Will Elizabeth Warren Stymie Clinton’s Pro-Big Finance Campaign Promises?

A Financial Times reporter who is clearly no Elizabeth Warren fan says that the Massachusetts senator will be able to thwart Hillary Clinton’s Wall Street backers who expect to regulatory breaks if she becomes President. As John Dizard wrote over the weekend:

Cynics, including most of the US public, figure that Wall Street will have bought the next Democratic administration. They are wrong. Contrary to what you might expect from historical experience, Wall Street is going to get little, if anything, for its money…

But while Mrs Clinton may be president, the sheriff of Wall Street will be Senator Elizabeth Warren. The senator, her progressive allies and her policy wonk followers have a lot to say about the financial sector. And not the sort of sugary reassurances you hear at high-end fundraisers.

The key to the progressives’ Wall Street strategy is that it is not centred on a list of legislative proposals, but on databases of prospective appointees to regulatory and administrative positions. The Warren-istas understand that the Republicans are likely to have just around half of the Senate, and are likely to retain control of the House. The bad news, for Ms Warren’s supporters, is that new laws will be hard to pass. The good news is that the existing laws, including Dodd-Frank and the SEC’s governing legislation, already give future appointees all the authority they will need.

Dizard’s assessment of Warren’s clout is based on her having blocked the Administration’s nomination of Lazard mergers & acquisitions banker Antonio Weiss as Treasury undersecretary of domestic finance. Dizard misrepresents the reasons for Warren’s opposition: it wasn’t that she didn’t believe in “Wall Street experience” for roles where that might be germane. It was that Weiss’ qualifications for the post were solely that he’d been a heavyweight Obama fundraiser, and that he was therefor representative of a cronyistic relationship between Big Finance and the Democratic Party. As we wrote in late 2014:

Warren’s grounds for objecting to Weiss were straightforward: his experience was no fit for the requirements of his proposed Treasury role. On top of that, he had been involved in and therefore profited from acquisitions called inversions that Treasury opposes because they reduce the taxes paid by the acquirer, which uses the acquired company to move its headquarters to a lower-tax jurisdiction…

Warren upped the ante in a speech on Tuesday, making Weiss, who is now head of investment banking at Lazard, a symbol of what is wrong with the relationship between the government and Big Finance: that of far too much coziness between the large, influential players and financial regulators. And in sharpening and further documenting her critique, she has put the Robert Rubin wing of the Democratic party in her crosshairs.

Warren won her fight against the Administration, with only blogger on her side, against the Mighty Wurlitzer of the New York Times, the Washington Post, and the Wall Street Journal all playing the same hymnal. She had the better argument and more and more Senators were coming around to her point of view. Weiss withdrew.

But, reasonable readers might say, that was one fight over a second-tier official post. Why should one believe that Clinton won’t get her way on the banking front, at least a lot of the time?

The fact is that Wall Street wields a lot less power than it did in Washington a few years ago. The big banks are not held in the same esteem that they one were. Even though no executives went to jail, years of scandals, stories on market-rigging, and multi-billoin fines have made it amply clear that financiers don’t behave well when left to their own devices. Deregulation, which was once something all sophisticated-seeming policy wonks supported, is no longer fashionable, and is a tough sell on the banking front. And while the big finance players still remain too big to fail, they are subject to much more in the way of regulations and compliance than they were pre-crisis. In other words, they’ve lost the ideological battle that they are so obviously indispensable and that their activities require so much technical expertise that supervising them closely would be a bad idea.

But why is it reasonable to think that Warren can prevail against a bank-friendly President Clinton? Hillary seems to have been able to coast on the brand fumes of her husband’s support of bank deregulation and installation of Bob Rubin and his acolytes in powerful government positions. Despite being a favored recipient of Wall Street largesse, Hillary has not done all that much for the industry. Her efforts as a New York senator were perfunctory. Her passion is foreign policy (gah). Domestically, Silicon Valley in general and Google in particular is far more important to her than anyone in finance. She’d deploy a lot of energy fighting Warren without much upside. That doesn’t mean that Clinton won’t go a few rounds against Warren to show she made an effort. Thus the game will be to see what Clinton has to deliver in the way of nominees to key regulatory posts. Clinton may go the route of trying to serve up candidates that are minimally acceptable, or look on paper to have some progressive sympathies, but are Vichy Left stooges.

And there is a perverse irony at work. Even though Warren looked to have been played by Clinton when her operatives messaged idea of a Warren vice presidency hard and Warren went after Trump with considerable zeal, Warren did get some benefits. The media treating her as a powerful player and designated attack dog against Trump gave Warren a lot of media play, reinforcing her status.

Skeptics will say, correctly, that Obama could have brought Wall Street to heel at the start of his Administration, and that financial firms remain too large and the banking industry needs to shrink much further. While that is true, that moment passed and as a result, we are having to make progress the slow, hard way. Warren’s skills as a bureaucratic infighter, a communicator, and a policy wonk are enabling her and her allies to methodically cut the financial services industry down to size.

