WASHINGTON — The book is closed on Senate legislation reforming parts of the Dodd-Frank Act. But months after a group of Democrats helped propel the bill forward, the opposition party’s identity crisis on banking policy is still on full display.

In her speech this week backing new regulation and signaling a possible White House run, Sen. Elizabeth Warren, D-Mass., echoed the zero tolerance of many in her party toward unwinding post-crisis rules. But her sharp words were in stark contrast to pro-regulatory relief stances by moderate Democrats on the campaign trail.

“What’s important to keep in mind is that the Democratic views on regulation are not monolithic, and in fact, they are quite heterogeneous,” said Brandon Barford, a partner at Beacon Policy Advisors.

Sen. Elizabeth Warren, D-Mass.
In her speech Tuesday backing new regulation, Sen. Elizabeth Warren, D-Mass., echoed the zero tolerance of many in her party toward unwinding post-crisis rules. Bloomberg News

Warren used her speech to call for new legislation ending a cozy relationship between private companies and regulators, and said the “war on regulations is waged on behalf of giant companies that don’t want to follow any rules.”

Consumer advocates say it is crucial for the party to hold firm on preserving the Obama-era regulatory regime.

“What’s critical for Senator Warren and others is to make sure consumers and voters know that the Democratic Party is not going to be involved in this massive new attempt at rolling back the Dodd-Frank regulations,” said Amit Narang, a regulatory policy advocate at Public Citizen.

And yet, in contrast to Warren’s words, Senate Democrats running for reelection in red states have not been shy about their recent support for the law rolling back certain Dodd-Frank provisions, which President Trump signed last month.

Just Monday, the campaign of Sen. Heidi Heitkamp, D-N.D., who helped craft the new Dodd-Frank reforms, publicized a report by PolitiFact challenging claims by her opponent that her support for reg relief was insincere. The conservative group Americans for Prosperity, funded by the Koch brothers, recently released an ad praising Heitkamp’s vote for the reg relief bill. She was also the only Democrat at the bill signing.

“Heidi has always been committed to practical regulatory relief that helps North Dakota families and businesses thrive,” a Heitkamp campaign spokeswoman said in a press release. “That’s why she put politics aside and North Dakotans first to help write and pass sensible reforms to Dodd-Frank so that community banks and credit unions can provide the relationship lending rural North Dakotans know and trust.”

Sen. Jon Tester, D-Mont., who also helped negotiate the bill and is locked in a tight reelection battle, has also touted his reg relief credentials. Similarly, in a recent TV ad for his reelection campaign, Sen. Joe Donnelly, D-Ind., touted his bipartisanship and record of cutting “regulations that cost jobs.”

“Heitkamp, Tester and others, they want to make sure the economy is growing. They have no philosophical objection to deregulate those entities that are best serving their constituents,” said Barford. “Democrats will never be able to have a governing majority unless those that are more moderate are able to get a vote to be elected in red or purple states. … Frankly, people from different parts of the country are just more conservative on these kinds of issues.”

At times, the two opposing messages seem aligned on issues related to helping smaller banks. For example, just Thursday, Warren announced she was introducing legislation along with Sen. Cory Gardner, R-Colo., to provide an exemption from the federal prohibition on marijuana in states with legalized pot laws. The bill, with support from community bank backers, is intended to enable financial institutions to cater to pot businesses.

But Warren — the architect of the Consumer Financial Protection Bureau — continued to espouse a take-no-prisoners approach on the GOP's deregulation push in a fiery address Tuesday that may feed speculation that she is considering a presidential run.

“The Trump administration and an army of lobbyists are determined to rig the game in their favor, to boost their own profits — the cost to consumers be damned,” she said. "But it’s not just the CFPB ... under attack. In agency after agency, across the federal government, powerful corporations and their Republican allies are working overtime to roll back basic rules that protect the rest of us.”

Aaron Klein, a senior fellow at the Brookings Institution and a former Democratic aide on the Senate Banking Committee, pointed to the effectiveness of the Warren strategy to fight against Republicans’ deregulatory efforts. Her direct message resonates with those who do not see nuance on financial policy issues, he said.

“Politically speaking, I don’t think there are many regulation voters,” Klein said. “So I think Senator Warren is right to point out that the ‘Mick Mulvaney, buyer beware, blind faith in the market, return to what got us into the financial crisis’ is horrific policy. … I think Sen. Warren is exactly right to be pointing out areas where the Trump administration is forgetting the lessons learned of the crisis and is repeating mistakes in the past, particularly at the CFPB.”

Yet others argue that Warren and her allies in the Democratic caucus are simply trying to amplify their message in response to the legislative defeat of Congress making changes to Dodd-Frank. (The recent bill was titled S. 2155.)

“For the most part, S. 2155 was the big banking bill of the year. … Those who are on the losing end of that are kind of re-establishing their position,” said Ed Mills, a policy analyst at Raymond James.

Mills said whether Democratic members follow Warren’s approach or that of the party’s more moderate wing depends on their specific constituencies.

“The simple truth is, for certain members of Congress, being with Elizabeth Warren is positive,” he said. “For other members, being against her, is equally important. For certain members of even of her own party, for those who stood up to her, it is politically beneficial as well.”

Klein says he does not see the differences within the Democratic Party moving forward posing a major challenge to the party’s agenda whether in the minority or the majority. How members proceed on their stances and votes will depend on the issue.

“Any committee chairman’s first job is to count the votes and make sure they have the majority of that committee,” he said. “It depends on the issue and the coalition you are building.”

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