohibitive favorite, almost certainly going to win. And he's talked about a property tax cap and a spending cap. You don't hear Democrats say words like cap often when it comes to spending. So does he feel he needs to absorb some of that Christy magic?

HENNINGER: I think there's a big caveat here, Paul. Yes, he does feel that way, but he also has no choice.

(LAUGHTER)

One of the realities is none of these governors has anywhere to hide anymore. New York, California, Illinois, their deficits are so huge, their public pension obligations are so overwhelming, it's no longer able to raise taxes to pay that off, so they have to do these things. It's good that Chris Christie was the first guy out of the gate with kind of dynamism he has.

Now, implementing this stuff is harder. Andrew Cuomo is talking about a property tax cap. To get that reform, he's going to have to take on his assembly. He's going to have to take on some teacher's unions who have — constitute about 60 percent of the money that comes from the property tax.

GIGOT: And are helping him get elected.

HENNINGER: And helping him get elected. And so to see him actually pull this off would be a minor miracle.

GIGOT: Kim, any other Democrats sounding these themes?

STRASSEL: Oh, it's astonishing. It's a huge issue on the campaign trail. They have been so beat up by the Republicans on some of these issues. You've got guys like the Democratic governor in Illinois, Pat Quinn, making the argument right now that he ought to be elected, as a Democrat he'd be better positioned to force unions to make concessions. I mean, this is a crazy turn of events out there. But it goes to show, what is interesting, a lot of these Republican candidates, they're not only running to win, they're running to build public mandates to get this done. And that's important as well.

GIGOT: I think one of the ironies here though is, two of the candidates, Meg Whitman in California and Foley in Connecticut, they're hamstrung a little bit because they're succeeding Republican governors who are not very popular and who both raised taxes. So you're seeing the Democratic candidates try to, and particularly in California, Jerry Brown running for California, tying Meg Whitman to Arnold Schwarzenegger, who is not popular. They said, we tried an outsider and tried a reformer. It didn't work. Let's stick with the professionals like Jerry Brown.

STRASSEL: Yes, and you've got, you know, Tom Foley in Connecticut, same thing, running under the legacy of Jodi Rell, a sort of big spending, tax raiser. And in a way though, this is helping some of these guys, like Whitman and Foley, because they are saying, look, I'm a different person than that, don't tie me to my party. What I'm promising to do is come in and clean house, not just the Democratic side, but the Republicans who are running the state, too.

GIGOT: It seems to me, James, the key to this reform is, can you put in long-term structural reform that makes it impossible when the good teams come back — or much harder when the good teams come back, if they ever do, for the spenders to come back in power. So you have to have some kind of cap on spending and some kind of cap on taxes, a hard cap.

FREEMAN: Yes, you want the cap on spending and taxes. And you also want the real reform of pensions, which is to shift workers to 401K-style plans like everyone in the private sector gets. Just benchmark it to whatever the average company in your state is offering, offer that to the government workers. And that is the real reform.

GIGOT: Because right now they have guaranteed payouts and they end up getting them spiked at the end of their tenure, lifetime, so they can have an even a bigger pension at the end, for 30 years.

FREEMAN: Yes, and I hear from Christy's camp, he hasn't given up that idea in Jersey. He's pushing —

GIGOT: Really?

FREEMAN: — another plan to get rid of most of the unfunded liabilities, but he wants to go further.

GIGOT: All right, thank you, James, last word.

When we come back, Angelo's ashes. Does the former Countrywide CEO's settlement with the SEC give the political class a pass on their role in the mortgage mess?

(COMMERCIAL BREAK)

GIGOT: Former Countrywide CEO Angelo Mozilo settled civil fraud charges brought against him by the Securities and Exchange Commission last week, agreeing to pay a $22.5 million fine, the largest ever for a senior executive of a public company. And that huge sigh of relief you hear? That's the political class in Washington, after learning that Mozilo wasn't required to name names as part of his deal with the SEC. Documents show that as many as 30 senators or Senate employees received discounted VIP loans under the so-called Friends of Angelo program. Retiring Connecticut Senator Chris Dodd is Countrywide's most famous client, but will we ever know the identities of the others?

James, are we going to find out the names? And why don't we know?

FREEMAN: Yes, it's weird. This whole process in Washington has been designed to prevent the names from coming out. We almost learned more, before they started issuing subpoenas, than we know now.

(LAUGHTER)

GIGOT: So we — people know the bottle neck here.

FREEMAN: Yes. The — Countrywide was collapsing in 2008, and Bank of America bought it. Now, when we want to get information about Angelo Mozilo's VIP loans, we — the government sends a subpoena —

GIGOT: Friends of Angelo program.

FREEMAN: — to Bank of America, the current owner, to say, let's have the information on the so-called Friends of Angelo loans, which were to — basically cut rate mortgages for VIPs at Fannie Mae and Freddie Mac, in Congress, in the executive branch. And unfortunately, this came to a head about a year ago, with the House Oversight Committee finally agreeing at long last to get issue a subpoena to get those documents.

GIGOT: To issue a subpoena.

