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Sen. Kaufman of Delaware tests the big-bank theory
Tuesday, April 27, 2010; A15


When Congress excluded the public option from its landmark health-care
bill, the leading voices in opposition from the left were familiar
figures such as Howard Dean, liberal bloggers and members of the
Congressional Progressive Caucus.

On the other hand, Sen. Ted Kaufman (D-Del.) was virtually unknown
until a few months ago. But the debate on financial regulatory reform
has turned Kaufman, an appointed senator, into a liberal hero as he
seeks to break up the largest banks in the country. Under his
proposal, no bank could hold more than 10 percent of the nation's
total deposits, and banks could have liabilities up to only 2 percent
of the nation's gross domestic product. Such provisions, he says,
would force banks such as Bank of America to shrink.

Obama administration officials and top Democrats on Capitol Hill have
not directly criticized Kaufman's idea. But they say the current
version would empower regulators to monitor the size of banks and
their risks to the overall economy and break up banks if necessary.

And Obama economic adviser Lawrence H. Summers said on PBS last week,
"Most observers who study this believe that to try to break banks up
into a lot of little pieces would hurt our ability to try to serve
large companies, and hurt the competitiveness of the United States."

Kaufman said regulators have not used that power and will not do so in
the future. His plan, he added, is the best way to prevent bailouts of
big banks.

"What do we have to do before someone sends the message that these
things are too big and that this Congress cannot pass the buck to the
regulators who didn't do the job in the past?" he said. "What are we
doing now as senators on the floor, passing legislation based on the
fact 'I trust my regulators now'? Why aren't we passing legislation
that will work over the next two or three generations?"

Kaufman, who served as a Senate aide to Joseph R. Biden for more than
20 years, has hammered the issue in speeches for weeks. As the debate
on regulatory reform dominates congressional discussion, four other
Democratic senators have joined his cause.

He is also, at least among liberal activists, no longer anonymous.
Arianna Huffington has raved of Kaufman: "What conditions helped turn
him into a fearless crusader? And how do we get more like him?"

Kaufman is an unusual kind of senator, part of a small club that once
included three but is down to two. Paul G. Kirk Jr. was a longtime
aide to Sen. Edward M. Kennedy (D-Mass.) and served in his old boss's
seat briefly until Republican Scott Brown was elected. George S.
LeMieux, a former chief of staff to Florida Gov. Charlie Crist,
remains in the Senate as the replacement to Republican Mel Martinez.

Kaufman was surprised when Biden, days after being elected vice
president, proposed that his former aide should replace him; Kaufman
had never held public office. Gov. Ruth Ann Minner (D) made it
official by appointing him.

Kaufman immediately said he would not seek a full term, and it was
widely assumed he was a caretaker of the seat for Beau Biden, the vice
president's son and Delaware's attorney general. But Biden opted
against a run for the seat in November. Rep. Michael N. Castle (R-
Del.) is now the front-runner, but Kaufman, 71, still has no plans to
run.

"I've never been elected to anything, I was never the class president,
not even in third grade," he said. But he added: "It's much easier
than I thought it would be. When I taught my courses [at Duke
University], I would tell students, 'I would never want to be a
senator; that's not what I want to do, and staff is really important.'
Now the one message I give to chiefs of staff is 'You could be a
senator, too.' "

Kaufman, with no need for fundraising or raising his profile, has
largely toed the party line on key issues. Before regulatory reform,
he was perhaps best known in the Senate for giving a speech every week
in praise of a federal employee, reflecting his view of the importance
of the much-maligned "Washington bureaucrats."

At the same time, the graduate of the University of Pennsylvania's
Wharton business school had long been interested in financial issues,
and he saw an opening in February and March as much of the Senate
remained focused on health care.

His strong rhetoric and the obvious populist appeal of his stand may
not carry the day, however. No Republican has formally endorsed his
proposal. And if the two parties reach a compromise on the
legislation, Kaufman's provision may not even come up for a vote: Some
Democrats and Republicans who oppose his provision may not want to
want to go on record opposing a provision to shrink big banks, an idea
likely to be popular with the public.

Kaufman, while eager to make his case publicly, has been unwilling to
use his ultimate trump card: his long-standing relationship with
Biden. He says the two speak regularly, but Kaufman has not asked
Biden to back his bank proposal, nor will Kaufman blast the
administration in his speeches.

"I am a senator; I think this is what a senator does," he said,
referring to giving speeches and offering amendments. Referring to
Biden, he added: "He is one of my best friends, but he's never called
me [since Kaufman entered the Senate] and said, 'I really want you to
do this.' And I never call him up."


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