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20 comments

  1. pretzelattack

    i don’t know much about the subject of financial regulation, but it seems to me like they don’t really have to deregulate more, just continue to fail to enforce the extant laws and regulations. i hope i’m wrong, i’d like to see progress on this.

  2. Jeff

    From the 2014 post cited above: “…On top of that, he had been involved in and therefore profited from acquisitions called inversions that Treasury opposes because they reduce the taxes paid by the acquirer, …”
    Inversions are now frowned upon by the IRS, and no longer possible.
    In the long run we’re all dead, and right now, not much we can do. But we can make a step a day, and that will get us far by the end of the year.

  3. FromCharleston

    Devoutly to be wished: an electorate literate enough to grasp that what we’re talking about here is not the end of finance, but simply regulation that protects equitable finance – the notion that financial institutions can serve best by serving according to some sort of “reasonable man” (/woman) standard, and that “the Warrenistas” (please!) are regarded as radical only in that they/we oppose large financial institutions’ serving the wealthy by using esoteric finance to create rentier carousels so arcane, and with so high a price of admission, that they would quite literally never enter the imagination of any reasonable or fair-minded person.

    There’s plenty of fodder for demonization, but overall we are simply talking about not allowing cynical intentions to govern finance.

    What could possibly go wrong? Sigh.

  4. Northeaster

    “says that the Massachusetts senator will be able to thwart Hillary Clinton’s Wall Street backers”

    Clearly they don’t know Warren, we in Massachusetts do. She has a great habit of saying the right things, but when it comes down to it, she is a fraud.

    I did two (2) stories on issues here for a regional publication and her office would not comment on either. First, was the proliferation of H-1B Visa workers flooding our region and displacing American workers, the second was her stance on firearms.

    Our CONgressional delegation recently released a op-ed in support of our Massachusetts Attorney General Maura Healy unilaterally banning firearms. Because of the language, even handguns could technically be banned making all of us felons. In Warren’s case, her personal bank is BofA (irony I know), who also own over $12 million worth of shares in Sturm, Ruger, and Co. (more irony). The more I looked into each CONgress Members finaincial disclosures/porfolio’s, the more investments in the firearms industries they were tied too. Then again, in the case of Ruger, who wouldn’t like a 600% return since Obama’s election?

    She is a hypocrite and a fraud of the worst order, and I’m not even going to the ridiculousness of the “fake indian” BS. Her plan for student loans is even more garbage, reducing interest rates to Fed rate levels. All that does is grant access to even more money, which colleges will raise costs in-kind to more newfound monies. I’m not even touching her plus-$300K for “teaching” one class a Harvard either. Oh, and wake me when she marches The U.S. Attorney General in front of her Committee.

    As her constituent, and her office’s refusal to discuss important issues with The People of my state, she can screw. She is a hypocrite, a liar, and a fraud, just like most of the rest in CONgress

  5. Anne

    If Clinton is elected, I fully expect her to revert to the strongly pro-finance positions she held pre-primary, which will test Warren’s loyalties: does she keep fighting for the consumer even if it means going head-to-head with Clinton, or does she temper her fight in order to maintain some semblance of Democratic unity? Can Warren put together a larger, stronger coalition of allies?

    It looks like we’re going to find out.

    I fully expect the industry to resist any efforts to rein it in; I think there will be a fair amount of administration okey-doking, packaging “reforms” that aren’t really reforms (perhaps some sternly-worded demands to “cut it out”), and giving to the industry behind the scenes while appearing to be hard on it in public.

    I just hope Warren doesn’t end up being co-opted by Clinton; I sincerely hope she is too smart to allow that.

    But we’ll see soon enough, I guess.

    1. PlutoniumKun

      I’d be amazed if Warren doesn’t expect that. I don’t really know the game she is playing, but I suspect her ‘loyalty’ is about avoiding any blame if Clinton goes down in flames, and cementing her place as a reliable player. Hopefully she has judged this right. I think Yves observations a few weeks ago are probably right – Warren is not a ‘progressive’ in the sense NC readers would recognise, she is essentially a one trick pony in terms of policy – but her ‘trick’ is very good and very valuable and hopefully she will continue to be a thorn in Wall Streets side.

    1. Arizona Slim

      My prediction: Lynch will not be reappointed. Reason: There will be new revelations relating to that Phoenix Sky Harbor Airport meeting with Bill.

      This will trigger a messy process to replace her. Sort of like the 1993 search for a qualified AG.

  6. diptherio

    Being pessimistic has served me well so far. When there were questions raised here about whether Mary Jo White would step up or not, I assumed she would not…and I was not disappointed. When discussion centered around whether Bernie would just become another “sheep dog” candidate for the Neocon Dem party, I assumed he would, one way or another…and I was not disappointed. Now the question is will Warren be effective in reigning in Wall Street, despite having one of their employees at the head of her party…I assume not. I hope to be disappointed this time, but if history is any guide, I wouldn’t put any money on it…just sayin’.

