2:40 pm Feb. 21, 2012
Last month, a senator from New York sent a letter to five federal agencies, joining with a number of Republicans in expressing concern about how a new piece of Wall Street regulation would be implemented. The senator wasn’t Chuck Schumer.
Defending the prerogatives (and profits) of the largely New York-based finance industry has long been the territory of Schumer, who has in turn been handsomely rewarded in campaign contributions from Wall Street.
But as he has become more of a national Democratic leader, his message on Wall Street has come more into line with his party’s. He has dropped the anti-regulatory tone, and even boasted on national television recently that Wall Street types no longer donate money to him as they once did.
Meanwhile, Kirsten Gillibrand has quietly overcome considerable skepticism about her on Wall Street to become a go-to advocate for the financial services industry in her own right.
"She has really worked hard to understand and be supportive and helpful where she could, on a whole variety of issues," said Kathy Wylde, the president and C.E.O. of the Partnership for a Greater New York. "She's worked it very hard."
BEFORE THE FINANCIAL COLLAPSE IN 2008, SCHUMER WAS EFFECTIVELY the Senator From Wall Street.
In the name of maintaining New York's competitiveness as a financial capital against overseas markets, he worked diligently to keep the hometown economic engine humming, consistently beating back regulation and taxation that the local finance industry deemed cumbersome. He helped free big banks and Wall Street firms from the constraints of Glass-Steagall, bucked his party on a proposed increase in the carried interest tax, and sponsored a sympathetic 2006 McKinsey report, with Mayor Michael Bloomberg, that Barney Frank recently declared to have been the high-water mark of the industry’s influence in Washington.
Schumer’s relationship with the industry helped fuel his rise up the Democrat ranks, first as chairman of the Democratic Senatorial Campaign Committee, where he helped marginal candidates raise tremendous sums of money, and later as a high-ranking member of his party’s leadership in the Senate.
When the market collapsed, the industry hoped Schumer, with his considerable clout, might be their champion once again. But Schumer, whose standing with voters in New York has always been solid, had a bigger, less parochial agenda to worry about. He duly embraced the national Democrats’ agenda of regulatory reform, voting in favor of the Dodd-Frank bill even at the cost of some of his prior support.
“His leadership position means he really has to pick his battles,” said Wylde. “The industry would like him to be visibly, vocally in their corner on every issue, and I think that's more than can be expected from someone in a leadership position in the Democratic majority.”
WALL STREET TYPES, LIKE MANY other types, greeted then-governor David Paterson’s appointment of Gillibrand to the Senate in 2009 with considerable skepticism. The fact that Gillibrand, a moderate, one-and-a-half-term House member representing a conservative-leaning upstate district, was largely unknown to them was part of it.
But there was also the fact that Gillibrand had twice voted against the Bush administration’s Troubled Asset Relief Program, the $700-billion injection that the industry had insisted it needed to stay afloat.
Since those early days, just as she did with gay-rights groups and gun-control advocates, who were also skeptical of her and her record, Gillibrand applied herself to the task of reassuring the industry that she would be a strong advocate for them.
But being a strong supporter of the industry isn’t quite as simple as it used to be.
For one thing, the “Wall Street” agenda in Washington has become considerably more complicated than it was even just a few years ago when a senator from New York who wanted to protect the city and state’s golden goose simply by advocating deregulation.
The anger at Wall Street after the bailouts, the same anger that helped give rise to the Occupy movement, also made it politically unfeasible simply to oppose all regulation on the finance industry.
At the same time, what once amounted to a relatively unified banking-and-investment lobby is now more balkanized, with each sub-sector of the industry fighting against certain specific provisions of the landmark Dodd-Frank legislation—the ones that deal with, say, proprietary trading, versus the ones that deal with interchange fees—that pose the biggest threat to their own bottom lines.
So both New York senators, in their capacity as advocates for a hometown industry, have had to pick and choose their spots.
In May of 2011, Gillibrand and Schumer both signed a letter, along with 16 members of the New York House delegation, urging regulators to reconsider how they planned to regulate derivatives. And both opposed an amendment by Senator Jon Tester, a Montana Democrat, that threatened to lower debit-card swipe fees.
