Senate Banking Committee Chairman Sherrod Brown faces a tough 2024 campaign to recapture his Ohio senate seat in a state that's increasingly Red. Can the same state that elected conservative populist firebrand J.D. Vance also re-elect Sherrod Brown? And what do the political undercurrents apparent in Ohio mean for banks?
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SCHOENBERGER: In this series on populism and banks, the reporters in American Banker's Washington bureau are taking a look at the issue from different angles. Claire Williams, our Congressional reporter, wondered how the rise in populism tied to Donald Trump would affect the reelection prospects of Senator Sherrod Brown, the Ohio Democrat who's just as populist. Why does this matter to bankers? Because Brown heads the Senate Banking Committee, so he's the one doing the regulatory oversight of banks. I'm Chana Schoenberger, editor-in-chief of American Banker, and this is Bankshot.
SHERROD BROWN: When we fight for workers, we fight for all people, whether you punch a clock or swipe a badge. Whether you work for tips or you work for a salary, whether you're raising children, or you're taking care of an aging parent, and we, as we celebrate the dignity of work, we unify — we will not divide.
[Cheers]
Populists are not racist. Populists are not anti-semitic. We do not appeal … we do not appeal to some by pushing others down.
CLAIRE WILLIAMS: This is Senator Sherrod Brown, being, maybe, a little optimistic. But, this is 2018 — what seems like a lifetime ago in political terms — and he had just won re-election to his third term representing Ohio in the U.S. Senate.
Brown's victory in 2018 was hard-fought. Donald Trump won Ohio by more than eight points just two years earlier, the culmination of the rise of the Republican party — and Trump in particular — in Ohio and among working-class white voters in the Rust Belt in general. But that was six years ago, and Brown is up for reelection again in 2024.
When I think about the 2024 elections, and what they mean for bankers, I think about Ohio.
Not only is Sherrod Brown the Senate Banking Committee Chairman, he's your prototypical progressive populist. For years, he's made a name for himself as a pro-union, pro-worker campaigner. He rails against what he calls the "Wall Street business model" on the campaign trail, and its role in the disappearance of Ohio manufacturing jobs. And for the last 17 years, that's worked really well for him.
But the last time Ohio had a chance to send someone to Washington, they elected JD Vance — the Trump-endorsed Hillbilly Elegy memoirist who has emerged as one of the most ardent and vocal firebrand conservatives on Capitol Hill.
JD VANCE: The fundamental lie of American feminism over the past 20 or 30 years, is that it is liberating for a woman to go and work 90 hours a week in a cubicle at Goldman Sachs, shipping her fellow countrymen's jobs off to a country that hates them. And that is liberation compared to the problems of family and patriarchy in our modern society. Think about environmental justice, the term that you'll hear if you're ever on a university campus these days, where the net result of the policy of environmental justice is to ship a large number of manufacturing jobs off to the dirtiest economy in the world. That's China, and frankly, India as well. In exchange for the good feeling that you have done something for climate change, when in reality, if you're shipping millions of manufacturing jobs off to China, you're making our planet dirtier, not cleaner, and the people who lose their jobs in the process have a right to complain.
WILLIAMS: Can the state that elected this guy also vote to send Sherrod Brown back to Washington?
VANCE: Say you're middle class in Ohio, where I'm running for Senate right now. And you're worried about the fact that your heating bills this winter look to go up by 50 or 60%. Say you're worried about the fact that your grocery bills, your gasoline bills are skyrocketing even as we speak. Ladies and gentlemen, don't dare complain about it. Because didn't you know, the person who has implemented these policies is the first female Treasury Secretary, Secretary of the United States. She's a great trailblazer. Who cares that you can't afford basic necessities for your family? The universities tell us that so long as we're trailblazing on diversity, equity inclusion, it doesn't matter if normal people get screwed.
WILLIAMS: To say Brown and Vance have different policy preferences would be an understatement — it might be more accurate to say their policy preferences are emphatically opposed to one another. But if you look past Brown and Vance's policy conclusions, they seem to mostly agree on their assessments of what is ailing Ohio voters — or at the very least, they're tapping into a very similar populist vein, and it is articulated in very similar ways.
