Next week’s Super Tuesday kicks off a more obscure, but
arguably just as important, election season: the congressional
primaries. Alabama, Arkansas, and Texas choose their nominees for House and
Senate next Tuesday. One of those races has been particularly unusual,
because the incumbent has an acute case of biting the hand that
feeds him. And that tells us something important about the nation’s mood.
Richard Shelby, the 81-year-old Republican from Alabama who chairs the Senate Banking Committee, faces four opponents in his Senate primary, most notably an ex-Marine named Jonathan McConnell who was born in 1982, when Shelby served as a Democrat in the House. McConnell, with boosts from Breitbart.com, is running as an anti-Washington, Tea Party-friendly candidate. Political observers in Alabama say this represents the first serious challenge to Shelby in his 30 years in the Senate.
Shelby has taken the primary seriously, spending much of a $19 million war chest, enlisting outside groups for help, and even going negative on McConnell. No Senate candidate has spent as much on ads as Shelby so far in the 2016 cycle. He needs to get more than 50 percent of the vote to avoid an April 12 runoff. And one of his main targets in the primary, strangely enough, is Wall Street.
I call that strange because Shelby runs the committee with jurisdiction over Wall Street, and has received $2.7 million in campaign contributions from the finance, insurance, and real-estate industries just since he last came up for re-election, according to the Center for Responsive Politics. But this populist moment demands that even a politician stuffed with Wall Street donations must curry favor with voters by bashing the banks.
The most prominent bank-bashing ad looks back at Shelby’s record. “Bailouts reward failure and punish taxpayers,” says Birmingham small business owner Shannon Riley. “When the big Wall Street banks came with their hand out, Shelby said, ‘No way!’ Stood firm. Was the lead Republican voice against them. He refused to put hardworking taxpayers on the hook.” As Riley talks, images of Bank of America, Morgan Stanley, and Wells Fargo buildings roll across the screen. All three institutions gave PAC money to Shelby this year, so you can say they were funding this condemnation of their activities.
Now, the ad isn’t totally implausible. Shelby did vote against the TARP bailout, and has consistently called it a policy mistake. He also was one of three Republicans to vote for the Brown-Kaufman amendment to Dodd-Frank, which would have put a size cap on the largest banks’ deposits and liabilities. He has always been a somewhat mercurial figure when it comes to finance.
However, Shelby has also been Congress’s lead antagonist to the Consumer Financial Protection Bureau, which Dodd-Frank created. His top priority since taking over the Banking Committee has been relieving large regional banks like SunTrust and PNC from stricter oversight under Dodd-Frank, and rolling back mortgage regulations to allow a freer hand in lending. He succeeded in getting one of these breaks into law, allowing banks to apply for “rural lender” status and be exempt from a series of mortgage rules.
So seeing this opponent of consumer protection regulations position himself as the enemy of the banking industry is striking. And it signals the times we live in, where sentiment against Wall Street—bipartisan sentiment, it turns out—is running hotter than it did even in 2008, when the credit crunch crashed the economy.
It’s not hard to figure out why. For the first time since the crisis, a national political figure is staking his campaign on taking on Wall Street, and is receiving a favorable response. Bernie Sanders’s broadsides against the banks, building on a critique Elizabeth Warren has honed inside Washington for the past several years, have left an indelible mark on public opinion. Incredibly, this feeling has meandered over onto the other side of the aisle; Donald Trump has attacked big financial traders as “paper pushers” who create no value for the country. And Shelby appears to recognize the dangers of being too close to the financial titans, even if you’d expect an Alabama electorate to have other concerns.
In fact, Shelby has not merely run ads to prove his anti-Wall Street bona fides. In a hearing earlier this month with Federal Reserve Chair Janet Yellen, Shelby adopted a piece of Sanders’s Fed agenda, calling for quicker transcript releases of Federal Open Market Committee meetings on monetary policy. Currently the Fed releases the transcripts within five years; Shelby wants it lowered to three, increasing transparency at the institution.
Shelby’s Fed proposals include making the head of the New York Federal Reserve a presidential appointment, instead of having the current board, which includes bank executives, choose the top official supervising their financial activities. It’s an example of how Shelby has moved toward opening up the central bank to greater scrutiny and reducing its institutional power, and it’s part of the trans-partisan coalition that has coalesced around the Fed.
The populist energy driving anti-bank sentiment has only gone so far—in January, the Senate failed to break a filibuster to a bill that would have required the Government Accountability Office to audit the Fed annually. But Shelby, though he had voiced opposition to the bill previously, voted for the audit.
It’s worth noting that one of the most critical advances in financial regulation came about from primary pressure. Blue Dog Democrat Blanche Lincoln, then chair of the Senate Agriculture Committee, authored a forceful crackdown on derivatives in the Dodd-Frank law, primarily because of a primary challenge from Bill Halter in Arkansas. That law has been weakened from its initial aims, and Lincoln, who beat Halter but lost the general election, is now a lobbyist for Walmart, Monsanto, and other big corporations. But the point is that outside pressure has been one of the few ways to get Congress to defy its financial backers and take on the big banks.
Whether from the progressive left or the populist right, loud warnings about the over-financialization of our economy and the propensity of fraud as a business model has made friendliness to Wall Street a political liability—even for an Alabama Republican. Given the public mood, Richard Shelby is not likely to be the last politician mounting an incongruous attack on his own donors.