John Carney couldn’t understand why the vote was so close. The Delaware congressman, a Democratic member of the House Financial Services Committee, had been there when a reform to the Dodd-Frank “swaps push-out” passed—in a 55-6 landslide. He’d joined a veto-proof majority, 292-122, to back the reform in a House bill that was throttled by the Democratic Senate. The bank-friendly Democrat had not expected the reform’s quiet return, as a rider in the must-pass “Cromnibus” spending package, to kick off a revolt.
“This passed with nearly 300 votes,” said Carney on Thursday night, after the House had voted on the Cromnibus, and as legislators of both parties congratulated him or wished him Merry Christmas. “It would have been more than 300, like some of the other bills we’ve done, if there wasn’t this toxic description of what it might do. Unfortunately, the world we live in, the political world, is one of perception. I try to deal with the facts. Sometimes that’s at odds with the way we do work here, where you get these political narratives that take on a larger than life part of the discussion.”
Put it this way: Carney was not Ready for Warren. For the better part of two days, most of his fellow Democrats approached the Cromnibus—which did not de-fund the president's immigration order, or the bulk of the Affordable Care Act—as a sell-out of cosmic proportion. This started when Massachusetts Senator Elizabeth Warren gave a Wednesday floor speech challenging her colleagues to restore swaps push-out, which prohibited banks from booking derivatives in their own subsidiaries.
"The financial industry spent more than $1 million a day lobbying Congress on financial reform, and a lot of that money went to former elected officials and government employees," said Warren. "And now we see the fruits of those investments. This provision is all about goosing the profits of the big banks."
The backlash should have been predictable. As Carney recalled, the original bill to change the swaps rule lost some votes after critical media coverage. More specifically, the New York Times reporters Eric Lipton and Ben Protess noticed that Citigroup had practically written the swaps language; its "recommendations were reflected in more than 70 lines of the House committee’s 85-line bill."
Yet it didn't become "toxic" until the fight over the "Cromnibus." Warren made the swaps language infamous. In the House, she found an impromptu whip team led by Illinois Representative Jan Schakowsky and the party's ranking member on the Financial Services Committee, California Representative Maxine Waters. She found an ally in the Minority Leader, California Representative Nancy Pelosi, who took the floor on Thursday to warn that the swaps rule was exactly the sort of time-bomb that could create another financial crisis in the pattern of 2008.
This rattled the Democrats' appropriators, some of whom were heading for the exits. Virginia Representative Jim Moran spent a good part of Thursday telling reporters that Warren was "running for president" and drowning Democrats in her ambition.
"She obviously has a lot of influence," said Moran after the votes. "The media listens to everything she says."
And that was why she mattered—and would continue to matter, even as she rebuffs admirers who want her to wage a quixotic presidential campaign against Hillary Clinton. Warren's rebellion was an omen of what Republicans could expect from the Democrats in January, when they took command of the Senate and a larger majority in the House. Warren had led most of the party's left in an impromptu alliance with the inconsolable Republican right. Only 162 House Republicans voted for the "Cromnibus," which augered a future in which Democrats could determine whether key bills passed or failed. The Democrats, freed of the burden of congressional leadership, could make the Republican bills infamous. They could even do so while separating themselves from the Obama White House.
That happened with the "Cromnibus." House Democrats augmented their criticism of the swaps provision with an attack on an equally infamous rider inserted by incoming Majority Leader Mitch McConnell, which allowed individuals to give roughly 10 times as much money to party committees as they're currently allowed. In conversation after conversation, House Democrats twinned the measures, accusing Republicans of doing Citigroup's bidding then opening up a parlor room where the lobbyists could deposit their checks.
"If we sign up for a bill that, on the one hand, says we're going to allow the big banks that ruined the economy to make even more money by maintaining dangerous derivatives on in-house and taxpayer money, and in the same bill we say the same people can give even more money as a reward for their swaps push-out, then the optics are so bad and so ugly that I don't want to be associated with it," said Minnesota Representative Keith Ellison, a leading House progressive.
Most Democrats agreed with him. They proudly told reporters that calls from the White House—especially calls from JP Morgan Chase's Jamie Dimon—did nothing to move them.
"My friend, President Obama, knows better than to think they can change my mind," said a smiling Schakowsky.
Other Democrats talked about the swaps rule as a direct threat to their constituents. California Representative Mark Takano left a lengthy House meeting on the Cromnibus, where White House chief of staff Denis McDonough had personally appealed for votes, comforting Florida Representative Corrine Brown. Both of them represented districts—the Inland empire, central Florida—that had been walloped by foreclosures. Brown was choking back tears.
"They don't think we care about all the people who lost their homes in the foreclosures?" she asked. "The bankers never went to jail! To give them a blank check to do it again is just totally unacceptable."
"We represent the middle class," said Takano. "People move to our areas to get homes, to get footholds for the first time in their lives. I can't go back to telling my district that we're going to allow the banks to gamble more, be on the taxpayer hook when they fail, then give more money to campaigns."
Warren's savant mastery of the media enabled some of them. But she didn't create the sentiment. The Democratic conferences in the next House and Senate will be, famously, deprived of any conservatives from the deep South. The Blue Dog caucus that was most open to entreaties from Wall Street has been reduced to a harmless rump.
At the same time, as Oregon Representative Earl Blumenauer pointed out, the Republicans' House majority will include 26 members whose districts were won twice by Obama. Its Senate majority depends on states like Illinois, Pennsylvania, and Wisconsin, where the next Democratic ticket could run at least as strongly as Obama. On the left, it's universally believed that the Democratic Party lost its appeal because the middle of the country started to blame it for collusion between government and banks, government and big pharma. If the brief Thursday rebellion created nothing but a story about Jamie Dimon begging them for support, and largely being rebuffed—well, that's the brand they want for their party.
It'll just require some help from the Republicans. The only reason that Democrats nearly derailed the Cromnibus was that a group of hardline conservatives refused to back a bill for their usual reasons—it funded the ACA, it left immigration policy untouched, it didn't balance the budget by Tuesday. "It really is reprehensible that the president would be making calls to Democrats to get votes for a bill that fully funds the Obama agenda," said Minnesota Representative Michele Bachmann, who spent part of her final day in Congress flogging a short-term CR idea, and part of it taking photos of favorite spots.
Over the next year, Democrats want more left-right convergences like that. They know that voters blanche at anything seen to be a gift to Wall Street. Those that survived the Tea Party year of 2010 remember how Republicans campaigned on that. One iconic and representative commercial for now-Senator Rand Paul, in his Kentucky race, attacked an opponent for taking "campaign money from the very people who supported the bailouts."
They know they can make this infamous. They know, for two years, that they have no other leverage against financial institutions. That's going to mean more alliances with right-wingers, and more befuddlement for the party's deal-makers. It has very little to do with a presidential campaign; it's about limiting how much of the 2009-2010 progressive legislation can be undone in riders added to must-pass bills. "The next 25 months," said Blumenauer, "are about [President Obama's] legacy." And Warren might be in a better position to defend it than Obama is.