As election season draws closer, candidates, possible candidates, and would-be candidates have started to flesh out the main issues and themes. Mitt Romney will not seek the Republican nomination for president in 2016. Jeb Bush and Rand Paul are considering bids. Hillary Clinton has announced her intention to run for president, as was expected. The revived Democratic left wants Elizabeth Warren, the junior Democratic senator from Massachusetts, but she will not run. Bernie Sanders, the less-than-charismatic Independent senator from Vermont, has announced his candidacy. New Jersey’s Republican Gov. Chris Christie has not been indicted in the BridgeGate scandal but it has dimmed his presidential prospects and his popularity stands at an all-time low. Wisconsin’s Republican Gov. Scott Walker is also on the list of GOP hopefuls. Pollsters and political experts have their picks of most-likely to succeed. Politicians like Warren, had she decided to run, have really long-shot odds at securing the nomination of the party let alone succeeding Barack Obama as president. Still these candidates serve a purpose: They bring key issues to forefront of the national debate, serve as foils to their more well-known counterparts, and force the heavyweight candidates to defend themselves.
Warren would have been an outsider in the Democratic primaries. But that title belies how important a role she may play in the impending elections. Even though she has not entered the race to challenge Clinton, Warren has actually set the parameters of debate for the leading Democrat, an unusual feat in American politics. Warren’s agenda, topped by her desire for the government to implement greater regulations on the financial sector and her fairly generic version of economic populism, has become Clinton’s agenda, at least to a small degree. Take for an example, Clinton’s comments that “the average CEO makes about 300 times what the average worker makes” and “the deck is stacked in favor of the powerful,” statements The New York Times took as evidence that she was “embracing the ideas trumpeted by Ms. Warren.”
Polling numbers show Clinton to be juggernaut; the latest figures found her popularity surpassing that of any GOP contender in the key swing state of New Hampshire. The results of the latest Bloomberg Politics/Saint Anselm New Hampshire Poll show that even though Clinton’s advantage over Rand Paul, Marco Rubio, and Jeb Bush has narrowed, she still has the lead. And Clinton remains the first choice of 62 percent of likely Democratic primary voters. Other polls show more nuanced results. The CBS News/New York Times poll found that her popularity is divided along partisan lines, with 35% holding a favorable view, 36% an unfavorable view, and 28% a neutral view. Even more importantly, 45 percent rated her as not “honest and straightforward.”
This is why Clinton needs Warren. As the New Yorker’s Ryan Lizza quoted a Warren adviser, the Massachusetts senator can “get her [Clinton] on record and hold her feet to the fire,” and getting a candidate to go on the record during a campaign largely binds their hands. As Jonathan Bernstein wrote for the Washington Monthly in 2012, “what they say [during a campaign] is how they’ll govern.” Clinton may be an economic liberal, but she does stand to the right of her Democratic colleagues with regards to a number of issues. Most importantly, she is far more hawkish than the majority of her party, including President Barack Obama. So Clinton needs Warren to validate her liberalism. And because Clinton is mistrusted by a sizable percentage Democrats, she will not usurp Warren as the voice of the party, which is a win for the Massachusetts senator. If Clinton manages to secure the White House, she will most likely be facing a Republican House and may be even a Republican Senate, meaning she will need a bloc of Senate liberals to push back against Speaker of the House John Boehner (R-Ohio), who has used the specter of the Tea Party to wrest concessions from the Obama administration over the past four years.
Clinton has one major problem: stirring voters out of the lethargy and disillusionment that kept the midterm election turnout low, particularly among Democrats. By comparison, Warren has been able to show to voters she shares their outrage at Washington’s incompetence and close connection to Wall Street. She is one of few politicians that talks about the powerlessness of the average American. A Warren bid would force Clinton to explain how she would help middle class voters, which she needs to do. As Sen. Chuck Schumer (D-N.Y.) reminded his party at a speech before the National Press Club late last year, Democrats are at their best when focusing on policies that strengthen the economic security of the middle class.
