In losing Wall Street battle, Warren may gain party clout
WASHINGTON — Before she became a senator, Elizabeth Warren came to Capitol Hill and promised “plenty of blood and teeth left on the floor” if she did not get meaningful reforms of Wall Street. This week, she showed what she meant.
The Massachusetts Democrat brought Congress to the brink of yet another government shutdown in her effort to kill a provision that she said would have once again put taxpayers at risk of bailing out big banks. The provision was inserted by Republicans in a huge spending bill.
She appears to have lost the policy fight, but won a political battle.
By Friday morning, more than 300 former Obama aides had signed a letter urging her to run for president, joining overtures made by an increasing number of liberal groups, some of which are unhappy with front-runner Hillary Clinton. Warren said again Friday that she will not run.
“It’s not about rifts. It’s not politics,” Warren said in an interview, as she reiterated her now familiar argument that middle-class families are losing out to the billionaire class. “It’s about putting the issues forward.”
Even though the spending bill, with the banking provision included, appeared headed to passage in the Senate and on to President Obama’s desk, Warren managed the difficult feat of galvanizing much of her party’s liberal base this week.
Along with House minority leader Nancy Pelosi, Warren helped rally rank-and-file Democrats to oppose the spending bill, threatening its passage until Obama and other White House officials gathered enough votes to get it through the House Thursday night and advance it to the Senate.
Warren took to the Senate floor Friday and harshly criticized “cronyism’’ and examples of “Wall Street insiders getting key position after key position’’ in the executive branch.
“The American people are disgusted by Wall Street bailouts,’’ she said, saying that the provision will water down the Dodd-Frank law passed after the 2008 financial crisis and would “raise the risk that taxpayers will have to bail out the biggest banks once again.’’
For now, Warren appears determined to put more distance between her party and Wall Street. Her fight against the spending bill marks her second uprising against the Democratic leadership that she joined a month ago when she was named to a new strategic policy position. She is continuing her opposition to Obama’s pick for a high-ranking Treasury post, Antonio Weiss.
Her brand of feisty economic populism exposed a deep rift in the Democratic Party, and put on display the kind of divisions that Democrats are used to gleefully watching Republicans grapple with.
“I can’t deny that it reflects a debate going on in the party right now about where to go and how to get there,” said James Manley, a former aide to Senate majority leader Harry Reid. “It’s just the Dem-on-Dem violence was tough to watch.”
Behind closed doors, some of her more senior colleagues were concerned with her no-compromise approach, even as one Democratic leadership aide insisted that party leaders were comfortable with Warren’s plan to draw public attention to the financial reform issue.
These Democrats warned that Republicans would take power next month, and that Democrats could lose far more, including further weakening of the financial reform law, if they did not agree to a compromise now.
Democrats have not criticized Warren publicly, even if some aides have grumbled privately. The closest they come to knocking her is defending the art of compromise.
“Sometimes, you have to look at the longer view of what’s important for our country,” said Senator Patty Murray, a Washington State Democrat who supported the bill.
Senator Barbara Mikulski, the chairwoman of the appropriations committee who led negotiations on the spending bill for Democrats, fought off six other Republican provisions that would have weakened financial reform even more, including one that could have jeopardized the consumer agency designed by Warren, according to Vincent Morris, a committee spokesman.
In the interview, Warren said she realized Mikulski fought off numerous attacks against financial regulations when she negotiated with Republicans, but “there comes a time when we say ‘Enough is enough’ ” to what she says are backdoor attempts to undermine the Dodd-Frank law.
Obama said Friday that, even as he disagreed with some of the bill, it was crucial in many respects, including funding the battle against the group known as the Islamic State and efforts to combat Ebola. The bill also includes money for other Democratic priorities including early childhood programs, National Institutes of Health, and FDA food inspections.
Some Republican lawmakers have compared Warren to Ted Cruz, the Texas senator who helped foment last year’s 16-day shutdown.
But Warren and other Wall Street critics believed that they needed to send a message that they would not roll over to Wall Street. Former representative Barney Frank, who co-wrote the Dodd-Frank financial regulations that bear his name, said the spending provision was “the road map for stealthily undoing all this in the future.”
“You’re not always going to win. That’s just the nature of politics,” said Dennis Kelleher, a Wall Street critic who heads a group called Better Markets and a Warren ally. “Every time the American people are reminded of what Wall Street’s doing in the dark corners of Washington, it’s a loss for Wall Street.”
Warren’s call to House Democrats to oppose the bill unless Republicans removed the Wall Street measure put pressure on many in her party. No member of the Massachusetts delegation supported the spending bill when it came to a vote Thursday night.
Representative Michael E. Capuano missed the vote because his wife was in the hospital after ankle surgery, but would have voted no, according to his spokeswoman, Alison Mills. Representative Joseph P. Kennedy III voted against the spending bill, even after touting the inclusion of a manufacturing bill he authored.
The measure that drew Warren’s ire would remove a requirement that banks conduct some of their riskiest trading activity under separate divisions that are not insured by taxpayers. The requirement was put into the financial overhaul to prevent taxpayers from having to bail banks out for risky activities.
A similar provision to weaken the banking regulation was approved in the House last year. It had support from 22 of 28 Democrats in a committee vote as well as 70 Democrats in a full vote.
The bill was a big priority for the banks. Citi, one of the banks that would most benefit from the change, has spent at least $10.6 million on lobbying over the past two years. It has 54 registered lobbyists, nearly 90 percent of which previously held government jobs, according to data collected the Center for Responsive Politics.
Ed Skyler, executive vice president for global public affairs for Citi, wrote in a blog post Friday that the bank “has been and remains a strong supporter of financial reform.”
He argued that the provision in the spending bill was important because the current policy actually weakens regulations by pushing risky activity “into less-regulated markets” and hampers companies’ ability to manage risks.