Wall Street’s Faith in Schumer Slips
Sen. Charles Schumer has worked quietly but vigorously to shape financial regulatory reform legislation, a delicate exercise that has the New York City resident straddling the fence between his responsibilities as a Democratic Party leader and as a representative of Wall Street’s interests.
Schumer’s decision to support a strong, liberal-minded reform bill rather than rallying to Wall Street’s defense has caused intense grumbling and hurt feelings in the New York-based financial services industry, long among the Senator’s most loyal political and financial backers. Schumer’s harshest detractors accuse him of taking Wall Street’s campaign cash and then turning his back on the industry for the sake of career advancement in Washington, while those less impassioned offer a more balanced critique.
Schumer, in an interview, brushed aside the criticism and defended his actions, arguing that New York City is suffering from 10.7 percent unemployment due partly to Wall Street excesses and that he has advocated policies meant to protect all of his constituents. He contends that his focus on effective reform has prevented the passage of vindictive legislation favored by some Democrats looking to punish the industry for a deep recession still being felt on Main Street.
“It’s a difficult issue. But I’m very comfortable with where I am despite the criticism that I get,” Schumer said Wednesday. “I believe that there were significant excesses in the financial services industry that led to the crisis. That’s what’s motivated me.”
Perhaps because Schumer mined Wall Street for contributions so successfully during his two terms as Democratic Senatorial Campaign Committee chairman, the Senator is seen as particularly intertwined with the financial services industry. Schumer in 2006 and 2008 led the Democrats to a total of 14 Senate seat pickups, and he outraised the National Republican Senatorial Committee by leaps and bounds partly because his constituents in lower Manhattan opened their checkbooks.
None of the financial industry sources interviewed for this story suggested Schumer owed Wall Street fealty for all of that support, and some lobbyists working on this issue lauded Schumer and his staff for their availability and assistance as the fight over regulatory reform legislation has heated up. But there appears to be growing frustration in financial services circles, with some arguing that Schumer has failed to adequately protect an industry threatened by politicians looking for an election-year scapegoat.
“What I think he’s most focused on is, How do I become Majority Leader?'” said one K Street operative, noting the contest would likely ensue between Schumer and Majority Whip Dick Durbin (D-Ill.) if Senate Majority Leader Harry Reid (D-Nev.) loses his re-election bid.
A Schumer aide dismissed as pure hyperbole the notion that the New Yorker’s position on regulatory reform is governed by internal Democratic politics. “The Senator is certain Harry Reid is going to be re-elected. The unemployment rate in New York City, one of the remnants of this crisis, is reason enough for him to believe in strong reform,” this aide said.
Even those less critical of Schumer’s role in the financial regulatory reform process acknowledge that he has often operated behind the scenes and been far less public than his constituents on Wall Street would prefer. Schumer readily concedes this fact, explaining that he has been out front on some issues related to the reform bill, while quietly working on others — much like he did throughout the health care debate.
But Schumer disputes claims that he has operated strictly in secret, noting he recently went public about his support for a bank tax and was very open about changes he wanted at the Securities and Exchange Commission. He also says he made no secret about his work on new corporate governance and consumer protection regulations.
“I’ve been out front on a whole lot of issues,” Schumer said. “Then there’s behind the scenes. Sometimes I defer to colleagues a little bit.”
Schumer said he’s regularly consulted Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.), the architect of the financial regulatory overhaul, and said he had a strong hand in the Democratic messaging response to the attack on the reform package launched last week by Senate Minority Leader Mitch McConnell (R-Ky.). Schumer said he called White House Chief of Staff Rahm Emanuel and Reid, and he worked with progressives to help engineer a coordinated response to the GOP assault.
Sen. Jack Reed (D-R.I.), who has worked closely with Schumer on financial regulatory reform issues, said the Democratic Conference vice chairman is prepared to do what’s right, even if it means taking on the “powers that be” in New York.
“He’s everywhere doing everything simultaneously,” Reed said.
One financial services industry lobbyist credited Schumer with being blunt and forthright with Wall Street players who have come to see him, explaining the politics of the reform bill and where Washington is on this issue. Essentially, Schumer has told the industry that a strong reform bill is going to pass and that there is little they can do about it, the lobbyist said.
However this makes little sense to an industry accustomed to rational outcomes and unfamiliar with the nuance and rhythms of Capitol Hill politics. As such, Schumer has become rather unpopular among many in the industry. There’s a term used on Wall Street when one side in a deal feels insulted and taken advantage of. The term, “retraded,” refers to a trader who goes to the floor of the stock exchange to retrade a recently acquired stock.
According to this industry lobbyist, Wall Street at the moment wouldn’t mind retrading Schumer.
“These are sophisticated people, they understand things need to be done. But they don’t understand how anyone can favor current things in this bill. They want someone to emote with them, and that’s not where Schumer is,” this individual said. “He doesn’t want to be making phone calls right now. A ton of people are upset.”
Emily Pierce contributed to this story.