September 16, 2008
Sen. Dodd, Please Surrender Your Gavel
September 16, 2008 By: Chris Healy Category: News
The Everyday Republican
At what point do the facts and the tasks of leaderships intersect to demonstrate that it is time for U.S. Sen. Chris Dodd to relinquish the gavel as Chairman of the Banking and Urban Affairs Committee?
We would argue it is now and we hope that the public calls on Sen. Dodd to resign as chairman of this important committee given the grave nature of our financial markets and Sen. Dodd’s failure throughout to see it and to act in our interests.
Let’s take a look at the sub-prime mortgage meltdown. Last year, there were plenty of indications that many banks and mortgage institutions were highly leveraged and did not have the capital needed to sustain large defaults. All you had to do was read the Wall Street Journal or watch Kudlow and Company.
On January 11, 2007, Chris Dodd decided to run for President. No sane person felt Dodd had any shot at all but he had a few millions dollars socked away, most of it coming from the financial institutions that Dodd is supposed to keep an eye on. So, off Dodd went to Iowa and as a result, his committee held few substantive meetings on the growing problem.
The first warning sign was February 2007, when the government reporterd than home sales were down 20 percent from 2006. Then in May, UBS, whose American headquarters sits in Stamford shuts down Dillon Read Capital Management, its US subprime arm and GM’s finance unit announces deep losses on subprime mortgages. Did anyone from Dodd’s office or the Senator himself think to call UBS and inquire as to the seriousness of the Dillon shutdown?
The Federal Reserve under Ben Bernanke, managed to keep many balls in the air, by pumping more money into the system, hoping it would stem the tide of bad loans, over-leverage hedge funds and other financial instruments created to market garbage home loans as securities. Meanwhile, Dodd put his children in Iowa schools, knuckled down to the hard work of candidate debates and was endorsed by a firefighter’s union.
In August, the first gut punches came - American Home Mortgage, one of the largest US independent home-loan providers, files for Chapter 11; Countrywide, the biggest US mortgage lender, narrowly avoids bankruptcy by taking out emergency $11.5 billion loan and then, on August 31, Ameriquest goes out of business.
On January 3rd, Iowa Democrats went to the polls and a few dozen managed to vote for Chris Dodd, who had to fly Connecticut Democrats out to the state to fill a room. Later that month, the government reported that homes facing foreclosure up 57% compared to same month of previous year. US unemployment rises sharply.
It is important to pause here and reflect on one reason why Sen. Dodd thought no attention was needed to the mortgage meltdown and huge losses in the equity markets - information. Dodd, like most lawmakers, gets his information from thousands of lobbyists who dominate the halls of Congress. The financial industries have some of the best and best financed.
According to www.OpenSecrets.org, Sen. Dodd was the largest recipient of contributions from employees of Fannie Mae and Freddie Mac, the two quasi public organizations which insure two-thirds of the mortgages in the country. Dodd collected $165,400 over the last nine years. Dodd has collected thousands more from other banks, insurance companies, bond agencies, the whole spectrum of interests that comprise this nation’s financial industries.
How can anyone claim to see clearlywhen so much money and attention is clouding their vision adn judgment? Chris Dodd swims in a sea of special interest money on a daily basis and those who have his ear, pay for the privilege to float by and give him their take on things.
Some influence in other ways, like Countrywide Financial, which was always looking for friends in Congress. The company President, Angelo Mozillo, has a program for the well-connected to provide lower than market rate loans for mortgages. Chris Dodd got two of these mortgages and it saved him a bundle. Sen. Dodd claimed he got no special treatment and would disclose the details of his arrangement with Countrywide.
Sen. Dodd promised to disclose them in late July. We are still waiting. That was the same week he told the public that Fannie Mae and Freddie Mac were solvent.
When the U.S. Treasury seized Fannie and Freddie, Dodd said hearings should be held to examine the details. Now, he says, we should wait until the dust settles.
Do you see a pattern here Mr. and Mrs. Connecticut? Our senior Senator has no clue or has had a clue for a long time. While the value of your home falls, Chris Dodd takes a vacation or worse, does nothing.
Many books will be written about how Fannie Mae and Freddie Mac scammed the system, built an empire and paid good salaries to the politically connected and walked away with even a bigger pay day. One chapter should be devoted to Sen. Dodd and why he was asleep at the switch, or was persuaded that nothing was amiss.
Either way. Sen. Dodd has failed to lead. His committee of jurisdiction was a paper tiger. He should hand the gavel to someone who at least reads the Wall Street Journal or Barron’s and understands what is happening in the real world and that it isn’t pretty.