Apr 10 2008

Shelby is banking panel's traffic cop


By Lisa Lerer

Just a month after taking office in 1993, President Bill Clinton unveiled a $16 billion economic package and asked congressional Democrats to give him three days before firing off any critiques.

Alabama Sen. Richard Shelby, then a Democrat, waited barely three hours.

As payback, Clinton moved a $375 million program from Huntsville, Ala., to the Johnson Space Center in Texas.

But not even Bill Clinton outmaneuvers Richard Shelby. When the Republicans took control of Congress in 1994, Shelby left the Democratic Party, blaming his defection squarely and publicly on his dissatisfaction with the Clinton administration.

That’s the kind of unforgiving personality that Sen. Chris Dodd (D-Conn.) faces as he tries to hammer out solutions to the country’s deepening housing crisis.

Shelby is one of the most powerful lawmakers working the housing issue. As the ranking Republican on Dodd’s Senate Banking, Housing and Urban Affairs Committee, Shelby has taken on a role similar to a legislative traffic cop, largely controlling what gets out of the Senate and onto the president’s desk.

Known among lobbyists as a particularly wily negotiator, Shelby can outmatch Dodd’s more compromising style.

“He’s almost perfect when it comes to conference-style negotiation,” said one mortgage industry lobbyist. “He always wins.”

Last week, Shelby was the GOP hatchet man in negotiations with Dodd to draft a compromise housing bill. Shelby blocked a proposal to allow bankruptcy judges to restructure mortgages. And he slowed progress on another plan, first proposed by Dodd and Rep. Barney Frank (D-Mass.), to refinance mortgages for millions of homeowners at risk of defaulting.

“I was insistent that it not be in the package, because I said we need to hold hearings on it,” Shelby said on CNBC. “I’m not big on that package.”

For consumer advocates who pushed hard for both proposals, Shelby is a formidable obstacle.

“He is tough. He stakes out very clear positions, very clear principles and reasons for those positions, and hangs tough,” said Travis Plunkett, legislative director of the Consumer Federation of America.

Before his political career, Shelby was a lawyer in Tuscaloosa, Ala., representing a large number of small businessmen. In Congress, his work translated into fervent support for free markets, low taxes and a seemingly paradoxical backing of consumer rights.

Shelby was elected to the House in 1978, after working his way up through state politics. When he joined the Senate eight years later, he immediately nabbed a spot on the Banking Committee. And in 2003, he took the reigns as chairman from then-Sen. Phil Gramm (R-Texas). Shelby lost the gavel to Dodd two years ago, after the Democrats retook the majority.

Shelby has used his perch to advocate for investors rights, a position that may be rooted in a personal slight. Shelby and his wife held small stakes in WorldCom and Global Crossing and lost tens of thousands of dollars on their investments after both companies were floored by accounting scandals.

He avenged his bank account with legislation. He helped push the Sarbanes-Oxley Act, the most sweeping accounting law overhaul in decades, through Congress. And as part of the reauthorization of the Fair Credit Reporting Act, he won the inclusion of a provision giving every American the right to receive a free annual credit report.

As chairman, Shelby collected spoils from both sides. The senator has taken almost $2.2 million in political contributions from finance, credit card, insurance and real estate companies, more than twice as much as he has accepted from any other industry. He also won the Philip Hart Public Service Award from the Consumer Federation of America.

In between his consumer work, Shelby has pushed doggedly for another key interest: hometown pork.

He came in third on the Citizens Against Government Waste’s list of top earmark recipients, bringing in $464 million worth of projects to Alabama.

Now Shelby’s consumer advocacy and support for government funding is butting up against another one of his cherished tenants, the free market.

“There is a line that we should not cross,” he said last week during a Senate floor speech on the compromise housing bill. “That line is represented by a taxpayer-funded bailout of investors or homeowners.”

His comments came just hours after he had interrogated Bear Stearns executives and Treasury officials during a committee hearing on the bailout of the investment banking giant.

“We can’t send the signal that if you take the risk and you’re too big to fail, the Fed’s going to come running and the Treasury is going to back it and the taxpayer is going to be on the hook, can we?” he asked.

Shelby’s hard line against bailouts, lobbyists say, exasperates everyone from Wall Street bankers to consumer advocates.

“It’s great to have him on your side,” the CFA’s Plunkett said, “but it’s hard work to be on the other side.”