Bloomberg reignites Democratic fight over financial crisis

The ghosts of the 2007 financial crisis are lingering over the Democratic presidential primary, reigniting the battles over Wall Street reform that divided the party more than a decade ago.

Much of the fight is now centered on former New York Mayor Mike Bloomberg, who has steadily risen in the polls.

In response, his progressive rivals for the Democratic nomination such as Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) have ripped Bloomberg for his comments panning tougher financial regulations in the immediate aftermath of the crisis.

The progressive crusaders have painted Bloomberg, a billionaire media tycoon, as the epitome of the corporate greed and recklessness that derailed the global economy and drove record economic inequality.

“It’s a shame Mike Bloomberg can buy his way into the debate,” Warren tweeted Tuesday in response to Bloomberg qualifying for his first Democratic primary face-off.

“But at least now primary voters curious about how each candidate will take on Donald Trump can get a live demonstration of how we each take on an egomaniac billionaire,” she added.

Bloomberg had been critical of the broad overhaul of financial rules when they first took hold, blasting the landmark Dodd–Frank Wall Street Reform and Consumer Protection Act as “stupid” and counterproductive.

On Tuesday, he formally shifted his stance by unveiling his own financial reform plan, one which proposes expanding Dodd-Frank and undoing many of the rollbacks of the Trump years.

Even as Bloomberg’s proposal puts him well within the mainstream of a Democratic Party that has fiercely defended the regulatory framework enacted by former President Obama and which has been chipped away at by Republicans.

“If you ask the Wall Street folks, I think there’s a lot of elements of his plan that they would find very troubling,” said Jason Rosenstock, a financial services lobbyist and partner at Thorn Run Partners.

But Bloomberg’s move to cover his left flank may not be enough to quiet a decade of pent-up frustration among a progressive base that is seeking a candidate to upend the entire financial system.

“It’s indicative of how far the Democratic primary voters have shifted to the left when this proposal is sort of seen as a center-left proposal,” Rosenstock said. “There is a legitimate populist anger against the banks that is probably as old as the republic itself but that the Democratic Party has been able to tap into.”

Bloomberg’s close ties to Wall Street and socially liberal views have often complicated his political ambitions.

A lifelong Democrat, Bloomberg joined the Republican Party in 2001 ahead of his first campaign for mayor of New York City. Bloomberg left the GOP in 2007 and served as an independent for the remainder of his second term and the entirety of his third term as mayor before rejoining the Democratic Party in 2018.

Bloomberg’s prolific financial support for gun control, fighting climate change and anti-smoking initiatives helped build bridges and foster close ties with Democratic politicians. But his entry into the 2020 fray has brought attention to Bloomberg’s past stances on financial policy that are far out of step with the party.

During a 2008 live interview in Washington, D.C., Bloomberg blamed the housing collapse on federal laws to eliminate “redlining,” the practice of denying mortgages to people, typically of color, who would otherwise qualify for home loans based on where they lived at the time.

“Once you started pushing in that direction, banks started making more and more loans where the credit of the person buying the house wasn’t as good as you would like,” Bloomberg said.

The reemergence of Bloomberg’s comments ignited a firestorm among liberals and his top progressive critics. Sanders, Warren and a slew of fair housing advocates condemned Bloomberg’s support for a racially discriminatory practice.

“We will not defeat Donald Trump with a candidate who instead of holding the crooks on Wall Street accountable, blamed the end of racist policies, such as redlining, for the financial crisis,” Sanders said at a Sunday rally in Nevada.

Bloomberg reversed course in his Tuesday proposal, calling for an expansion of the Community Reinvestment Act and efforts to crack down on lending discrimination through greater data reporting.

Lisa Rice, president and CEO of the National Fair Housing Alliance, called Bloomberg’s proposal a “good first step” toward amending his 2008 claims. But Rice also criticized Bloomberg for conflating several distinct anti-discrimination laws and blaming foreclosure victims for predatory tactics.

“Redlining in its historical context has nothing to do with class or income. It’s race,” Rice said, adding that Bloomberg’s 2008 claim “damages these consumers, these people who have been mistreated for centuries.”

“Here’s another person putting them down and saying that they did not deserve to have a home when they absolutely did.”

Bloomberg has sought to recant on his past criticism of Dodd-Frank despite insisting in 2014 that it would prevent banks from making enough money to “provide the financing that this country and this world needs to create jobs and build infrastructure.”

Despite those rules, U.S. banks have reeled in record profits under Dodd-Frank, and the industry as a whole has adjusted to life under the new regime. Bloomberg’s Tuesday financial reform proposal also reconsiders his past opposition to the law and calls for reversing President Trump’s efforts to loosen it.

“Given how profoundly the 2008 crisis undermined faith in the establishment — and given how close it brought the world to economic collapse — authorities everywhere should be doing all in their power to fix the flaws it revealed,” the proposal reads.

Bloomberg will have a prime showcase to convince voters that he has changed his views on the crisis as he faces off with his top rivals. He will be taking the stage on Wednesday in Las Vegas after qualifying for his first presidential debate.