Dems in ‘Toss-up’ Races Turn to Wall Street for Campaign Funds

After voting to deregulate the banks, Senate Democrats in close races are funding their campaigns with bank industry money

Dems in ‘Toss-up’ Races Turn to Wall Street for Campaign Funds
Former Sen. Heidi Heitkamp (D-N.D.) donated $750,000 of leftover campaign funds to create the One Country Project.

Four Democrats who voted for a banking deregulation bill earlier this year and are now in dead-heat re-election races have received large contributions from banks and financial interests, compared to the amount received by most senators, a Sludge review of campaign finance data shows.

In March, 17 Senate Democrats, including four who are currently in the most competitive races, broke with the majority of their caucus to vote for Sen. Mike Crapo’s (R-Idaho) bill to roll back regulations on the banking industry (S. 2155). The bill primarily benefits medium-size banks, with assets worth between $50 billion and $250 billion, but it also includes provisions that could help giant bank-holding companies like Goldman Sachs, as well as the smallest community banks. The bill was signed into law on May 24, 2018.

According to the most recent Cook Political Report ratings, the four senators in highly-competitive “toss-up” races in which “either party has a good chance at winning” are Joe Donnelly (D-Ind.), Heidi Heitkamp (D-N.D.), Bill Nelson (D-Fla.) and Claire McCaskill (D-Mo.).

If the Democrats have a shot at taking control of the Senate, they have to flip several seats that are currently in Republican control and, just as importantly, they have to hold onto these seats that are held by Democrats but are facing strong challenges from Republicans.  

Out of 100 senators, Donnelly, Heitkamp, and McCaskill each rank in the top five recipients of campaign contributions from PACs and employees of commercial banks during the current cycle, according to data compiled by OpenSecrets. Nelson does not rank as high for bank contributions, but he has the eighth highest total from the securities and investments industry, including contributions from several companies that lobbied for the Crapo bill.

The amount of money available for candidates to spend on campaign expenses is often a major factor in electoral outcomes. A 2014 study from Represent.Us, reported by Vox, found that campaigns that spend more money than their opponents win their elections 91 percent of the time.

Some experts think these Democrats support banking deregulation legislation, like the Crapo bill, because they know it helps them fund their re-election campaigns.

“I do think that money is the root of all evil when it comes to banking legislation, and campaign contributions figure at the front of that calculation,” said Bart Naylor, a financial policy advocate at watchdog group Public Citizen.

“I think that what [the four Democrats] were doing was taking a measure as to, ‘Is the trouble I’m going to get in with my constituents when they are made aware of this worth what I expect to get from the banking industry?’” said Naylor. “I think they made the calculus that it was worth the money.”

No senator—Democrat or Republican—has received more campaign money from the banking industry this cycle than Heitkamp, who is in a dead-heat in North Dakota against Republican House Rep. Rick Berg.

As of September 24th, Heitkamp had received $266,000 from PACs and employees of commercial banks, such as JPMorgan Chase and Citigroup, plus another $70,000 from Goldman Sachs, which reported lobbying on the banking deregulation bill and will benefit from a provision requiring the Federal Reserve to custom-tailor its enhanced oversight of the largest, systemically-important financial institutions.

In addition, Heitkamp’s leadership PAC, Dakota Prairie PAC, has received contributions from the PACs of several trade groups and companies that supported and lobbied on the banking bill, including the American Bankers Association ($10,000), Mortgage Bankers Association ($10,000), JPMorgan Chase ($10,000) and Regions Bank ($10,000).

Donnelly, who is running neck and neck with Republican challenger Richard Mourdock in Indiana, has received $200,000 from the banking industry since the beginning of 2017, more than all other senators but two.

Donnelly has received $59,250 from individuals affiliated with Signature Bank, a growing medium-size bank based in New York City that had about $44 billion in assets as of March 31. Signature Bank would have been designated a “systemically important financial institution” (SIFI) and faced heightened regulatory standards once it passed $50 billion in assets, but now that the Crapo bill is law it won’t be designated a SIFI until it reaches $250 billion in assets.

Barney Frank, the former House Democrat whom the Dodd-Frank financial reform bill is named after, has served on the board of directors for Signature Bank for the past three years. During the debate, Frank was publicly supportive of the Crapo bill, and his endorsement was cited by the bill’s supporters in Congress, including Heitkamp, as they argued against their colleague’s objections.

Donnelly has also received contributions from several lobbyists who reported lobbying the Senate on the Crapo bill and related issues. Sean D’Arcy, a lobbyist at Akin Gump Strauss Hauer & Feld who lobbied the Senate on “matters relating to federal banking law and regulation” for the American Bankers Association, gave $1,000 to Donnelly’s campaign. Michael Levy, a lobbyist at Brownstein Hyatt Farber Schreck who lobbied the Senate on S. 2155 for the Promontory Interfinancial Network, also gave Donnelly $1,000.

McCaskill, who is in a tight race against Republican Josh Hawley in Missouri, received $174,000 from the banking industry this election cycle, more than all but four members of the Senate.

McCaskill has received $30,000 from individuals affiliated with Morgan Stanley, plus another $2,500 from Morgan Stanley’s PAC. According to disclosures filed with the Secretary of the Senate, Morgan Stanley hired Crossroads Strategies to lobby the Senate on S. 2155, among other things. Morgan Stanley could benefit from a provision in the bill that directs regulators to allow bank holding companies to exempt their central bank reserves from the supplemental leverage ratio, which was designed to limit large banks’ leverage, potentially making them less stable in a crisis.

McCaskill has also received $17,000 from Goldman Sachs, $36,000 from Wells Fargo, and $18,000 from the US holding company of UBS, a Swiss bank that would likely benefit from the bill.

While Nelson is not a top recipient of contributions from the banking industry, like Heitkamp, Donnelly and McCaskill, he still received $17,000 from Morgan Stanley, $15,000 from Wells Fargo and $12,000 from Goldman Sachs. He has also received $8,000 from SunTrust Bank, an Atlanta-based bank with $199 billion in assets that would be deregulated under the bill’s lifting of the floor for SIFIs. SunTrust reported lobbying the Senate on S. 2155 in quarter 1 and quarter 2 of this year.