Rep. Lacy Clay’s Clash With Obama Administration Over Wall Street Reform Haunts His Reelection Fight

A clash between Rep. William Lacy Clay Jr. and the Obama administration over a key Wall Street reform rule is set to reemerge as a flashpoint in the final weeks of the St. Louis congressman’s fight for an 11th term, courtesy of a six-figure ad buy from an anti-monopoly group.

Clay is locked in a rematch with nurse and Black Lives Matter leader Cori Bush, a would-be member of the so-called Squad who lost the 2018 Democratic primary to Clay by a 20-point margin.

In 2009, as the Obama administration was working with Congress to rewrite the rules of the economy to strip out the predatory behavior that helped fuel the financial crisis, the Department of Labor zeroed in on what became known as the fiduciary rule. Put simply, there was no rule that required financial advisers to have the best interests of their clients at heart when making investment decisions or recommendations. Instead, advisers could offer clients high-fee, low-performing investments that would do more to benefit the adviser than the client: a problem that particularly plagued workers at the lower end of the income scale, given their reduced power in relation to advisers, who are generally chosen for them by employers.

The Obama administration proposed a rule that would require financial advisers to have the best interests of their clients in mind, the so-called fiduciary rule. Lobbyists for the investment industry immediately began an assault from all sides on the proposed rule, leading a drawn-out, six-year battle. Central to that strategy was allying with key Democrats on the House Financial Services Committee, who could give a bipartisan gloss to the effort. Clay, a senior member of that committee, played a leading role in the effort. In return, he was flooded with campaign cash from donors in the investment industry, many of whom hadn’t given to his campaign previously.

Here's the anti-corruption ad running against Rep. Lacy Clay starting this week pic.twitter.com/8ms0VcbXG1

— Ryan Grim (@ryangrim) July 20, 2020

Clay’s work on behalf of the financial industry came amid a battle within the Congressional Black Caucus over whether to defend Wall Street reform’s gains. One CBC member on the Financial Services committee, speaking confidentially at the time, said that his colleagues’ work with Wall Street and the GOP had become a glaring contradiction. “People are sick about what they’re doing,” he said. “Some things are just uncharacteristic of certain people. Everybody here has a brand. If your brand is down with the people, standing up for the little guy, then all of a sudden you’re on some bills that have got you helping Goldman Sachs have looser regulations on derivatives? It’s like — wait, what the hell is that?”

Clay is in the awkward position of being on the same side as Trump against Obama in a fight over whether investment advisers should be able to scam retirees.

Among other efforts, Clay organized his Democratic colleagues to join Republicans around a 2015 letter asking the Obama administration to scrap its rule and start over. He signed a similar letter in 2013, arguing that the new rule would drive investment advisers simply to stop working with some clients, disproportionately hitting Black savers..

In April 2016, over the objection of Clay and a bloc of other Democrats, Labor Secretary Tom Perez issued the final rule: a watered-down version, but a significant step forward nonetheless. It was to take effect in April 2017. The drawn-out process, however, would ultimately be the rule’s undoing. The new administration delayed it from taking effect, investment advisers took it to court, and with the administration declining to defend it, it was killed by the conservative 5th Circuit. “The controversial rule requiring advisers to act in their clients’ best interests when it comes to managing retirement accounts is officially dead,” MarketWatch eulogized.

That puts Clay in the awkward position of being on the same side as President Donald Trump against Obama in a fight over whether investment advisers should be able to scam retirees. Indeed, once Trump was in office and the issue became purely partisan, Clay sided with the other Democrats on the committee in opposing the rollback of the rule — a rollback he had previously called for. The Clay campaign declined to comment for this story.

A new anti-monopoly group, Fight Corporate Monopolies, is launching a six-figure ad buy this week focusing on Clay’s role in fighting against Obama’s conflict-of-interest rule, according to Faiz Shakir, an adviser to the group and the former presidential campaign manager for Sen. Bernie Sanders. FCP is an electoral offshoot of the American Economic Liberties Project, a policy shop focused on monopoly power run by Sarah Miller, a former Treasury Department official and Shakir’s spouse. Two former insurgent candidates, Morgan Harper and Lillian Salerno, are also advising FCP.

Clay has other problems too. A poll of the race conducted by the progressive firm Data for Progress found Clay is polling under 50 percent, a crucial threshold, according to people who’ve seen it. DFP head Sean McElwee said he wasn’t able to share the survey, but it offered “reasons to believe he is vulnerable.”

Ahead of the Missouri primary on August 4, significant firepower is headed for St. Louis in support of the insurgent Bush, according to sources familiar with the planning. Sunrise Movement, fresh off an election victory in Texas and a near miss in Kentucky, is placing its next big bet on St. Louis, throwing in behind Bush. The youth-led climate group also has a well-funded independent expenditure arm that may spend on the race. The advent of such big money outside spending from the left is a relatively new feature of congressional primary politics, making incumbents less safe than they otherwise would be.

This is Bush’s second challenge to the Clay dynasty in Missouri. Clay was first elected to Congress in 2000, taking over the seat from his father, a civil rights activist, who was elected in 1968. Collectively, the Clays have held a congressional seat in the region for 52 years. Bush was one of the first candidates backed by the progressive PAC Justice Democrats in its inaugural campaign cycle in 2018, and was a major character in the documentary “Knock Down The House,” in which Alexandria Ocasio-Cortez played a starring role.

In 2018, Bush was unable to spend on digital ads, direct mail, billboards, or TV. This cycle, she had raised just under half a million dollars by the end of June.

