April 10, 2009

CHRIS DODD UPDATE: Dodd’s role in deregulating banks comes back to haunt him.

Does U.S. Sen. Christopher J. Dodd rue the day a decade ago when he brokered the deal to repeal the 1933 Glass-Steagall Act, which some analysts have called the most important financial legislation to come out of the Great Depression?

Buoyed by the five-term Democrat’s misadventures with his two Countrywide “VIP” mortgages and an amendment that let American International Group hand out big bonuses, Dodd’s Republican opponents have taken to citing his personal role in busting up the New Deal barrier between commercial banks and investment banks, securities firms, and insurance companies. . . . Reporters and bloggers writing about Dodd as the chairman of the Senate Banking Committee out to “modernize” the nation’s financial regulatory system also have begun to connect him to the repeal, which President Barack Obama has suggested helped spark the wave of deregulation that contributed to the current economic crisis.

In a Dodd profile published two weeks ago, a Fortune magazine editor quoted the head of the American Bankers Association lauding the senator as the “unsung hero” in the passage of the Gramm-Leach-Bliley Financial Services Modernization Act, which actually dismantled the key Glass-Steagall provisions intended to protect bank depositors from risky and speculative investments.

“Dodd doesn’t like to talk about it anymore,” the writer added, “not when he’s trying to rebuild vital parts of the same regulatory framework he helped knock down.”

Read the whole thing.