Warren took to the Senate floor three times in a single week back in December to rail against Wall Street and financial deregulation. Her final entreaty came hours after the House of Representatives approved a spending bill that would bring sweeping changes to the financial regulation implemented after the 2008 financial crisis, and showed the same populist spirit and disdain for Washington’s preferential treatment of Wall Street that has brought the senator recognition in a Congress known for stalemate and inaction. Her speech sought to leave behind the partisanship that has made legislation near impossible and acrimonious bickering the norm. Her message was simple: Reform does not need to be a partisan issue; regulating the financial sector so that the 2008 crises has no sequel should be made a priority. Warren’s rhetoric encapsulated her, and the nation’s, anger at the architects of the financial collapse in the way that candidate Barack Obama’s captured the aspirations of a nation looking for unity when he made his “A More Perfect Union” address in March 2008 — a speech that is seen as instrumental in his victory.
The problem with financial reform is the stranglehold corporate interests have on Washington’s legislative process. And there is little doubt the influence the business and wealthy elite have on American politics. An April 2014 political science study — “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens” offers evidence that American voters as a broad group are correct to assume they have little influence on policymaking. Princeton University Professor Martin Gilens and Northwestern University Professor Benjamin Page, who authored the study, found that “the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.” In simple language, members of the business and economic elite have power — that the average citizen does not — to influence party philosophy because they are the party; not only do the wealthy and large corporations have the ability to guide policymaking by funding lobbyists and readily donating to campaigns, but members of the business and economic elite are included more regularly in the political process, especially in adversarial roles.
The divide in American political life that Warren is pulling into the spotlight is not that between liberals and conservatives — or Republicans and Democrats — but between individual and corporate interests.
In her December 12 speech, Warren made the 2008 taxpayer-funded $700-billion bailout of the U.S. financial sector a symbol of the power corporate interests have on the United States federal government. The bailout was controversial. Especially in retrospect, with the financial industry’s prodigious recovery, the bailout seemed to be proof of Wall Street’s in leverage in Washington. With the benefit of hindsight, economists and politicians can argue that those in charge could have handled the financial crisis better. While it may be true the federal government should not have bailed out the financial industry, and studies have shown such measures make banks even more prone to risk taking, the decision was not so clear in the wake of the housing market crash. But whether the financial sector should have received bailout funds is now more of a secondary issue, and ensuring a similar crisis never happens again is the primary object. Financial meltdowns benefit very few. Yet the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act — the most significant change to the financial industry since the Great Depression — continues to create political debate. And it is a measure of how partisan American politics are that the reform of an industry that created the conditions for the worst recession since the Great Depression is dividing Washington lawmakers.
Officially known as the Emergency Economic Stabilization Act of 2008, the bailout act authorized the Secretary of the Treasury — then Henry Paulson, who proposed the bill — to spend as much as $700 billion (later dropped to $475 billion) to purchase distressed assets, especially mortgage-backed securities, and supply cash directly to banks. Funds were also distributed to automakers General Motors and Chrysler, insurers like AIG, underwater homeowners, and entire alphabet soup of programs meant to pull the U.S. economy back from the brink of disaster. But the largest chunk — $245.1 billion — went to the banking sector. Bank of America got $45 billion; Citigroup got $45 billion; Morgan Stanley and Goldman Sachs got $10 billion each; and JPMorgan Chase got $25 billion, even though current chief executive Jamie Dimon has said the bank never even needed the funds. He claimed that JPMorgan only took the money “because we were asked to by the secretary of Treasury.” Goldman chief Lloyd Blankfein also later said that he would never have accepted the funds had known the act was “this pregnant with potential for backlash.” However, in November 2009, during a closed-door meeting with the Financial Crisis Inquiry Commission, the organization tasked with investigating the causes of the economic crises, Federal Reserve Chair Ben Bernanke acknowledged that 12 of the 13 most structurally important financial institutions were on the brink of failure when the bailouts were first distributed.
Ostensibly, the bailout worked; American taxpayers did not lose any money, and the financial sector remained solvent. As Obama announced in October 2012: “We got back every dime used to rescue the banks,” and the government profited; to date, the U.S. Treasury has recovered $267 billion through repayments, dividends, interest, and other sources, meaning the government profited by approximately $22 million. Few would argue that the bailout plan was perfect, although research conducted by Michele Fratianni of Indiana University’s Kelley School of Business and Francesco Marchionne of Nottingham Business School did postulate that a poor but timely response is better than a well-thought but late response.
