Sen. Charles E. Schumer, the presumed next Democratic leader in the chamber, has deep ties in the lobbying and influence sector — and a reputation for being cozy with Wall Street.
But over the next two years, as he awaits his expected promotion, the New Yorker will have to navigate around the policy divisions between the party’s populist wing and its members who are friendlier to business. And Senate observers say he is likely to keep some distance from corporate interests, especially in the banking industry.
“He represents a big, diverse state,” said Democratic lobbyist and high-dollar donor Steve Elmendorf. “In working with him for 25 years, he very aggressively represents the state of New York. Sometimes that means he’s representing one interest over another.”
Elmendorf, who runs the firm Elmendorf | Ryan, said there is a misperception that Schumer looks out for Wall Street to the exclusion of other industries, such as technology, or of ordinary constituents. “At the end of the day, he’s a progressive guy who got his start representing a middle class district in Brooklyn,” he said.
Schumer’s collection of former aides and associates includes a long roster of financial industry lobbyists such as: Roger Hollingsworth, the Managed Fund Association’s executive vice president and managing director of global government affairs; Carmencita Whonder, who handled Schumer’s Banking Committee issues, and has recently represented such clients as Ares Capital Corp. and Guggenheim Investment Management at the firm Brownstein Hyatt Farber Schreck; and Izzy Klein, a principal at the Podesta Group, whose clients have included Credit Suisse Securities and the Investment Company Institute.
Other former aides in the private sector include Phil Singer of Singer Bonjean and Heather McHugh, a former Schumer legislative director, who is with Capitol Hill Strategies.
Another former aide, Eric Hauser, has a high-profile role at the AFL-CIO, where he is communications director and strategic adviser to the labor union’s president Richard Trumka. Numerous Schumer alums are also scattered around the Obama administration, including White House legislative affairs chief Katie Fallon.
Elmendorf’s business partner, Jimmy Ryan, may be best known as a former top aide to the current Senate Democratic Leader Harry Reid of Nevada, but Ryan also once worked for Schumer in the House.
Schumer has already won Reid’s endorsement — and that of other Democrats — to succeed the Nevadan. His closest competitor, Patty Murray of Washington, endorsed Schumer on Monday, according to Roll Call.
Those rapid series of endorsements so quickly after Reid’s announced retirement last week led progressive advocacy group CREDO Action to blast Schumer.
“Sen. Chuck Schumer has spent his entire career carrying water for Wall Street interests,” said the group’s political director Becky Bond, calling him a “disastrous choice to lead the Democratic caucus.”
But Schumer’s policy record on Wall Street interests is mixed.
Schumer this year could have claimed the top slot of the Senate, Banking, Housing and Urban Affairs Committee, but instead allowed the more liberal Sherrod Brown, D-Ohio to take it, saying at the time he wanted to focus on his leadership role running the Democratic Policy and Communications operation. He remains a senior Democrat on Banking.
Swaps in Banking
The industry has been his go-to for campaign donations. In the 2010 cycle, the finance and real estate sectors were by far his top contributors, according to the Center for Responsive Politics, followed by lawyers and lobbyists.
His support from the financial industry helped fuel his rise in the Democratic caucus, but it also could work against him with the party’s more liberal and populist members, who have been eager to take on the firms they believe caused the 2008 financial crisis.
“Although Sen. Schumer represents New York, and is often viewed as close to Wall Street, we do not believe the legislative environment for money center banks would improve materially if he were to take over the top spot in the Democratic leadership. In our view, Sen. Schumer has made a concerted effort to align himself more closely with other industries in recent years,” said Isaac Boltansky, an analyst with Compass Point Research and Trading in a recent note to clients.
Schumer has largely been absent from Banking hearings over the past two months on proposals calling for rolling back some regulatory roles for smaller and community banks under the Dodd-Frank financial overhaul (PL 111-203).
By sidestepping the top Democratic post on the panel, Schumer can remain in the background on issues that may put him at odds with liberals, such as Elizabeth Warren, D-Mass., who has been outspoken against any changes to Dodd-Frank and some want to see run for party leader.
Schumer called Dodd-Frank “necessary” when it became law, but along with many Democrats supported an omnibus spending package (PL 113-235) that softened a provision in the financial overhaul to give banks more leeway in handling their swaps operations. Warren voted against the omnibus because of the swaps language.
At other times, Schumer has aligned with progressive Democrats and come out against legislation important to the financial services industry.
In January, Schumer negotiated a five-year extension of the Terrorism Risk Insurance program (PL 114-1) with Financial Services Chairman Rep. Jeb Hensarling R-Texas, a priority for the insurance industry. Schumer, however, worked with Warren to offer a floor amendment to block a provision in the reauthorization to would exempt non-financial firms, known as end users, from complying with derivatives rules under Dodd-Frank. It fell, 31-66.
On one issue close to the financial world, raising the carried interest tax, Schumer’s position has been tough to pin down.
The New York Democrat says he supports efforts to have compensation for private equity and hedge fund managers taxed at normal income rates rather than the lower rate for investments. But he also has said the higher tax rate should apply to other business sectors — a view that has significant opposition. Opponents of the change believe Schumer’s call for a broader increase in the carried interest rate has helped scuttle action for several years.
Supporters say Schumer is only trying to get to a fair result.
“It’s not like Wall Street’s an illegitimate economic factor in the state he represents,” said lobbyist Larry O’Brien, who has worked with Schumer for years, including on fundraising efforts for the party. “But having said that, if you look at Dodd-Frank and the Volcker Rule, you will find that he was, in terms of how he approached those issues, he was objective and really tried to reach what he thought were the right conclusions.”