Sunday, March 22, 2009

Dodd and the Appearance of Corruption

Ages ago, long before the Damoclean sword of the “appearance of corruption” was hanging menacingly over US Sen. Chris Dodd’s head, the senator was asked to dilate on the connection between campaign receipts and political favors. He said there was no connection in his case; any perceived connection simply meant that those who contributed to his campaigns were voting with dollars for his programs.

Of all the Sherlock Holmes’ in the world, certainly Dodd would know better than most whether he had received a quid for a quo. And he was quite sure he hadn’t – ever.

This analysis is mistaken in several important points, not the least of which is that it is not Dodd’s role to sniff out political corruption. Politicians are what lawyers would call interested parties. Journalists are, sometimes, disinterested parties. They are the bloodhounds of corruption. It is their chosen calling to sniff out corruption and expose it to the cleansing light of day, where it may be disinfected.

Somehow along the way, Dodd fell from grace. His precipitous fall is not the result of Dodd’s politics. In Connecticut, largely Democratic and largely liberal, Dodd’s politics has always stood him in good stead. The journalistic gods in his state generally have looked with favor on Dodd’s liberal policies. In this regard, he often has been compared favorably with Massachusetts US Sen. Ted Kennedy, the liberal lion of the senate. Both are convivial Irishmen; both have mastered the craft of the US senate’s arcane wheeling and dealing; both are pedigreed politicians. Ted Kennedy is a chip off the old Camelot block, and Dodd’s father, before he suffered his own fall from grace, was among Connecticut’s most able and distinguished public servants.

It is altogether possible that Dodd believed so heartily in his own rectitude -- he knew he was not accepting favors – that he became insensible to the niceties of corrupt politics.

Certainly, the possibility of corruption has surrounded Dodd’s head like a black aureole for some time. Dodd is head of the banking committee, a position from which a corrupt politician could easily parcel out favors for campaign cash. Dodd has received oodles of campaign contributions from the finance industry, an interested party in the quid pro quo business; he was responsible, as Chris Powell of the Journal Inquirer reminds us, for the dismantling of the Glass-Steagall Act, a legislative breakwater that prevented financial institution from engaging in the banking business. The Banking Act of 1933 separated commercial and investment banking, and after it was partially dismantled, a tsunami of transformative economic changes washed over the country, laying waste to sound banking practices. After 12 attempts in 25 years to repeal obstructive provisions of Glass-Steagall, lobbying efforts were rewarded in Nov 1999 when Glass-Steagall was gutted.

Not only did Dodd vote to repeal Glass-Steagall, his whole record is pockmarked by votes to loosen controls on the financial industry.

While the left is in rebellion over the repeal of Glass-Steagall, the right points to the Community Reinvestment Act as institutionalizing the poor standards that led to the mortgage meltdown on Dodd’s watch.

“In an earlier newspaper story extolling the virtues of relaxed underwriting standards,” wrote Stan Liebowitz, the Ashbel Smith professor of Economics in the Business School at the University of Texas at Dallas in a prescient opinion piece in the New York Post a year ago, “Countrywide's chief executive [Angelo Mozilo] bragged that, to approve minority applications that would otherwise be rejected "lenders have had to stretch the rules a bit." He's not bragging now.

Indeed – neither is Dodd.

In a survey of the dismemberment of Glass-Steagall, Frontline reports:

“Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, ‘You're buying the government?’"

In a Marketwatch piece Rubin, the 70th United States Secretary of the Treasury during both the first and second Clinton administrations, is named as one of the ten most unethical people in business.

How would Dodd fair in a similar rating?.
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