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Warren vows fight to defend fiscal rules

Wall St. battles could split party

Senator Elizabeth Warren was photographed in Washington on Jan. 8.J. Scott Applewhite/Associated Press

WASHINGTON — Elizabeth Warren celebrated her takedown of President Obama’s nominee for a top Treasury spot last week by signaling a readiness for her next battle: blocking those who meddle with the post-2008 financial reform known as the Dodd-Frank Act.

The Republican-controlled House last week passed a bill that would further ease Dodd-Frank rules and sent it to the Senate, one of several changes approved in recent days. The Massachusetts senator and her allies in the Democratic Party’s liberal wing, who have turned into a viable threat to Wall Street, insist they will do their utmost to derail all rollback efforts.


Divisions are expected to pop up, not only between Warren and Republicans in the new Senate majority but between Warren and centrist Democrats, who tend to view Wall Street firms more favorably.

“Elizabeth Warren is going to draw the line in the sand and moderate Democrats are going to have to decide which side they want to be on,” said Isaac Boltansky, an analyst at Washington financial services firm Compass Point Research & Trading, and a former Warren aide on the Congressional Oversight Panel, which reviewed the government’s Troubled Asset Relief Program.

Warren headed into 2015 already a darling of the left and the focus of efforts to draft her for a presidential run.

In the last two months, her standing has soared further. By leading the successful effort to vanquish investment banker Antonio Weiss in his bid for Treasury undersecretary for domestic finance, she drew cheers from her populist base and all but ensured the White House will steer away from future Treasury picks with strong Wall Street ties.

She nearly derailed a major spending bill because of a provision on derivatives trading that she considered a threat to financial regulations. And she drew negative attention on Republican efforts to insert Dodd-Frank changes into a terrorism insurance bill.


Warren declined an interview on her efforts. Despite multiple draft movements by her ardent supporters, she has declared numerous times that she will not run for president and plans to complete her Senate term, which ends in January 2019.

ButWarren is shaping the presidential debate.

“Attacking financial reform is risky and wrong,” Hillary Clinton, a potential Democratic nominee for president, tweeted Friday, sounding an increasingly populist tone. “Better for Congress to focus on jobs and wages for middle class families.”

But even as Warren influences the dialogue for 2016, she will be playing defense on Dodd-Frank this year. Warren’s rise has drawn heavy fire from Washington’s business lobby.

“The idea that enterprise and American companies should be more vigorously regulated by the government, and in fact controlled by the government, is a view that we don’t share,” Chamber of Commerce president Thomas Donohue said last week, when asked about Warren.

His comments followed a speech, in which he linked economic populism to a state-run economy.

Donohue told reporters Warren was “a very pleasant woman if you sit down and have a cup of tea with her . . . but if she runs for president, I don’t think the American people will share her views.”

Republicans, now in control of both houses of Congress, plan an ongoing siege of Dodd-Frank. The House started early, using the first days of the new Congress to approve measures that would impact the law. One would delay until 2019 a part of the Volcker Rule, a key provision that bans banks from betting in financial markets with their own money. The White House has threatened a veto and its chances appear dim in the Senate, although elements of the bill may reappear.


Warren also likely will be forced to combat attempts to restructure the Consumer Financial Protection Bureau, the watchdog agency that she conceived and that came out of Dodd-Frank.

Her influence seems to have spilled over into the House, where Democrats beat back Republican efforts last week to fast-track the legislation on the Volcker Rule. It passed, but only after a roll-call vote.

“Elizabeth, given the prominence she has earned, is very well-positioned to frustrate [the GOP and Wall Street] by putting a spotlight on this,” said former representative Barney Frank, the Massachusetts Democrat who helped craft Dodd-Frank.

But Warren faces political risks as she battles both Republicans and the White House. Efforts by her opponents to paint her as unreasonable could stick.

“Is she so far out there on the left that it makes [Democrats] out of touch with the country or is she really on the leading edge?” said Cornelius Hurley, director of Boston University’s Center for Finance, Law & Policy.

Wall Street and its lobbyists are framing their argument on Dodd-Frank as a demand for “technical corrections” to complex legislation.

“In the old days, you dealt with one regulator when you had an issue, maybe two, now it’s five or six,” said Jamie Dimon, chief executive of JP Morgan Chase, last week after reporting the bank’s fourth-quarter results. “You all should ask the question of how American that is, and how fair that is, and how complex that is for companies.”


Either way, both sides now acknowledge her influence.

“Everybody is on alert to scrutinize claims that supposedly support Wall Street deregulation bills,” said Dennis Kelleher, president of Better Markets, a nonprofit that advocates for tighter financial regulations. “It is going to be far fewer than Wall Street had hoped. And there is no question that’s because of Elizabeth Warren.”

Jessica Meyers can be reached at jessica.meyers@globe.com. Follow her on Twitter @jessicameyers.