Is Charlie Rangel the Next to Go? 22-Term New York Democrat Faces Serious Primary Threat

Charlie Rangel has been a U.S. Representative. since 1971 and is currently the third longest serving Congressperson in America. He turned 84 years old this past Wednesday, and was at the center of a tax avoidance scandal several years ago. As the Wall Street Journal reported in its 2009 article, Morality and Charlie Rangel’s Taxes:

Ever notice that those who endorse high taxes and those who actually pay them aren’t the same people? Consider the curious case of Ways and Means Chairman Charlie Rangel, who is leading the charge for a new 5.4-percentage point income tax surcharge and recently called it “the moral thing to do.” About his own tax liability he seems less, well, fervent.

Of course, if a mere pleb like you or I were caught avoiding taxes we’d likely face harsh consequences. However, for a crony politician like Charlie Rangel all is forgiven and is allowed to continue to “represent” his constituents.

In light of the stunning upset Dave Brat just pulled off against House Majority Leader Eric Cantor earlier this week, many are asking the question as to whether or not we are seeing a genuine political shift against the incredibly corrupt status quo. Personally, I think so. Even if I am incorrect on that front, one thing that is abundantly clear is that any candidate with strong ties to Wall Street will be attacked like a piñata. While the mainstream media likes to talk nonsense about how Brat won because of his opposition to immigration reform, it appears the opposite is true. His winning issue was actually crony capitalism and Wall Street theft. As was so fantastically reported on by The Republic Report:

“All of the investment banks, up in New York and D.C., they should have gone to jail.”

That isn’t a quote from an Occupy Wall Street protester or Senator Elizabeth Warren. That’s a common campaign slogan repeated by Dave Brat, the Virginia college professor who scored one of the biggest political upsets in over a century by defeating Majority Leader Eric Cantor in the Republican primary last night.

The national media is buzzing about Brat’s victory, but for all of the wrong reasons.

So while Democratic pundits may be laughing at the “civil war” within the Republican Party, they better look in their own backyard. Anti-Wall Street and anti-crony capitalism as a political issue isn’t just big within the GOP, it is set to take American politics by storm in general. Just ask Charlie Rangel, who faces a tough primary from Dominican born Adriano Espaillat in the primary. In fact, he is under so much heat, he pulled out of the final debate at the last minute. The Huffington Post reported yesterday that:

Something new is happening in a New York Democratic primary contest: An incumbent is getting hit for being too close to Wall Street.

The unlucky congressman is Rep. Charles Rangel, who was called out by challenger Adriano Espaillat during a recent debate for a vote to water down Wall Street reform. Espaillat, a state senator, has been hammering Rangel for weeks over his ties to the financial industry. On Thursday night, Rangel pulled out of the final debate before the election.

Rangel, 84, has been in office since 1971, but is in a dead-heat with Espaillat in the primary for New York’s 13th Congressional District, which represents Harlem and some sections of the Bronx. Rangel, Espaillat and a third contender, the Rev. Michael Walrond Jr., squared off in a debate Wednesday evening.

Espaillat attacked Rangel’s 1999 vote to repeal the Glass-Steagall separation between traditional banking and risky securities trading, saying economists widely cited it as a cause of the 2008 banking collapse. Espaillat then asked why Rangel voted to roll back a key aspect of the 2010 Dodd-Frank financial reform law, referring to Rangel’s support for a measure that would reinstate taxpayer support for risky derivative trades by big banks. The bill, HR 992, had been the subject of intense lobbying from the nation’s largest financial institutions.

The primary is on June 24th, and while Rangel is already half out the door anyway, a loss still would serve as a huge wakeup call into 2016, when Wall Street crony Hilary Clinton (she has earned millions speaking to private equity and Wall Street giants lately) assumes she is owed the crown.

Meanwhile, I want to highlight an article from Naked Capitalism yesterday titled: SEC Commissioner Kara Stein Declares War on SEC Chair Mary Jo White. Mary Jo White is a totally captured Wall Street lapdog, as I noted as soon as she was appointed in my piece: Meet Mary Jo White: The Next SEC Chief and a Guaranteed Wall Street Patsy. This is precisely what makes the Naked Capitalism piece so interesting. We learn that:

A relatively new SEC Commissioner, Kara Stein, has decided to depart from the usual polite behavior regulatory overseers and is making noise about SEC decisions and policies that she finds to be dubious. The word most commonly used in the media about her remarks is “blistering”.

But the press, while giving Stein’s unusually forthright speeches the attention they warrant, has either failed to notice or is pretending to miss what is really going on: Stein is taking on SEC chairman Mary Jo White on her finance-firm-friendly regulatory stance in a remarkably frontal manner.

The reason that Stein’s outspokenness is so unusual is that it is almost unheard of for a regulatory supervisor to cross swords openly with an agency head who hails from the same party.

Stein described one pre-crisis rule change that some readers may remember, namely, that the SEC changed its net capital rule in 2004 to let dealers use their own models, including dubious but still widely used Value-at-Risk models. Stein stresses that at the time, the SEC knew full well that this change would let firms get away with carrying less capital. Indeed, the wink-and-nod was that that was the point: the objective was to “reduce regulatory costs for broker-dealers.” Part of why the SEC took such a narrow view of risk was that historically, the agency was concerned only that the customers of a broker-dealer would come out whole if a firm fails, and not to make sure the firm can survive market upheaval. We all know how that movie turned out. The biggest US securities firms did indeed lever up and either failed, were rescued or merged into banks.

It’s important to take note of and support Stein’s efforts at the SEC. There is a lot of well-deserved cynicism about regulators and regulatory processes. But it is also critical to remember that well-placed individuals can make a difference. Even as one commissioner out of five, Stein has already made a mark on the final Volcker rule and is throwing a lot of sand in the gears of Mary Jo White’s game plan of going easy on the financial services industry on the regulator front. So if you have a minute, send a note to your Congressman and/or Senator (particularly if they are on any of the banking or financial services committees) praising her latest speech. The more notice Stein gets, the more effective she will be in her reform efforts.

Slowly but surely, things are changing. Keep pushing everyone.

In Liberty,
Michael Krieger

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