WASHINGTON — Today’s terse and fractured political climate sets boundaries on what it means to be “Democrat” or “Republican.” When you announce your party, most people think they know your views.
That is unless you are Sen. Heidi Heitkamp of North Dakota.
The standard definitions don’t work for her. In the party of Dodd-Frank, Heitkamp helped lead the Senate fight to unwind pieces of it. Just as her party is vying to add congressional seats, Heitkamp has been the target of Democratic criticism. When asked who she wants running point on the politically prickly issue of housing finance reform, she names a Republican.
“When I got elected, I said that I’m going there not to represent a political party, but I’m going there to get a job done,” said Heitkamp, a first-term senator locked in a tight re-election battle with a House Republican in a state won by President Trump. “And [passing reg relief] is a great example of getting a job done — you know, setting a goal, working toward that goal, working in bipartisan way.”
In an interview, Heitkamp discussed the fits and starts of getting a reg relief package through the Senate, and sounded open to passing even more measures.
She said enacting reforms to ease the regulatory burden on smaller institutions was necessary to contain the reach of the biggest banks.
“I felt strongly that ‘too big to fail’ had gotten worse because of the growth of the largest institutions,” Heitkamp said. “If we were going to curb that problem, we needed to create a more competitive environment for regional banks.”
But in an era of nonstop polarization, her middle-of-the-road approach hasn’t always won accolades.
Heitkamp and other moderate Democrats who supported the Senate bill were attacked by their party’s base. At the other extreme, Heitkamp’s election opponent, Rep. Kevin Cramer, R-N.D., touts his own reg relief credentials, including support for measures that go beyond the Senate bill that became law in May, and has sought to tie Heitkamp to Democratic leaders like House Minority Leader Nancy Pelosi, D-Calif.
Even though bankers like Heitkamp, the industry — eyeing two candidates in North Dakota who both support reg relief — has largely remained neutral in her campaign, choosing more full-throated endorsements in other states.
“Frankly, in the Heitkamp race, there are two good candidates that understand banking, so we are choosing to stay out of that one," said Mike Winder, executive director of Friends of Traditional Banking, a super PAC that backs candidates deemed beneficial to the industry.
‘Nothing happens here unless you work in a bipartisan way’
In May, Heitkamp was the only Democrat standing beside President Trump at the White House ceremony for the signing of the reg relief bill, known as S 2155.
It was the culmination of roughly five years of negotiations to find common ground on ways to ease the effects of Dodd-Frank, starting with members such as Heitkamp building relationships with the Obama administration to craft a potential package.
When Senate Banking Committee Chairman Mike Crapo, R-Idaho, took the gavel in 2017, the moderate Democrats on the committee waited for him to cut a deal with the ranking Democrat, Sen. Sherrod Brown of Ohio. But they could not reach a compromise, opening the door to Heitkamp and other moderate Democrats — including Jon Tester of Montana and Joe Donnelly of Indiana — to negotiate with Crapo directly.
“When those [talks between Crapo and Brown] fell apart, we had a package,” Heitkamp said.
The resulting bill, which passed the Senate on the March 15 by a vote of 67-31, was not everything the banking industry wanted. Its central provision reduced the number of banks subject to the Federal Reserve’s enhanced supervision for large institutions, and it added regulatory exemptions for community banks. But the basic framework of Dodd-Frank was preserved.
Still, its passage was the industry’s biggest legislative policy victory since the crisis.
“Nothing happens here unless you work in a bipartisan way and that was perfectly obvious,” she said of the legislative talks.
Other lawmakers credited her with seeing beyond hard-line views and rhetoric to where common ground can advance legislation.
“Heidi is definitely a fighter, but she’s also the first to look for points of compromise, and the first to say, ‘Hey, we might not agree on everything. But where we do, there’s no earthly reason why we shouldn’t be able to actually get something done.’ That’s Heidi,” said Sen. Mark Warner, D-Va., who supported the reg relief bill.
Former Sen. Kent Conrad, D-N.D., who previously held Heitkamp’s seat, said her focus on policies that can attract 60 votes — the threshold for passing legislation in the Senate — makes her an effective legislator.
“She’s been a remarkably productive member of the Senate,” said Conrad. “You can’t just work one side of the aisle. If you want to be effective in the U.S. Senate, you have to be able to work with people of both sides.”
Stuck in the middle
But in 2018, being able to compromise does not necessarily translate into political success.
Her re-election battle has been an uphill one as she tries to hold a seat in a state Trump won by almost 36 percentage points. The Cook Political Report and Larry Sabato’s Crystal Ball at the University of Virginia’s Center for Politics both view the North Dakota Senate race as a “toss-up.” Some polls have Cramer clearly in the lead.
Cramer, who has garnered support from both Trump and Vice President Mike Pence, criticized the current Senate for failing to act on the House’s Financial Choice Act, a more sweeping rollback of Dodd-Frank.
“While the Senate has failed to act on most of our successes, I was pleased they at least combined a few of our bills in S 2155,” Cramer said in a statement to American Banker. “Hopefully the next Senate will have a more pro-business makeup and we can pass more substantial reforms.”
Campaign advertisements for Cramer have aligned Heitkamp with the Democratic Party’s establishment.
“Heitkamp’s support for [Hillary] Clinton and other liberal Democrat party leaders like Chuck Schumer and Nancy Pelosi does not represent the ideology of North Dakota voters,” his spokesman said in a statement earlier this year.