FREEMAN: But part of the deal was, we don't want the names of congressmen. Send those to the Ethics Committee and —

GIGOT: Where they get buried until — while there's an investigation. Or maybe there isn't an investigation.

FREEMAN: Or have they even gotten there yet. And then a question with the Senate, the subpoena was carefully crafted not to endanger the Senate. So, what the Congressman Issa, in the House, Darrell Issa, California Republican did, was send the Senate a letter saying, I've seen documents and names are blocked out, but there are 37 employees, what do you say, look into.

GIGOT: And why can't I —

FREEMAN: That's what we're waiting for.

GIGOT: But why can't Issa make those public?

FREEMAN: This was the deal that he worked out with Chairman Towns, the Democrat.

GIGOT: To be able to get the subpoena issued, he had to agree to this kind of secrecy. Are we going to be able to find this out?

James, are we going to find this out?

FREEMAN: Oh, I mean, it's a question. Unless the Senate Ethics Committee wants to get more aggressive or the Chairman Towns in the House wants to release the names that he may or may not know, depending on whether he's cared to look in these files. And then the question is whether the House Ethics Committee, if they've even gotten the referrals, are they going to do anything with them? So it's been a black hole. And I think what happened was, they finally agreed a year ago, OK, we're going to issue a subpoena, and the press pack has moved on to other stories and —

GIGOT: Like, whether or not the Republicans will take Congress and it sort of died down.

FREEMAN: Yes.

GIGOT: But this is an outrage. This ought to have been made public.

Dan, is this settlement that Mozilo got with the SEC, is this fair? Is this a fair reckoning for the public?

HENNINGER: Well, you know, the idea here is, did Angelo Mozilo pay enough? Look, Angelo — this is not Bernie Madoff. Angelo Mozilo was not sitting in a little room on the third floor of the building —

GIGOT: Right.

HENNINGER: — running this whole thing out of his back pocket. This is much bigger than that, as James is suggesting. You know would be really fair is if Barney Frank lost that race in Massachusetts.

GIGOT: Because he was the biggest single enabler of Fannie Mae and Freddie Mac in the House of Representatives.

HENNINGER: Right. Yes. In 2004, Fannie and Freddie itself bragged that Countrywide held 20 percent of their single-home business, so this was an enormous number of —

GIGOT: Countrywide issued the subprime loans to people, many of whom couldn't pay, and then sold those to Fannie Mae, allowing Countrywide to issue even more loans, so they were business partners in a fundamental sense.

HENNINGER: Yes.

GIGOT: But —

HENNINGER: Well, I think there's a big less on son here. We often hear people say, why can't business and the public sector work together, more private sector, public partner.

(LAUGHTER)

This was the biggest private-public partnership in the history of the world. There's more venality, more corruption and possibly criminality than anyone has ever seen from a public-private partnership.

GIGOT: Yes, here is what it is, private profits, socialized risks.

HENNINGER: Yes. Yes.

GIGOT: That's what a public-private partnership often ends up with.

(LAUGHTER)

FREEMAN: Yes, and I think the problem with the Mozilo settlements is people think, oh, that's the end of it, we got the bad guy. The bad guy's were in Congress and in Fannie Mae and Freddie Mac, et cetera.

GIGOT: Those were the architects, all right.

FREEMAN: Right.

GIGOT: And the regulators.

When have to take one more break. We come back, "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Time now for "Hits and Misses" of the week.

Dan, first to you.

HENNINGER: Paul, a significant miss to the students in merry old France, seen rioting on television screens all over the world this year, because French President Sarkozy is trying to get the fiscal affairs in order by raising the retirement age from 60 to 62.

(LAUGHTER)

They're rioting over an event that's going to take — take place 40 years from now. The scenes on the screen shows exactly where the United States does not want to go.

GIGOT: That's why I give them a hit, for showing them where we don't want to end up.

HENNINGER: Yes.

GIGOT: All credit to the French rioters.

OK, Kim?

STRASSEL: I'm saying hurrah for Canada. I know there's a lot of wailing up there right now because Canada lost the vote in the general assembly for a temporary seat on the U.N. Security Council. The better way to look at this is you have to be doing something right to upset to have upset that many dictatorships —

(LAUGHTER)

— and sanctimonious Western European counties to lose this vote. In this case, it's Stephen Harper's conservative government that's been great on Afghanistan, great on Israel, pushed back on things like cap-and-trade. If the only price on this is losing the honor of a U.N. seat, well, Canada ought to be throwing a party.

GIGOT: All right.

James?

FREEMAN: This is a big hit to the — really the polar opposite of the French government workers we saw earlier. This is Marisol Valles Garcia, who is the 20-year-old mom who has agreed to be the mayor of a town in Chihuahua, Mexico. This has been ground zero in the drug war. And she is saying she wants a better life for her town and children, and great courage on her part.

GIGOT: Yes, because her predecessors have been killed.

All right thanks, James.

That's it for this week's edition of the "Journal Editorial Report." Thanks to my panel and to all of you for watching.

I'm Paul Gigot. We hope to see all of you right here next week.

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