The Levee Breaks: Democrats Rage Against Obama Over Wall Street Giveaway

12/12/2014 07:12 pm ET | Updated Dec 15, 2014
ASSOCIATED PRESS

WASHINGTON -- Less than a month after Sen. Elizabeth Warren (D-Mass.) landed a new Senate leadership position, Senate Majority Leader Harry Reid (D-Nev.), Sen. Chuck Schumer (D-N.Y.) and President Barack Obama risked a fight with her over government subsidies for risky Wall Street derivatives trading.

They won the near-term policy fight: After a bruising bicameral battle, the House of Representatives narrowly approved an annual spending bill that granted taxpayer support for the risky financial contracts at the heart of the 2008 meltdown.

But the bitter feud left Reid and Obama politically embarrassed, while consolidating a burgeoning populist movement within the Democratic Party that highlighted Warren's influence in wings of the Capitol far removed from her perch on the Senate Banking Committee. It also forced Obama and a host of Democratic leaders into the crosshairs of a critique Warren typically levels at Republicans: that powerful people in Washington are rigging the system to help Wall Street at the expense of the middle class.

Hours after declaring White House support for the package, Obama was forced to send Chief of Staff Denis McDonough to the Hill to round up votes -- a public admission that the president's party wasn't taking marching orders from him. By the end of the night, Obama, House Speaker John Boehner (R-Ohio), and Jamie Dimon, the CEO of the nation's largest bank, JPMorgan Chase, were all whipping members to support the package -- a tremendously damaging scenario for Obama's stature with the Democratic electoral base. House Minority Leader Nancy Pelosi (D-Calif.) and her allies, meanwhile, played the role of underdog, digging in for a Tim Howard-esque performance that emboldened progressives, even in defeat.

"I'm proud that I voted no," Rep. Keith Ellison (D-Minn.), co-chair of the Congressional Progressive Caucus, told HuffPost. "The fight was clearly good for morale."

Democrats were unhappy with several aspects of the funding bill. The legislation cuts Pell Grant funding for low-income college students, legalizes benefit cuts for pensioners who used to work for the government, attempts to curb access to abortion, and defunds the legalization of marijuana in the District of Columbia.

Those are all familiar issues for political junkies. And as with most political issues, you probably could predict how a card-carrying Democrat almost anywhere in the country would feel about them.

But House Democrats didn't fight on the obvious stuff. They made their stand on a complex Wall Street regulation that most of the Beltway political media had never heard of before Warren started holding press conferences on Tuesday.

And the same week, a host of Senate Democrats voiced their opposition to Obama Treasury nominee Antonio Weiss -- a Wall Street merger expert who helped orchestrate the Burger King deal with Canadian restaurant chain Tim Horton's that would help Burger King duck U.S. taxes. Warren has been campaigning against the Weiss nomination, arguing that elite financiers already exercise too much influence over the administration's economic policy decisions.

The banking slugfest isn't a run-of-the-mill policy dispute for Democrats. The central policy struggle within the Democratic Party over the last four years has been about its relationship with Wall Street. President Bill Clinton made nice with the financial industry by slashing capital gains taxes, shattering the Glass-Steagall separation between traditional lending and risky securities trading and, of course, deregulating derivatives. And for years, the party was happy to take Wall Street campaign cash and use it to implement other policy priorities.

The financial crisis of 2008 changed all of that (it also created the tea party and empowered the GOP's anti-crony capitalist movement). The wreckage the Great Recession inflicted on American families -- particularly Democratic constituencies like the young, the poor and people of color -- forced many to question the price of their faustian bargain.

Obama's generally Wall Street-friendly economic team and the necessities of campaign finance politics in the Citizens United era obscured the unrest for a long time. Well into 2014, a common tactic for otherwise hardline progressives was to go easy on big banks. As HuffPost reported this summer in a joint project with The New Republic, even left-wing stalwarts like Rep. Gwen Moore (D-Wis.) were routinely partnering with big banks to roll back parts of the 2010 Dodd-Frank financial reform law.

Those days appear to be gone. Moore was whipping "no" votes with Rep. Maxine Waters (D-Calif.) late into Thursday evening in an impromptu war room Waters set up in her own office. Leading members of both the Congressional Black Caucus and the Congressional Progressive Caucus crammed for space, making calls and counting votes.

"We agreed with the Leader and Rep. Waters," said Moore spokesman Eric Harris. "We had a very large presence in a very crowded room."

Both Harris and Ellison cited broad discontent with the bill. But Ellison emphasized that many members might have signed off on GOP cuts to Democratic programs if they were better than what his caucus could expect next year under a Republican-controlled Senate and a broader House GOP majority. But they weren't willing to subsidize Wall Street in the same package.

"The last election, the problem is that voters believe we're all in on this cabal together, and nobody's thinking about their families," Ellison said. "The minimum wage is winning all over the country at state and municipal levels but Democrats still got shellacked in the midterms. People have separated Dems from the minimum wage. [Members of Congress] won't let [themselves] be painted in a way that is pro-Wall Street and anti-middle class."

Warren's influence over the fight obscures her office's initial fumbling of the issue. After HuffPost first reported last week that the swaps issue was taking a central role in talks, Sens. Sherrod Brown (D-Ohio) and Carl Levin (D-Mich.) organized a letter to Reid and Boehner objecting to the provision, and Sens. Jeff Merkley (D-Ore.) and Tom Harkin (D-Iowa) signed on. Noticeably absent: Warren, Brown's Banking Committee colleague.

The swaps provision was still included in the package by Tuesday, and when Warren jumped into the fray, progressive bedlam broke out within the House caucus.

"The two people who led us most clearly were two great women, Maxine Waters and Sen. Elizabeth Warren," Ellison said. "They had a lot of support."

Pelosi gave Waters political cover by decrying the White House position on the House floor -- she called it Wall Street "blackmail" -- but the main whip effort was actually a Waters operation, with help from Warren. Pelosi did not formally demand that her caucus vote against the spending package, opting instead for the softer organizational route of publicly trashing Obama and the bill while allowing her colleagues to vote as they chose.

They almost pulled off an upset, but Waters said the joint efforts of Obama and Dimon peeled off enough of her supporters to pass the bill.

"I think we got hurt when Jamie Dimon and the president started to whip," Waters told reporters Thursday night, according to The Hill. "That's when I think we lost some votes."

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