Each lament that the strong middle class culture that once defined Ohio is fading away. Each pins the blame for that loss on Wall Street, or the private equity firm or bank that offshored jobs, or the manufacturers that replaced workers with machines. Those forces are what has devalued the hard work that defines Ohio family life, and they are the representatives that are going to fight to bring that life back.
Populism has been a familiar feature in American politics for centuries, but has been particularly pivotal in the realm of financial policy and regulation since the 2008 financial crisis. That makes intuitive sense: U.S. households lost an average of $100,000 in asset value in 2008 and 2009 alone — which is to say nothing of lost income or employment — and those massive personal losses were the result of, at best, reckless behavior by banks and other financial companies — companies that were bailed out by the government. The anger against banks in 2008 was legitimate, visceral and intense, and that anger was channeled in the coming decade by mostly liberal politicians and policymakers.
But as we have seen in Ohio, that populist anger has evolved and is no longer primarily a feature of the left wing of the Democratic party — there is a growing strain of it on the right as well that has a similar pitch but very different policy conclusions.
For this season of Bankshot, American Banker's DC bureau is going to look at how populism has become such a critical feature of financial policy making, how it is evolving, and what that means for the future of financial policy — and it all starts in Ohio.
From American Banker, I'm Claire Williams, and this is Bankshot, a podcast about banks, finance, and the world we live in.
WILLIAMS: If you unfurl the electoral map, Brown's seat is one of three that Democrats absolutely need to win in order to maintain control of the Senate come November. It's as critical a race as they come, but it is also a very difficult one.
KYLE KONDIK : For Sherrod Brown, you know, Ohio is a state that, you know, that Donald Trump is likely to win for President.
WILLIAMS: That's Kyle Kondik, managing editor of Sabato's Crystal Ball, an election forecasting outfit at the University of Virginia.
KONDIK: So that puts Brown in a tough position because he's going to definitely need some Trump voters to vote for him or Republican presidential voters to vote for him in order to win again. He has been a pretty good electoral performer in the past, although elections were 2006, 2012 and 2018.
WILLIAMS: But 2024 is a different animal.
KONDIK: I described all those as good years for Democrats, broadly speaking. You know, Obama won reelection in 2012. And then '06 and '18 were both Democratic wave years with an unpopular Republican president in the White House. So I think this is the toughest challenge for Brown of his Senate electoral career.
WILLIAMS: This is as good a time as any to give a few very big disclaimers. Banking issues may have been front-and-center in 2008, 2010 or even 2012, but they won't be in the 2024 campaign season. It's also true that the link between politics and policy — that connection between what's said on the campaign trail and what lawmakers do when they show up in Washington — is always tenuous, and especially so for down-ticket issues like banking regulation.
But just because banking policy isn't on everyone's mind doesn't mean that those choices don't affect ordinary people in very important ways.
They're a modern manifestation of a debate about how and for whom our national economy is supposed to work:
Alexander Hamilton lectured Thomas Jefferson that Virginia farmers did, in fact, need to help pay New York's debts via a central bank.
William Jennings Bryan pleaded with the country to not crucify mankind upon a Cross of Gold. And the Kingfish himself, Huey Long, convinced us that every man can, indeed, be a king,
All the political undercurrents that those figures represent are linked to policies and institutions that have shaped our banking system.
The political and legislative battle that culminated with the foundation of the Federal Reserve dominated the early part of the 20th century; debate around the gold standard and the establishment of the U.S. dollar as the world's leading reserve currency lasted for decades; the expansion of government oversight of financial markets in the New Deal and the creation of the FDIC came only after passionate arguments that lasted for years.
And in our era, progressive outcry after the 2008 bank crisis led to Dodd-Frank – a law that imposed a host of new regulatory and supervisory standards on banks, and created a brand new agency dedicated solely to consumer protection in financial affairs.
Bank regulation, I'd argue, has always been a way to satisfy and quell populist sentiment, and remains so today. But the exact configuration of that regulation is what's changing.
