New to the world stage, President Davis had to prove himself to the Washington establishment and other world leaders. Russian President Sergei Ivanov, also elected in 2004, gained international attention for his aggressive comments and frosty stance towards the United States. Ivanov, known for his provocative statements as Defense minister, defeated Prime Minister Mikhail Kasyanov in a surprise to some western observers. Since the 2002 Moscow Treaty, the enlargement of NATO and election of a pro-western government in Ukraine had provoked nationalist sentiment. In 2004, President Davis had explicitly ran on a platform to end the War in Afghanistan. Approaching its fourth year, America’s end goal was an open question, especially given the struggle to find or even confirm the whereabouts of Osama bin Laden. Insurgent attacks had spread to northwest Pakistan, and al-Qaeda aligned groups were more prominent in north and west Africa. Rather than pulling troops home, new Joint Chief Chairman James L. Jones and President Davis ordered a surge in Afghanistan, to win a war without a goal. Using the loose language of the 2001 Authorization of Military Force against Terrorists, US forces became directly involved in several of these African conflicts as well. Support and training missions were widespread, stretching from Mali to Somalia. Technological developments and practiced mission in Afghanistan had also proved the effectiveness of a new technology – armed “drones.” Flown remotely, these lightweight aircraft could provide hours of overwatch above a location and the ability to strike immediately if a threat was identified, without risking the lives of American servicemembers. It was a powerful tool that was in its infancy under President Gore. President Davis would oversee a significant expansion of its use, including in Pakistan and on African support missions.
Conservative activist groups and conservative House Republicans, bitter after the Supreme Court fight, surged in a base revolt over the holiday season. Talk radio and Fox News chastised their wimpy Washington leaders. Republican Study Committee Chair Mike Pence decried the past year as a “surrender.” A crisis and opportunity offered salvation. The “Fannie and Freddie” scandal would slowly unwind from 2004 into 2006. As the clean-up from Hurricane Karen continued, the damage from the mortgage crisis would grow. For years, Democratic figures had been rotating in and out of the housing giants, taking big fat payouts as their quality of service and operation declined. This rot had been spreading in the private markets as well. Major names like Washington Mutual and Bear Stearns proved to be engaging in extremely risky behavior, misleading their customers and regulators about their financial products. President Davis’s new administration began to crack down on some of the worst practices, but the markets reacted negatively. Touting his efforts in taking on Enron and Arthur Andersen, the Davis Administration had come in with an undercurrent of holding corporate power responsible. As the weaker institutions struggled to avoid collapse and regulatory scrutiny expanded, loans slowed and housing growth collapsed for the first time since the early 90s. SEC Chairman Gary Gensler, when asked about the economic struggles, said he would not apologize for enforcing the law. Federal Reserve Chairman Roger Ferguson was likely a side causality of these economic struggles. Instead of reappointing him in 2006, President Davis elevated his deputy Janet Yellen instead.
Congress began to act as well. Senator Chuck Hagel introduced the Federal Housing Enterprise Regulatory Reform Act which was quickly made a priority given the on-going crisis. With Republican control of the Senate, sweeping hearings were opened and Banking Commitee Chair Richard Shelby became a household name. Unemployment peaked above 6% in December 2005. The off-year elections, reflecting the uncertainty of the moment, were mixed results. New Jersey Governor Jon Corzine was reelected and Republican former state Attorney General Jerry Kilgore won the race in Virginia. While the race was national news in 2001 in the wake of the 9/11 hijacking, New York Mayor Fernando Ferraro's reelection got little coverage elsewhere.
Attempting to seize the moment, House Republicans wielded little power in the minority but compensated with a strong media presence. Their messages on good governance were soon undercut. House Minority Leader Tom DeLay stepped down from his leadership position as a wide lobbying scandal was exposed, involving several other members. Orange County Congressman Christopher Cox, as a compromise between John Boehner and Roy Blunt, was elected as interim Minority Leader. Cox had coordinated the Reagan White House’s response to the Saving and Loans Scandals of the late 80s. Cox’s expertise in the field was seen as an asset in an unfolding, complicated crisis. Cox was diagnosis of thymus cancer. He underwent surgery in January and took several weeks to recover, but was given a clean bill of health and the party selected him as leader for the remainder of the term.
As the financial crisis unfolded, there was still movement by the Gang of 8 on immigration reform. Republican National Committee "autopsies” after the 2000 and 2004 elections both pointed to the need for a softer line on immigration by the party. John Kasich had moderated from Elizabeth Dole, but the party platform had changed little. Davis’s wins in Colorado, Nevada, and New Mexico were critical to his close victory. RNC Chairman Ed Gillespie’s emphasized the need for temporary worker visa reform as a pro-business move. Florida Governor Jeb Bush, who won his Florida gubernatorial election in 1998 with a majority of the Hispanic vote, and his brother George Bush, now President of the influential Business Roundtable, were leading advocates outside of Washington. Although it was of great interest to President Davis, he was already extremely busy with the surge in Afghanistan, Hurricane Karen recovery, and the mortgage crisis. Vice President Dick Durbin took the lead as a key negotiator. Durbin in 2001 had introduced the DREAM Act, a bipartisan move with Utah Senator Orrin Hatch, which had a framework to provide residency to undocumented immigrants brought to America as children.
