The Democratic Senatorial Campaign Committee made its first play of the 2010 cycle Friday in Pennsylvania, launching a television ad that rips “millionaire” Republican Pat Toomey for his Wall Street background.
It retails a questionable claim that Toomey traded derivatives, a type of instrument that “nearly wound up destroying our economy.”
Democrats are spending about $360,000 on broadcast time and $27,000 on cable TV to air the ad statewide, according to sources who track advertising buys. That’s enough for 600 gross ratings points in Scranton-Wilkes Barre; 500 points each in Johnstown and Erie; 400 points in Pittsburgh; and 300 points each in Harrisburg and Philadelphia.
This is the first broadcast TV spot for Democrat Joe Sestak since the primary, when he spent all his money in the final weeks of the campaign to beat Sen. Arlen Specter. By contrast, Toomey has been up on the air unanswered for more than a month, as has the right-leaning US Chamber of Commerce, painting Sestak as a big-spending liberal. Toomey enjoys an average lead of 4 percentage points in the polls.
It’s true that trading in risky derivatives triggered the financial collapse of 2008, but there are many species of derivatives, and the specific one that caused all the problems – credit default swaps – were not even invented until six years after Toomey left the financial industry. Those derivatives allowed banks and investment firms to trade on underlying mortgages, and became nearly worthless when housing prices collapsed, causing huge losses to firms that held the paper.
Toomey worked on the Street from 1984, when he graduated from college, and 1991. He traded in what were then relatively new financial products: derivatives based on currency exchange rates and interest rates, which allowed companies to buy a hedge against fluctuations.
The ad is close to a discredited attack piece run by Specter in April 2009 when he was still a Republican and was facing a probable primary challenge from Toomey – Factcheck.org slammed Specter, and his campaign then reworked the ad.
But this DSCC ad does not mention “credit default swaps” as Specter’s did. So it is literally accurate, but still misleading. Clearly, the ad makers want viewers to believe Toomey was a one-man economic wrecking crew.
DSCC also says in the ad that Toomey “wrote the law to weaken oversight of Wall Street.” This is a reference to the Gramm-Leach-Bliley Act of 1999 that repealed the Depression-era Glass Steagall separation between commercial and investment banking. Some economists say that the repeal helped pave the way for the recession by allowing some financial institutions to become “too big to fail,” but others believe the change was blameless or even helpful in cushioning the crash.
Toomey’s campaign says he never wrote the 1999 law. Indeed, he did not co-sponsor the legislation that became Gramm-Leach-Bliley, though he did speak in favor of it and vote for it. Toomey was a member of the Financial Services Committee at the time, but he was a lowly freshman.
On the other hand, articles in Derivatives magazine and The Morning Call newspaper both report that Toomey helped to write the law. Toomey’s official congressional biography also said he helped write the law, according to an archived page from his Website.
At any rate, the repeal of Glass Steagall passed both Houses by overwhelming bipartisan votes, and was enthusiastically signed into law by then-President Bill Clinton, a Democrat.
If voting for Gramm-Leach-Blilely is a disqualifier, then DSCC may have to rethink its support for Majority Leader Harry Reid of Nevada, Sen. Blanche Lincoln of Arkansas; Sen. Patty Murray of Washington; Sen. Chuck Schumer of New York, Sen. Ron Wyden of Oregon; and Sen. Patrick Leahy of Vermont. Not to mention Vice President Biden.
Of course, none of them ever worked on Wall Street.