The Mellowing of Maxine Waters
OVER her 22 years in Congress, Maxine Waters has likened bank executives to "gangsters," snarkily addressed them as "captains of the universe" and threatened to tax their companies "out of business."
The Democrat from Los Angeles, in other words, is not known for showing love to the financial industry.
So in March, when she visited a group of community bankers in a conservative corner of her district, she seemed ready for a chilly reception. "Let's see what these guys have to say for themselves," Ms. Waters said with a smirk as she emerged from her S.U.V.
Escorted to a private conference room at Malaga Bank, Ms. Waters grabbed a seat at the head of the table. A dozen or so bankers shuffled in, each armed with a tale of woe about the Dodd-Frank banking overhaul passed by Congress in the aftermath of the financial crisis.
The law is too tough, they groaned. Its capital requirements are too steep. One banker's voice quivered as she described a regulatory examination of her bank. Another griped about regulators overstepping their bounds: "They can tell you how many pens and pencils we have in our drawers!"
In the past, such grumbling might have set off Ms. Waters's famous hair-trigger temper. But with each complaint, she leaned in for more, nodding appreciatively. "We've heard they chase down silly stuff," Ms. Waters said, referring to regulators and shaking her head in disapproval. "I'm willing to take a hit" to help lower the capital requirements, she said. She even suggested the bankers hire new lobbyists to better represent them. "Influence us," Ms. Waters said softly, reminding them of her new role as the ranking Democrat on the House Financial Services Committee. "Help us understand the intricacies of your business."
This was not "kerosene Maxine," the nickname Ms. Waters has earned for her tendency to hurl flammable remarks. (Exhibit A: She once screamed onstage in Los Angeles that "The Tea Party can go straight to hell, and I intend to help them get there.") Rather, she was all empathy, vowing to use her new sway in Washington to protect the bankers' interests. "You have a lot of good will right now," she said. As for Dodd-Frank, Ms. Waters said she stood ready to defend the law, but also instructed the bankers to compile a "laundry list" of their concerns. "I don't want you to look at this as being impossible to tweak," she said.
After an hour of swiveling nervously in their chairs, the bankers broke into grins. One executive slapped Ms. Waters a high-five. Another embraced her.
"You've softened," Paul C. Hudson, the chairman of Broadway Federal Bank, teased Ms. Waters. "I love the new Maxine."
The New Maxine was born in part from Ms. Waters's ascension, in January, on the House Financial Services Committee. Exonerated in September at the end of a three-year ethics investigation, she replaced Barney Frank, Democrat of Massachusetts, for whom the banking overhaul bill was named.
The influential Financial Services Committee oversees community banks and Wall Street alike. And Ms. Waters has softened somewhat, not just toward local bankers in her district who might expect her ear, but also toward the Wall Street C.E.O.'s she formerly reviled.
In recent months, she dined with John Stumpf, the C.E.O. of Wells Fargo, and met Wall Street chief executives like Michael L. Corbat of Citigroup and Jamie Dimon of JPMorgan Chase. It's what she called "an open-door policy." Most notably, given her penchant for railing against Wall Street abuses, she recently pushed regulators to delay certain rule changes on high-stakes derivatives trading. The regulators ultimately agreed.
The move may seem at odds with her track record as a rabble-rouser and consumer activist. In her long committee tenure, Ms. Waters positioned herself to the left of fellow Democrats, making her name on issues like affordable housing and foreclosure prevention. Ms. Waters acknowledged that "some of my friends will not agree" with all of her recent decisions. But after two decades in Congress, she says she has learned to pick her battles.
One battle emerged in recent days. In the face of intense lobbying pressure, Ms. Waters voted on Tuesday to oppose several House bills that would water down Dodd-Frank, a move that one consumer advocate called "gutsy."
"Sometimes the advocates won't like what I'm doing, and sometimes the industry won't," Ms. Waters said during the tour of her district in March. Then, raising her voice and striking a feistier tone, she added: "I'm not owned by anyone."
A softer touch with the nation's biggest banks could allow her to score points — and campaign donations — from an industry unhappy with her previous approach. And being more willing to compromise could also afford her new credibility on Capitol Hill to press her central focus — the cause of consumers. But at a time when bank lobbyists are stepping up their attack on regulators, her soothing words to bankers raise a question: just how committed is the New Maxine to the banking changes she helped pass just three years ago?
IN the back seat of the Infiniti S.U.V. driving down Interstate 110, Ms. Waters glanced at her cellphone, anxious that she was running late for a tour of nearby homes that recently emerged from foreclosure. She barked directions at her driver, pointing to a detour that might shave five minutes off the trip.
