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Scott Brown, Wall Street's Hope to Stop Elizabeth Warren


Scott Brown, Wall Street's Hope to Stop Elizabeth Warren

Clockwise from left: David Burnett/Contact Press Images; Mark Lennihan/AP Photo; Jonathan Alcorn/Bloomberg; Kathy Willens/AP Photo; Mark Wilson/Getty Images; Shannon Stapleton/Reuters/Landov; John Wilcox/Boston Herald/Polaris

Scott Brown is the only white guy on his team playing a charity basketball game at the Dunbar Y Community Center in Springfield, Mass., and he’s working. He huffs up and down the court in a gold tank top with a number 10 on it, maroon shorts, and Nike (NKE) high-tops that make it look as if he’s got black-and-white hams strapped to the ends of his legs. The crowd is feisty, Love Shack pulses from the speakers, and the winded, increasingly sweaty Republican senator from one of the most Democratic states looks annoyed as he misses a pair of foul shots. “This isn’t soccer, Senator!” someone shouts from the stands, after Brown goes flying, for the second time, onto his butt. The silhouette of two men jabbing at their BlackBerrys from the sidelines is a subtle reminder that this carefully staged display of athleticism is more than just an effort to raise money for troubled youth on a steamy August afternoon. Scott Brown’s race against Democratic candidate Elizabeth Warren to hold on to his Senate seat—formerly occupied by Ted Kennedy and narrowly won in a 2010 special election—has become one of the most closely watched congressional elections in the country, as well as the most expensive, with more than $53 million raised so far, according to the Center for Responsive Politics. Much of Wall Street, in particular, is determined to see Brown reelected.

At stake is the vote that could alter the balance of power between Democrats and Republicans in the Senate, as well as a position of symbolic importance. The race is about two very different views of America’s economic future. For the Wall Street bankers, hedge fund managers, and private equity executives from New York, Connecticut, and elsewhere who are pouring money into Brown’s campaign, it’s also about something much closer to their hearts: stopping Elizabeth Warren. The Harvard Law professor, former head of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP) and driving force behind the Consumer Financial Protection Bureau in Washington, has become the populist champion of government restraint of Wall Street. When asked why he thought Wall Street had become so active on behalf of Brown, Massachusetts Representative Barney Frank says: “Two words: Elizabeth Warren.”

“She makes everybody feel good about financial reform because of her résumé—Harvard, former bankruptcy attorney. You think she gets Wall Street. But she’s never taken risk,” says Lawrence McDonald, a former Lehman trader and co-author of A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, who recently hosted a Brown fundraiser on Cape Cod. “In every financial crisis, you have a pendulum that swings, and she literally is that pendulum.”

Warren in her Harvard office, right before she joined a 2008 congressional oversight panel on bailout fundsPhotograph by Jodi Hilton/The New York Times/ReduxWarren in her Harvard office, right before she joined a 2008 congressional oversight panel on bailout funds

Watching Warren speak in public makes clear why some in the money business might feel that way. “The system is rigged,” she told an adoring crowd at the Democratic National Convention in Charlotte. “Wall Street CEOs, the same ones who wrecked our economy and destroyed millions of jobs, still strut around Congress, with no shame, demanding favors and acting like we should thank them!” She paused amid waves of screaming and clapping. “Does anyone have a problem with that?”

Since bouncing into office as a Tea Party hero—a truck-driving everyman with great hair—Brown, 53, has been trying to project an image of moderation in the face of the anti-corporate, We-Are-the-99-Percent outrage Warren represents. This strategy creates a number of challenges for him, especially in Massachusetts, where his success depends on his image as an amiable centrist: Be Republican, but not too Republican; distance yourself from Mitt Romney and his conservative running mate Paul Ryan without trashing them; show up at your party’s convention, but act as if you don’t want to be there; accept donations from financiers while pretending that you don’t know why they’re so interested in you. If Warren is a pendulum, Brown is a pretzel.

Portraying Brown as a glistening sports hero is a central part of his campaign’s strategy. He’s been pictured biking 100-plus miles across the state and doing multiple triathlons. “He’s definitely not ivory tower,” says Andrew Card, the former White House Chief of Staff under George W. Bush. “He is engaged, he gets his hands dirty, he gets sweaty, and he gets in his truck and he shakes hands.” When Brown is asked whether he thinks it might hurt him to be seen as allied with Wall Street, he stiffens. “I think you’re listening to the Democratic talking points,” he says, repeating one of his favorite lines. “All I know is, in Massachusetts I’m considered the independent person I went down there to be.” The senator has developed a reputation as someone who doesn’t particularly like answering press questions, and as he talks, he prepares to rush away. “Professor Warren has said she wants to leave blood and teeth on the floor and not compromise. Well, she’ll fit right in down there.”

