Dem unity shatters with debate on banks

The Senate Democratic Conference is splitting apart in an angry debate over a banking reform bill that has ended months of party unity in opposition to President Trump’s agenda.

Sen. Elizabeth Warren (D-Mass.), the Senate’s most vocal Wall Street watchdog, is taking a hard line against the bill and drawing complaints from moderate Democratic colleagues who support the bill and worry she’s putting them in a tough political position.

{mosads}It’s the first time this Congress that Senate Majority Leader Mitch McConnell (R-Ky.) has had any real success dividing Democrats on  major legislation after he failed to pick up any bipartisan support for health-care and tax-cut bills in 2017.

With the midterm elections rapidly approaching and Senate Democrats up for reelection in 10 states Trump carried in 2016, cracks in party unity are starting to show. But the banking issue is not attracting the headlines that the health care and tax debates generated and it remains to be seen how much of an election-year issue it will be.

Democratic sources say that Senate Minority Leader Charles Schumer (D-N.Y.) is staying out of the fracas, wanting to avoid the ire of either side. One Democratic aide said Schumer is staying “generally quiet” during some of the arguments that have taken place in meetings.

“He’s trying to herd cats,” said the source. “There’s a divide in the caucus and I think Schumer hates seeing that stuff.”

Sen. Claire McCaskill (D-Mo.), who is running for reelection in a state that Trump won by 19 points, expressed during a lunch meeting last week her frustration at liberals for attacking fellow Democrats on the banking bill.

Other centrist Democrats in tough races were irate that Warren called them out in a fundraising email last week that criticized them for supporting what she called the “Bank Lobbyist Act” and highlighted votes in favor of proceeding to the bill.

“It could have political significance because it reveals the divide between progressives and centrists within the Democratic Party, and that’s something that’s a looming gap for Democrats and is likely to pop up in the next presidential campaign,” said Darrell West, director of governance studies at the Brookings Institution. 

Warren has drummed up attention to a bill that might otherwise be overlooked as the media has focused more on Trump’s diplomatic overtures to North Korean leader Kim Jong Un and other stories. 

She warned on the Senate floor Thursday that colleagues risk making the same mistake Congress committed in 1999 when it repealed the Glass-Steagall Act and the firewall it kept in place between different financial institutions.

“This bill isn’t about the unfinished business of the last financial crisis. This bill is about laying the groundwork for the next one. So I will make a prediction: This bill will pass. And, if the banks kept their way, in the next 10 years or so, there will be another financial crisis,” she said.

Warren’s opposition has helped motivate liberal activist groups such as Democracy for America, which is targeting centrist Democrats with phone calls this week.

“We’re supporting Elizabeth Warren and her fight by having our members make phone calls, thousands of calls in the last week pressuring senators,” said Charles Chamberlain, executive director of Democracy for America.

He said voting for the bill will hurt Democratic incumbents running for reelection even in pro-Trump states.

“It really calls into question whether or not the Democratic Party is really interested in fighting against Wall Street or not. Clearly Elizabeth Warren is. She gets it,” he said.

“There’s no way that any vote in a red state or a blue state that supports Wall Street like this is a benefit at the polls,” he added. “When you have a [Democratic Sen.] Jon Tester in Montana that votes in the wrong way on an issue like this, he’s hurting his chances for reelection, he’s not helping.”

After months of failing to pick off Democratic support for major bills, Republicans are cheering some of the infighting across the aisle.

GOP strategists say Warren’s staunch opposition reflects how out of touch the Democrats’ liberal base populating the East and West coasts of the United States have become from Middle America.

“It underscores the ongoing challenge that Democrats have. Their base, by and large, has a very difficult time grappling with life anywhere other than the coasts,” said Josh Holmes, a GOP strategist and former chief of staff to McConnell.

Holmes, like the bill’s other supporters, claims that the legislation will provide needed relief to community lenders and argues that Warren is putting her centrist colleagues in a tough spot by portraying it as a giveaway to Wall Street. He said there is a range of issues that Republican leaders can use to highlight other differences within the Democratic confernence, citing immigration and gun control as other examples.

“The split exists on a whole range of issues that they have been able to mask thus far just simply out of opposition to President Trump,” Holmes added.

The banking bill, or the Economic Growth, Regulatory Relief and Consumer Protection Act, as it is formally known, differs from last year’s ObamaCare repeal and the tax-cut bill in key ways.

Unlike the GOP health-care and tax-reform efforts of 2017, which were partisan from the start and largely drafted behind closed doors, the banking measure was negotiated with Democrats from its inception and had nine Democrats as original co-sponsors.

Democrats also say that there is broad support within their caucus for giving community banks some regulatory relief, but that many of their members aren’t willing to also swallow additional provisions giving regulatory relief to banks with up to $250 billion in assets.

Liberal activists and allied groups that favor stricter regulation of Wall Street argue that the bill is far more than targeted relief for community banks.

They say it is a broad deregulation of the nation’s biggest banks that will put the country at greater risk of a financial collapse and wipe out important consumer protections.

Robert Borosage, co-founder of Campaign for America’s Future, a liberal advocacy group, said this week’s vote on the banking bill is a “very significant thing, both symbolically and in substance.” He said that 80 percent of the nation’s banks will have reduced regulatory supervision and that banks will no longer be required to keep detailed data on lending practices to minority groups.

“We know we have continued problems with racially inequitable loan practices and we ought to be enforcing that measure and not backing away from it,” he said. “Sen. Warren is exactly right to call out her colleagues on the Democratic side.”

“Democrats made a mistake under Obama by not doing more to put bankers in jail and holding people accountable for what happened in the financial crisis,” he added.

The strains within the Democratic conference first became evident in January during a three-day government shutdown, when several Senate Democrats privately questioned the aggressive tactics used to force action on an immigration bill to protect an estimated 800,000 young immigrants from deportation.

Fifteen Democrats and Sen. Bernie Sanders (Vt.), an Independent who caucuses with them, voted against reopening the government after critics such as Sen. Kamala Harris (D-Calif.) said that a pledge by McConnell to debate immigration “fell far short” of what she needed to support the bill.

Sanders, Harris and Warren are viewed as top 2020 presidential candidates.

“As these issues come to the floor, particularly this year in an election year, I think you’ll see more and more Democratic breaks from their leadership,” Holmes, the GOP strategist, said.

He predicted that Democratic unity will be tested again if there is a debate on gun control later this year, noting that several senators are running for reelection in pro-Trump states with strong traditions of gun ownership, such as Montana, North Dakota, Missouri, Indiana and West Virginia. Holmes said legislation restricting certain abortion practices could also come to the floor closer to Election Day, presenting tough votes for embattled Democratic centrists.