Political Hay

Banking on Mike Castle

How the Delaware Republican moderate could still prove useful to Democratic cap-and-trade schemers.

By 8.17.10

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Here's the scenario -- it's 14 days after the 2010 midterm elections. The American people made their voices heard at the ballot box and voted for an ideological shift in the United States Congress. But despite this clear voter sentiment, a desire for change, Senate Majority Leader Harry Reid decides to announce an aggressive legislative agenda to finish out the second session of the 111th Congress.

That's not a far-fetched scenario to envision, especially when it comes to Senate Democrats making a last run at passing cap-and-trade. It's a possibility Carol Browner, Obama's energy and environmental czar raised in a TV interview recently. So shouldn't it be taken seriously?

One of the key storylines in this scenario would be the swearing in of the winner of the special election for Vice President Joe Biden's former Senate seat in November. Right now, there are three legitimate contenders -- 2006 Delaware U.S. Senate nominee Christine O'Donnell and Rep. Mike Castle on the Republican side, and on the Democratic side Delaware businessman Christopher Coons. Most polling gives Castle an edge over O'Donnell and Coons. And that's a problem.

The problem is the winner will be seated right after the election and would give that newly sworn-in member the ability to vote on bills during the so-called lame-duck session. And if cap-and-trade comes up during the session, there's a historical precedent showing how Castle would vote.

Castle has been friendly with the environmental movement in the past, but the most telling part of the narrative is that in 2009, when the House passed its version of the bill, Castle was a "yes" vote. One of eight Republicans to go the other way, he had no qualms with bucking the trend of his party. The question is, why?

It's not as simple as labeling Castle a greenie, tree-hugging Republican, but more along the line of the interests supporting the nine-term congressman. As Delaware's former governor, Castle has a pattern of looking after the banking industry, a major component of the state's economy. He did this first as public servant in state government, but more recently in Congress as a member of the House Financial Services Committee.

Should cap-and-trade be signed into law, it would place limits on carbon emissions, and as National Center for Public Policy Research's Tom Borelli says, it would lead to "the creation of the largest commodity market in the world." Borelli adds that the Commodities Futures Trading Commission estimates a $2-trillion futures market would be created "in relatively short order," which he says would be larger than the futures market for oil and gas.

An entire new trading market created out of thin air? It's no wonder Castle would be on board. Wall Street firms would stand to profit off of each transaction made in on such an exchange. So the immediate benefits of cap-and-trade for the banking industry would certainly outweigh any long-term concerns it may present the industry for the overall economy.

Because of its lax regulations and corporate governance laws, more than 50 percent of all publicly traded companies in the United States, including 63 percent of Fortune 500 companies have made Delaware their "legal" home, according to the state's website. The same is true with the banking industry.

With that distinction of being corporation-friendly, Bank of America, JPMorgan Chase, Citigroup, Deutsche Bank and Barclays all have a major presence within the state and have considerable influence in the Delaware state legislature. However, these banks wield that influence beyond Dover and into Washington as well.

Take a look at Castle's campaign contributors. The Delaware congressman has been a favorite of the banking industry when it comes time to filling campaign coffers. According to the Center for Responsive Politics website OpenSecrets.org, since his election to Congress in 1992, three of Castle's top five contributors have been from the banking industry -- MBNA Corp (acquired by Bank of America in 2006), Bank of America and Morgan Stanley. And 10 of his top 20 contributors were banking firms.

As things stand now, Reid has demonstrated he has been able to break filibuster by peeling off a few votes for cloture, in particular Massachusetts's Scott Brown and Maine's Olympia Snowe and Susan Collins. But with the departure of Sen. Ted Kaufmann, the current Delaware junior senator, the Democratic leadership will either have to find one more vote to get legislation through in this lame-duck session, or they have to find one less vote, particularly on cap-and-trade, if Castle wins the race.

So why would Mike Castle be dangerous in a 2010 lame-duck session of the U.S. Senate with cap-and-trade legislation on the table? The answer is pretty obvious.

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About the Author

Jeff Poor is a staff writer at the Business & Media Institute.