Warren, 63, is always referred to by the Brown camp as “Professor Warren,” to emphasize her nerdy elitism. She certainly would never be seen streaking up and down a basketball court. About halfway through the Springfield charity game, things begin to turn around for the senator, and he starts scoring at almost every opportunity. After a stretch of seeming indifference to the political celebrity in their midst, the crowd erupts enthusiastically whenever Brown makes a move; even the BlackBerry wielders look up from their screens. Brown’s team is ahead, 43-42, with 30 seconds left, and Brown has the ball. Then, somehow, one of his opponents steals it and nails a shot just as the buzzer sounds.

Both Brown and Warren are money-raising machines. In January, they made a pact to try to prevent outside fundraising groups, such as Karl Rove’s American Crossroads, from running ads to influence the Massachusetts Senate race. So far the outside groups have respected their wishes, leaving a campaign that’s more petty than nasty.

Warren is on track to be one of the most successful Senate fundraisers of all time, having wrangled $28 million in contributions so far, according to the Center for Responsive Politics. Much of that comes from national liberal groups such as Emily’s List and Moveon.org, as well as individual donors across the country that include the occasional Hollywood celebrity, such as Barbra Streisand.

Brown has raised $19 million during the 2012 cycle, with the financial-services industry giving the most. A joint fundraising committee Brown launched with the National Republican Senatorial Committee, the Scott Brown Victory Committee, can receive up to $30,800 per donor per cycle, a portion of which can go to Brown directly. As of June 2012, just under half of the $3.8 million raised had come from people in finance. Among the Wall Street titans who have contributed to Brown’s campaign are Cliff Asness, co-founder of AQR Capital Management; Ken Griffin of Citadel; Anthony Scaramucci of SkyBridge Capital; and Louis Bacon of Moore Capital Management.

Brown is not of Wall Street. His hard-knocks-jock childhood in Wakefield, Mass., is an important part of his political identity. He was raised by a struggling mother who cycled through abusive boyfriends and husbands, a couple of whom terrorized Brown and his sister. Brown seemed destined for a life of delinquency when he discovered a passion for basketball, which carried him to Tufts University on a scholarship. He joined the National Guard and went to law school, married TV news reporter Gail Huff, and had two daughters. He also became famous for winning Cosmopolitan’s “America’s Sexiest Man” contest in 1982, which catapulted him into a frothy-but-brief modeling career, complete with hours logged at New York’s Studio 54 in the shoulder-pad heyday of the early 1980s. “I came to be a Republican on my own, and it was partly driven by sports,” he writes in his 2011 campaign memoir, Against All Odds. “I believed in a strong military and in service, and in standing up to those who wanted to do harm,” Brown writes. “But beyond that, I had largely identified with Republicans as the party of fiscal responsibility and fiscal restraint.”

Brown (center) drives for a basket at an Aug. 13 fundraiser in Springfield, Mass. Sports have been central to his appealPhotograph by Michael S. Gordon/The Republican CompanyBrown (center) drives for a basket at an Aug. 13 fundraiser in Springfield, Mass. Sports have been central to his appeal

He says it was his wife who urged him in 1992 to become a property assessor and later a member of the board of selectmen in Wrentham, where they lived. In 1998, Brown ran successfully for the state House of Representatives. He made the leap to state senator in 2004—a special election he won against all predictions by 343 votes. As a member of the minority party in the statehouse, he hewed to issues that could be described as safe. “Brown has a modest record of legislative initiatives, but he has carved out a niche as a leading advocate for veterans,” wrote political columnist Brian Mooney in the Boston Globe.

Then, in August 2009, Ted Kennedy died. “If you want to make a fool of yourself, go ahead,” Brown recalls his wife saying to him when he expressed interest in running for the seat Kennedy had occupied for 47 years. He met with Andrew Card, who briefly considered pursuing the seat. “He was a bit bombastic when he first started talking to me—‘I am going to run and I am going to win,’ ” Card recalls Brown telling him when they were sussing out one another’s intentions. But then the tenor of the conversation shifted, Card says, and Brown suddenly offered to help run Card’s campaign if he decided to move forward—which he didn’t. “I was surprised that he was so committed to running, and that he also committed to supporting me if I wanted to run.”

Brown met with a trio of campaign consultants who are with him still, veterans of Romney’s campaign for governor and failed 2008 presidential run: Eric Fehrnstrom, Romney’s campaign strategist; Beth Myers, Romney’s former chief of staff; and Peter Flaherty, a former prosecutor. “They’re talented people, particularly in the Massachusetts milieu,” says Peter Blute, deputy chairman of the Massachusetts Republican Party. “This is a different place, different from anywhere else. They say in Massachusetts only three things matter: sports, politics, and revenge.”

