Speaking with a trade magazine a decade ago, former U.S. Rep. Patrick Toomey reminisced about his experience as a seller of derivatives - "options, swaps, forwards and so on" - and advocated deregulation of the financial-services industry.
While the interview might have seemed unremarkable then, the reelection campaign of Sen. Arlen Specter (R., Pa.) is hoping that Toomey's Wall Street background will come back to haunt him in their expected GOP primary campaign next spring.
Backers of Specter plan to argue that Toomey's laissez-faire philosophy and investment-banking experience would be liabilities in the fall 2010 Senate election if he were to win the Republican nomination, given popular anger at financial institutions.
"Imagine what the Democrats would do to a guy who's that far to the right, with the added liability of being the poster child for Wall Street excess," said Christopher Nicholas, Specter's campaign manager.
In two recent public appearances, the five-term senator has argued that Toomey "helped to create" today's financial problems.
Toomey, head of the conservative Club for Growth, said that twisted the record and was "laughable" because Specter also voted for the main legislation to deregulate the financial industry.
"You know a career politician is desperate when he brings up the private-sector work I did more than 20 years ago on matters entirely unrelated to today's problems," Toomey said yesterday in an e-mailed response to questions.
In the spring of 1999, Toomey was a freshman House member and cosponsor of legislation that became known as the Gramm-Leach-Bliley Act, which rolled back Depression-era restrictions that prevented commercial banks, insurance companies, and investment banks from merging.
Specter also voted for the legislation, which was enacted in November 1999.
"The trend in deregulation, beginning in the early 1980s, is one of the biggest reasons for the sustained economic expansion," Toomey was quoted as saying in the May 1999 issue of the now-defunct Derivatives magazine, archived on DerivativesStrategy.com. "I would like to see us continue to deregulate on many fronts, including the financial-services industry."
Some economists blame deregulation, and particularly the trade in derivatives backed by mortgages, for triggering the crisis in financial institutions underlying the recession.
Toomey worked as an investment banker for Chemical Bank and Morgan Grenfell from 1984 to 1991, a time when, he said, "the vast majority of the exotic financial instruments associated with today's problems had not yet been invented."
Toomey said he sold derivatives tied to foreign currencies and international interest rates, allowing clients to lower their borrowing costs and shield themselves from fluctuations in currency exchange rates.
"The resulting savings enabled these companies to invest more in American factories, hire more workers, and grow our economy," he said.
Toomey's Wall Street career was not a hot-button issue during the 2004 Pennsylvania Senate primary, when he came within 17,000 votes of unseating Specter. The economic and political climates were different then.
After considering a race for governor in 2010, Toomey last month turned his sights to a possible rematch after Specter crossed party lines to provide a crucial vote for President Obama's $787 billion economic stimulus plan.
That vote angered many GOP conservatives, as did Specter's support for government bailouts of Wall Street financial firms, polls show.
Specter said he voted for the stimulus legislation and aid to banks because both were essential to keep the nation from sliding into a depression.
Toomey said that he supported "vigorous enforcement" and prosecution of criminal wrongdoing in the financial industry but that "in the case of bad business decisions . . . I strongly oppose placing that burden on taxpayers."