On Wall Street, Dem shake-up puts party at crossroads

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Harry Reid’s decision to not seek reelection could open another front in the battle for the direction of the Democratic Party, and its complicated relationship with Wall Street.

Sen. Charles Schumer (D-N.Y.) emerged as the immediate favorite to take over as the chamber’s top Democrat, but his rise could further intensify an already heated debate about the party’s approach to the financial sector, one of his home state’s biggest industries.

Led by Sen. Elizabeth Warren (D-Mass.), liberals with a harsh perspective on Wall Street have seen their voice and influence within the Democratic Party grow of late.

The freshman senator’s fierce recriminations of big bankers have attracted plenty of attention on the left and launched her into a spot in Senate leadership, just two years into the job. That message also provided the foundation for a relentless campaign to get her to challenge Hillary Clinton, who many on the left are wary of for ties to the financial sector.

That same groundswell could complicate Schumer’s bid to lead Senate Democrats.

“I don’t know how he’s going to play this, I really don’t,” said one financial lobbyist. “He’s got huge personal and political interest in the financial industry…they’re the biggest employers in his state.”

By Friday afternoon, Schumer appeared to have a significant upper hand in the Senate shakeup. Reid quickly endorsed Schumer for the job, and Sen. Dick Durbin (D-Ill.), his biggest competition, reportedly also plans to back the New Yorker for the top spot.

But while Reid tried to lay the groundwork for Schumer to take over, Warren was jumping into a fresh fight with the biggest banks in New York. Following a Reuters report that some banks were considering freezing donations to Democrats out of anger towards Warren, she accused the industry of “swagger and threats.”

“The biggest banks on Wall Street have made it clear that they expect a return on their investment in Washington,” she said in a fundraising pitch to backers.

The financial sector is Schumer’s biggest donor base, having raised $3.8 million from the securities industry since 2009, according to the Center for Responsive Politics. During the 2014 election cycle, when Schumer was not up for reelection, he raised enough to fall 12th among lawmakers for donations from the sector.
The deep-pocketed industry, and Schumer’s contacts there, could be a critical asset ahead of 2016, as Senate Democrats will be eager to raise funds and, eyeing a favorable map, try to win back the Senate.

With an eye towards a leadership move, he passed on taking the top Democratic spot on the Senate Banking Committee following the 2014 retirement of Sen. Tim Johnson (D-S.D.). That role fell to Sen. Sherrod Brown (D-Ohio), another big bank critic.

The liberal group CREDO Action announced Friday they would oppose “Wall Street Chuck” for Democratic leader, but those in the industry view him as someone willing to listen, far from a lockstep ally.

“He’s worked with our industry for many years. He understands our industry,” said Francis Creighton, executive vice president of government affairs at the Financial Services Roundtable. “But when he’s an opponent, he’s a very effective opponent.”

Schumer voted in favor of the Dodd-Frank financial reform law, and the industry harbors little belief that placing him at the top of the Senate would usher in a new era of open Democratic arms towards Wall Street. But with Warren using every opportunity to flay finance titans, there are some who believe Schumer could temper that message.

“He’s not going to rewrite Dodd-Frank, but I think the messaging would change,” said the lobbyist. “That would be the small victory.”

On his retirement, Reid was given favorable treatment by both sides of the Wall Street debate. Industry advocates say that Reid was willing to hear their case, if not intensely focused on policy matters he left to the relevant committees.

“He wasn’t one of the people who was trying to attack us. He was always willing to listen,” said Creighton. “When they write the history of the Senate, they’re going to remember Harry Reid as one of the strongest Senate Majority Leaders ever.”

At the same time, pro-reform stalwarts credit his leadership with helping steer Dodd-Frank towards passage, and keeping it intact after Republicans took the House in 2010.

When the GOP took control of the House, they advanced dozens of measures that would trim, alter, or outright repeal portions of the landmark financial reform law.

But under Johnson, who retired in 2014, and Reid, none of those bills gained an inch in the Senate.

“Let’s not forget how important Senate leadership was in getting the Dodd-Frank bill done,” said Dennis Kelleher, president and CEO of Better Markets. “Senate Democrats, with Sen. Reid’s leadership, have been essential to protecting financial reform and reining in Wall Street.”

“I would hope whoever the next Senate Democratic Leader is shares Sen. Reid’s healthy skepticism of Wall Street and its unhealthy influence in our political process,” he added.


Tags Charles Schumer Dick Durbin Elizabeth Warren Harry Reid Hillary Clinton Sherrod Brown Tim Johnson

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