Brown spent much of the Senate campaign driving around in his pickup truck and calling in to radio shows to gab about the Red Sox—although the truck, it later turned out, had been purchased to haul his daughter Arianna’s horse around rather than be used as his daily ride. Anger over the economy and the battle over the Affordable Care Act, among other things, had mobilized conservatives. There were only a handful of venues in which voters could vent their frustration, which played in Brown’s favor. A Democratic win was still such a foregone conclusion that it took months for Brown to get his national party’s attention, but he finally did. “About a month out from the election, where polls were narrowing, the money came from just about everywhere,” Blute says of Brown’s fundraising. “The money was coming so fast that at the end, they couldn’t even open the envelopes. They had, like, $7 million left over.” After months trailing far behind his opponent, Attorney General Martha Coakley, Brown surprised everyone by winning.

According to a tally maintained by the Washington Post, Brown has voted 66 percent of the time with his own party during his brief time in Washington; he likes to cite a narrower 54 percent figure as evidence of his bipartisanship. He sponsored a bill to promote the hiring of veterans and voted to repeal Don’t Ask Don’t Tell. In late 2011, he helped write a bill banning members of Congress from trading stocks based on nonpublic information.

In July 2010, Brown voted in favor of the Dodd-Frank financial reform bill, which created the Consumer Financial Protection Bureau and mandated rules to regulate derivatives and deal with failing banks. Brown’s support of the bill, which most Republicans opposed, was the deciding vote. However, he used his vote to extract changes that financial institutions wanted made to the Volcker Rule, a central aspect of the legislation that limits proprietary trading for FDIC-insured banks, giving them a little more “wiggle room,” as Frank puts it. As a result, banks are allowed to invest up to 3 percent of their capital in private equity and hedge funds, a change that benefited Wall Street as well as Massachusetts-based Fidelity Investments and State Street (STT). Brown, along with Senators Olympia Snowe (R-Me.) and Susan Collins (R-Me.), also insisted that the cost of implementing the legislation, estimated at around $20 billion by the Congressional Budget Office, come from TARP money rather than through a levy on the largest banks, as the Democrats wanted. “Since we needed their votes,” Frank says, “we had to relieve the financial institutions of that and put it on the taxpayers.”

Then, in June 2012, e-mails between Brown’s legislative director, Nat Hoopes, and the U.S. Department of Treasury came to light showing that Brown had continued to lobby to loosen the rules as they were being written. Hoopes had argued for the most lenient interpretation possible of the Volcker Rule; to allow banks to bring in outside customers to invest in private equity and hedge funds; and to increase the ability of banks to lend money to private equity and hedge funds in need of bailouts—which could further jeopardize depositors’ money, critics say. “Want to make sure that it all goes the right way after all the heat we’ve taken,” Hoopes, who’d previously worked at Lehman Brothers, wrote to Treasury official Barrett Hester on March 3, 2011. “This should be very simple and straightforward and the Fed is over-complicating it.” In another e-mail message, Hoopes referred to Treasury Secretary Timothy Geithner as Brown’s “triathlon buddy.” That and the Dodd-Frank interventions gave Warren an opening to attack Brown as beholden to Wall Street.

“Wall Street people have no Senate race that means anything,” says McDonald, the Lehman alum and Brown fundraiser, explaining one reason he got involved in Brown’s campaign. McDonald says that he’s concerned about the stability of the financial system and that academics have become too influential with policymakers in Washington. “A Hank Paulson-type person versus Elizabeth Warren is like night and day in terms of effectiveness at handling what is going on today.” If Warren were to win, McDonald says, she’d be “seen as an expert” by a second Obama administration, which he finds terrifying. Scott Brown is “just a good senator,” McDonald adds. “He wouldn’t be an adviser to either candidate in a financial crisis.”

On August 14, Brown gave what was billed as a “major policy speech” on taxes at Lombardo’s, a supper club from a bygone era in Randolph, outside Boston. The news media were well represented, along with 400 or so members of the South Shore Chamber of Commerce. Anticipation was high—Brown’s people had been promoting the event heavily, promising lots of “policy.” As the attendees vacuumed up plates of chicken francese, Brown launched into an impassioned defense of “risk takers” in the economy. “I want to say thank you,” he said to the job creators out there, sounding a lot like Romney. The speech turned out to be devoid of policy ideas, however, focusing instead on sharp critiques of Brown’s opponent. He referred to “Professor Warren’s twisted logic” and said she thought successful people “owe a hunk of [their] success back to the government as higher taxes.” He became worked up, referring to the coming “Taxmageddon” and asserting that Warren supported “$3.4 trillion in tax increases”—a number later contested in the press. Then came the wind-down: “I’m going to make mistakes, but I learn from them, and then I grow, and I move on and I become a better senator.”

