Sen. Dodd can now focus on his legacy

In deciding not to seek reelection, Sen. Christopher J. Dodd became perhaps the highest-profile political casualty of the deep recession and public outrage over the financial industry bailout.

His rapid fall -- from 2008 presidential hopeful to lame-duck legislator -- parallels the arc of the nation’s economic downturn.

Long associated with Wall Street, Dodd saw his chances for winning reelection clouded by disclosures that he was among the “Friends of Angelo,” who received preferential mortgage rates at Angelo Mozilo’s troubled Countrywide Financial Corp., now part of Bank of America Corp.

As chairman of the Senate Banking Committee since 2007, the Connecticut Democrat also became the target of criticism that he failed to aggressively investigate the subprime mortgage mess while later helping engineer the $700-billion bill to rescue the nation’s biggest banks.

“The economic problems have put voters in a grumpy mood, and some of these missteps, like the Countrywide mortgage issue, really upset voters,” said Douglas Schwartz, director of the Quinnipiac (Conn.) University Poll, which has tracked Dodd’s falling approval rating among voters.

“During a different time, if voters weren’t so grumpy, perhaps these things wouldn’t have had such an impact on them,” Schwartz said.

Dodd has tried -- with little success -- to separate himself from that taint recently by taking more populist, consumer-friendly positions, including proposing a tougher overhaul of financial regulations.

His proposal goes well beyond the legislation passed by the House and backed by President Obama by advocating the creation of a single banking regulator to replace the Federal Reserve and other agencies.

But freed from political concerns and eyeing his legacy, Dodd could be poised to make the compromises on that and other provisions needed to push the legislation through the Senate.

“The political forces associated with his reelection are now off the table, so I think it makes it easier to achieve a bipartisan bill,” said Scott Talbott, chief lobbyist for the Financial Services Roundtable, an association of large financial companies that oppose some key parts of Dodd’s proposal.

Indeed, Dodd has been working in recent weeks with the top Republican on the banking committee, Sen. Richard Shelby of Alabama, and a small bipartisan group of senators on revisions to his proposal.

Shelby and Dodd said last month that the talks were “extremely productive” and they hoped to resolve their differences by the time the Senate reconvenes Jan. 19.

Senators are at odds over creation of an agency to protect consumers in the financial marketplace and new powers for the government to seize and dismantle large financial firms whose failure could threaten the economy.

Although Dodd rose to new prominence as a leading player in President Obama’s push to reform the healthcare system, he conceded Wednesday he was “in the toughest political shape” of his career.

“I love my job as your senator, I always have and still do,” Dodd told supporters gathered outside his home in East Haddam, Conn., as his wife, Jackie, and two young daughters stood nearby. “However, this past year has raised some challenges that insisted I take stock of my life.”

In addition to shepherding major legislation through the Senate, Dodd endured the deaths of his sister and his close friend Sen. Edward M. Kennedy as he himself battled early-stage prostate cancer. Dodd saw his job approval ratings in the state plummet, bottoming out at 33% in the spring.

“This is my moment to step aside,” Dodd said. He did not address some of the controversies he faced and took no questions.

Those troubles helped carry his career to a similar inglorious end as befell his father, former Sen. Thomas Dodd, who lost his bid for reelection in 1970 after being censured by the Senate for diverting about $116,000 in campaign contributions to personal use.

Christopher Dodd strove for years to restore his family’s reputation, including writing a 2007 book about his father’s role as a U.S. interrogator of Nazi war criminals after World War II.

“The one thing that Chris Dodd has always wanted to do is save the family name,” said Gary Rose, chairman of the government and politics department at Sacred Heart University in Connecticut. “Today, when we remember Tom Dodd, we think of censure and controversy. And I think the same thing will happen with Chris Dodd.”

Dodd’s close association with the financial industry stems not only from his congressional work on banking issues but also from his constituency: large insurance companies and many Wall Street employees with homes in Connecticut. Since 1989, Dodd received more campaign contributions -- $13.9 million -- from the financial, insurance and real estate sector than any other industry, ranking fifth among congressional incumbents,according to the nonpartisan Center for Responsive Politics.

Dodd’s stature as banking committee chairman and his Wall Street connections gave him a fundraising base to run for president. But his quest ended quickly in January 2008 with a poor showing in the Iowa caucuses.

Back home, the worsening financial situation exacerbated the anger many residents already had toward Dodd for moving temporarily to Iowa. And his connections with the financial industry became an increasing liability.

“It was perceived as a good thing at one time,” Rose said of Dodd’s Banking Committee post and relationship with Wall Street.

“Now that we’ve had this economic recession and the anger that’s out there involving the bonuses and the bailouts of Wall Street,” he said, “he’s perceived as an agent of those interests who have in some respect profited off of the taxpayers.”

Dodd tried to change that image, pushing through legislation last year that imposed tough new restrictions on credit card interest rates and other fees. Dodd also inserted a last-minute amendment into the $787-billion economic stimulus legislation in February that limited bonuses at firms receiving government bailout money and allowed the administration to appoint a pay czar to restrict executive compensation.

But a month later, news broke that AIG, which is 80% owned by the federal government after its bailout, was paying $165 million in bonuses to employees of the unit that led to the company’s downfall.

The bonuses were part of employee contracts existing before the stimulus legislation was passed. Dodd’s amendment originally would have barred such bonuses, but Treasury Department officials expressed concerns that such a retroactive provision could be illegal.

Dodd was blamed by some people for inserting a loophole into the bill allowing the AIG bonuses to go through.

“I think he’s been unfairly victimized,” Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said Wednesday.

The AIG bonus controversy followed Dodd’s admission in 2008 that he had refinanced homes in Connecticut and Washington, D.C., under Countrywide’s VIP “Friends of Angelo” program, which offered discounted loans and other perks.

Dodd said he was unaware that the program offered such benefits. He said at the time he thought the program was just a courtesy for people who had done business with the company before. The Senate Ethics Committee last year cleared Dodd of breaking ethics rules.

Frank, who pushed financial regulatory legislation through the House last month, said Dodd’s decision not to seek reelection could be “a mild positive” for getting the Senate to take action.

“When you’re not running for reelection, you have more time,” Frank said.

Beyond that, Dodd also is motivated by how he will be remembered, said Travis Plunkett, legislative director for the Consumer Federation of America advocacy group.

“I can’t imagine he’s not going to want to do everything in his power to achieve meaningful legislation before he leaves,” Plunkett said. “Every leader worries about his legacy, and I’m sure Sen. Dodd is thinking about his.”

jim.puzzanghera@

latimes.com