Ted Kaufman - United States Senator for Delaware

Kaufman leading the financial fight

Source: The News Journal


January 19, 2010

As Congress heads for a final showdown on health care, it already knows the next debate will be on financial reform. If you think partisanship and political pressure and lobbying dominated the first half of the congressional session, you ain’t seen nothing yet as Congress seeks to put reins on the financial world.

A prominent voice in the Senate debate will be Delaware’s Ted KAUFMAN, who has been speaking out repeatedly and forcefully on the need for congressional legislation, federal agency enforcement and Justice Department prosecutions to control excesses and prevent their recurrence.

So concerned is KAUFMAN about the problems that have occurred and may well recur in the financial world that I wonder if he will change his mind about leaving the Senate seat when his term ends next January if necessary reforms have not been enacted. He insisted to me in a recent interview that he is sticking to his pledge not to seek election to the remaining four years of Joe Biden’s Senate term. He particularly loathes the idea of the massive fundraising a Democrat needs to challenge the candidacy of the popular Republican Mike Castle, who wants to move from the House to the Senate.

A lame-duck status might well be an advantage for KAUFMAN because he can speak out on the issues that concern him without fears of it hurting any election chances. Although he is a freshman senator, KAUFMAN gets his respect, back-stage smarts, and clout from his many years as Biden’s chief adviser.

In December, KAUFMAN chaired a Judiciary Committee oversight hearing into mortgage fraud, where he asked about criminal behavior and why there had not been any convictions. Companies like Goldman Sachs were selling mortgage-backed securities while also trading in hedge funds that those securities will lose value. A Goldman executive last week admitted that the firm offered investment advice on which it had already taken the opposite approach.

KAUFMAN sees some hope that bipartisanship will return during the financial debate. He has signed on to a bill sponsored by Republican John McCain of Arizona and Democrat Maria Cantwell of Washington to restore the provisions of the Glass-Steagall Act. Originally passed in 1933 as one of the measures resulting from the Great Depression, the act separated commercial and investment banking. It was repealed in 1999 with an overwhelming vote from both parties and President Clinton’s signature. Today many financial experts say that repeal helped lead to the current financial dilemma by allowing banks to invest in risky securities while obligated to preserve deposits and make loans. KAUFMAN says it’s as if a lawyer in a divorce case was representing both husband and wife.

The senator says it’s no wonder that the American people don’t trust financial institutions with such practices as high-frequency trading and “naked short-selling.” In the former, large trades are done in a split second and now account for 70 percent of stock volume with little transparency. In naked short selling, brokers bet the stock goes down but don’t have to hold the shares. The Securities and Exchange Commission may soon issue new rules regulating these practices. KAUFMAN says he has faith in the new SEC chairman, Mary Schapiro, and enforcement director Robert Khuzami, but cautions that other commission members may be slowing Schapiro’s efforts for tougher rules and crackdown.

The big Senate debate will be over the Consumer Protection Act which would regulate many aspects of the financial world. I would think that senators would be pressured to pass such legislation by an outraged public, including the many who have lost homes and jobs, and even the tea party zealots who don’t think government is protecting them. The average American will be arrayed against banking interests and many other lobbying groups who fear supervision. KAUFMAN will be in the thick of the fight.

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