Senator Elizabeth Warren, a Democrat from Massachusetts, speaks during the Democratic National Convention (DNC) in Philadelphia, Pennsylvania, U.S., on Thursday, July 28, 2016. Division among Democrats has been overcome through speeches from two presidents, another first lady and a vice-president, who raised the stakes for their candidate by warning that her opponent posed an unprecedented threat to American diplomacy. Photographer: David Paul Morris/Bloomberg
While Hillary Clinton may be president, the sheriff of Wall Street will be Senator Elizabeth Warren © Bloomberg

Wall Street people, or their lobbyists and lawyers, are spending a lot of time parsing the Democratic party’s policies and presidential candidate Hillary Clinton’s speeches or musings about economic policy. Moneyed financial-sector Democrats are writing cheques and showing up at supposedly elite campaign events.

Cynics, including most of the US public, figure that Wall Street will have bought the next Democratic administration. They are wrong. Contrary to what you might expect from historical experience, Wall Street is going to get little, if anything, for its money.

Betting websites such as Iowa Electronic Markets give the Democrats about a 75 per cent chance of winning the presidential election in November. But while Mrs Clinton may be president, the sheriff of Wall Street will be Senator Elizabeth Warren. The senator, her progressive allies and her policy wonk followers have a lot to say about the financial sector. And not the sort of sugary reassurances you hear at high-end fundraisers.

The key to the progressives’ Wall Street strategy is that it is not centred on a list of legislative proposals, but on databases of prospective appointees to regulatory and administrative positions. The Warren-istas understand that the Republicans are likely to have just around half of the Senate, and are likely to retain control of the House. The bad news, for Ms Warren’s supporters, is that new laws will be hard to pass. The good news is that the existing laws, including Dodd-Frank and the SEC’s governing legislation, already give future appointees all the authority they will need.

What they do not believe they need is Wall Street experience. Marcus Stanley, policy director of the union-backed Americans for Financial Reform, the investor group, speaks for many progressives in stating: “We are reversing the status quo of many decades.”

The key moment for the next generation of Democratic party financial policy people came in January 2015, when former Lazard banker Antonio Weiss failed to obtain Senate approval for his appointment as undersecretary of the Treasury for domestic finance. That job was just the sort of important, but under-the-radar, position that would have been routinely filled by a Democrat-friendly Wall Streeter. But Mr Weiss was denied the necessary votes. He eventually asked the White House to withdraw his nomination. He was made an adviser to Treasury Secretary Jack Lew, with no administrative authority.

“That was an important moment,” says a satisfied progressive Wall Street critic. “Mind you, with all the money and power at stake, this sort of fight will recur. But I don’t think you would have seen that kind of opposition to a White House appointment of a Wall Streeter before the global financial crisis.”

Progressives believe their main victory under the Obama administration was the establishment of the Consumer Financial Protection Bureau, which has relative freedom from the vicissitudes of the Congressional budgeting process and a wide range of powers. They are also committed to the restrictions on the banking industry created by the Dodd-Frank law.

However, the CFPB, Dodd-Frank and bank regulation are kind of yesterday to the progressive activists. In the future, they particularly want more say over the Securities and Exchange Commission, the US regulator, and, through the watchdog’s authority, over the asset management industry.

Katy Milani, a financial reform activist at the Roosevelt Institute, a think-tank, in New York, says: “We are looking more broadly at shadow banking. We think among the key components there are leverage requirements.”

Interestingly, the progressives are somewhat less fascinated than they were in designating specific institutions as systemically important financial institutions. Rather, as Ms Milani’s colleague Mike Konczal puts it: “I think the conversation is going to evolve from institutions to activities and instruments.”

That means the progressives will spend less time fighting over whether MetLife, the bank, or BlackRock, the world’s largest asset manager, cross some asset-size line to determine whether they should be more strictly regulated as Sifis. Instead, the activists will focus on controlling particular activities of large asset managers, as well as hedge funds with leveraged positions.

Dodd-Frank has provided the legal basis for forcing a more rapid deleveraging of the banking system. Bond market and banking people have tried to make the case that this is leading to a contraction of credit capacity for the real economy.

Mr Konczal rejects those arguments. “I don’t think there is a liquidity problem. There is a lot of crying wolf here. If there is a trade-off with credit for the real economy, we haven’t seen it yet.”

Private equity funds and hedge funds were not as directly affected by Dodd-Frank and the consequent regulations as banks and securities dealers. In future, the Warren-istas plan to use friendly appointees to the SEC as a means to direct more attention to those sectors.

The progressives’ plans for the financial sector are still in the process of being formed. They are absolutely clear, though, that in return for its campaign contributions, Wall Street will only get stale hors d’oeuvres and insincere, robo-signed, thank you letters.

The regulatory and administrative jobs will go to enthusiastic progressives, and, maybe, if they are good, some converts to the cause.

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