On the other side of the spectrum, the vote by Heitkamp and other Democratic moderates in favor of reg relief was seen as a betrayal by progressives.
“When I saw a handful of my Democratic colleagues vote for it, it felt like a stab in the heart — not for me, but for all the homeowners who were cheated and the taxpayers who bailed out those banks,” Sen. Elizabeth Warren, D-Mass, said in a speech in March.
One area in particular where Heitkamp and others faced a backlash from the likes of Warren and Brown was an exemption for banks and credit unions that provide fewer than 500 mortgages a year from having to report extra data required by the Home Mortgage Disclosure Act. Both Warren and Brown blasted the measure for making it harder to enforce anti-discrimination laws.
Heitkamp fought back, insisting that community banks would be overburdened by the HMDA requirement.
“That increased paperwork would have such a devastating effect on lending in small organizations,” she said.
Bankers and others have credited Heitkamp for taking positions that are unpopular in her own party.
“She took on a lot of crap to get [S 2155] over the hump,” said Stacey Tronson, vice president for compliance at the $862 million-asset Cornerstone Bank in Fargo, N.D. “She’ll take on a fight for the greater good.”
Tronson said Heitkamp is upfront with bankers about which reg relief provisions could garner enough political support, and which measures are unlikely.
“She’s honest about how ‘I can’t support everything you want,’ ” Tronson said. “She is very realistic about why that doesn’t work.”
Washington-based industry representatives say Heitkamp’s willingness to go against members of her own party sets her apart.
“Quite frankly, I wish there were more of her in Congress,” said Richard Hunt, president and chief executive of the Consumer Bankers Association. He added that Heitkamp “literally” sits next to Warren on the Banking Committee, but “they could not be any more polar opposite.”
But unlike Tester, who has received two major banking industry endorsements for his re-election in a state Trump also won in 2016, Heitkamp hasn’t had the same vocal industry backing.
She has received more than $205,000 from commercial banks for her re-election campaign. But bankers also likely see the state as a bellwether for the midterm elections as a whole.
The industry has typically supported the Republican legislative platform, and Heitkamp’s re-election battle could present an opportunity to flip a seat to the GOP to make up for Democratic gains elsewhere.
North Dakota Bankers Association President and CEO Rick Clayburgh said he appreciates Heitkamp’s work to give community bankers a voice by bringing federal regulators to the state, communicating with bankers one on one and supporting reg relief legislation. But he also said that he knows some bankers in the state back her opponent.
“I know there are many bankers who are supporting her campaign, as well as banks supportive of Rep. Cramer,” Clayburgh said. “It’s a tough race. In the case of Sen. Heitkamp, being on the Banking Committee is a very important position for banks in the state.”
More reg relief?
On other regulatory reform ideas supported by the industry, Heitkamp has been sympathetic but has struggled to get fellow Democrats on board.
She has been open to structural changes at the Consumer Financial Protection Bureau, and has also said she would like to see regulatory authority for implementing the Volcker Rule — the ban on banks’ proprietary trading established by Dodd-Frank — consolidated under the Federal Reserve. Currently, five regulators have jurisdiction over the rule.
“I think that actually adds to accountability, but that wasn’t something that could be put [in S 2155] and generate the same level of support that we received,” Heitkamp said of the Volcker Rule reform.
As S 2155 was signed into law, House Republicans indicated that it wouldn’t be the end of their efforts to roll back the current regulatory framework for U.S. banks and businesses.
They put together a package, being labeled as a third iteration of the Jumpstart Our Business Startups Act, or JOBS Act 3.0, which mostly focuses on capital formation but includes a few banking and credit union measures.
Other Democrats have been cautious to get on board after facing tough criticism from the progressive wing of the party for supporting S 2155, but Heitkamp says she is willing to come to the table.
“We don’t call it the JOBS Act, I call it the capital formations package,” Heitkamp said. “We need to get 60 votes over here. We’re examining it as we promised [House Financial Services Committee] Chairman [Jeb] Hensarling we would. I think there are provisions where we wouldn’t get 60 votes.”
Heitkamp said she is open to working with Republicans on identifying and fashioning a package that would get 60 votes. But she also would like to see Democratic consumer protection measures added to it, especially relating to the credit reporting agencies.
“Everybody is still very concerned about what happened with Equifax,” Heitkamp said.
“If we can fashion a package, we should try and do that,” Heitkamp said. “Where I might support that bill in its entirety right now, I also like getting things done. So I think it’s a matter of understanding and appreciating that 60 votes isn’t always easy to come by.”
If Heitkamp wins re-election, another persistent policy issue she and other Banking Committee members will face is how to reform the housing finance system.
Heitkamp said the government needs to have a “high-level discussion” on reforming the mortgage giants Fannie Mae and Freddie Mac that recognizes that their significance goes beyond the housing market.
“We can’t just look at financing reform; we have to look at this as a major economic issue for American families,” Heitkamp said.
In addition to crafting a GSE reform plan, senators will also be involved in confirming the Trump administration’s pick to run the Federal Housing Finance Agency, the regulator for Fannie and Freddie. The term for current Federal Housing Finance Agency Director Mel Watt expires in January, but he is currently embroiled in an investigation over allegations that he sexually harassed an employee.
Heitkamp says her clear choice for FHFA director would be Sen. Bob Corker of Tennessee, a Republican who is retiring after having been a strong voice on GSE reform. He sponsored a past reform proposal with Warner that failed to gain enough support in the Senate.
“I think Bob Corker would be an excellent new director,” Heitkamp said.