    1. ChrisPacific

      Now the question is will Warren be effective in reigning in Wall Street, despite having one of their employees at the head of her party…

      She has been in that position already for some years now and has done OK. I don’t think it’s unreasonable to expect her to continue doing what she has been doing.

  7. b.

    > that moment passed

    I’m with Hussman – that “moment” will repeat itself, and that’s what the “players” need to be prepared for. This is IMO the miscalculation that Sanders made, and that Warren is making. Being a “stakeholder” in a Clinton administration facing Great Recession 2.0 courtesy of Obama’s decision to aid and abet the financial industry by trying to rewind the clock is not an advantage. It might not happen prior to November – and it would be interesting to see if and how the market will be propped up in recurring moments of weakness – and it might not even happen in 2017, but 2020 is a different issue altogether.

    Sanders made this mistake throughout his campaign – e.g. objecting to the Fed’s attempts to raise interest rates, instead of objection to the Fed’s interventions as such – and neither Sanders nor Warren appear to have take a stand on reversing the decision that, pace Hussman, ended the crisis “on March 16, 2009, when the Financial Accounting Standards Board abandoned FAS 157 ‘mark-to-market’ accounting, in response to Congressional pressure from the House Committee on Financial Services on March 12, 2009.”

    Right now, Trump is better positioned than any ‘stablishment or “progressive” player to weather the next downturn.

    1. sierra7

      “….“on March 16, 2009, when the Financial Accounting Standards Board abandoned FAS 157 ‘mark-to-market’ accounting….”
      A fact that seems to have gone down the memory hole in US…….It was almost immediately after that the market began it’s “recovery” into the stratosphere it is today…….

  8. Angry Panda

    1. One wonders how likely would Warren be to issue a hold on a nomination that was supported by senior members on either side of the chamber. As I recall, she wasn’t alone on the Lazard thing, in particular as McConnell & Co. were all too happy to let a Democratic Senator go out there and fight the nomination of the Democratic President.

    I suspect if she were to step out of line too much, she’d get the full media “cease this partisan obstructionism” treatment, and she knows it.

    2. Warren’s “footsies” with the Clinton campaign – not endorsing, then endorsing – suggest to me that Warren is not a magical progressive unicorn that vomits rainbows over the joyous populace, but, fundamentally, a political animal who is using her position within the left-ish wing of the party to be a more significant Senate player than her seniority would suggest. This does not mean she does not genuinely believe in various things that are actually to the left of the Democratic party. However, believing is one thing, playing by-the-rules-and-within-the-framework is quite another.

    Put differently, I am not even sure that, if it came down to it, she would have pulled an Obama and “voted against the Iraq War” (a gamble at the time, to be sure, unless one was confident that the Bush White House would muck it up no matter what happens, as they surely did).

    3. So going forward, I would expect Warren to pick a fight here and there, but generally be a team player, particularly if Clinton wins the race. All of which raises the question of what she really “won” by sticking with the Clinton machine in the end (ditto Sanders), but that’s something else entirely.

    The point is that all grand media slash Internet talk of how she’s going to do this, and that, and that other thing, and push the Senate this way, and pull the Senate that way…I am not a buyer. I think it’s just a smokescreen, really.

    1. John Wright

      Note, your “pulled an Obama and “voted against the Iraq War”” is an inaccurate depiction of history.

      Obama was an Illinois state senator at the time and gave a speech opposing the Iraq war.

      He cast no vote against the Iraq war.

      To judge from his tough talk and unprincipled follow through on most items (financial reform, regulatory actions, Nuclear disarmament, transparency advocacy countered by his dogged whistleblower pursuit), if Obama HAD been a US Senator at the time, I can see him giving a fiery speech opposing the Iraq war, but then voting to support Bush for “unity” reasons.

      But we can’t know how he would have voted if he were US Senator at the time..

      The saying that “talk is cheap” has been well borne out by Obama.

      But it works for him..

  9. Gaylord

    Who will restore the middle class assets and the public treasury that were stolen by the banksters? Neither Clinton nor Warren. Fuggetaboudit.

  10. Fiver

    Hard to imagine any significant role for Warren so long as the fundamental premise since 2009 has been that when push comes to shove, it’s the Law and public interest that go out the window, not bankers.

  11. PH

    Doubt Warren will have clout generally.

    On selected issue or appointment, she could mobilize grass roots.

  12. uncle tungsten

    Clinton will run rings around Warren. Think of Jacob Lew as O’bummers attack dog and you get the gist. Hillary will appoint hard assed flunkeys of the banks and miners and big pharmas and to hell with Warren. Warren will just get down to asking tough questions on the odd committee and all will be well in Hillaryland.

    Clinton never had any intention of tasking Warren with anything other than scraping the dog sh*t off the pavement before every arrival of herself, the chosen one.

    If Clinton is elected it will make our experience of past presidential ugliness look like quaint meanderings.

  13. Joe Kapoe

    I try to remain hopeful b/cause dispair is just what the powers that be want of us. So I’m supporting Zephyr Teachout running for Congress from NY. It looks like she can continue the work that Warren has done in calling out the abuse of the financial sector and hopefully extend it to the political sector too.

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