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A Man against the Machine

WASHINGTON, DC ­– America’s financial sector has shown renewed strength in recent months – political strength, that is – by undermining most of the sensible proposals for banking reform that remain on the table. If we are still making any progress at all, it is because of the noble efforts of a small number of United States senators.

Most notable has been the work of Senator Ted Kaufman, a Democrat from Delaware (yes, a pro-business state), who has pressed tirelessly to fix the most egregious problems in the US financial sector. Kaufman understands that successful reform requires three ingredients: arguments that persuade, the ability to bring colleagues along, and a good deal of luck in the form of events that highlight problems at just the right time. On two fronts, Kaufman has – against long odds – actually managed to make substantial steps.

Long before it became fashionable, Kaufman persisted with the idea that the US real estate boom was fueled in part by pervasive fraud within the mortgage-securitization-derivatives complex, effectively at the heart of Wall Street. This thesis is now gaining much broader traction – major newspapers now report a broadening criminal probe by the federal government – and by New York’s state attorney general – into the US financial sector’s residential lending and related securities practices.

With Senators Patrick Leahy and Chuck Grassley, Kaufman worked last year to pass a bill providing timely resources to federal law enforcement agencies working on recent financial fraud. More recently, Kaufman was devastating in his cross-examination of Goldman Sachs executives. Senator Carl Levin, chairman of the subcommittee that heard their testimony, evidently seeing eye to eye with Kaufman, was just as tough after a year-long investigation of Washington Mutual, Goldman, and the abject failures of bank regulators and credit rating agencies.