Spurning left, centrist Dems tout bank law for midterms

Three vulnerable Senate Democrats hailing from states President Trump won in the 2016 election are touting their work on a new bipartisan banking law, portraying it as proof of their independence in Washington.

Democratic Sens. Heidi Heitkamp (N.D.), Jon Tester (Mont.) and Joe Donnelly (Ind.) co-authored the bipartisan legislation, signed by Trump on Thursday, that eases the regulatory oversight imposed on banks and credit unions by the Dodd-Frank Act.

The senators say their bill is a prime example of their ability to work across party lines and solve problems, a message they are eager to bring back to voters in their home states.

“One-size-fits-all rules from Washington have been strangling Montana’s Main Street economy and threatening our rural way of life,” Tester said after the House passed the bill on Tuesday, sending it to Trump.

“When the extremes on both sides of the aisle tried to derail our efforts, we bucked partisan politics and instead found common ground,” he said. 

Yet whether the law will turn into electoral gold remains to be seen. 

The banking industry remains deeply unpopular, and liberal activists have assailed the new law as a giveaway to the financial industry.

“There’s nobody that is going to be motivated to support someone because they’re proving their bipartisanship by giving banks what they want,” said a former Democratic strategist now leading a liberal nonprofit. 

Trump made slashing Obama regulations a pillar of his 2016 campaign, and he pledged to “dismantle” Dodd-Frank shortly after his election. He hailed the new law as delivering on that promise.

“This is truly a great day for Americans, and a great day for workers and small businesses across the nation,” Trump said at the Thursday signing. 

Heitkamp, Tester and Donnelly were key forces behind the successful loosening of the Dodd-Frank rules. The trio, along with Sen. Mark Warner (Va.), anchored the Democratic side of the negotiations. 

The moderate Democrats were concerned with Dodd-Frank’s impact on community banks and credit unions, arguing that financial institutions that pose no risk to the broader economy are suffering under regulatory requirements that should only apply to industry giants. 

The GOP’s narrow Senate majority meant Republicans needed Democratic help to overcome a filibuster from liberal colleagues, giving moderates leverage in the talks.

The resulting bill, released in November, keeps most of Dodd-Frank intact. But the compromise gave banks with up to $250 billion in assets major regulatory relief, enraging liberals such as Sen. Elizabeth Warren (D-Mass.), who warned of the potential for another financial crisis. 

The Democratic authors of the bill conceded that it went further than they would have preferred in rolling back regulations, but said the benefit for community banks and credit unions would outweigh the costs.

Heitkamp, Tester and Donnelly have also dismissed suggestions that they pushed to loosen the banking rules to protect their right flank in the midterm elections. While Heitkamp has avoided Trump’s wrath so far, the president has held rallies in Tester and Donnelly’s states in support of their Republican opponents.

“This election has nothing to do with this,” Tester said during a March press conference on the bill. “This has everything to do with access to capital and making sure rural America remains strong moving forward. If this bill didn’t do that, I wouldn’t support it.” 

While praise from Trump is toxic for Democrats in liberal strongholds, it could provide a boost to moderates from states where Trump is popular.

Trump and his team nodded to the potential boost the bill could give the Democratic incumbents. The president praised “great Democrats” behind the bill Tester, Donnelly and Heitkamp put on his desk, but only named and invited Heitkamp to the signing ceremony. 

“This law is an example of what we can achieve when we work together and break through gridlock,” Donnelly said after the signing ceremony.

It remains to be seen whether scaling back rules on banks will help the Democratic candidates win Republican votes, but polling indicates it could work.

Close to 70 percent of Republicans polled by Gallup in November said there is too much federal regulation of businesses, compared to 20 percent of Democrats.

A July study from Pew also showed a 13-point gap in the share of Republicans (46 percent) and Democrats (33 percent) who said banks and financial institutions have a positive impact on the U.S.

The American Bankers Association (ABA), a top U.S. bank lobbying group, has sought to aid Democrats who’ve supported efforts to roll back Dodd-Frank. The group spent $100,000 on TV ads in Montana featuring bankers praising Tester for his work on loosening bank rules. 

“The release of these positive television ads represents another step in ABA’s advocacy for our members,” said ABA press secretary Ian McKendry. “We will be supporting candidates in both parties who have advocated for policies that will help banks better serve their customers and communities.”

But other campaign veterans doubt that the senators’ support for the law will be a difference-maker in November.

Stuart Roy, a GOP strategist and former aide to Senate Majority Leader Mitch McConnell (R-Ky.), said “endangered Democrats will find this vote as helpful as a parachute that opens after the second bounce.”

“Voters barely remember big legislation,” Roy said, calling the bill “not even a fraction” of the importance of the main issues driving voters to the polls. 

Roy also said Democrats could risk suppressing their base by touting efforts to scrap regulations. 

A February poll commissioned by Americans for Financial Reform, a nonprofit supporting tough bank laws, found that only 17 percent of voters support loosening regulations on the biggest firms impacted by the bipartisan bill. 

The survey, conducted by left-leaning Public Policy Polling, also found that 59 percent of voters support Dodd-Frank, and only 25 percent believe it went too far in regulating banks.

The former Democratic strategist said Democratic support for the Dodd-Frank bill is mainly useful as a way to keep financial sector super PACs and bank lobbyists from supporting their Republican opponents. 

“It allows them to try to keep industry from donating to their opponent,” the strategist said. “But in terms of winning voters, it’s a losing issue for everybody.”