Warren’s Relish for Combat Over Compromise Faces Sternest Test

(Bloomberg) -- Bashing Wall Street propelled Elizabeth Warren to the Senate, where she has continued to battle bankers, administration officials, Republicans and at times, fellow Democrats.

Yet while her zeal for combat over compromise has made Warren a hero to progressives and raised her profile as a 2020 presidential contender, it hasn’t yielded substantial legislative wins -- suggesting it could be difficult for her as president to deliver on her big proposals that need bipartisan support.

Since she was first sworn in as a senator from Massachusetts in 2013, she has had a significant impact on shaping policy toward Wall Street; for example, setting a test for regulatory agency nominees that they must back a requirement for companies to disclose political donations. Yet that often meant blocking legislation and taking on members of her party, including President Barack Obama, over appointments she said weren’t ideologically sound.

And she frequently lost, something that never really mattered according to people who know her.

“Warren came to Washington to be an outside voice critiquing Washington and Wall Street. That is how she viewed her position in the Senate,” said Isaac Boltansky, who worked for Warren before she was elected and is now a financial policy analyst at Compass Point Research & Trading. “There were bills that she introduced that she never intended to become law, they were meant to challenge the presumption of the status quo.”

Warren is seeking the Democratic nomination for the presidency promising to enact “big structural change”: Government-run health care, free college tuition, universal child care, the Green New Deal and more, all paid for with steep new taxes on the wealthy and corporations. Congress would have to pass all of it. And Warren would have to earn the support of skeptical Democrats, let alone Republicans who will likely still control the Senate.

Warren says that a White House victory would be statement enough to Congress that America wants to see her policies enacted. She’s also vowed to end Congress’s use of the filibuster rules that require three-fifths of the Senate to support the end of debate.

“When I win, I will turn around to all my Democratic colleagues and say this is what I ran on,” she told reporters in Iowa in November. “It’s there and that’s what the majority of the people in the United States of America said they wanted.”

In a speech delivered in New Hampshire Thursday, Warren said she has no illusions of bipartisan unity.

"Unlike some candidates for the Democratic nomination, I’m not counting on Republican politicians having an epiphany and suddenly supporting the kinds of tax increases on the rich or big business accountability they have opposed under Democratic presidents for a generation," she said.

"I’m not betting my agenda on the naïve hope that if Democrats adopt Republican critiques of progressive policies or make vague calls for unity that somehow the wealth and well-connected will stand down," she added, pledging to build a "grass-roots movement" to produce a new economy.

Before she came to Congress, she chalked up some significant wins at a time when people in the financial industry said she was far less confrontational.

As an expert appointed to a congressional panel set up in the wake of the 2008 financial crisis, she played a key role in crafting the 2010 Dodd-Frank Act, and she is credited with creating the Consumer Financial Protection Bureau, an agency established by the new law to protect people from predatory lending and other abuses.

But while she wanted to run the agency, Obama didn’t nominate her.

Warren had a reputation as an academic who was willing to work with those who disagreed with her. Observers say that changed once she entered politics.

“She turned a different color when she was elected to the Senate,” said Richard Hunt, president of the Consumer Bankers Association, whose members include the biggest American banks. “Before, she would meet with us regularly. I believe we had an admiration and respect for each other even though we disagreed. Not anymore. She is dug in and not changing her mind.”

Campaign spokeswoman Saloni Sharma pointed to her success in fomenting such public anger at two Wells Fargo & Co executives that they were fired. She said a bill Warren sponsored with Republican Senator Chuck Grassley of Iowa to make it easier to buy over-the-counter hearing aids was an example of a significant bipartisan legislation. Sharma said Warren also changed the conversation on Social Security and the student loan crisis.

‘Wall Street Is Scared’

“Billionaires are upset and Wall Street is scared of her because they know she will be effective at making them pay their fair share and at holding them accountable,” Sharma said.

But Warren’s effectiveness would depend on compromise.

“Senator Warren’s high-profile plans will not move forward absent significant compromise,” said Jason Grumet, president of the Bipartisan Policy Center. “The senator has demonstrated the capacity to engage in the kind of legislative process on a lot of issues that are below the fold, but has not yet demonstrated the ability to create the kind of coalition necessary to pass significant structural changes like many of the ideas driving her campaign.

“Whether she can or not is uncertain,” he added. “The absolutism in Senator Warren’s campaign will not be effective in a divided Congress.”

“There’s a big difference between a hearing-aid bill and Medicare for All,” said Elaine Kamarck, senior fellow at the non-partisan Brookings Institution. “Members of Congress are not going to get on board easily.”

The Senate Banking Committee proved to be an ideal perch for her fights.

