Wall Street cashes out investment in Chris Dodd 

If Chris Dodd hadn't been so cozy with the financial industry, he wouldn't have been hounded out of the Senate.

But if he weren't retiring, he wouldn't have a free hand to write the legislation to change the way the financial industry is regulated.

The financial industry built Dodd's career, so why shouldn't it profit from the demise of it? It's like a political credit-default swap.

It's a perfect fit for the Goldman Sachs era on Wall Street: No matter who loses, they win.

Dodd had been on political auto pilot for decades, but he tried to liven things up with a run for the presidency in 2008.

The biggest investor in his presidential campaign was Connecticut-based hedge fund SAC Capital ($248,200). But the management teams at all of the big financial houses came across for Dodd's bid. Employees of Citigroup, Bear Stearns, Goldman and American International Group were all high on his donor list.

Despite moving his family to Iowa, he finished last in the state's Democratic caucuses -- behind Joe Biden and "uncommitted."

Worse for Dodd, his vanity candidacy tipped off Connecticut voters that something was amiss with their senior senator.

Dodd was elected to the House in 1974, just four years after his father had been driven from the Senate by a campaign finance scandal. In 1980, Dodd moved up to the Senate and mostly allowed his state to forget about him.

Dodd's legislative pursuits were deadly dull to voters but of great interest to the insurance and finance industries that dominate Connecticut.

That Dodd, unknown in the rest of the country, could raise and spend $18 million on his absurd presidential candidacy is good evidence of how lucrative it is to focus on financial regulation in Washington.

Connecticut voters might have forgotten about his goofy Iowa campaign by now if it hadn't been for the bursting of the mortgage bubble.

In June 2008 Dodd proposed an aid package for subprime lenders, including Countrywide Financial.

As Dodd was pushing the bailout, reporter Daniel Golden of Portfolio magazine discovered that the banking committee chairman had saved about $75,000 on two loans because of preferential treatment he received from Countrywide's then-chief executive officer, Angelo Mozilo.

As the mortgage market continued to melt down, Dodd was scrambling to protect his biggest political benefactors -- mortgage backers Fannie Mae and Freddie Mac.

Dodd had for years pushed rules to allow Fannie and Freddie to operate like private companies when it came to profits and like public companies when it came to losses. It made him very popular in Washington.

Fannie and Freddie provided safe harbors for politicians between gigs -- like the $320,000 Rahm Emanuel pocketed for a no-show seat on Freddie's board. But more importantly, the firms funded campaigns.

Dodd was the top recipient of Fannie and Freddie funds ($165,400 through 2008), but the two government-sponsored entities, as they are benignly called, shrewdly spread the wealth around, including $120,349 in donations to the church plate of then-Sen. Barack Obama.

Dodd pleaded for the Fannie and Freddie bailout that has so far cost $126 billion. When Dodd argued in support of the cash dump, he called the lenders "fundamentally strong."

Dodd was later caught in a shady deal on an Irish vacation cottage with a former Bear Stearns executive whom the senator had helped to get a pardon for insider trading from outgoing President Clinton.

But the electoral catastrophe for Dodd came in March 2009 when it was revealed that he inserted language in the Obama stimulus that allowed bailed-out insurance firm AIG to pay out $165 million in bonuses.

When he announced his retirement in January 2010, Dodd was losing in head-to-head polls to all Republican comers in a heavily Democratic state.

Since his political future caved in, Dodd has been working with great fervor to complete the financial legislation sought by Obama.

Though the president wants Dodd to drop a $50 billion fund to cover the cost of future bailouts, he and Dodd agree that the idea of institutions being "too big to fail" should be codified in law.

If Dodd were running for re-election he would be under pressure to get tough on Wall Street. The Left wants the government to break up the big banks, and the Right wants to end bailouts permanently. But because he is on his way out, Dodd is free to ignore their demands.

Because an inappropriate relationship with the financial sector cost a senator his career, that senator is in a unique position to change the regulation of the financial sector without fear of political consequences.

It is an only-in-Washington story.

Chris Stirewalt is the political editor of the Washington Examiner. He can be reached at cstirewalt@washingtonexaminer.com.

About The Author

Chris Stirewalt


Washington Examiner Political Editor Chris Stirewalt, who coordinates political coverage for the newspaper and ExaminerPolitics.com in addition to writing a twice-weekly column and
regular blog posts.

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