Sen. Jack Reed talks with Sen. Charles Schumer, D-N.Y., during an appearance by Federal Reserve Chairman Ben Bernanke before the Banking Committee.

The Providence Journal / Mary Murphy

WASHINGTON –– Sen. Jack Reed, a key supporting player in this month’s launch of a $700-billion rescue of the financial system, has taken a large fraction of his multimillion-dollar reelection fund from people in banking, securities, real estate and insurance — the industries with the biggest direct stake in the historic federal intervention.

The financial sector accounts for more than $1 million of the $4.45 million that Reed has amassed for his campaign for a third six-year term in the Senate, according to compilations by independent watchdog groups.

At a moment when the financial markets have triggered a crisis for the entire economy, “It just seems like a lot of money coming into his campaign from that particular industry,” said Bill Allison, of the Sunlight Foundation, one such campaign finance monitoring group in Washington. “They’ve made quite an investment in him.”

But Jennifer Duffy, an independent campaign analyst in Washington, cautioned against the unfair “presumption” about elected officials that “if you take any money at all, in some way it is a conflict of interest.” The possibility of a conflict has to be tested against every legislator’s overall record, she said, “and Jack Reed is an example where it is the last thing from the truth.”

Reed himself said his “guiding principle” as a legislator is “what is best for the people of Rhode Island and the people of the United States.” Campaign donations are “not central to how I make decisions,” he said.

Reed acknowledged that he may not need the millions of dollars he has raised to defend against the current challenge from Republican Robert Tingle, who has never raised as much as $5,000 (or $200 from an individual contributor) the threshold requiring a report to the Federal Election Commission. Six years ago, Reed spent $2.5 million to defeat Tingle with 78 percent of the vote.

Rather, he is raising money for a challenge that might someday come from a rich candidate willing to tap a personal fortune to run for the Senate.

That is a legitimate worry — every incumbent candidate’s “worst nightmare,” according to Darrell West, a campaign finance expert at the Brookings Institution. Elected officials without personal fortunes have to prepare for the possibility of “the multimillionaire who shows up willing to drop millions into the campaign, whose idea of a fundraiser is writing a check.”

Duffy, who handicaps Senate races for The Cook Political Report, said her organization automatically puts the tag “vulnerable” on any incumbent senator who has “less than $1 million in the bank” for an upcoming election. To illustrate the phenomenon of the “self-funding” challenger, Duffy and West both pointed to New Jersey Gov. Jon Corzine, a former chief executive of the Wall Street firm Goldman Sachs, who spent more than $60 million of his own money to win a New Jersey Senate seat in 2000.

“I will not unilaterally disarm,” Reed said last week during an interview that focused heavily on the question of whether it looks bad for a public official of his stature to take so much campaign money from a troubled industry with a clear stake in his legislative efforts.

REED MIGHT be best-known nationally as the West Point graduate whose work on the Senate Armed Services Committee prompted presidential candidate Barack Obama to take him as a guide last July on his tour of Iraq and Afghanistan. Reed’s friends at home in Rhode Island see him as using his seat on the Health, Education, Labor and Pensions Committee to help the causes of unions, public schools and medicine. Inside the Senate club, he is the versatile Harvard-trained lawyer and dedicated Democratic partisan rewarded with a plum seat on the pork-dispensing Appropriations Committee.

But Reed’s campaign cash donations from weapons manufacturers, from labor, from the health-care industry, and from lawyers and lobbyists are all dwarfed by the 21-percent share of his fundraising total that he has taken from the financial sector during an 18-year career in the Congress.

Since the fundraising cycle that began his victorious first run for Congress in 1990, Reed has raised more than $13.1 million. Almost $2.8 million came from such arenas as banking, real estate, insurance and stock investment.

(All such totals in this story come from the Center for Responsive Politics. The center is an independent campaign finance watchdog group in Washington that culls statistics from candidates’ official filings with the Federal Election Commission. Totals do not include gifts of less than $200. The maximum lawful total that an individual can give a campaign during a two-year cycle is $4,600.)

As a senior member of the Senate Banking, Housing and Urban Affairs Committee, Reed has been active for years in debates over financial deregulation, housing and — most notably — the recent rescue legislation to stabilize the credit system and the larger economy.

But Duffy suggested that the financial sector’s share of Reed’s war chest is not out of line with its share of the economy.

And West said the finance sector is too broad to be unified on legislative priorities. Investment banking and real estate, for example, could have sharply different goals for any given measure, he said.

Reed’s career totals also show contributions from two financial companies that have become infamous for their troubles — the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, known as Freddie Mac. The government saved Fannie and Freddie — housing finance companies badly damaged by the subprime mortgage crash — from bankruptcy last month, in return for a large ownership stake.

Reed ranks 10th among all 535 members of the House and Senate in his $78,250 fundraising total since 1989 from the campaign arms of Fannie Mae, Freddie Mac, their employees and family of employees. But Reed pointed to several initiatives that Fannie and Freddie have vigorously opposed. “The ultimate test for conflict of interest is in the voting record,” said West, a former Brown University political scientist. “In Reed’s case there are many cases where he voted in consumers’ interests” and against the interests of contributors.

Reed’s pattern holds when totals are examined for the two-year fundraising cycle that encompasses the 2008 election. As of late August, Reed had taken about $1.05 million from the financial sector — ranking him fourteenth among all senators. Exceeding Reed in Senate finance-sector receipts were current and past presidential candidates Barack Obama, D-Ill; John McCain, R-Ariz.; Hillary Rodham Clinton, D-N.Y.; Joseph R. Biden Jr., D-Del.; Christopher J. Dodd, D-Conn.

LAST SUMMER, as part of a multibillion “economic stimulus” bill to finance public works, Reed helped create the mechanism to raise money for efforts to assist in the renegotiation of mortgages on homes in danger of foreclosure. The same system of surcharges on transactions under Fannie and Freddie will gradually create a large federal fund exclusively to subsidize housing for poor people.

Reed said his initiative “was staunchly resisted by Fannie and Freddie.”

All the same, homebuilders, mortgage bankers, Realtors and other players — all significant contributors to Reed’s campaigns — had a big stake in the creation of a federal fund that would eventually add billions of dollars for subsidized apartments for poor people.

Reed was asked whether it would be better to accept no contributions from anybody in the housing finance world whose interests might compete with his responsibility to constituents and to poor people who need lodging.

“My efforts with respect to affordable housing were designed to help people who can’t afford to live in decent housing,” Reed replied. Those efforts “have been opposed by a lot of folks who are the high rollers,” he said.

“I’ve been fighting for people who don’t have as strong a voice in the United States Senate,” Reed said.

The question of perceived conflict of interest can be difficult to answer, Duffy said. “Think of banks,” which in a general sense give substantial amount to Reed’s campaigns through their “political action committees” or PACs, Duffy said. “There are banks in Rhode Island that employ many Rhode Islanders. Is it really a conflict to take PAC money that is contributed by the bank’s employee?” she asked. “There’s a fine line between disavowing all money and disavowing your state’s interests,” she said.

jmulligan@belo-dc.com