Ms. Waters, who flies from Washington to her Los Angeles district almost every weekend, knows the territory well. She moved here from St. Louis a decade after high school, where the senior yearbook predicted she would become speaker of the House.
Arriving with her children, she enrolled in college at what is now California State University, Los Angeles. After a stint at Head Start, Ms. Waters joined the board of Essence magazine as she raised her profile in local politics. As a state lawmaker, she cemented her activist credentials during a bitter campaign to prevent California pension funds from investing in companies doing business with South Africa during apartheid.
Ms. Waters was elected to Congress in 1990, and has easily held her seat ever since, even as the district stretched farther away from inner-city south Los Angeles to the conservative community of Torrance. At 74, she shows few signs of the wear and tear of Washington. Ms. Waters swims 10 to 15 laps every weekend and adheres to a diet known as the 16-hour fast, routinely depriving herself of food until after sundown.
She has become famous — or infamous — for her public remarks as well, from her defense of the violence in the 1992 Los Angeles riots as "somewhat understandable" to a kindergarten-style verbal tussle with Peter King, a New York Republican, on the House floor that escalated to the moment when she told him to "shut up." She also stubbornly supported Fannie Mae and Freddie Mac, the government-sponsored companies that backstop the mortgage market, before their federal takeover.
Yet Democrats say the public perception of Ms. Waters as a firebrand is often out of context.
"That caricature is totally incomplete," said Dwight Fettig, a former top official on the Senate Banking Committee who is now a Democratic lobbyist at Porterfield, Lowenthal & Fettig. "People underestimate her at their own peril."
Her reputation does not seem to trouble her constituents, either; she is politically invincible in her district, in part because of her advocacy on behalf of ordinary homeowners. She memorably let "Nightline" tape her as she spent two frustrating hours on the phone being switched from one unhelpful bank employee to the next, trying in vain to secure loan modifications for her constituents. And one of her major efforts was writing legislation that created the Neighborhood Stabilization Program to revamp foreclosed homes.
During her trip to her district in March, she toured a once-blighted Los Angeles neighborhood that had received stabilization funds. In high heels and a hard hat, the congresswoman moved from house to house, greeted like a celebrity. Construction workers threw their arms around her. A police officer chased Ms. Waters down the street, trying to snap her picture.
Ms. Waters, already behind schedule, obliged the added distraction. "My wife would kill me if I didn't do this," the officer declared.
MS. WATERS'S safe seat and her longevity on the Financial Services Committee meant that when Mr. Frank retired, she was in line to succeed him.
But until a few months earlier, the promotion had been in doubt, as Ms. Waters awaited the results of a long-running House ethics investigation.
In the fall of 2008, as Washington scrambled to rescue Wall Street banks at the height of the financial crisis, Ms. Waters contacted Henry M. Paulson Jr., then the Treasury secretary, to arrange a meeting on behalf of a trade group representing beleaguered minority-owned banks — including a firm in which her husband owned stock. Ms. Waters's husband, Sidney Williams — the former N.F.L. linebacker and ambassador to the Bahamas — stood to lose about $350,000 if the bank, OneUnited, failed.
When the meeting was held, Treasury officials were surprised to see that OneUnited was the only minority-owned bank represented. In response to a question, OneUnited's executives made an appeal for a $50 million bailout. The suggestion that a congresswoman intervened to serve the financial interest of her husband kicked off a long, convoluted investigation that involved the establishment of a special ethics committee.
Last fall the committee exonerated Ms. Waters, after an independent investigator ruled that she intended to act on behalf of all minority-owned banks, not just OneUnited. According to the independent investigator, Ms. Waters learned about OneUnited's appeal only after the meeting in 2008.
The ethics committee, however, admonished Ms. Waters's chief of staff, who is also her grandson, for twice trying to assist OneUnited. And the events prompted the committee to amend some of its ethics rules.
The exoneration paved the way for Ms. Waters to take over Mr. Frank's post. That news troubled Wall Street. Ms. Waters, lobbyists noted, was long hostile to their interests. She was, for example, a rare voice in opposition to a 1999 law that struck down Depression-era banking laws. That law, the Gramm-Leach-Bliley Act, has since been implicated as one cause of the 2008 financial crisis. "I voted no," she later boasted. "I was right."
Ms. Waters also played a crucial role in passing Mr. Frank's financial overhaul, pushing a provision that would make it easier for shareholders to oust a company's board members. And at Mr. Frank's urging, Ms. Waters helped sell the bill to the Congressional Black Caucus, delivering critical votes. "She was one of the closest relationships I've had," Mr. Frank said recently.
