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What the rise of Wall Street foe Liz Warren means

Democrats got trounced in the midterm elections but one member of the party seems to have come out of the wreckage looking stronger than ever: Sen. Elizabeth Warren of Massachusetts.

In just the last week, Democrats elevated Warren to the party leadership in a role created just for her. She will serve as "strategic policy adviser to the Democratic Policy and Communications Committee," a role that basically means she will bring a strong progressive voice to the party's decision making process as it decides how to engage with the new GOP majority.

Warren this week also got a rock star's welcome at the Democracy Alliance meeting in Washington, a gathering of wealthy liberal donors who greeted the senator with cheers of "Run, Liz, run!," a reference to a 2016 presidential campaign that Warren has (mostly) said she will not engage in.

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The Warren adulation has important ramifications heading into the next Congress and the 2016 campaign cycle. It means the main lesson Democrats took away from 2014 was that they failed to fire up the progressive base with a stronger message on the economy, immigration reform, Wall Street regulation and other issues that tend to energize the left.

And that makes it even less likely that the Senate Democratic leadership will want to give ground to more moderate members of the caucus who want to cut deals with Republicans on deficit reduction, trade, taxation or other issues.

Senator Elizabeth Warren
Getty Images
Senator Elizabeth Warren

The early plan from Democrats instead seems to be to double down on strong opposition to the Republican agenda and begin to build back the "Obama coalition" of younger and more diverse voters for the 2016 races they hope will give them the Senate back while retaining the White House.

Warren is already flexing her muscles and showing how she conceives of her role as power-player in the Democratic Party.

A senior aide to Warren this week told me the senator plans to oppose President Barack Obama's nomination of Antonio Weiss, a Wall Street investment banker, to be Treasury undersecretary for domestic finance. It's not clear if Warren's opposition will be enough to bring along other Democrats and kill Weiss' nomination through a filibuster in the next Congress.

But it does show that anything that seems even remotely favorable to the banking industry is going to have a tough time moving forward in the 114th Congress. Looking for Democrats to concede any ground on Dodd-Frank reforms that might benefit smaller financial institutions? Don't bank on it.

Weiss, head of global investment banking at Lazard, is widely respected on Wall Street. But he advised on Burger King's acquisition of Canadian doughnut chain Tim Hortons, a so-called "tax inversion deal." But that's not the only thing driving Warren's opposition to him.

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The Warren adviser told me: "She is a no on Antonio Weiss. She was a Treasury official herself, she cares a lot about who is in the domestic finance role. It oversees Dodd-Frank implementation and other core economic policy-making."

The adviser added that Warren "agrees with Senator [Chuck] Grassley that his past work with corporate inversions is a major issue, and she's had growing concerns with the administration being loaded with so many appointees from Wall Street rather than more people who would bring different perspectives."

The adviser also argued that Weiss' mergers and acquisitions background on Wall Street was not a good fit for the domestic finance post. "She also doesn't believe that his investment banking background—which focuses almost entirely on Europe and on international mergers and acquisitions—puts him in a good position to oversee domestic issues like consumer protection and U.S. financial regulation," the adviser said.

The wildly divergent views between Wall Street and progressive Democrats are on stark display here. The finance industry thinks the Obama White House has largely stiffed them on senior jobs and has no idea how markets and the economy actually work. To the Warren world, the administration is rife with Wall Street yes men.

Obama allies scrambled to respond to Warren's opposition, noting that Weiss co-authored a report in 2012 with the Center for American Progress on reforming the tax system to help boost the middle class and has the backing of several progressive leaders, including CAP's Neera Tanden and former National Economic Council director Gene Sperling.

Those two people just happen to be very close to Hillary Clinton, illustrating the other big impact of the continued rise of Warren.

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Clinton still seems like a lock for the Democratic nomination. But until Warren fully forecloses the option of running for president, the former first lady, New York senator and secretary of state is going to have to continue to tack left and embrace the populist movement. She has thus far not displayed any skill at doing so.

And even if she waltzes to the nomination as expected, Clinton could wind up running on a platform and as head of a party well to the left of where she really is, something that may prove exceedingly difficult.

—Ben White is Politico's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money [politico.com/morningmoney]. Follow him on Twitter @morningmoneyben.