WASHINGTON — Perceptions that Senate Banking Committee Chairman Chris Dodd is too close to the banking industry and put his personal ambitions ahead of dealing with the financial crisis have put him at risk of losing his seat and under pressures that will affect how he steers his panel's agenda.
In interviews with advisers, Capitol Hill aides, political analysts and financial industry representatives, it is clear the Connecticut Democrat's embattled status has ramped up the scrutiny he faces and left him little room for error. They said that to stay in office, he will need to distance himself from the industry, tack to the left, spend more time in Connecticut, prove he can implement President Obama's agenda and focus on consumer issues.
"He is facing incredibly difficult tasks," said Roy Occhiogrosso, a former Dodd adviser and leading Democratic strategist. "The pressures on him are enormous."
Whether and how Dodd can manage the competing interests at play is an open question. When asked how they would advise Dodd, sources were all over the map — spend extra time in Connecticut, focus on his work in the Banking Committee, pass tough consumer legislation (even if it cannot be enacted) or try to push only bills that stand some chance of enactment in the closely divided Senate.
Additionally, Dodd must work to undo a series of missteps that, fairly or not, left the impression that he was given special treatment by Countrywide Financial Corp., and that he helped ensure American International Group Inc. executives received lavish bonuses.
"He needs to do a lot of explaining," said Stuart Rothenberg, a political analyst. "He needs to be very present in the state. He's going to have to spend a lot of time talking to voters."
Several sources said Dodd's best strategy may be a sharp tilt to the left of the political spectrum and a push for pro-consumer legislation.
"I would tell him to run as a populist — run on the side of the consumer," said former Rep. John LaFalce, the top Democrat on the House Financial Services Committee from 1998 to 2002. "Chris has always had some good consumer instincts, and that has to become more prominent in the days, weeks and months ahead."
LaFalce said Dodd already has a good record on issues like credit cards but needs to continue pressing on that and other issues, including overdraft fees, predatory lending and derivative regulation. The former lawmaker argued that Dodd would be better off de-emphasizing regulatory restructuring, though that is a top priority for Obama and House Financial Services Committee Chairman Barney Frank.
"I would put that on hold," LaFalce said. "It's like rearranging chairs on the Titanic. It takes your eye off the ball."
Evidence of a leftward focus can be found in a 12-11 committee vote last month to pass a bill that would rein in card practices. The legislation has little chance of enactment without changes. (Despite the vote, it does not even enjoy uniform support among Democrats, and Republicans oppose it).
But just pushing the bill forward gave Dodd a chance to tout an accomplishment back home during the Easter recess and won praise from the Hartford Courant, which had criticized him a few weeks earlier for his role in the AIG bonuses.
Advisers also said Dodd can cite a series of hearings he has held on topics such as the housing crisis, regulatory restructuring and credit cards when he campaigns back home; enactment of a bill is not necessary.
"I don't think he needs to prove to voters that he can pass a bill to modernize the financial structure just to prove that he can pass a bill," said Amos Hochstein, a former policy director for the senator. "He has held several hearings on this topic. He's working at it very hard, but he's not going to hasten the process just to make a political point."
Dodd's position could complicate Obama's agenda, which may include a push for more money for the Troubled Asset Relief Program. The president said in January that his administration would likely need more than the $700 billion allocated to the Treasury Department last year for the program, but any request is liable to be deeply unpopular with lawmakers and their constituents.
Hochstein said that even if Dodd supported giving the administration more money, the administration would have to do the heavy lifting by itself.
"This is something that the administration itself is going to have to explain to the public in Connecticut and elsewhere why that is necessary," Hochstein said. "If not, it cannot be Senator Dodd's job to be the spokesman for the administration's needs. They will have to do that on their own."
There is also the question of how much more time Dodd will need to spend campaigning in Connecticut, which could distract him from his Banking Committee responsibilities. Observers said it will prove a tricky balancing act.
"He needs to continue to do his job," Occhiogrosso said. "Sometimes his job requires him to spend more time in Washington, and sometimes his job requires him to spend more time in Connecticut. I think he needs to continue to find the right balance between the two, which is hard, but that's what a senator has to do, and I think he does a good job at it."
In an e-mail to American Banker, Dodd said he is focused on doing his job, not campaigning.
