Warren's New Leadership Post: The Implications for Banks

WASHINGTON — Sen. Elizabeth Warren's new spot on the Democratic leadership team has supporters cheering, but it remains to be seen how the role will impact her work on banking issues.

The Massachusetts Democrat was already a progressive star when she came to Congress just two years ago, and she's continued to be a vocal advocate for reigning in the big banks and improving the lives of middle class families.

While her new position as strategic policy adviser to the Democratic Policy and Communications Committee will come with added responsibilities, most expect that she's unlikely to change her message — or her tough tone — anytime soon.

"She's risen to this spot by sticking to the beat of her own drum, and the addition of a new title isn't likely to change her persona or her process," said Isaac Boltansky, an analyst with Compass Point Research & Trading.

Indeed, a day after the announcement of her leadership spot, which is a newly created position, there were reports Warren was gearing up to oppose the nomination of Antonio Weiss to be Treasury undersecretary for domestic finance.

Bloomberg News, citing a person familiar with Warren's position, said the Massachusetts Democrat may oppose his nomination because of his work on corporate tax inversions, which Warren has vigorously opposed.

If so, this would put Warren at odds with the Obama administration and potentially other Senate Democratic leaders.

Yet it's also clear that senior Democrats need Warren. After losing control of the chamber earlier this month, Senate Democrats have already trained their eyes on the 2016 elections, when conditions are better stacked in their favor.

Even as a freshman, Warren was already one of the most sought-after lawmakers ahead of the midterms this year, raising millions of dollars for her fellow Democrats and stumping in battleground states across the country. It's likely her new post is in recognition of that work — with the hope that she can do even more ahead of 2016.

"Life is about to get harder in the Senate when Republicans take control, but this is a seat at the table for all of us — and that matters," Warren said in a fundraising email Thursday, after the announcement by Majority Leader Harry Reid, D-Nev.

Warren will serve as a bridge to progressive groups around the country that have been frustrated with the policies of the past few years.

"The key to having influence is having a seat at the table, having clear positions and knowing how to translate that into policy — so I think that this not just good news for Sen. Warren, it's good news for the Democratic Party and for people who don't want the country to have to suffer again through an economic calamity caused by Wall Street," said Dennis Kelleher, president and chief executive of Better Markets.

Lisa Donner, executive director of Americans for Financial Reform, added that Warren has already been an "incredibly effective advocate" adding that the new position on leadership provides an "elevated platform" for her work.

But what's less clear is what she will do as Congress starts negotiating on key banking initiatives, including changes to the Dodd-Frank Act. Democrats have resisted opening up the financial reform law since it was passed in 2010, but with Republicans now in control of both the House and Senate, the issue is likely to be discussed more seriously. There's also been growing support for tweaks to various provisions from lawmakers on both sides of the aisle — such as raising the threshold for systemically important institutions from $50 billion.

While Democrats are expected to continue to energetically block larger changes to the law, such as changes to the Consumer Financial Protection Bureau, it's very possible there could be a deal on more minor reforms. How Warren would handle being at the leadership table for those discussions remains unclear.

"She's only been in the Senate for two years — and Congress has not accomplished much — but she's yet to have a major legislative accomplishment. There's criticism that she lacks the ability to compromise," said Edward Mills, an analyst at FBR Capital Markets. "What I wonder is, if she's in leadership and part of negotiations, does that bring her closer to understanding what it takes to get the deal?"

Depending on how involved in leadership Warren ends up being, it remains an open question whether she can maintain the same ideological purity that has brought her such success with liberal crowds so far.

"If she wants to be an effective member of leadership, she can't be a free agent," said one financial services executive. "If she really doesn't care, she can be free agent, but she won't be in strategy sessions, and she won't be taken seriously."

It's also unclear how Warren will divide her time in light of her additional responsibilities, and whether she will continue to be as active a force on the Banking Committee.

"With a position of this nature, you have less time to focus on committee work, including hearings and markups," the executive added. "It will take her away, to some degree, from delivering her strident statements."