This Time, Schumer Doesn’t Side With Wall Street

Pending more details, Chuck Schumer is supporting the Obama administration's proposals to provide greater oversight of the derivatives, credit-default swaps, and other complicated financial instruments that helped cause the present economic crisis.

"We need to regulate derivatives and Obama's outline is strong and sensible and I look forward to seeing the details," Schumer said in a statement sent to The Observer.

It might seem to be a no-brainer for a Democratic Senator to support his party leader's actions against one of the most unpopular industries in America. But given Schumer's close relationship with and advocacy for Wall Street, which has been well documented, any major regulation of the industry puts him in a potentially awkward position.

Since the financial crisis struck last year, Schumer has sought to distance himself from some of the more freewheeling practices of the banking industry, saying he didn't, before the crash, totally comprehend how risky they had become.

(He told The Times last year he was going through an "evolution.")

With regard to the derivatives, at least, this is not Schumer's first call for greater regulation.

In a detailed letter sent to the S.E.C., the Federal Reserve and the New York Federal Reserve following the near-collapse of Bear Stearns last June, Schumer wrote that the "derivatives trading between sophisticated investors, which is currently largely unregulated, can cause enormous systemic risk," and, "I am very concerned that the regulatory oversight of the credit derivatives market, like the regulatory oversight of the housing market, has been too lax for too long."

He then asked a series of involved questions about how greater regulation could prevent systemic financial failure.

But in the past, Schumer applied his considerable clout to the cause of loosening restrictions on the industry.

In 1999, Schumer and former Senator Phil Gramm of Texas successfully sought to break down the barriers between investment and commercial banks, and decrease regulatory oversight—measures that arguably made the boom years of the early aughts possible, but which have also been blamed for causing the promulgation of the exotic financial instruments that caused the crisis.

He also worked to water down legislation that would have strengthened the power of the S.E.C. to oversee the nation's largest credit-rating agencies, which had bestowed good ratings on companies like Enron and WorldCom before their collapse.

(Since the crisis, Schumer has proposed more stringent rules for credit-rating agencies.)

This Time, Schumer Doesn’t Side With Wall Street