Bush’s part in the film, however, was circumscribed by her 57 to 37 percent loss to Clay, who trumped her by nearly 30,000 votes. In all of 2018, Bush raised just $177,000, and getting her name in front of enough voters to win was a major challenge. The race led to something of a falling out with Justice Democrats, as the group, which had initially planned to assist an entire slate of candidates, made a decision that spring to go all-in on Ocasio-Cortez’s primary race. After Ocasio-Cortez’s June upset victory, the group pivoted to focus on the campaigns of Kerri Harris for Senate in Delaware and Ayanna Pressley for a House seat in Boston, Massachusetts. That left Bush underfunded and outmatched in her August primary. (The campaign manager for Amy Vilela, another of the film’s candidates, is now communications director for Bush’s campaign.)

This time around, Bush has the backing of Justice Democrats. Though the group again has not prioritized her race relative to candidates like Jamaal Bowman in New York, they have raised some $40,000 for her campaign. Bush doesn’t yet have an endorsement from Ocasio-Cortez, who had campaigned for Bush in 2018. But Bush may be better positioned for a win.

This cycle, she had already raised just shy of half a million dollars by the end of June, compared to Clay’s $730,000. This has given her the ability to send $85,000 worth of mailers so far, with another $33,000 budgeted for radio and digital ads in the final weeks, on top of a planned TV ad buy of $50,000 this week. Drivers in St. Louis are also more likely to learn who she is: The campaign has eight billboards around the region, plus 50 4-by-8-foot signs.

Nothing remotely similar happened in 2018, as her campaign was unable to spend on digital ads, direct mail, billboards, or TV, scrounging enough together for some two weeks of radio ads. Toppling a 50-year dynasty without name recognition is effectively impossible, which puts a different gloss on the 37 percent she managed to pull.

Her unique profile could also make for a sizable advantage in this moment: She’s a nurse running in the middle of a pandemic, and a leading Black Lives Matter activist running amid a radical rethinking of the role of police in America. Bush rose to political prominence as a leader of protests following the killing of Mike Brown in Ferguson. Those protests — and the forceful, militarized police response — launched the Movement for Black Lives in August 2014, building to the worldwide protests following the May 2020 killing of George Floyd in Minneapolis.

Evan Weber, political director for Sunrise, said that Bush’s race would be a significant priority, and the group would push its volunteers to make contact with voters, help get out the vote, and donate to her campaign. The added resources are part of a two-pronged strategy: persuade voters who’ve sided with Clay in the past to switch to Bush, and find voters who would be supportive of Bush if they learn about her candidacy.

Earlier this month, Sunrise claimed a significant victory, having gone all-in in Texas for civil rights attorney Mike Siegel, who is running for Congress on the Green New Deal with labor support in a district shot through with fossil fuel production. In the final week of the runoff, the group made more than 100,000 calls in the district.

The organization had also made the nomination of Charles Booker for Kentucky senator a major priority. Booker, a state legislator, was also propelled by BLM protests in Louisville. Had the mail-in voting started a week later, they likely would have won the June primary. The entry of Sunrise into Bush’s race means that many more voter contacts between today and the end of voting on August 4. (Absentee ballots must be requested by July 22.) Most voting is likely to be in-person, given Missouri laws that make it difficult to vote by mail. “Sunrise Movement started with just a small group of young activists dreaming of a better world,” Bush said in a statement. “When we face unprecedented crises like a global pandemic, climate change, and the violence of racism, we must reimagine what’s possible.”

Sunrise’s top political priorities for the remainder of the summer are Alex Morse and Sen. Ed Markey, both Massachusetts politicians. Morse, the mayor of Holyoke, is challenging Rep. Richie Neal, the chair of the Ways and Means Committee in the primary on September 1. Markey is the lead Senate sponsor of the Green New Deal resolution and is being challenged by Rep. Joe Kennedy. The group is also watching the primary challenges to Reps. Rashida Tlaib in Michigan and Ihan Omar in Minnesota, both of whom are significantly ahead of their rivals.

The same group targeting Clay in St. Louis, Fight Corporate Monopolies, is also spending $300,000 against Neal in his primary, making a similar argument, that Neal did the bidding of corporate interests and benefited by reaping campaign cash.

If the group is successful in either race, it could dramatically alter the political ecosystem in Washington for Democrats. For years, Democrats have been able to sign on to letters calling for this or that industry to be deregulated, cash checks from that industry, and never face a reckoning back home. If such work starts to come with a steep electoral price tag, Democrats are likely to pause before allying with industry so quickly.

As of March, Clay reported having just over $450,000 cash on hand, much of that gathered from the types of financial interests that have benefited not just from his efforts to roll back the conflict-of-interest rules, but other behind-the-scenes moves he’s made on behalf of industry.

Retirement advising firm Charles Schwab and the insurance brokers New York Life, Assurant, and State Farm began giving to Clay for the first time after he began his push against the conflict-of-interest rule, giving him a combined $27,500 over the same period. Between 2014 and 2017, firms that had only given him small amounts began majorly upping their giving, including JP Morgan Chase, Citigroup, Goldman Sachs, AFLAC, Edward Jones, Bank of America, and the National Association of Insurance and Financial Advisers. PACs directly implicated by the fiduciary rule gave him some $150,000 overall during the time he fought the rule. Early last year, the American Financial Services Association held a fundraising summit for Clay.

As HuffPost reported previously, more than $500,000 of Clay’s money through the first quarter of 2020 came from political action committees, with nearly four of every five dollars coming from a corporate PAC. Nearly $300,000 of it came from the financial industry generally.