From Katie Porter to Colin Allred, candidates who ran hard on taking on Wall Street found many victories in the 2018 midterms — and vulnerable red-state Democrats who tried to prove their bipartisanship through deregulation lost big. But even before running on the left flank of financial policy proved itself electorally, the progressive wing of the Democratic Party had already, without much fanfare, won a longtime intra-party fight. When it comes to financial policy, the members of the Democratic Party vying for the 2020 presidential nomination are closer to Alexandria Ocasio-Cortez than they are to Senator Chuck Schumer.
In February 2018, long before anyone in the national media had Ocasio-Cortez on their radar, she was forcefully speaking out against a bill formally named the “Economic Growth, Regulatory Relief, and Consumer Protection Act” (S. 2155) but dubbed the “Bank Lobbyist Act” by consumer advocates. This legislation, signed into law in May, rolls back the automatic monitoring by the regulators for financial institutions with more than $50 billion in assets — raising the bar for this automatic scrutiny to a staggering quarter of a trillion ($250 billion). It also functionally exempted 85 percent of US banks and credit unions from fair lending laws in the mortgage market. Minority Leader Schumer voted against the bill but he did not whip the caucus against it — an implicit endorsement of the deregulatory policy. In the end, 16 Democratic Senators voted with the GOP to carve a giant chunk out of the Dodd-Frank Act.
The bipartisan push for S. 2155 came in the immediate wake of the Trump tax giveaway, of which the banks were a major recipient: JPMorgan Chase & Company estimated they’d pay at least $7 billion less in taxes in 2018 as a result. The vote on the Bank Lobbyist Act also happened in the immediate wake of the Parkland shooting, and a huge number of the banks who benefit from the bill also finance assault weapons manufacturers. One of the bill’s defenders, Senator Mark Warner (D-Virginia), tried to defend the bill’s timing by saying, “We’ve been working on this legislation for four years, long before this president came into power.”
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Democrats joining Republicans to deregulate Wall Street is nothing new. It happened in the Obama administration, too — in some cases, with Obama’s support. But what’s different about this cynical, bipartisan rollback is that every single serious 2020 Democratic presidential contender voted against it. Many assumed the bill’s opposition would be limited to Senators Warren and Sanders, joined only by Democratic primary challengers like Ocasio-Cortez and Kerri Harris, who challenged Senator Tom Carper in the Democratic primary in Delaware. But this bill was opposed by Senators Kamala Harris (D-California), Amy Klobuchar (D-Minnesota), Cory Booker (D-New Jersey), Kirsten Gillibrand (D-New York), Chris Murphy (D-Connecticut), Sherrod Brown (D-Ohio) and Jeff Merkley (D-Oregon) — all likely 2020 contenders.
But it’s not just the roll call on S. 2155 that shows how seriously the Democratic presidential aspirants are taking financial policy and Wall Street accountability. The 2020 contenders are also working to produce or co-sign legislation that publicly distinguishes them as serious about economic justice.
Senators Elizabeth Warren and Bernie Sanders have long championed meaningful policy to reduce the power of Wall Street. Both senators have tried to outdo themselves this year with new legislation to restructure the financial system. Warren’s Accountable Capitalism Act would give both shareholders and workers more power over how corporations are managed, including a requirement that workers elect 40 percent of the membership of their company’s board of directors. Warren has long pushed for a 21st-century version of Glass-Steagall, separating casino-like investment banking activities from boring commercial banking. And Sanders’s Too Big to Fail, Too Big to Exist bill would place a hard size limit on financial firms, ensuring their exposure was no more than 3 percent of GDP ($619 billion at the time of this writing).
But more indicative of the shifting winds are the senators whose names you wouldn’t normally expect to see on legislation seeking to strip financial firms of some of their power. Arguably, the most dramatic move is Senator Kirsten Gillibrand’s backing of a bill to place a tiny tax on most Wall Street transactions. A financial transaction tax is the third rail of financial reform legislation, the hill that Wall Street banks will die on to prevent. The support by a New York Senator — and one that is a top 20 recipient of Wall Street dollars — for Sanders’s Inclusive Prosperity Act of 2017 is a real indication of the way Gillibrand is seeking to delineate herself from both Schumer, and the rest of the Presidential contenders, putting herself squarely in the Warren/Sanders camp. Senator Gillibrand also introduced a bill to bring basic banking to Post Offices — an idea long-supported by reformers like Warren and Sanders, and which the Post Office could implement without legislation. But Gillibrand’s focus on lowering barriers for the unbanked, and also introducing some competition in basic banking services, is another example of her willingness to buck the financial titans that loom so large in her home state, and is a signal we should all welcome.
Another surprising entrant into advocacy for financial reform is Senator Cory Booker. Booker has historically been a Wall Street defender, including one very public defense of Mitt Romney and private equity firms back in 2012. But this year, Booker joined with Senator Sherrod Brown on The Stop Overdraft Profiteering Act, a bill that would ban overdraft fees on debit cards and ATM withdrawal, fees that disproportionately affect the poor. Booker also teamed up with Senator Bob Casey (D-Pennsylvania) in a bill (The Worker Dividend Act) aimed at ensuring that when companies enrich their shareholders by paying out some of their profits in dividends, that workers also benefit. The bill would require companies to pay out a sum to its workers equivalent to the money it is paying out to its shareholders, or half of all profits above $250 million, whichever is less. Booker’s shift toward bills that combat financial predation and strive for more corporate accountability show the shift in his thinking since 2012.
Kamala Harris is another senator who’s seen criticism from the left in the past, facing heat over her failure, as California Attorney General, to pursue misconduct by now-Treasury Secretary Steven Mnuchin for violations by Mnuchin’s bank. Harris seems to be responding directly to that criticism with her co-sponsorship of The Accountability for Wall Street Executives Act, a bill that will allow state attorneys general to subpoena federally-chartered banks and interview their executives, something a 2009 Supreme Court decision currently prevents them from doing.
Some might wonder if this is just political posturing. But real pressure from constituents and a rising left outside the party has clearly forced them to take tacking left on economics seriously. If Democrats retake power in 2020, it’s not going to be enough to reinstate the pieces of Dodd-Frank that have been ripped up, or to refuse to bail out the banks after the Trump deregulatory bonanza leads us to another crisis. They’re going to need to assemble a new package of ideas to meaningfully reform the economic system. The fact that the 2020ers are assembling not just rhetoric, but legislation, with ideas of how to do just that, is a sign that they take that challenge seriously.