Her confrontations with people like Wells Fargo’s John Stumpf over the bank’s opening of millions of bogus customer accounts became instant sensations. Stumpf was later ousted. His successor, Tim Sloan, who also went head-to-head with Warren, eventually stepped down as well.

Warren would follow her attacks from the dais with letters to the companies and their regulators, calling for additional changes and the executives’ heads. She pressed the Federal Reserve to replace Wells Fargo’s board members, she called for multiple agencies to strengthen their rules and repeatedly called on the company to answer more questions about the scandal.

Wins and Losses

She also stymied bipartisan attempts to change the structure of the CFPB, according to congressional staffers and lobbyists. And she had sway with financial regulators on matters about implementing the 2010 law.

But she lost a string of fights when she started to block fellow Democrats from making any changes to Dodd-Frank, which created sweeping regulations aimed at preventing another financial crisis.

In late 2014, Democrats who controlled the Senate wanted to ease Dodd-Frank rules over trading derivatives for big banks like JPMorgan Chase & Co. and Citigroup Inc. Warren opposed the change. The provision was part of a year-end spending bill and her stance at one point threatened to shut down the government.

“Mr. President, I’m back on the floor to talk about a dangerous provision that was slipped into a must-pass spending bill at the last minute to benefit Wall Street,” she said on the Senate floor.

Congress passed the spending bill with the provision Warren opposed.

She opposed efforts by a bipartisan group of lawmakers who wanted to relieve small and regional banks from Dodd-Frank’s strictest rules in 2018. On the Senate floor, she railed against more than a dozen moderate Democrats, including several facing tough re-elections in Republican-leaning states. She called them out personally in emails, and nicknamed the bill “The Bank Lobbyist Act.”

Riling Democrats

Some Democrats argued Warren was wrong about whom the bill targeted.

In an unusual intraparty public dispute, Senator Heidi Heitkamp of North Dakota argued that “a lot of the things that have been said about this bill have been reckless. This is not a giveaway to Wall Street.”

The legislation passed and was signed into law by President Trump in May 2018.

Warren also opposed Democratic nominees for financial regulation jobs, often clashing with the Obama administration. It was a big part of her strategy that “personnel is policy.”

In 2014, she lashed out against Antonio Weiss, Obama’s pick for Treasury undersecretary for domestic finance. She argued Weiss’ work at Lazard Ltd, a financial advisory firm, made him too cozy with Wall Street to police the industry effectively. Tapping into her base of progressive grassroots supporters, she created so much noise that Weiss asked Obama to remove him from consideration.

An End Run

But the Obama administration found a way around her. Treasury Secretary Jack Lew tapped Weiss to be a special adviser at Treasury, a job that didn’t require Senate confirmation.

“Weiss was able to do much of what he would have done as undersecretary,” said Capital Alpha financial regulation analyst Ian Katz. “In terms of policy making, it didn’t make a big difference.”

In 2016, Warren took on Mary Jo White, Obama’s choice to run the U.S. Securities and Exchange Commission, for refusing to require companies to disclose their political contributions in financial statements that are scrutinized by investors.

White refused, saying she didn’t have the legal authority to do so. Warren publicly scolded her in hearings, and followed with equally scathing letters telling her that “your leadership of the commission has been extremely disappointing.” Escalating the clash, Warren demanded that Obama demote White.

“The only way to return the SEC to its intended purpose is to change its leadership,” she wrote the White House in October 2016.

Obama didn’t remove White, and the SEC has yet to take up the issue of corporate political spending disclosures.

Yet it had an impact. The issue of corporate political disclosures has become a test for any Democrat seeking a Senate-confirmed job at the SEC. Lisa Fairfax, a securities lawyer chosen for an SEC commission vacancy in 2016, never got a vote after she stumbled answering questions on the topic.

Warren also had significant sway in shaping financial regulation outside the legislative process, and regulators adopted many issues she raised. As president, she could continue to shape policy with appointments. But that would fall far short of adopting the “big, structural change” she promises in the campaign.

Warren uses her political skills to bolster Democrats who agree with her and has openly criticized Democratic candidates who disagreed with her. She has used her presidential campaign resources to help fellow Democrats, hiring organizers in states that hold key gubernatorial and state legislature races.

Many voters say they’re looking for a candidate who will begin to unify the Democratic Party. As her poll numbers have slipped, Warren has begun to signal a willingness to compromise, at least for the time being.

“Look, I will sign anything that helps and I’ll keep fighting for more ways to help because I think that’s the right way to do it,” Warren said.

(Michael Bloomberg is also seeking the Democratic presidential nomination. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)

©2019 Bloomberg L.P.

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