The 2008 collapse of Lehman Brothers shook the foundations of the global economy. Ten years later, the bank's failure and ensuing global financial crisis have fundamentally altered the Democratic Party.
On Sept. 15, 2008, the investment bank with more than $600 billion in assets filed for bankruptcy protection, sending U.S. stock markets plummeting. It was a major jolt in what would become the worst economic slowdown since the Great Depression. The post-2008 economic meltdown led to a spike in unemployment, a steep drop in equity values and federal bailouts for large banks and major automakers.
In the years following the crisis, an exasperated political left turned its rage not only on the wealthy bankers and corporations at the center of the storm, but also the politicians who liberals felt did not do enough to punish those responsible. The 2011 Occupy Wall Street movement mobilized masses in the world's financial heart in New York. The following years saw the rise of populist politicians such as Sen. Elizabeth Warren, D-Mass., and Sen. Bernie Sanders, the Vermont independent socialist who mounted a surprisingly strong challenge to Hillary Clinton for the 2016 Democratic presidential nomination.
After the economic mess, the Democratic Party undeniably moved left. That has made its officials more unabashed defenders of the government's role in protecting workers and consumers from economic catastrophe, notable Democrats and party observers say.
"I think [the financial crisis] has generally reinforced the confidence with which we leading Democrats defend a strong role for government. The importance of appropriate regulation," said former Rep. Barney Frank, a Massachusetts Democrat who helped to craft the landmark Dodd-Frank financial reform legislation that became law in 2010. It passed when Democrats had solid majorities in both houses of Congress.
"The era of saying 'the era of big government is over' is over. No Democrat says that anymore," he added, referencing the famous phrase from Democratic President Bill Clinton's 1996 State of the Union address.
The crisis also helped to spark a rise in candidates — including some embracing a "Democratic socialist" label — who push for policies such as free public college or a jobs guarantee for Americans. Those platforms are meant to help the working class move closer to level ground with the wealthy, and partly stem from concerns about economic inequality fueled by the Great Recession.
What is less clear now is how the reverberations of the Lehman Brothers collapse will affect the Democratic Party in critical elections this November and in 2020. While a spat emerged between centrist Senate Democrats and the chamber's more liberal wing earlier this year over support for a GOP-backed bill to roll back some Dodd-Frank rules, Democratic policy watchers doubt bank regulation will drive much intra-party division in the years to come.
Rather, disagreements over the government's role in health care or whether the U.S. should guarantee a job with a living wage may be more likely to surface as Democrats jostle to challenge President Donald Trump in 2020.
"I think there's going to be a fight for defining yourself as the progressive champion because there's this idea that that's where the center of gravity is. I don't think that would have been true without the financial crisis," said Josh Bivens, director of research at the left-leaning Economic Policy Institute.
The financial crisis and the government's response to it amplified a view already held in pockets of the political left: that a rigged economy benefits the rich and powerful the most. The 2008 bailout of the large financial institutions that shared part of the blame for the recession — one of the main tools to limit economic damage — only added to the anger many Democrats felt toward Wall Street after the Lehman demise.
The fact that Obama administration Treasury Secretary Tim Geithner — who aided the Bush White House's initial response to the crisis while at the New York Fed — oversaw the Democratic president's efforts to stabilize the economy frustrated the left. A feeling that the Obama administration did not go far enough to prosecute financial executives who contributed to the crisis stoked even more outrage among liberals.
"The was a disenchantment with the Obama administration's approach to remedying problems that followed the crisis," said Nolan McCarty, a professor of politics and public affairs at Princeton University.
The "center of gravity has shifted toward the progressive, populist wing" of the party, partly as a result of the recession, Bivens said. That shows in the popularity of politicians such as Sanders and Warren, who stormed into the national consciousness in recent years with rallying cries to break up big banks and protect consumers and workers from what they call predatory practices by corporations.
Warren, as a private citizen and a Harvard professor, first proposed the creation of the Consumer Financial Protection Bureau as part of the Dodd-Frank legislation. The Trump administration has largely defanged the agency, which was started to protect consumers from deceptive or abusive practices.
Trump and the years-long push against Dodd-Frank by Rep. Jeb Hensarling, R-Texas, and by former congressman and now-CFPB Director Mick Mulvaney, have also contributed to Democrats' staunch defense of financial regulation. Many GOP lawmakers argued that Dodd-Frank, which in part aimed to monitor systemically important institutions and ensure they would not fail if another crisis took place, put an unnecessary burden on lenders and stifled economic growth. Trump shares the view.