"I am working with President Obama to build a 21st-century financial system that protects consumers and investors, cracking down on abusive credit card practices, continuing to assess and oversee the administration's financial rescue plans, passing housing reforms that will help families avoid foreclosure and pursuing a rigorous transit agenda," he said.
In many ways, Dodd's political problems stem from appearing to abandon the state in 2007 during his presidential bid. The news media now focuses on his associations with Countrywide and AIG, but the decision to move his family to Iowa to position himself for the primary there did not sit well back home.
It also gave rise to a perception that he was an absentee chairman of the Banking Committee just as the financial crisis was deepening.
Moving to Iowa was "a total disconnect from his constituents," said Roger Pearson, a Connecticut lawyer and former Greenwich first selectman, who is considering challenging Dodd in next year's Democratic primary. "Why would he even consider doing this? You don't move out of the state — you bang heads together to try to do a triage for the economic system. … That deflated the view of him, I believe, significantly in the state."
Dodd's problems grew worse after it was revealed that he was considered a "Friend of Angelo" Mozilo, then Countrywide's chief executive, and allegations he received a reduced rate on mortgages from the company. The press, particularly conservative organizations, jumped on Dodd and continued to pummel him, even though it was unclear if he received special treatment.
The senator himself did not help matters by dragging the situation out, refusing to release documents about the mortgages he received before finally refinancing the loans. "He should have immediately said, 'Here's the documents. It's not a big deal.' … Then it probably would have been over," said Gerald Noonan, the president of the Connecticut Bankers Association, who said he has supported Dodd for 30 years.
Though Dodd argued that he did not receive special treatment, the deal continues to give opponents an opening. Former Rep. Rob Simmons, one of the Republicans running against Dodd, said the explanation was flimsy. "A 28-year veteran of the Banking and Housing Committee, now a chairman, doesn't think the label VIP status means anything when he is getting a mortgage from a company that his committee oversees? That's not credible," said Simmons, who came out 16 points ahead of Dodd in a recent poll.
The deal also reinforced the idea that Dodd was too close to the financial services industry. He raised $9 million from the finance, insurance and real estate sector from 2003 to 2008, according to the Center for Responsive Politics. (The total includes money for his Senate and presidential races.) About $900,000 came from commercial banks.
Critics argue that he is fatally compromised. But Noonan said that Dodd is misunderstood. The trade group chief said he has constantly tried to explain to bankers why they donate money to the senator's campaign, even though they receive little to nothing in return. "Dodd has always been on the consumer side," he said. "I haven't gotten any favors and I have been giving to Dodd for 30 years, so I don't know who got all the favors."
Making things even worse for Dodd was his role in the AIG bonuses, which started as an attempt to put himself ahead of popular anger against bailout recipients. During debate on the economic stimulus package in February, he added an amendment designed to restrict executive compensation for Tarp recipients, but which exempted all bonuses paid before Feb. 11.
After the AIG bonuses came to light, Dodd denied knowing about the exemption before finally acknowledging his office added it at the Treasury Department's request.
"You don't lose your credibility over one event or one incident," said Simmons. "You don't lose it in one day. You have a cumulative effect here of a whole series of disclosures, and unfortunately there may be more."
But his supporters argue Dodd was damned no matter what he did. "First he was criticized for pushing legislation that was too restrictive and then he was being accused of not being tough enough, so it was ironic," said Occhiogrosso.
One result is that some political analysts consider Dodd the most vulnerable senator of either party up for re-election.
"Sen. Dodd is in enormous danger and at this point has to be called an underdog," said Charlie Cook, editor and publisher of The Cook Political Report. "While you never want to say this far out that he has no chance … his problems may well be irreparable."
There is already speculation that Dodd could bow out and Democrats would run an alternative candidate.
Not everyone is counting him out just yet. With 18 months before the general election, several sources argue that Dodd has plenty of time to market himself to Connecticut voters. By some calculations, he would prevail if he captured just 70% of Obama voters in the state.
Jim Jordan, a political adviser for Dodd, said that the senator, who never faced a serious re-election challenge before, is reintroducing himself to constituents, and once they see the impact he has in Washington, the situation will change.
"He's doing an awful lot of events, talking about the things that people want to hear about: the stimulus package, Tarp, their jobs," Jordan said. "He is at the center of virtually everything important that is going on in Washington. He really is doing and will do an awful lot in the next 18 months to execute Obama's agenda."
