05/05/2011 05:53 pm ET | Updated Jul 05, 2011

Debbie Wasserman Shultz, DNC Chair, Targeted By Dem Group For Wall Street Ties

WASHINGTON -- The escalating lobbying blitz surrounding debit card swipe fees has now pitted a prominent Democratic messaging organization against the newly elected chair of the Democratic National Committee.

New ads launched as part of a million-dollar campaign funded by merchants opposed to high swipe fees criticize Rep. Debbie Wasserman Schultz's (D-Fla.) efforts to delay new rules which would lower such fees. Similar ads target Sen. Jon Tester (D-Mont.) and a host of congressional Republicans.

It is extremely rare for a Beltway-based progressive advocacy group to directly target the DNC chair, the formal head of the Democratic Party. Such infighting exposes a deepening schism between Democrats who hope to pull the party away from Wall Street and the party establishment, which still relies on the financial sector for campaign funds.

Democratic insiders said Wasserman Schultz's ability to raise money was a major factor in her elevation to the role of DNC chair, a post she was officially elected to Wednesday. A prolific fundraiser, Wasserman Schultz counts Wall Street among her most generous donors. Throughout her congressional career, she has raised over $945,756 from the finance, insurance and real estate industries, second only to the $956,800 she has raised from labor unions, according to data from the Center for Responsive Politics. In recent years, FIRE industries accounted for more of the DNC chair's campaign contributions than any other donor category for both the 2008 and 2010 elections.

And such firms have billions at stake in the swipe fee battle. Banks charge retailers swipe fees -- also known as "interchange" fees -- every time a customer pays for something with plastic. Stores pass some of these higher fees on to consumers wherever they can, in the form of higher prices for just about anything money can buy.

Last year's Wall Street reform bill required the Federal Reserve to restrict the amount that banks can charge on debit card swipe fees, but the bank lobby has come out in full force over the past few months in an effort to delay the implementation of the new Fed rule, part of a longer-term strategy to repeal the law outright.

Banks score $16 billion from debit card swipe fees each year, with $8 billion flowing to 10 banks, according to The Nilson Report. Retailers of all sizes are lobbying hard to ensure that the Fed follows through with its rule on time, with Walmart, Target and Home Depot leading the charge.

The Fed's swipe fee crackdown -- which would lower the average debit card fee from 44 cents to 12 cents -- is currently scheduled to go into effect in July. Tester and Sen. Bob Corker (R-Tenn.) are pushing a bill in the Senate that would delay the rules by two years. Wasserman Schultz, along with Rep. Shelley Moore Capito (R-W.Va.), are spearheading a companion bill in the House.

Like many politicians, Tester does not want his swipe fee position to be viewed as a defense of Wall Street banks. "For Senator Tester, this isn’t a matter of right or left, it’s a matter of what’s right and wrong for rural America," Tester spokeswoman Andrea Helling told HuffPost.

Wasserman Schultz, a longtime opponent of swipe fee reform, similarly avoids invoking Wall Street in her opposition to swipe fee reform, arguing instead that caps would harm consumers who use debit cards. “If this amendment stands, our constituents will pay more for basic banking products and credit cards and no longer receive valuable services like fraud and identity theft protection paid for by the current interchange system,” she said.

The new ads defending swipe fee reform, first reported by Politico’s K Street newsletter, started Sunday in Washington on cable and the talk shows and will expand to Congress members' home states. In addition to targeting Wasserman Schultz, Tester, Corker, and Capito, the campaign goes after Sens. Bill Nelson (D-Fla.), Pat Toomey (R-Pa.) and Mike Lee (R-Utah), as well as Reps. Jeb Hensarling (R-Texas), Kenny Marchant (R-Texas.), Blaine Luetkemeyer (R-Mo.) and Ed Royce (R-Calif.).

The spots are being run by American Family Voices, a Democratic public relations firm backed by the merchant lobby that includes retail giant Walmart. AFV’s president is Mike Lux, who co-founded Americans United for Change with Brad Woodhouse, now a top aide to Wasserman Schultz at the DNC. Lux is the secretary and member of the board of directors for AUFC, according to the group’s tax records.

AFV and AUFC share an office and regularly coordinate messaging and work together on projects, but both Lux and AUFC officials say there was no coordination on the swipe fee ad campaign that attacks Wasserman Schultz.

“They’re on the same side as I am on the swipe fee thing. There’s some very indirect connections,” Lux told HuffPost, emphasizing that the the two groups did not directly connect on the ads.

Bob Creamer, a consultant with AUFC, said that he was unaware that Lux’s group was launching the ad campaign, but doesn’t disagree with the position Lux is taking. Creamer and Lux have both written for HuffPost in favor of swipe fee reform.

“I totally agree with that position. I think that position is right and Americans United has been totally in favor” of capping swipe fees, Creamer told HuffPost, adding that the group had “no knowledge” of the AFV ad campaign.

Two other officials at AUFC reached out to HuffPost independently to note that AUFC had nothing to do with the ads against Wasserman Schultz, and a third said AUFC was not involved with the ad campaign. (In 2008, HuffPost shared office space in DC with three other organizations, one of them being AUFC.)

Lux said that he wasn’t sure whether Wasserman Schultz, who wields new power over donors as DNC chair, would retaliate by clamping down on AFV's donors, but he wasn’t concerned. “Who knows?” he said of the prospect. “I don’t tend to get money from establishment Democrats anyway. I get money from populist progressives. I think the bankers gave up on giving money to me some time ago.”

The infighting over swipe fee reform extends to the Republican party. In March, a group linked indirectly to Karl Rove, Americans for Job Security, blasted Republican Sens. Roger Wicker (Miss.), David Vitter (La.) and Capito for opposing swipe fee reform in an ad campaign. A GOP firm founded by Mike Dubke and Dave Carney, AJS operates out of the same office as Crossroads Media, which Dubke and Carney now run (the pair no longer officially head AJS). Crossroads Media was responsible for the campaign's ad buy and includes Rove's American Crossroads, the national GOP and the Republican Governors Association on its client roster.

For his part, Lux maintains that he has no reason to worry about siding with the merchants on the swipe fee issue. “I think that Democrats need to get off the side of the bankers and get on the side of consumers and small business. That’s the bottom line, and I don’t think Wasserman Schultz should be helping them as much as she is. I don’t think Tester should be helping them as much as he is,” he said.

“I think the politics of it are crazy," he added. Why be on the side of the banks when you can be on the side of small business folks, cab drivers, restaurant owners, consumers, hardware-shop guys. Why would you pick the banks over all those folks?”