A decade after the Lehman bankruptcy, the top Democrats on the Senate and House committees with oversight of banks cheered the steps to regulate the financial industry and warned against the Trump administration's efforts to roll them back.
"Ten years after Wall Street crashed the economy, you would think Washington would still be vigilant about risks to our economy and American families," said Sen. Sherrod Brown of Ohio, the Senate Banking Committee's ranking Democrat. "But at one agency after another, the rules are being rewritten to suit the special interests, raising the risk that taxpayers will once again be on the hook for Wall Street's recklessness."
Democratic Rep. Maxine Waters of California, ranking member on the House Financial Services Committee, said that "Dodd-Frank has not only made our nation's economy stronger, but also has given Americans confidence in a system that is safer, more accountable and more transparent."
"Democrats remain committed to fighting to protect American consumers from bad actors in our financial system, and ensuring that the Consumer Bureau and other important Dodd-Frank protections are not eliminated or weakened," she said in a statement to CNBC.
Party unity on financial regulation broke for a time earlier this year, when 16 Senate Democrats joined with Republicans to pass a bill rolling back some of the Dodd-Frank regulations. Still, bank regulation isn't expected to be a campaign trail sticking point among Democrats, for now.
The measure raised the asset threshold at which banks are considered too important to fail to $250 billion from $50 billion. Among other provisions, it also made it so smaller firms would no longer have to undergo stress tests or submit "living wills," and it eased mortgage loan data reporting requirements for most banks.
The measure's most vocal champion was Sen. Heidi Heitkamp, D-N.D., who argued the bill would give needed relief to small community banks in her state. Heitkamp is among the 10 Senate Democrats facing re-election this year in states Trump won in 2016. She stood near Trump as he signed the bill in May.
Warren led opposition to the bill. She contended that it could open taxpayers to more liability or make it easier for mortgage lenders to discriminate.
Warren, Heitkamp and Sanders were not available for interviews.
Frank believes Democratic concerns about the changes were overblown, although he also worries about more mortgage discrimination as a result of the law.
Some saw the issue as embodying a wider dilemma in the Democratic Party this year: balancing a general shift toward more progressive ideals with a desire to take back Congress. In particular, younger voters and candidates — who faced burdensome student loans and a difficult job market after the crisis — have embraced more left-wing policies, according to Princeton's McCarty.
The change was most notably manifested when Alexandria Ocasio-Cortez, a 28-year-old New York activist still paying off her student loans, beat high-ranking Rep. Joe Crowley in a Democratic House primary. Ocasio-Cortez, who in November will likely become the youngest woman elected to Congress, won in a heavily blue Queens and Bronx district that Crowley represented for two decades.
And just last week, 44-year-old Boston City Council member Ayanna Pressley defeated longtime Democratic Rep. Michael Capuano in a primary election.
At the same time, many Democrats view courting independents and Republicans as critical to winning the GOP-held seats the party needs to flip to win a House majority. Democrats in red states such as Heitkamp's have touted moderate, bipartisan credentials as they try to keep their Senate seats this year.
Since winning over GOP voters is critical, Democrats must strike a balance and represent centrist, pragmatic interests even as progressives push the party left, some experts say.
"This effort is not going to be a happy marriage. The warfare between centrists and progressives will backfire if it allows President Trump to get re-elected or Republicans to hold onto the House," McCarty said. "It's a marriage of convenience, not love."
But as the midterms and 2020 approach, Frank does not expect centrist Democrats to push for more changes to the law bearing his name. He notes this year's bank bill has not come up much on the campaign trail, where endangered Senate Democrats have drilled into health-care policy.
Experts expect health care, as well as economic issues such as the federal minimum wage or a jobs guarantee, to cause the most debate among Democrats as they decide which vision is best to defeat Trump. While discussions about whether government should have a larger role in health care do not trace perfectly back to the crisis, the job and wage issues are more directly linked, according to Bivens.
Frank sees a few reasons why financial regulation has not surfaced more often as a campaign issue, and may not even in 2020. Aside from disarming the CFPB — which Frank worries has not received enough attention — the GOP has largely backed off talk of repealing financial regulations. That is partly because centrist Democrats indicated they would not go further than the bill passed earlier this year.
In addition, he calls it difficult to campaign on the concept of having prevented a crisis, which is difficult for voters to see.
"It is hard to take credit for the absence of something bad. Unlike, say, health care, which delivers good to a lot of people, the virtue of financial reform is that it prevented a lot of bad," Frank said. "And it is always very hard in a political campaign to take credit for disaster averted."