MATT DOLE: In Ohio, we have traditionally had a very strong Union-Democrat threshold across a lot of the state that helped elect Democrats for years in Ohio. That changed under Donald Trump — or certainly started to shift under Donald Trump. And a lot of those folks started voting Republican, despite their sort of working class or union affiliations.
WILLIAMS: That's Matt Dole.
DOLE: My name is Matt Dole, and I'm a political campaign consultant based in Ohio, but do races across the country.
WILLIAMS: The 2024 senate race in Ohio will show us to what extent post-Dodd-Frank progressive politics — which Sherrod Brown embodies so well — are still relevant to the Democratic side of the ticket. And it will also show how comprehensively Donald Trump and the Republican party have tapped into that same well of populist anger among economically disaffected blue-collar supporters in the Rust Belt that Brown and Democrats have drawn support from in the past. For Dole, Republicans might even be doing it better.
DOLE: I think part of that is cultural rather than economic. I think that some of those folks say traditionally, Democrats have been supportive of unions, for instance. But I also want somebody who's going to be pro-life, pro-gun and … and share my values, my cultural values. And they started voting that way.
WILLIAMS: But let's back up for a second: When we use the term "populism," what exactly are we talking about?
CHRIS WITKO: What populism is, is not really universally agreed upon. And it's a big question that a lot of scholars have asked.
WILLIAMS: That's Christopher Witko.
WITKO: I'm Christopher Witko, and I'm a professor of public policy and political science at Penn State. And I study things like class inequality, redistribution, things like that in the policy process and in politics.
WILLIAMS: He also co-wrote a book called "The New Economic Populism: How States Respond to Economic Inequality" alongside William Franko, a political science professor at the University of West Virginia. Chris brought me some academic definitions of populism. Here's one by Cas Mudde, a leading scholar on populism and political extremism in the United States and in Europe.
WITKO: [6:53] They define populism as what they call, quote, a thin centered ideology that considers society to be ultimately separated into two homogeneous and antagonistic camps, the pure people versus the corrupt elite. And that's really what you see in virtually all populist rhetoric is something like, you know, "we are the 99%, right, we're the 99%. There's the 1%."
You know, you might see on the right, it might be something like we're, we're the real Americans, and you know, these other people in the liberals and the immigrants or whatever, are not real Americans.
WILLIAMS: It's hard to talk about Ohio politics and economic populism without talking about the decline of domestic heavy industry — and in Ohio, that industry was steel manufacturing.
In Mahoning Valley, which sits in the Northeast corner of the state, the economy boomed during World War II, when the furnaces and foundries of companies like Republic Steel and U.S. Steel supplied materials that armed the U.S. military. After the war there was a drop in demand, a loss in competitiveness and a long decline.
On September 19, 1977, Youngstown Sheet and Tube closed, and the Mahoning Valley's once booming economy never really recovered. At its height, Youngstown's population reached more than 170,000 in the 1930s. Today, it's roughly 60,000.
That has had massive political consequences. The workers and the unions who represented them viewed themselves as blameless in the decline of their hometowns, while Wall Street, the steel CEOs, globalism, China, Mexico, and anyone who could be blamed for the collapse of the industry were viewed as the "corrupt elite."
For decades, the Mahoning Valley was a Democratic stronghold, and folks typically voted Blue alongside their union leadership. Barack Obama won the county over Mitt Romney by a punishing 27.7 points in 2012.
Trump brought about an abrupt reversal of those dynamics, appealing to those formerly Democratic voters with his brash personality and rhetoric against trade rivals China and Mexico. Hillary Clinton barely carried the county over Donald Trump in 2016, and then in 2020, the county flipped to Trump.
DOLE: On the economic side, blue collar Democrats in Ohio have shifted into the Republican Party and you've certainly seen that in a county like Mahoning County, which Youngstown, Ohio is the county seat of a Democrat County for 100 years or more, and shifted in 2016. And in 2020, it's pretty safely in Republican hands now.
WILLIAMS: What this all means for Sherrod Brown, of course, will be decided in November, but he should not be counted out. Brown is popular with union leadership in places like Youngstown, and his blue-collar, friendly everyman brand is still strong in the state. Just ask Paul Beck.
