Chuck Hagel, the first-term senator from Nebraska, jokes about his status as the lowest-ranking Republican on the Banking Committee.

"They never can see me at the end," he says of his assigned spot nine seats away from committee Chairman Alfonse M. D'Amato. "They have to use a bullhorn to even get my attention."

But being at the bottom of the depth chart in terms of seniority has not deterred Sen. Hagel, whose record after less than two years on Capitol Hill makes him the political equivalent of a freshman sensation in the Nebraska Cornhuskers' backfield.

From his unique perch as a Banking Committee member and chairman of the Senate Foreign Relations subcommittee on international economic policy, the former businessman helped broker Senate approval of $18 billion for the International Monetary Fund in March because his farm state relies on exports to the Asian countries being helped by the loans.

But it is his work on behalf of community bankers - a powerful force in Nebraska - that makes Sen. Hagel an industry hero.

He is trying to reform the Federal Home Loan Bank System to let institutions with assets below $500 million obtain advances for small- business, agricultural, and rural development loans. Barriers to membership would be lowered by his legislation, too.

Sen. Hagel is also challenging a bill easing credit union membership limits by pledging to offer an amendment on the Senate floor that would tighten restrictions on the nonprofits' business lending.

"I would consider Sen. Hagel one of our strongest allies," says William L. McQuillan, president of City National Bank in Greeley, Neb., and of the Independent Bankers Association of America.

Sen. Hagel's popularity extends beyond Nebraska bankers. Universally praised as a nice guy who is approachable, genuine, and true to his word, the new senator makes even Washington veterans gush.

He is "a breath of fresh air," says Kenneth A. Guenther, executive vice president of the IBAA. "He has had a highly unusual and productive run for a freshman senator, and I think it is because of his personality."

Indeed, Sen. Hagel is viewed as a rising GOP star popular with Sen. D'Amato and Senate Majority Leader Trent Lott. He is a deputy whip and organizer of a major Senate Republican fund-raising dinner this fall for the second consecutive year.

But observers emphasize that Sen. Hagel, despite his easy-going manner, takes stands and challenges his own party. He has crossed swords with Sen. Lott on IMF funding and Sen. D'Amato on Home Loan bank reform.

A skillful dealmaker, Sen. Hagel persuaded Sen. D'Amato to compromise on the Home Loan bank legislation. The New York Republican had refused to support the plan because Sen. Hagel threatened to attach it to the credit union bill, a populist measure that the Banking Committee chairman wants to keep free of amendments and pass quickly. Besides, the Federal Home Loan Bank of New York wants broader investment powers.

So Sen. Hagel has agreed not to try and link his reform plan with the credit union bill and to accept changes endorsed by the New York bank. In return, Sen. D'Amato will either attach Home Loan bank reform to the Shelby-Mack regulatory relief bill scheduled for a committee vote July 29 or advance it separately, according to sources familiar with the deal.

Some observers question Sen. Hagel's move, saying the credit union bill has the best chance for enactment this year of any banking-related legislation. But supporters say that gaining Sen. D'Amato's powerful backing was a considerable victory.

"He took a chairman and turned him around to support his legislation," a banking lobbyist says. "That was a heavy lift."

Sen. Hagel, 51, learned the art of the deal as a millionaire entrepreneur and investment banker. He was co-founder in the mid-1980s of Vanguard Cellular Systems Inc., now a large public company, and president of McCarthy & Co., a privately owned Omaha-based investment banking firm that financed a successful phone company venture in Hungary.

"There is nothing as exhilarating as business, making deals and seeing things come together and using all your talents to make something happen," Sen. Hagel said in a recent interview.

The North Platte, Neb., native has a wide-ranging resume. He has been a Hill staffer, an infantryman in Vietnam, a radio newscaster, a federal bureaucrat, and ubiquitous corporate and civic board member. President Reagan nominated him for deputy administrator of the Veterans Administration in 1981, and he is credited with turning around an entrenched bureaucracy as president of the World USO in the late 1980s.

On the eve of his decision to run for the Senate in the 1996 election, his wife, Lilibet, asked him only half jokingly whether he could keep the same job for a full term.

"I don't think I ever did one job for six years," he says he realized. "I assured her I was disciplined enough."

Despite his wandering curiosity, friends say, Sen. Hagel can focus quickly.

"He is very goal-oriented once he fixes on one after doing all that looking around," says Michael R. McCarthy, his former investment banking partner.

They point to his determination, despite long odds, to run for the Senate to succeed retiring Democrat Jim Exon. Nebraskans had not elected a Republican senator since 1972, and his opponent was popular two-term Gov. Ben Nelson.

After Sen. Hagel's victory, he wasted no time gauging bankers' concerns. At a meeting in January 1997 before he reported to the Senate, bankers planted the seed that grew into Sen. Hagel's Federal Home Loan bank plan.

"We met him and talked about all the issues we had," Mr. McQuillan says. "At the top of the list was liquidity for our community banks." He says bankers emphasized their need for new sources of funds as an aging rural population and the flight of younger residents to cities has reduced their deposit base.

"I did see some of these liquidity problems when I was heading up an investment bank," Sen. Hagel says. "I saw it in a very practical way that these small-town banks need some help."

He has not taken a stand on the financial services reform bill, which the Banking Committee is expected to vote on in September. It includes parts of his Home Loan Bank reform plan, but he says that is not enough to guarantee his support.

However, he is vocal that the credit union legislation would hurt community bankers.

Sen. Hagel, with Sen. Robert F. Bennett, R-Utah, will propose lowering the cap on commercial lending to 7% of assets from the 12.25% maximum in the version of the bill approved by Senate Banking in late April. Credit unions would have three years to comply with the provision.

That amendment would count all business loans toward the cap, striking a provision in the current bill that would exempt loans of $50,000 and under. Loan officers also would be required to have two years of experience in commercial lending.

Sen. Hagel also plans to support an amendment expected from Sen. Richard C. Shelby, R-Ala., that would eliminate Community Reinvestment Act requirements for small banks.

"To essentially carte blanche give them that ability to take on the small bankers and go head-to-head and compete for commercial loans and then not have to pay taxes and not have to be saddled with CRA and some of these other issues I just don't think that is fair," Sen. Hagel says.

Though being a senator is a thrill because he can delve into so many different policy matters - or "play in many ponds," as he puts it - Sen. Hagel has pledged to restrict himself to two terms if reelected in 2002.

There are just too many other things to do out there. "I am not going to retire in this job," he says.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.