Dykstra Hits Johnson on Finance, Not Health

Posted October 27, 2008 at 5:35pm

Unable to directly attack Sen. Tim Johnson (D-S.D.) by suggesting that Johnson is not physically up to the job, the Senator’s Republican challenger is attempting to use the nation’s financial straits to cut into Johnson’s sizable lead.

State Rep. Joel Dykstra (R) is arguing that the Senator did not do enough to prevent the financial crisis. But the argument is not carrying much force, as Johnson has a wide lead in the polls and is expected to glide to re-election.

Johnson, in his role as a senior member of the Senate Banking, Housing and Urban Affairs Committee and as chairman of its Subcommittee on Financial Institutions, should take a lot of the blame for problems in the financial markets, Dykstra told Roll Call. Johnson “clearly had a responsibility to sound the alarm or take some action.”

While Johnson held a 30-point lead over Dykstra in a recent poll conducted by his campaign, the challenger continues to believe the country’s financial problems and the Senator’s own ailments will help turn the tide. Johnson suffered a brain aneurysm in late 2006, which has hindered his speech and his ability to walk.

These issues will make a difference when people enter the voting booth, Dykstra added.

But Johnson’s campaign manager, Steve Jarding, said that Johnson has widened his lead since Dykstra started questioning the Senator’s health.

“It looks like a negative shot, and people are kind of recoiling against it,” he said.

Which may explain why Dykstra is now focusing on Johnson’s oversight role during the financial meltdown.

The Banking Committee needed to do more oversight and curb the offering of subprime loans by Freddie Mac and Fannie Mae, Dykstra said. Providing these loans to people who could not afford them caused the economic problems the country now faces, he said. The committee’s inaction “clearly enabled” Freddie and Fannie to offer these loans, he added.

Johnson’s inaction tells voters that the Senator was either unwilling or unable to take the necessary steps to protect the financial markets, Dykstra said. The Senator is also one of the largest recipients of contributions from financial service companies, he added.

“It looks like conflict of interest,” Dykstra said. “It smacks of insiders playing the system.”

But Jarding said those criticisms are not credible, given that the Senator sought additional oversight of Freddie and Fannie as early as 2003. Johnson and other Democrats on the committee also took legislative steps to reform Freddie and Fannie, but were blocked by Republicans, who were in the majority for six of the past eight years, and by the Bush administration, a spokeswoman for Johnson added.

A Senate Democratic aide agreed that Banking was not to blame.

“The Banking Committee was at the forefront of sounding the alarms” on Freddie and Fannie, and the White House blocked the committee’s reform efforts, the aide said. Freddie and Fannie, the aide continued, were not leading the charge toward subprime loans.

But the White House strongly disagreed with that assessment.

“That’s a joke,” White House spokesman Tony Fratto said. Democrats’ reform efforts would have “institutionalized weak oversight” of Fannie and Freddie. “The Democrats can try as hard as they want to rewrite history on this, but the history is clear: Congressional Democrats steadfastly blocked the creation of a strong, independent regulatory [agency] with the authority to prevent risky activity by Fannie and Freddie — while at the same time encouraging Fannie and Freddie to take on more risk.”

Furthermore, the committee did all it could to regulate these entities, given that the Securities and Exchange Commission had maintained until very recently that everything was fine, Johnson spokeswoman Julianne Fisher said.

“Becoming a Member of the Senate does not give you clairvoyance. It’s not part of the job description,” she said.

Several financial analysts and lobbyists agreed.

“There really isn’t much more [Banking] could have done,” a financial analyst said. The perception that housing prices would continue to rise is something Congress could not have changed, and the brokers and non-bank lenders who played a central role in the crisis are not subject to the Banking Committee’s jurisdiction, a banking lobbyist added.

While Congress could have done more to ensure that Freddie and Fannie were better capitalized and taking on lower risk investments, this economic crisis was the fault of both parties, the analyst said. There are so many explanations for the crisis that it’s hard to assign blame to any one group.

“I don’t think anybody in the world anticipated this,” the banking lobbyist added. But “hindsight’s always great.”

These experts also rejected Dykstra’s allegations of conflict of interest against Johnson. Such a claim is “the oldest trick in the book” for a challenger without any proof of the link between contributions and Johnson’s decisions, so that argument will not stand, the banking lobbyist said. “It’s totally bogus, it’s vacuous, it’s lame.”

Meanwhile, even if he is not directly attacking, Dykstra has called into question Johnson’s capability to do the job given his physical condition.

“We’ve been careful not to attack on that issue, but let the voters’ own sense of doubt” drive this, Dykstra told Roll Call.

Dykstra is questioning whether Johnson can continue to run his subcommittee and advocate effectively for South Dakota, given problems he faces in communicating. In particular, the Dykstra campaign has focused on Johnson’s refusal to hold debates during the campaign.

“It’s clear they don’t think he could survive any public scrutiny,” Dykstra said.

Dykstra’s campaign will ramp up these arguments now that Johnson pulled out of a local television interview that was scheduled for earlier this month. They will revise their ads and focus on this issue in upcoming speeches to “pound this home,” Dykstra said.

But Johnson has not missed a single vote since he returned to the Senate and continues to deliver funding for South Dakota, Jarding responded.

Dykstra, he said, is “barking up the wrong tree.”