Howard Wolfson is talking to me on the phone when he sees the headline on The Wall Street Journal’s Metropolis blog: sen. gillibrand to wolfson: blocking entire financial regulation bill is ‘stupid.’ “Huh,” Wolfson says, sounding genuinely surprised. “That’s not what she said. And we’re not opposed to the entire bill.”
Now his other phone is buzzing. “It’s a voice-mail from Kirsten’s chief of staff,” Wolfson narrates, “saying, ‘None of us had anything to do with that story.’ Which I believe.”
It’s a small, serendipitous multimedia moment. But that bit of electronic crossfire is emblematic of the tangled, contentious, multiplayer political drama swirling around New York’s high-stakes interest in the Washington debate over financial-industry regulation—and especially around Mayor Michael Bloomberg’s role as Wall Street’s staunchest defender.
Some background: Wolfson was in D.C. to do a bit of previously scheduled schmoozing with the state’s congressional delegation. In many ways, he’s an ideal emissary for City Hall, particularly to Democratic Washington: Wolfson has worked for Westchester congresswoman Nita Lowey, steered Gillibrand’s upset 2006 congressional win, and was a key part of Hillary Clinton’s senatorial and presidential teams before joining Bloomberg’s campaign staff last year; his wife is one of House Speaker Nancy Pelosi’s senior aides. In March, Wolfson went on the city’s payroll as a deputy mayor, part of the administration’s third-term overhaul that also dispatched Michelle Goldstein to Washington as New York’s chief lobbyist. To get things off on the right foot with the city’s congressional delegation, Wolfson and Goldstein set up an April 26 chat.
The weeks leading up to the meeting made it more fraught, however. The SEC suit against Goldman Sachs, quickly followed by President Obama’s financial-industry-reforms speech at Cooper Union, suddenly turned up the heat on an issue that had been sidetracked by the health-care battle. Bloomberg emerged as Wall Street’s strident champion this winter, and the White House was happy to have him as a foil. In April, the mayor returned to center stage, positioning himself as being above grubby politics, loudly warning of the possible damage to the city’s economy, and accusing New York’s Capitol Hill contingent of not fighting back. “The bashing of Wall Street is something that should worry everybody,” Bloomberg said. “We need the New York delegation to be out there protecting our businesses.”
The lecturing was not appreciated, and the resentment boiled over in a mid-April meeting between Goldstein and the delegation; last week’s sessions were more cordial, but some tension lingers. “The mayor has been out there for months publicly saying, ‘You have to defend Wall Street at all costs, and do it the way I want you to,’ ” says a top congressional aide. “Nobody who represents New York City thinks Wall Street isn’t critical to our economy.” Yet those same representatives are spooked by polls showing a heavy majority of their constituents raging at the financial industry.
All that skirmishing, though, is mere undercard. When Bloomberg aimed at the “delegation,” his real target was its king, Chuck Schumer.
New York’s two smartest and most powerful elected officials have worked collegially for most of eight years; they shared custody of Iris Weinshall when Schumer’s wife was Bloomberg’s transportation commissioner, and Wolfson helped Schumer beat Al D’Amato in 1998. Still, it’s surprising this clash didn’t happen sooner. Neither man lacks for ambition, ego, or confidence in his own judgment. Equally inevitable is that the flash point was Wall Street money. Bloomberg’s adult life is based on the earning and spending of piles of it, and there is no subject on which he is more authoritative or more prickly; Schumer’s political ascendancy has been fueled by his gift for raising millions in campaign cash for himself and other Democrats, much of it from the city’s financial industry. And until last year’s economic collapse, Wall Street had no better friend than the senator from Brooklyn—which is why the titans of industry are incensed by Schumer’s current, wildly uncharacteristic low profile. “Wall Street is beyond furious at Chuck. They think he sold them out, and Mike hears that from his friends,” a New York political consultant says.
