Six and a half years after the near-meltdown of the U.S. financial system, Wall Street is once again having a pretty good go of it. The Dow Jones Industrial Average has surged, industry profits are hitting near-record levels, and pliant lawmakers have chipped away at the 2010 Dodd-Frank banking reform law. After investing heavily in Republican candidates last year, Wall Street watched the GOP complete its takeover of Congress, further diminishing prospects for robust oversight and reform. But a specter nonetheless haunts the Street -- the specter of Sen. Elizabeth Warren (D-MA), the progressive whose crusades against swashbuckling bankers and the politicians and regulators in their pockets captivate the Democratic Party's base and may yet transform the national political debate.
Despite waging a valiant fight against a provision in last year's government spending bill rolling back a rule on banks' trading in risky financial instruments, Warren was unable to prevent the measure's passage -- financial deregulation and all. Yet Warren, who took to the Senate floor to passionately denounce Wall Street's political influence and call for big financial institutions to be broken up, emerged from the fight as the undisputed congressional leader of the Democrats' progressive wing. That status was cemented earlier this month when investment banker Antonio Weiss, facing a Warren-led rebellion, withdrew his nomination to a senior Treasury Department post.
In addition to voicing concern about the overrepresentation of Wall Street veterans in government positions, Warren also highlighted Weiss' advisory work on Burger King's merger with Canadian chain Tim Hortons -- a tax inversion deal that allowed Burger King to lower its U.S. tax bill. The freshman senator also noted that the Lazard banker's professional background was in international finance, making him an odd fit for the domestic finance post to which President Obama nominated him. Warren sank the nomination by relying not just on fellow progressives, but also on center-right Sen. Joe Manchin (D-WV) and centrist Sen. Jeanne Shaheen (D-NH), whose opposition to Weiss indicated that Warren's concerns spanned the political spectrum.
Backing Weiss became so politically risky for Democrats that even Sen. Kirsten Gillibrand (D-NY), one of Wall Street's home-state senators and a former corporate lawyer, deferred to Warren when the nomination was still active. “I think Senator Warren’s very clear,” Gillibrand said on MSNBC's "Morning Joe," when asked about the mounting anti-Weiss effort. “She believes that, as the person responsible for how consumers are affected, his background and his experience don’t fit the requirements.”
As Politico's Ben White reports, Gillibrand's remarks delivered a jolt to Weiss' supporters in the administration and on the Street.
“That moment stunned me,” a Weiss friend told White. “For a senator from New York who is ostensibly part of the sensible center to say this, I was just flabbergasted.”
It's getting hard out here for a plutocrat.
Once Weiss withdrew from contention and opted instead to serve as a senior counselor to Treasury Secretary Jacob Lew -- a position that doesn't require Senate confirmation -- many in the financial industry were apoplectic.
“Warren successfully put together this incredible coalition of activist groups and liberal media organizations that sprang into action without her really having to do much of anything,” one Wall Street executive who worked with Weiss during his ill-fated confirmation bid told White. “These people can now stop pretty much anyone they want and the White House can’t do much about it.”
That may be an exaggeration -- as Warren's unsuccessful bid to quash the deregulatory provision in the spending bill attests, her political clout isn't limitless. But the White House's unsuccessful effort to win confirmation for Weiss underscores that even with a unified GOP Congress, the administration can't simply flout the will of liberals, let alone take their support for granted. Indeed, November's Democratic drubbing has emboldened Warrenesque progressives who contend that the party lost badly because it failed to articulate the sort of populist economic message needed to woo voters into the Democratic fold.
The old joke had it that Republicans feared their base, while Democrats hated theirs; Warren seems to be doing her part to upend that truism.
Accordingly, President Obama commenced the final quarter of his tenure in office with a set of bold, unapologetically progressive proposals: free community college; a massive tax cut for lower- and middle-income Americans, paid for with new taxes on financial transactions and the wealthiest Americans; paid sick and family leave; and expanded subsidies for child care. Those policy proposals face uphill battles in the Republican Congress, but they convey to voters what the Democratic Party stands for, and as with Obama's unsuccessful call for a federal minimum wage increase, his latest proposals may spur progressive action on the state and local levels.
Call it middle class economics, call it Elizabeth Warren economics, or just call it plain old American liberalism; there's no denying that the growing rejection of the failed neoliberal model signals a larger political transformation. So significant is that shift that even Republicans feel forced to adapt to it; Jeb Bush and Mitt Romney, two well-heeled Republicans considering 2016 presidential bids, are now presenting themselves as anti-poverty warriors and decrying the wealth gap. They won't put forth proposals that will actually improve the lot of those whom the American economy has left behind, but their rhetorical support for eradicating poverty and creating an economy that doesn't work for only a privileged few shows that they detect a new reality in American politics
Unlike the period from 1980 to 2008, when the anti-government ethos of Reagan conservatism set the terms of political debate for Democrats and Republicans alike, we now confront the possibility of an era in which the progressive principles of social justice, corporate accountability, and public purpose shape our political parameters. Wall Street and the forces who perpetuate inequality are fully prepared for the battle to come, but it's no wonder that Warren has them clutching their collective pearls.