BECK: My name is Paul Beck. I'm a professor emeritus of political science at The Ohio State University. [0:52 cut to 13:10] Sherrod Brown has been very good about appealing to voters who are disgruntled with the status quo, and positioning himself in spite of the fact that he is very liberal and he's supported the Biden agenda, I think the figure is 98% of the time, he nonetheless has been able to appeal to white working class Democrats. Certainly the leader, leadership in the unions are very much supportive of Sherrod Brown. Now, whether that carries over to the rank and file is a big question. It hasn't in other elections, but it probably still will win with Sherrod Brown.
WILLIAMS: Labor unions have long served as a vector for Democrats to gain traction in otherwise hostile states, and populism has been the message that makes Democrats' appeals credible in those places. But gaining the endorsement of labor leadership has not always translated into votes, Beck says.
BECK: It's a situation that indeed has changed over time. Unions are still very strongly in favor of Democratic candidates, especially so with Sherrod Brown, but also with Joe Biden more recently. But union influence over their own rank and file workers has been waning over time. And there are fewer union members than there used to be in Ohio, particularly with the decline of heavy industry in northeastern Ohio.
WILLIAMS: And of course, the Ohio Senate race is subject to the same kind of demographic dynamics that will drive the rest of the country this election cycle, and the substance of the campaign will likely be centered on culture war issues, reproductive rights and immigration — not banking.
BECK: The rural areas and small towns of Ohio are overwhelmingly Republican, and have been for years and years and years. The cities — particularly cities with large minority populations — are heavily Democratic. The suburbs have kind of swung back and forth. And then they are not particularly hotbeds of Trump's support. And in fact, in recent years, particularly the off years, when the Democrats have made gains in Ohio, they've been largely gains that have come fueled by suburban voters, particularly college-educated suburban voters, and particularly white women. [11:51 cut to 12:04] They're not motivated particularly by social issues, except that abortion may be an exception to that. And the evidence is pretty clear from public opinion polls that there was a heavy abortion rights vote on the part of suburban white women in Ohio.
WILLIAMS: But elections are not contests between abstract ideas — they are choices between candidates, and one thing that has become apparent in recent years is that themrelves tend to make the difference in close contests.
In Ohio's case, Brown's opponent in November is Trump-backed entrepreneur Bernie Moreno, a former auto dealer who ran unsuccessfully for the Republican Senate primary in 2022. Moreno beat out two more established candidates in the Republican primary this year — Ohio state senator Matt Dolan and Ohio secretary of State Frank LaRose.
KONDIK: It remains to be seen exactly who his opponent is going to be, probably likeliest to be Bernie Moreno, former auto dealer who ran in 2022, and didn't get particularly far in that open seat. Moreno has the endorsement of Donald Trump, which I think is pretty valuable. He's also got a lot of money to spend. Matt Dolan, a member of the State Senate, who is also fairly wealthy, he ran in 2022 as well. Did okay, but obviously didn't win. And then Frank LaRose, the Secretary of State who is probably the most prominent of the three candidates, but he, you know, I think he was really eager to get Trump's endorsement, and he got bypassed for that.
So you know, again, Moreno is probably the likeliest nominee at this point, but you know, not not set in stone, of course. You know, Moreno is probably the least proven of the three candidates. So we'll see how he actually performs but, you know, he basically just needs to get Republican presidential voters to vote for him.
WILLIAMS: On the Republican side, that Donald Trump endorsement — in Ohio, as it is in the rest of the country — is key. Here's Matt Dole again.
DOLE: Bernie Moreno, a businessman who ran two years ago, ended up dropping out of the race relatively early in the process. decided to run again. He's racked up a few county endorsements, Republican Party endorsements and Donald Trump's endorsement and maybe eight or 10 US senators have now endorsed Bernie. So he has some of that institutional support, and is also independently wealthy. So it's, what's interesting is it's a wide open race for the Republican primary. Any of the three of them can win. Matt Dolan will have the most difficult time. I don't want to say he's a never Trumper but he's — he's no fan of President Trump, and voices that with regularity. So his coalition is folks who are dissatisfied with President Trump, and that probably causes him to have a ceiling in a Republican primary, especially Republican primary with Donald Trump on the ballot.
