With Friends Like Friend, Who Needs Financial Reform?

Amy Friend, chief counsel to Senate Banking Chairman Christopher Dodd (pictured) -- the senator who's instrumental in crafting legislation to overhaul the financial services sector -- bought shares in large banks and insurance companies that the committee considered rescuing during the height of the financial crisis in 2008.

That's right: Friend and her husband acquired shares of Morgan Stanley (MS), Wells Fargo & Co. (WFC), American International Group (AIG), "and other rescued companies as the panel considered legislation to address the credit crisis," according to Bloomberg.

It gets worse. Friend also bought shares of Fannie Mae (FNM) and Freddie Mac (FRE) before she was hired, Bloomberg reports, and bought stakes worth as much as $15,000 in four banks just weeks after taking the job.

Legal, but Despicable

The transactions, sadly, were permissible under Senate rules. But what I can't understand is how Friend had the time to unleash her inner Buffett. She made her trades at the height of the unfolding disaster, when congressmen -- and anyone connected to the financial-services industry -- were kinda busy. And they still are, with Dodd's financial-services overhaul bill and other legislation -- which brings us back to Friend.

As the U.S. copes with the worst financial crisis since the Great Depression, members of Congress and their staffs need to be especially careful about optics, guarding against activities that don't look good. Clearly, Sen. Dodd should have vetted Friend more closely. He learned this lesson after his deserved drubbing for having received preferential treatment on mortgages from Countrywide Financial CEO Angelo Mozilo.

Rather than risk losing his bid for reelection, Dodd is retiring after his term expires. Since he decided to call it quits, he has emerged as a passionate advocate for financial reform. "To restore faith in our markets and the economic security of the American middle class -- and to avert a potential future catastrophe -- Congress must pass comprehensive reform of our financial system," he wrote in Politico.

Poor Judgment All Around

Sometimes, though, the reformers need reforming themselves. Many Americans might ask how we can trust public officials to help us when they're clearly helping themselves, too. It's a fair question in the case of Friend: a friend indeed, whom Dodd told Bloomberg enjoys his confidence. How sad for the American people.

The chief counsel for any Senate Committee is perhaps second only in power and influence to the senators themselves. These staffers implement the often vague and contradictory ideas that flow from the mouths of politicians. Industry lobbyists target them. Reporters schmooze them. Many are awaiting lucrative careers after leaving public service.

So it's no surprise that many high-level congressional aides develop egos as large as their bosses'. But the fact that Friend apparently tried to benefit financially from her time in the Senate while still on the taxpayers' payroll is shameful. If it's not illegal, it should be. Regardless, Dodd should fire her for showing such poor judgment.