Photograph by David Burnett/Contact Press Images

Where Brown overwhelms people he meets with a firm handshake and brawny charm, the wisp-thin Warren speaks in soft-but-urgent tones and repeats three names that she evidently believes will carry her to Washington like magic flying teacups: Brown, Romney, and Ryan. The technique hasn’t been working as well as it might have, partly because Warren had a rocky introduction to the joys of campaigning. In April, the Boston Herald reported that she had been listed as Native American by Harvard Law School in an attempt to make it seem more diverse. The revelation became a scandal, which Warren handled poorly as she came to be mocked as “Fauxcahontas” in the conservative press. She also provided the inspiration for President Obama’s infamous “you didn’t build that” line—a botched rendition of a talk she gave last summer—which became the rallying cry of the Republican National Convention.

“This race is about the direction the country will take,” Warren said between handshakes at Sheriff Michael Ashe’s Annual Clambake outside Springfield on August 16. “Scott Brown, Mitt Romney, and Paul Ryan believe that the way to build a future for America is to cut taxes for the thin slice at the top and let everyone else deal with the consequences.”

Warren was a well-established bankruptcy expert at Harvard when she was called to chair the congressional panel overseeing the TARP bailout funds. She clashed with members of Congress and Treasury officials who she felt weren’t cooperative. Warren pushed for the creation of the Consumer Financial Protection Bureau, intended to shield consumers from unfair lending practices at credit-card companies and banks, yet President Obama didn’t nominate her to lead it because of intense Republican opposition.

Photograph by Jay Ellis/Polaris

In Springfield, Warren was asked if she knew that she’d been referred to as “a threat to free enterprise” during a Brown campaign event that morning. “Once again, Scott Brown stands with the big Washington lobbyists,” she said. “I want to close the loopholes and say no more subsidies to Big Oil, and those guys just hate that! I’m out there working for middle-class families and small businesses, nothing’s going to change on that.”

The polls have been tight for months; almost everyone agrees that the race will depend largely on turnout. A handful of people were waiting excitedly when Brown and his wife swept into a True Value hardware store in Braintree, just south of Boston, to accept an endorsement from the National Federation of Independent Business. Brown was wearing a red tie and a blue button-down with the sleeves neatly rolled up to his elbows; Huff was a glamour bomb in full makeup, swirling purple harem pants, and a pair of high heels as she teetered through the aisles inspecting paint thinner and cockroach poison. It was as if the prom king and queen had errands to run.

“Small and independent businesses like the one you’re standing in right now create jobs—not the, uh, government,” Brown said. “As you know, Professor Warren seems to think that entrepreneurs are delusional, that they built their businesses when all along it was the government.”

He cycled through his bit: The government “needs to know when to stand out of the way”; “you will never, ever hear me demonizing our job creators”; Warren wants “3.4 trillion dollars of tax increases over the next 10 years”; “I’ve been an independent thinker, a bipartisan leader”; tax hikes, tax hikes, tax hikes, Professor Warren, Professor Warren. … In spite of his reputation as a likable dude, Brown has become increasingly personal in his attacks over the course of the campaign, with constant references to Warren’s “chalkboard” and professorial mien. He was starting to seem as if he actively disliked her.

Yet when asked whether he thinks she’s an honorable person, he started sputtering. “If you’re talking … of course she’s honorable. We may disagree on policy issues …” he began, as a local television camera filmed away. “You know, I’ve been serving in the military for 32 years, I’ve been serving as an elected official, as an assessor, selectman, state rep, and in the United States Senate, and I think … when you’re talking about honorable, if you look it up in the dictionary, it talks about honor, and if you’re saying, do I have honor, yes, I strive very much to be an honorable person and treat this office with a lot of honor and dignity. Let me ask my wife—Honey, do you consider me honorable?”

Brown turned to Huff, who was standing off to the side. “Yes!” she said, giggling. “Very honest. Too honest at times.”

“Just ask my daughters,” Brown said. “I am very, brutally honest.”

“Thanks for taking the time,” he added. “I encourage you to buy something on your way out, like I’m going to do.”

The people who had gathered disbanded, and Brown and Huff figured out what to buy. Brown approached the register with a bag of Cracker Jack, a bottle of Vitaminwater, a box of bat repellent, and some mousetraps. He pulled out his wallet.

“Scott, Scott, get me a drink, Hon,” Huff said, sliding a Coke out of the fridge. As they gathered up their purchases and jostled out to waiting SUVs, the hardware store cashier said: “They have a bat in their attic.”

With Karen Weise
Kolhatkar_190
Kolhatkar is a features editor and national correspondent for Bloomberg Businessweek. Follow her on Twitter @Sheelahk.

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