Midterm elections lurk in background of reg relief debate
WASHINGTON — The Senate regulatory relief bill has divided congressional Democrats, highlighting key differences in party messaging that could play out at the ballot box this November.
Among the bill’s most outspoken co-sponsors are Sens. Jon Tester, D-Mont., Heidi Heitkamp, D-N.D., and Joe Donnelly, D-Ind. — moderates who are up for re-election in states that President Trump carried in 2016.
All three lawmakers worked closely with Senate Banking Committee Chairman Mike Crapo, R-Idaho, in developing the legislation, which includes a host of Dodd-Frank Act reforms for community banks as well as several more hotly debated measures benefiting larger institutions.
The bill’s passage could be crucial for helping moderate Democrats shore up support in their home states ahead of the 2018 elections.
But the centrist lawmakers who have supported the bill also find themselves in a tough spot, as more progressive colleagues, including Sens. Elizabeth Warren, D-Mass., and Sherrod Brown, D-Ohio, have blasted the package as being a giveaway to big banks.
Fifteen Democrats and Angus King, I-Maine, who caucuses with the Democrats, voted to begin debate on the legislation this week, along with the Republican caucus.
“There clearly are a lot of people on the left in the Democratic Party who are upset with the Senate vote. But for members thinking about 2018, this isn’t something that is going to matter all that much,” said Geoffrey Skelley, a political analyst at the University of Virginia’s Center for Politics. “If you are a Democrat who voted ‘yes’ on this, it may upset the base, but you are also trying to boost your more moderate credentials among other voters in your state.”
Moderates have threatened to pull their support if any changes aren't cleared first by the bill’s Democratic co-sponsors. Supporters are hopeful Democrats won't back out.
“In America’s heartland, people know that community banks, and the small businesses and families they serve, are struggling with the burden of overregulation — and even going out of business,” said Michael Steel, managing director at Hamilton Place Strategies and former press secretary for Speaker of the House John Boehner. “That’s tough for in-cycle Washington Democrats to ignore. Helping them is good politics, as well as good business.”
Still, it’s likely the divide represents more than just politics. Aaron Klein, a fellow in economic studies at the Brookings Institution, said support for the bill on the Democratic side isn’t quite as simple as calculating who is up for re-election in November and where.
“This is a chicken-and-egg question,” he said. “Are Democrats who are supporting the bill taking the more conservative position because they’re running for re-election in more conservative states, or was their election in those states consistent with their having a more conservative philosophy?”
The banking industry is hoping that the Senate can pass a Dodd-Frank regulatory relief bill next week, but political realities will dictate just how far the legislation will go. Republicans want to pull off a victory before the midterm elections and appear willing to settle for even modest changes to Dodd-Frank.
Looking further ahead, it’s notable that those weighing a potential 2020 presidential bid, including Sens. Kirsten Gillibrand, D-N.Y., and Kamala Harris, D-Calif., along with Warren, are resisting any changes to Dodd-Frank.
Yet some conservative critics have warned that this stance could be a miscalculation.
“Democrats who want to win the support of moderate swing voters are weary of supporting policies that appeal only to liberal elites,” Alex Conant, a partner at Firehouse Strategies and Sen. Marco Rubio’s communications director during the 2016 presidential election. “The fact that so many swing state Democrats are supporting banking reform should be a wake-up call to Democratic presidential candidates.”
Analysts said that despite the bill being much more targeted than the industry had hoped for, passing the legislation now is the smart move not just for banks and credit unions, but also for Republicans who are hoping to fend off a potential wave election in November.
The GOP has come under political fire over the past year for attempting to pass a health care reform law without Democratic support and for subsequently approving tax reform along party lines. The banking bill provides a prime opportunity to showcase the party’s ability to work across the aisle — something that could potentially help sway voters this fall — if the measure survives the current political battle and gets signed into law.
“I don’t care how ‘meh’ it might seem to conservatives, there is a decent measure of community bank relief in [this bill]. And a bipartisan political victory, on top of the tax bill, reinforces that they can get things done, and govern, even without resorting to party-line votes,” said Charles Gabriel, an analyst at Capital Alpha Partners.