WILLIAMS: So if there are two populist candidates on the final ballot in November – one being Sherrod Brown and the other a Trump-aligned Republican – what's the difference? How does that shape regulation and policy? Chris Witko again.
WITKO: The current populism, I think, on the left, and the right is somewhat backward-looking. And I think that's pretty true of populism in general — looking back to the time when the real Americans [cut] ran things, or things were working for real Americans or things were working for the people, right? So on the right, this is obviously very, you know … there's a lot of harkening back to things like the 1950s, when you had more traditional gender roles, when, you know, white people were clearly in charge of the political process and business and the economy and things like that.
And on the left, I think you do see a certain amount of nostalgia — like, I see a lot of stuff on social media, from young people, and just in conversations about, you know, "My dad was a plumber, who didn't even finish high school, and he had a house and two cars when he was 25." And, you know, "I'll never be able to have a house where I live," and that sort of thing. You know, just the idea that things work better in the past, and that some, some force is preventing things from working for the people that it maybe did in the past.
WILLIAMS: But how does that campaign rhetoric translate into actual policy? At least in Brown's case, we have a fairly good picture. In just the most recent example, he passed a bill through the Senate Banking Committee that would make it easier for the FDIC to claw back the compensation of failed bank executives — a concrete example of sticking it to the corrupt elite on behalf of the working class.
But how the election of more right-wing populists would translate into policy is less clear. Business-friendly Republicans have controlled the GOP caucus since Dodd-Frank, and much of their energy in the decade after its passage has been spent criticizing and paring down various provisions in that law.
Even so, there are some hints about how right-wing populism might govern. At the state level, a number of Republican officials have curtailed the activities of so-called "woke" corporations — including banks — and Vance himself has given bank lobbyists headaches by teaming up with the likes of Senator Elizabeth Warren on clawback legislation. He's also questioned bank CEOs on "woke" Diversity, Equity and Inclusion, or DEI, policies, and introduced legislation that would transfer oversight of banks with more than $100 billion in assets to the Office of the Comptroller of the Currency by converting those banks to nationally-chartered institutions.
In general, it's a challenge to the typical pro-business, free market ideology that champions banks' vital role in the economy and favors lighter regulation as a means of creating jobs and profit.
That manifests itself in lots of different ways, from banking policy to immigration reform.
WITKO: It'll be interesting to see what ends up happening with that, if the Republican party keeps leaning into this more populist stance, because obviously immigration is an issue where many sectors of corporate America would prefer to have a rational, coherent immigration policy reform, and that doesn't seem to be on the menu for the Republican party anyway.
WILLIAMS: Perhaps more consistently from the populist right is the desire to dismantle — or at least challenge — the administrative state. Opposition to federal regulation is not new in the Republican party, but it has intensified during and after the Trump administration, particularly with respect to financial rules. Former acting Consumer Financial Protection Bureau director Mick Mulvaney, for example, famously asked the Federal Reserve for zero dollars to fund his agency in fiscal year 2018; more recently, conservatives have teed up a Supreme Court challenge to a decades-old legal precedent whereby courts would not second-guess reasonable regulatory interpretations of ambiguous laws. That aggressive pushback against regulations are very much in line with the kind of populism that Trump ushered into national politics, Dole said, and it plays in places like Ohio.
DOLE: Ohioans are very interested in regulatory reform, just in general, average voters watch that in the state of Ohio. And part of it is Trump just started to, to establish what I consider a new sort of populism, which is just getting out of my way, stop regulating my life into the ground, stop feeling that you need to protect me because the government through 200, and almost 25 years of history, has proven to a lot of these folks that Ronald Reagan was right the government is is not the answer, but is the problem to which we need to answer.
SCHOENBERGER: This episode of Bankshot was reported and written by Claire Williams and edited by John Heltman. Our audio producer is Kellie Malone Yee. Special thanks to News 5 Cleveland and the National Conservatism Conference. For more news and analysis of the banking world, go to americanbanker.com/subscribe. From American Banker, I'm Chana Schoenberger and thanks for listening.