But to Warren the terms of the bailout are symbolic of greater governmental ills: Namely the close bond between major corporations and federal policy making. Her remarks took specific aim at Citigroup, now the country’s third largest bank by assets. When all government bailout funds are considered, the bank got half a trillion dollars in bailouts, about $140 billion more than the next biggest allocation. The Massachusetts senator claimed the financial institution “wields tremendous power in Washington.” Many Wall Street firms “have exerted extraordinary influence in Washington’s corridors of power, but Citigroup has risen above the others,” she continued. “Its grip over economic policymaking in the executive branch is unprecedented.” As an example, she cited the fact that three of the past four secretaries of the U.S. Treasury under Democratic presidents have had close ties to Citigroup, while the fourth was offered the position of CEO, but did not accept. Furthermore, the current Vice Chair of the Federal Reserve system worked at Citigroup, as did the Undersecretary for International Affairs at Treasury and one of the most recent chairs of the National Economic Council. Treasury Secretary Jack Lew, who led the Office of Management and Budget during the Clinton administration and again in the Obama administration, served as the chief operating officer of a Citigroup investment banking unit, which invested in a hedge fund “that bet on the housing market to collapse.” The bailout funds given Citigroup during the crisis saved his bonus. During his confirmation hearing, it came out that his Citigroup contract gave him a handsome payoff if he left the company for top job in the U.S. government.
“That’s a lot of powerful people, all from one bank,” said Warren, bookending her list of the government’s Citigroup alums. But those powerful people are not “Citigroup’s only source of power. Over the years, the company has spent millions of dollars on lobbying Congress and funding the political campaigns of its friends in the House and the Senate.” For reference, the bank spent $5,380,000 in 2014 and $5,630,000 in 2013 on lobbying and made $2,443,626 in contributions in the past election cycle. Even more concerning, and indicative of the close ties between government and Wall Street, is the fact that Citigroup lobbyist literally wrote the text of the rider in the omnibus spending package that weakens the Dodd-Frank Act provision regulating derivative trading. The fact that Citigroup had such an obvious hand in writing a measure that benefited its operations prompted Warren to make such a vocal stand against Wall Street.
That is an attitude that Hillary Clinton would be smart to incorporate into her potential campaign. “Elizabeth Warren. For many Wall Street leaders, the name is like the sound of their impeccably manicured nails scratching against a blackboard,” noted former Federal Deposit Insurance Corporation chair Sheila Bair in a piece for Fortune, succinctly summarizing how Warren has earned her credentials as a populist. “They have tried to marginalize her as left-wing extremist, but so far, her influence and popularity have only grown.” Bair also maintained that the senator is by no means an enemy to business. “The Elizabeth Warren I know respects business and the role it plays in jobs and wealth creation. Yes, she is a champion of the working class, but she couches her arguments in terms of policies that make the markets work better for all Americans. I don’t for the life of me understand what is radical or extreme about that.”
Some may argue, unlike Bair, that Warren is too extreme to ever be president. Some criticized her for opposing the last spending bill when she railed against Republicans for orchestrating 2013’s government shutdown because of their dislike of Obamacare, a move she termed anarchy at the time. But Warren’s voice and her outrage at Wall Street will play a role in the upcoming presidential elections even though she continues to say she will not run for president in 2016. Warren serves as a foil to Clinton, who defended Wall Street as a senator during the financial crisis. Clinton’s friendship with the financial industry does mean she will likely have deep pockets for the 2016 presidential election, as she would bring large industry donors back to the Democratic party for the first time since Bill Clinton’s presidency ended. According to the Wall Street Journal, Wall Street has provided the largest source of campaign funds for the Clintons since 1992. But that relationship has brought bad publicity. And Clinton’s personal wealth has grown into somewhat of a controversy, especially after she told ABC’s Diane Sawyer that: “We came out of the White House not only dead broke but in debt.” These are issues Clinton must face if she runs.
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