Subject: The Most Important Person You've Never Heard of in Washington's Push to Reform Wall Street
From: "Eric Schwerin" <[email-masked]>
To: "Hunter Biden" <[email-masked]>
Date: Tue, 27 Apr 2010 15:49:50 -0400

The Most Important Person You've Never Heard of in Washington's Push  
to Reform Wall Street
Sen. Ted Kaufman Says in an Exclusive Interview That Dems' Proposals  
Won't Work

Source: ABC News

By MATTHEW JAFFE

April 23, 2010

He might be the most important player you've never heard of in  
Washington's push to crack down on Wall Street.

When it comes to the biggest regulatory shakeup since the Great  
Depression, Sen. Ted KAUFMAN, D-Del., does not back the views of Wall  
Street or Republicans or Democrats, or even the Obama administration.

The man who served more than two decades as a top aide to Vice  
President Joe Biden -- and was his hand-picked choice to take over the  
Senate seat he vacated -- is very much his own man on the issue of the  
moment.

KAUFMAN has staked out his own position: the government should break  
up the country's biggest banks to make sure that no firm is ever again  
considered too big to fail.

End 'Too Big to Fail'

"The thing I'm most focused on is too big to fail," said KAUFMAN in an  
exclusive interview with ABC News. "That trumps just about everything  
else. We just cannot have a financial institution that is too big to  
fail, meaning they have to be nursed along or bailed out by the U.S.  
government. That cannot happen again."

But the proposal championed by KAUFMAN's fellow Democrat, Senate  
Banking Committee chairman Chris Dodd would not break up existing big  
banks.

"I just don't think it'll work," KAUFMAN said. "I'm concerned about  
whether it'll work with these really big banks because they're so  
complex, and there are so many international connections.

"I absolutely think the world of Chris Dodd. I just have a difference  
of opinion," KAUFMAN said. "My basic view of the world is these  
[banks] are too big to fail, and therefore that's what I'm pushing for."

If you don't know who Ted KAUFMAN is, that's probably because he only  
became a senator last year, when Biden became vice president. And  
he'll be a former senator by this time next year, having ruled out  
running for a term in his own right.

KAUFMAN served as Biden's chief of staff for 22 years, and the two  
remain close friends, though he hasn't always been the  
administration's ally.

His decision not to seek another term, he said, is not what's  
motivated him to become more aggressive in the push for financial  
reforms. Nor has it coaxed him into reflexive support for the  
Democrats' party line.

"There's not a single thing that I would do differently if I was  
running this year," he said.

Bring Back Glass-Steagall

No, KAUFMAN's passion for a Wall Street overhaul can be traced not to  
his one-and-done stint in the Senate or even to the financial meltdown  
of 2008, but to his time in Philadelphia in 1966. That is the year  
KAUFMAN graduated from the University of Pennsylvania's Wharton School  
of Business, where he studied the Glass-Steagall Act, landmark  
legislation from the early 1930s that separated investment and  
commercial banking activities.

As the years passed, though, KAUFMAN saw the government slowly start  
to move away from such Wall Street restrictions. In 1999, during the  
Clinton administration, Glass-Steagall was repealed. Now KAUFMAN wants  
it back.

"Investment banks and commercial banks shouldn't be under the same  
roof," he said. "I'm going to keep saying it and saying it and saying  
it. This is a very important part if we don't want to go down this  
road again."

Another factor that sent the country spiraling into recession was weak  
oversight by federal regulators charged with keeping an eye on the  
financial system during the Bush administration. That, too, he said,  
needs to change.

"We had a group that came in and said, 'We don't need regulators.  
Let's just throw the referees off the football field and see what  
football's like without any referees.' And we found out: It's pretty  
ugly. We went down a path that turned out to be a dead end, and it  
almost destroyed the country," KAUFMAN said. "We need to get back to a  
time where we have referees on the field watching what goes on."

But it is KAUFMAN's push to break up the country's biggest banks that  
has earned him raves from such leading experts as Simon Johnson,  
former chief economist at the International Monetary Fund.

"Sen. Ted KAUFMAN is a strident critic of our current financial system  
and a tough voice for greatly strengthening the Dodd bill," Johnson  
recently wrote on his blog the Baseline Scenario. "Sen. KAUFMAN," he  
said, "is exactly right to press for more."

In a statistic KAUFMAN frequently cites, 15 years ago the six biggest  
U.S. banks had assets that equaled 17 percent of the nation's gross  
domestic product. Today that number has soared to more than 63 percent  
of GDP. Three banks have nearly $2 trillion in assets on their balance  
sheets.

Citigroup -- Nearly $2 Trillion in Assets

One of these banks is Citigroup, which needed $45 billion in taxpayer  
bailout money after the financial meltdown in September 2008. At a  
hearing before the Financial Crisis Inquiry Commission April 8, Robert  
Rubin, a former senior adviser to Citigroup and Treasury Secretary in  
the Clinton administration, told the panel that he was not aware that  
the bank held more than $40 billion in complex mortgage-backed  
securities until a few months before the meltdown. That, KAUFMAN said,  
is evidence that these banks have grown too large -- top executives do  
not even know what is happening on their watch.

"Too big to manage, too big to regulate, and too big to fail -- there  
are a lot of indications that these banks are just too big," he said.

White House adviser Paul Volcker's proposal to ban big commercial  
banks, whose deposits are FDIC insured, from engaging in "proprietary  
trading," a risky but profitable activity, could help. "If banking  
institutions are protected by the taxpayer and they are free to  
speculate, I may not live long enough to see the crisis, but my soul  
is going to come back to haunt you," Volcker, a former president of  
the Federal Reserve, told Dodd's Senate Committee on Banking panel in  
February.

Earlier this week KAUFMAN and a group of other Democratic senators  
proposed a bill that would cap the size of banks by dictating that  
they cannot hold liabilities of more than 2 percent of GDP, or 10  
percent of the total bank deposits in the country. Bank of America,  
Wells Fargo, and JP Morgan Chase would be the three banks immediately  
impacted by such a bill.

KAUFMAN is not a member of the Senate Banking Committee, so his  
influence has been limited. But the Delaware senator has already left  
a lasting mark as a member of the Senate Judiciary panel on fighting  
financial fraud.

Last January, on his first day in office, KAUFMAN's fury at Wall  
Street after the financial meltdown incited him to go to the Judiciary  
panel's chairman, Sen. Patrick Leahy, D-Vt., and voice support for the  
creation of a task force to go after financial fraud. A few months  
later, President Obama signed the Leahy-Grassley-KAUFMAN bill into  
law. And last fall the president formed a task force to improve  
communication among regulators.

In the coming weeks, as financial regulatory reform takes center stage  
on Capitol Hill, KAUFMAN will get the chance to leave another lasting  
mark as the Senate begins its debate on Dodd's proposal. But even  
though the Democrats' proposal may not be as strong as KAUFMAN would  
like, he does not sound prepared to vote against it.

"I think over the last few weeks the momentum is on the side of folks  
who want to make this bill stronger," he said. "I don't see how people  
can vote against a financial regulatory bill like this one. It's not  
as strong as I'd like it, it doesn't have a section in it that I'd  
like it to have, but this bill or nothing? That's an easy choice."

Eric D. Schwerin
Rosemont Seneca Partners, LLC
1010 Wisconsin Ave., NW
Suite 705
Washington, DC 20007
(202) 333-1880
[email-masked]
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