With that track record in mind, some on Wall Street assumed that Ms. Waters would make Mr. Frank, one of the more liberal members of Congress, look like a free-market conservative.
But as Ms. Waters settled into her new role, she sent different signals. Just months after condemning Mr. Dimon for his opposition to some measures on derivatives, Ms. Waters urged regulators to delay the very same rules.
According to officials briefed on the matter, lobbyists for Citigroup and Goldman Sachs requested meetings with Ms. Waters's aides to raise concerns about the Commodity Futures Trading Commission's plans to impose new derivatives rules on banks operating overseas. The lobbyists argued that American authorities should stand down until foreign regulators acted. Those concerns were echoed in December when a liberal member of the trading commission, Bart Chilton, came out in favor of a slight delay to the rules. Days later, Ms. Waters sent a letter to Gary Gensler, the chairman of the commission, asking for a six-month delay.
"I am writing to you to relay some of the concerns I have heard from various stakeholders," she wrote to Mr. Gensler. (Ms. Waters's aides say that she did not send the letter until Mr. Chilton "tipped the scales." )
Still, the move elicited concern among critics of Wall Street who feared banks were winning over Ms. Waters.
"She should be shoring up regulators' spines, not clipping their wings," said Jeff Connaughton, a former lobbyist and Congressional staff member who recently wrote a book entitled "The Payoff: Why Wall Street Always Wins." Bartlett Naylor, a policy advocate at Public Citizen, a consumer rights group, called the derivatives letter "troubling," adding that Ms. Waters "needn't add her voice to the cacophony from antireform Wall Street apologists."
Ms. Waters, however, noted that she voted against recent House bills that could curb the trading commission's overseas authority. And unless she is "diametrically opposed," Ms. Waters said, she is willing "to take a chance" on some pro-industry efforts.
The letter to Mr. Gensler was unlikely to upset broad swaths of her base, which is generally more interested in housing issues than derivatives. In fact, Mr. Naylor said that Ms. Waters continued to be "a stalwart defender of the American consumer." He noted that the new role has not stopped Ms. Waters from meeting with consumer advocates, faulting banks for their foreclosure abuses and opposing legislative efforts to weaken the Dodd-Frank law. "When Wall Street interacts with me," Ms. Waters said, "they will see I understand how things work."
MS. WATERS'S shift in tone is not without precedent. The influential place she now holds has been known to nudge the staunchest liberals to the center, including her predecessor, Mr. Frank. "You make a trade-off when you're at the top of the committee," he said. "You gain a lot more influence but you give up some freedom to speak out."
The ranking member on the Financial Services Committee typically takes in millions in donations from the financial services industry. As of now, Ms. Waters has received few dollars from the banking industry. Other than a recent $2,500 donation from Goldman Sachs's political action committee, her coffers are largely stocked with money from unions and other liberal causes.
For Wall Street, Ms. Waters's more open approach to the industry was a welcome change. "The outreach has been very sincere," said James C. Ballentine, a lobbyist for the American Bankers Association.
Still, just how far that outreach goes — and whether her softening tone becomes a willingness to weaken Dodd-Frank — is a question that concerns consumer advocates. Bank lobbyists continue to argue for watering down the law's provisions, and Ms. Waters's public statements suggest she is trying to please both sides.
During a speech last month at the United States Chamber of Commerce in Washington, Ms. Waters opened the door to "revisit, modify and clarify" some of Dodd-Frank, while also stating her continued opposition "to wholesale revisions." And at a committee hearing on Tuesday, Ms. Waters led a fight against a set of House bills that could unwind Dodd-Frank's derivatives provisions, saying she was "exceedingly nervous about reopening the bill." She did so over the objections of Wall Street lobbyists and even several Democrats.
Still, of the five derivatives bills under consideration, she voted in favor of two.
"She clearly understands that her role has changed," said Kenneth E. Bentsen Jr., a former Democratic congressman who served on the House committee with Ms. Waters and is now the acting president of the Securities Industry and Financial Markets Association, a Wall Street lobbying group.
"But Maxine Waters is no shrinking violet," he said, "and I don't think any of that's going to change."
In the room with the California bankers, Ms. Waters suggested that at least when it comes to regulating community banks, things were going to be different.
"I think that you have made this effort of outreach is just extremely encouraging to us in the room," said Randy C. Bowers, the head of Malaga Bank.
Ms. Waters welcomed the praise. "I do make myself available," she said. "And now I have an opportunity as a ranking member," she said, where "I can help you."
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