Senate Democratic leaders have shown little appetite for taking on Wall Street before Election Day, despite urging by one of their star recruits, Massachusetts Senate candidate Elizabeth Warren.

Warren has called on Congress to resurrect the 1933 Glass-Steagall Act, which established a firewall between investment banks that traditionally specialized in speculative trades and commercial banks that historically earned money primarily from lending.

If Warren, an outspoken critic of Washington’s oversight of the financial services industry, wins in November, it could put her on a collision course with Senate leaders.

Senate Democratic leaders have carefully avoided a major confrontation with Wall Street this year, when millions of dollars are already flowing to Republican-allied super-PACs from anonymous donors.
Many Democrats are already squeamish about President Obama’s campaign attacks on Mitt Romney’s career at private equity firm Bain Capital, worrying they are being seen as attacks on Wall Street.

“We didn’t get Glass-Steagall in the big reform,” said Robert Weissman, president of Public Citizen, which supports stronger federal regulation. “That and many other limitations of Dodd-Frank are testament of the power of Wall Street.

“I don’t think the JPMorgan debacle is sufficient to overcome the political power of Wall Street. It’s going to come from some combination of more financial crisis and grassroots demand,” he said.

Critics of Wall Street’s trading practices believe the law’s repeal ultimately led to the 2008 financial crisis and still poses a serious risk to the economy.

They cite the recent revelation that JP Morgan lost at least $2 billion and possibly much more over the course of a few weeks because of a massive bet.

Former Sen. Byron Dorgan (D-N.D.), who was the Senate’s most outspoken defender of Glass-Steagall while in Congress, said Warren should expect a forceful pushback.

“It’s very hard because you’re taking on Wall Street, and Wall Street has substantial clout in Congress,” he said. “They were able to substantially dilute Dodd-Frank. Even what it required was fought bitterly by Wall Street. It will be hard to get it done but not impossible.

“There are plenty of members of the caucus who believe you have to re-impose Glass-Steagall,” Dorgan said. It is one of the few proposed reforms of Wall Street to draw bipartisan support.

Sens. Maria Cantwell (D-Wash.) and John McCain (R-Ariz.) introduced legislation in 2010 to restore the safeguards of Glass-Steagall and Sen. Richard Shelby (Ala.), the ranking Republican on the Banking Committee, voted against the repeal of Glass-Steagall in 1999.

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