Certainly the mayor has been prodded by his rich pals, but he hardly needed encouragement to jump into the fray when he believed Schumer was abdicating the role of New York’s chief Washington advocate. Bloomberg is invested in Wall Street in every sense: as a mayor protecting jobs, as the founder and owner of a company whose core product is terminals that crunch derivatives calculations, and as, well, an extremely wealthy investor in the hedge funds that could come under tighter scrutiny. “Reforms are fine; transparency is fine; the tenor that ‘Wall Street needs to make less money’ is not fine,” a Bloomberg ally says. “And that’s been the mind-set of the delegation. The mayor feels that the downside risk of regulations needs to be a part of the conversation, so he’s used the bully pulpit.”
At times, though, Bloomberg’s reminders to angry New Yorkers about the financial industry’s importance to the city’s economy have sounded like he’s scolding an addict for lack of gratitude to his dealer. As the tales of innovative greed at Goldman Sachs and elsewhere have accumulated, the mayor has stuck to his refrain about depending on financial-industry tax revenue to pay cops and firefighters and teachers, until the message seems to become, “Wall Street may be run by thieves, but they’re our thieves.” Even if the mayor is correct about the potential damage to the city’s budget, Bloomberg could have made a stronger case for how constraining the financial industry would be more painful to the city—and to the rest of the country—than the massive wounds inflicted by Wall Street’s rigged-casino culture. Instead, he’s declaimed publicly about doing “what’s right for the country, not what is politically popular at the time,” and privately he’s chortled along with reprobate Republican senator Mitch McConnell’s criticisms of Schumer.
Schumer was peeved—and puzzled. The senator’s allies claim that the mayor hadn’t brought up financial reform in weekly phone chats between the two principals, even as Bloomberg talked up the issue publicly, making Schumer’s camp suspicious that the mayor is restless at City Hall and looking for a national platform. Schumer, by contrast, was avoiding the spotlight and missing the chance to become the spokesman for principled reform. The senator was tight-lipped about Wall Street, his defenders claim, not because he was cravenly ducking the issue but because he’d made a much different strategic judgment: that combativeness like Bloomberg’s invites those who hate New York and Wall Street to vote for harsher measures.
Maybe it has been part of his master plan all along, or maybe he’s been flushed out by the mayor’s hectoring, but Schumer is finally speaking more forcefully as he tries to walk a fine line. “Wall Street did a lot wrong,” he told me late last week. “Listen, we have 10 percent unemployment not because of some proposed bill but because a number of financial firms went way over the top. At the same time, it’s New York’s most important industry.”
Two weeks ago, the mayor and the senator cleared the air in a phone conversation on the same day that Politico wrote about their rift. The next day, after Obama’s Cooper Union speech, the mayor finally got specific, saying he favors a consumer-protection agency and public trading of derivatives; he vehemently opposes Arkansas senator Blanche Lincoln’s proposal to force the spinoff of the swaps business.
Bloomberg may well be right about the ramifications for the city. “[Franklin] Roosevelt’s hands were free to impose regulation after the crash because there was no global financial industry in the thirties,” says NYU finance professor Thomas Philippon. “Today the threat of jobs moving to Hong Kong and Singapore is real.” Yet even if the more drastic measures become law, it’s still implausible that banks would bolt wholesale. More likely, after a period of wailing, Wall Street’s biggest players would get busy figuring out how to profitably exploit the new rules.
Bloomberg and Schumer talked again last Wednesday as the Wall Street bill headed to the Senate floor. The mayor and the senator appear to agree on most points, a bank tax being one significant exception. But that doesn’t mean the skirmishing is finished. In 2006, Bloomberg operatives bolstered Joe Lieberman’s Connecticut reelection campaign. Now similar help has been offered to Senate Majority Leader Harry Reid, who is in trouble in Nevada. A Reid win would end Schumer’s chances of rising to Senate majority leader next year. Surely the mayor merely admires Reid and wants the Silver State to be represented well in our nation’s capital. Because, as he’s been trying to explain to his good friend Chuck Schumer for the longest time, that’s all he wants for New York.