Could the "senator from Wall Street" become the "chairman from Wall Street?"
It’s the question being asked from the corridors of the Capitol to the cobblestone alleyways of lower Manhattan in the wake of this week’s announcement that Senate Banking Committee Chairman Tim Johnson, D-S.D., is retiring.
Johnson’s departure frees up the gavel on the influential panel and sets off a chain of musical chairmanships that won’t be finalized until 2015. The two leading contenders for the influential Senate Banking Committee chairmanship are Sen. Chuck Schumer, Wall Street’s home-state senator, and Sen. Sherrod Brown, a progressive Ohio Democrat who has made it clear he wants to break up the nation’s biggest banks.
Schumer is above Brown in the Senate’s seniority pecking order, but he faces a tricky political calculus. Schumer doesn’t need the Banking gavel to raise big bucks from Wall Street — he already tops the Senate at that — and a serious policy committee could prove a time drain and distraction for a politician with his eye on the long-term goal of becoming majority leader. He already heads the Rules Committee.
On the other hand, the Banking perch could help thicken his legislative resume while tending to the interests of his own state’s important and influential financial sector.
“It’s a tough call. I’m not sure there’s a wrong answer,” said Chris Kofinis, a Democratic strategist and former chief of staff to Sen. Joe Manchin, D-W.Va.
It’s no secret that the bank lobby would rather see a Chairman Schumer than a Chairman Brown. It’s not that Schumer is seen as an industry champion; Wall Street lobbyists still fault him for not doing more to help protect the financial-services sector during the debate over the Dodd-Frank financial reforms. But the banking industry sees Brown as a far worse alternative.
“It’s just a lesser of two evils thing,” said one financial-industry executive.
With so much that could alter the political landscape between now and the next Congress, Schumer is unlikely to make a decision soon. His office didn’t respond to requests for comment. The bank lobby is also keeping a low profile for now.
“There is nothing to be gained by going out and lobbying for something that is not going to happen for a year and a half,” said Brian Gardner, an analyst with the financial-research firm Keefe, Bruyette & Woods. “To go back a horse right now and push for something that may never come to pass seems to me to be wildly premature.”
Whoever is selected as the next chairman, Gardner wrote in a research note to clients this week, is “in our view, likely to be less bank-friendly than [Senator] Johnson.”
Brown is among the Senate’s most ardent critics of the banking sector. After the committee's confirmation hearing this month for Mary Jo White, President Obama's nominee to head the Securities and Exchange Commission, Brown was the lone dissenting voice in a 21-1 vote to approve her. He also has taken the lead, along with Sen. David Vitter, R-La., in trying to limit the size of banks that are deemed “too big to fail.”
With Johnson’s retirement, the most senior Democrat on the Banking Committee will be Sen. Jack Reed of Rhode Island, but he’s widely expected to assume the open chairmanship of the Armed Services Committee in the next Congress. Schumer is next in line after him, followed by Sen. Bob Menendez of New Jersey (who already chairs Foreign Relations) and then Brown.
The debate about whether Schumer would benefit more, politically, by taking the Banking gavel or staying atop Rules came to a boil this week. The Senate Rules Committee chairmanship puts Schumer in the middle of the internal mechanics of the chamber. “In terms of building relationships, strengthening relationships, it’s incredibly powerful,” said Kofinis. “But [Schumer] already has all that.”
Looming in the distance is a potential leadership showdown between Schumer and Senate Majority Whip Dick Durbin, D-Ill., whenever current Senate Majority Leader Harry Reid, D-Nev., decides to retire.
In that potential tussle, bankers would also prefer Schumer. Durbin has long had an adversarial relationship with the banking industry, siding with retailers over bankers in the fight over swipe fees and advocating for bankruptcy reforms to make it easier for consumers to discharge debt.
“We in the industry may not formally weigh in, but we would definitely be lobbying a little bit … to try and push Schumer over Durbin, and it would all be quiet,” said one industry lobbyist, who spoke on condition of anonymity.
There has been some talk that Schumer would be unable to keep his post as the Senate’s No. 3-ranking Democrat and lead the Banking panel, but a senior Democratic aide dismissed that argument, noting that Sen. Patty Murray chairs the Budget Committee and is also a member of the Senate leadership.
The top spot on the Senate Banking Committee historically is a plum post for a lawmaker looking to shake loose Wall Street campaign dollars. But the last time Schumer was on the ballot, in 2001, he raised more money from the finance, insurance, and real-estate industries — $5.485 million all told — than any other senator, according to the Center for Responsive Politics.
Schumer, who has a reputation first as a political operative and message-maker and second as a legislator, has worked hard this year to buff up his legislative credentials. The Banking chairmanship would give him a prominent post from which to legislate in 2015, though historic breakthroughs this year on immigration reform or gun safety could render that need moot. Schumer is in the middle of negotiating both legislative packages.
The prime arguments against the New York senator taking the job are that it could be seen as a detour from his leadership aspirations, bogging him down in legislative arcana rather than big-picture national politics. It could also be awkward for Schumer to lead oversight of Wall Street, which has become more controversial and higher profile since the financial crisis, while still catering to an important constituency in his state.
“It can be an important perch for your constituents, but, on the other hand, as someone who tries to court the liberal base to the extent he can, that’s going to be a pretty delicate balancing act,” said a former Senate Democratic leadership aide.
Schumer could also appease the left wing of the Democratic Party by clearing the way for Brown to take the gavel. “He could score a ton of points with the progressives by orchestrating Senator Brown taking that spot,” said Jaret Seiberg, a financial analyst with Washington Research Group.
This article appears in the March 29, 2013 edition of NJ Daily.