Much of the groundwork had already been done prior to the 109th Congress in other proposed legislation, like the DREAM Act. 20 years after Reagan’s Immigration Reform and Control Act of 1986, the Comprehensive Immigration Reform Act of 2006 was signed February 8th by President Davis. It combined residency for immigrants with specific paths to citizenship, massive increases in border security, pro-business “blue card” visa reform, and labor-backed crackdowns on unfair hiring practices. The Act was a compromise between a mostly Democrat House bill and bipartisan Senate bill. House Republicans were basically sidelined and were vocal with their frustration. The initial reaction applauded the compromise. As the country struggled with declining job numbers, the popular reaction began to turn negative. At town halls across the country, seemingly spontaneous “Minutemen” protests became to form and decry how it was hurting them, even though most of the provisions had not even taken effect. They were made for cable news events, with angry constituents shouting down their elected officials. Republican Senate leaders in particular felt the blowback, misjudging just how unpopular the immigration reform would be. Respected Washington figures, like Orrin Hatch and Olympia Snowe, were suddenly dealing with potential primary challengers. In a backlash to the backlash, pro-immigrant counter protests also sprung up in cities across the country, although many immigration advocates were disappointed the bill did not go far enough from their perspective.
When Eliot Spitzer came to Washington, it was originally as Solicitor General. It was not a natural fit, his background was criminal and corporate prosecutions, not federal constitution debates. The New York media dubbed him the “Sheriff of Wall Street” during his tenure as New York Attorney General. Even in that role he had gained national attention to the point of being suggested as a potential vice presidential candidate in 2004. With the unfolding financial crises, Davis appointed him as Deputy Attorney General under Deval Patrick. While Patrick kept focused on terrorism and general business, Spitzer from 2005 into 2006 was the face of the Davis Administration for investigations into white collar crime, leveraging a masterful use of media relations to apply pressure outside of the courtroom. The drive that possess a man to reach such high profile and high pressure role though often come with other consequences as well. His bank was concerned with recent payments being made were potential fraud perpetrated against Spitzer and reported the matter to the IRS, which was then reported to the FBI in 2005 under the new provisions Davis signed into law the year before. When the findings were clear on March 7, 2006, FBI Director Jim Johnson directly informed Attorney General Patrick of the open investigation and Davis asked for Eliot Spitzer’s resignation immediately. Patrick publicly announced the investigation appointed U.S. Attorney Patrick Fitzgerald as Special Counsel. The Eliot Spitzer scandal was a juicy story – as Solicitor General and Deputy Attorney General, Spitzer had solicited prostitutes. A panel on the DC Circuit Court upheld Fitzgerald’s appointment and confirmed his appointment as Independent Counsel. The investigation continued to get media attention through the 2006 midterms, much to the chagrin of Democratic candidates. Spitzer’s swift resignation did little to stop the media frenzy around the White House which went into full damage control. But Republican figures did not go unscathed. Louisiana Governor David Vitter, who was getting national praise for his handling of Hurricane Karen, admitted to being a customer of the same service. Vitter had dismissed similar rumors in his 2003 gubernatorial run as dirty politics. He did not immediately resign and asked for forgiveness. Republicans likely did not pressure Vitter further because his Lieutenant Governor was Democrat Mitch Landrieu.
Positive job numbers had slowly been eating away at the unemployment rate, ticking to 4.9% at the end of October. Wages were down overall and few Americans gained any benefits from the Dow Jones Industrial Average rally. The slow and steady improvements were not great headlines though as the Democratic establishment had been fighting negative headwinds the entire year. From the Minutemen protests to frustration over the never-ending war in Afghanistan, the American voter was seen as reacting against overpromises made by Democrats, and Republicans hailed it as a reaction against big government. Republican majorities would control both houses of the 110th Congress. Christopher Cox was Speaker-in-waiting with a 19-seat majority, swinging over 30 seats. It was a mixed map, but Republicans add two seats to their majority. They were disappointed by Rick Santorum’s loss to Bob Casey in Pennsylvania, and unperformed in the Delaware and Illinois special elections. Appointed Senator Ted Kaufman declined to run in Delaware, but Democrats recruited US Attorney Beau Biden, Secretary of State Joe Biden’s son, clearing the primary field and easily won in November. Republican wins in Missouri and Montana were expected, but the biggest surprise of the night was California, the President's home state. Senator Antonio Villaraigosa admitted to longtime rumors of an affair and that he and his wife would be separating. This news came out after the primary, though, and Villaraigosa remained on the ticket. In a squeaker, he was defeated by moderate Republican Condoleezza Rice, Provost at Stanford University. Even with the Senate race victory, Republicans failed to unseat Governor Cruz Bustamante. Actor Arnold Schwarzenegger’s campaign never materialized when his own marital indiscretions were exposed, which allowed wealthy Congressman Darrel Issa to clear the Republican primary. Despite his massive campaign chest, Issa underperformed compared to Rice and came up short.