But Gillibrand, in part owing to her lower profile, has also been able to stake out some of her own territory on the issue, like her letter last month inquiring about the Volcker Rule, which bans proprietary trading by commercial banks.
"I think for awhile there she was definitely in [Schumer's] shadow, but I think she's really started to break out of that,” said one industry source who is closely monitoring the implementation of Dodd-Frank.
And while the letter itself was hardly explosive—saying only that “the potential for inconsistent enforcement across various regulatory agencies is troubling”—the significance of a Democrat raising concerns, at a time when her party, led by the White House, was very much on the offensive against the excesses of Wall Street, was hardly lost on the industry.
“For a Democrat to stand up and criticize it is a signal to other Democrats to say something's wrong here," said the industry source, who said it showed “courage, and a willingness to turn against the popular tide."
And, in that sense, Gillibrand enjoys a certain freedom to operate at odds with the overall Democratic message in a way that Schumer—who is the chief architect of a 2012 message focused on income equality—can’t, exactly.
Last year Gillibrand voted “no” on both the extension of the Bush tax cuts and the debt ceiling compromise, deals that high-ranking Democrats like Schumer were almost contractually bound to support.
BOTH SENATORS ARE SOMEWHAT RELUCTANT AT THE MOMENT to promote their support from the industry.
On “Morning Joe” earlier this month, for what was supposed to have been a conversation about the harmful effect of super PACs, Schumer said the industry was punishing Democrats across the board, including himself.
"So they're not giving you money anymore?" host Joe Scarborough asked, incredulously.
"No. Very little, frankly," Schumer said.
"To me," Schumer said. "That's correct. Because they didn't like the Dodd-Frank Bill, which I think is balanced reform and fair reform. And they don't like the idea of saying millionaires should pay a 30 percent tax."
The extent to which Schumer’s donations have actually been dented is difficult to measure; he won a lopsided re-election shortly after Dodd-Frank was passed in 2010—outraising all other senators by nearly two-to-one from the financial services industry—and he hasn’t yet bothered to start raising money in earnest for his next race in 2016.
A spokesman, Mike Morey, said the senator still enjoys, overall, a good relationship with the industry.
“While there were some on Wall Street who were upset with Senator Schumer’s support of Dodd-Frank, he continues to have strong relationships with the vast majority of New York’s financial community,” Morey said in a statement.
Meanwhile, Gillibrand, who heavily promoted her endorsements from gun-control and gay-rights advocates after winning those groups over, has done less to promote her success in winning over the Wall Street.
Through September, Gillibrand had raised $973,600 for her re-election from the securities and investment industry, more than any other senator. The next-closest senator is Massachusetts Republican Scott Brown, who has been cast as an industry savior in his race against the populist Democrat Elizabeth Warren. And Gillibrand's total includes only the money she's raised since the end of 2010, when she won her first statewide race, with $1.5 million in help from the industry.
(In the fourth quarter of 2011, Gillibrand raised a total of $1.8 million for her campaign, and while it's not yet clear how much of that comes from Wall Street, her filing includes contributions from the political action committees of the Financial Services Roundtable, the National Venture Capital Association, Oppenheimer Funds, Citibank, and C.V. Starr, a financial firm run by former AIG chairman Maurice Greenberg.)
Gillibrand's office, like Schumer’s, points to support for reforms—specifically, the "comprehensive regulation of over-the-counter derivatives and the creation of the important Consumer Financial Protection Bureau"—to go along with continuing support of, and from, the industry.
"Senator Gillibrand has two important goals that are not mutually exclusive - reducing the amount of risk in the financial system so that we never again suffer from a financial meltdown and ensuring that New York City remains the financial capital of the world,” said her spokesman, Glen Caplin, in a statement. “Sometimes industry has agreed with her approach, and sometimes they have not, but she always fights for the best interests of all New Yorkers.
“For example, she fought hard for important Wall Street reforms like comprehensive regulation of over-the-counter derivatives and the creation of the important Consumer Financial Protection Bureau to serve as a new watchdog for consumers. She wants to ensure these new regulations are implemented as intended and will fight any Republican attempts to weaken these critical reforms, just as she will fight to ensure that New York City continues to be the financial capital of the world."