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Heading into Election Day, Democrats were optimistic about expanding their majority. That didn't happen. At least seven Democrats lost their seats, including a handful of freshmen who had flipped districts in 2018 that had backed President Donald Trump in 2016. Meanwhile, Republicans held on in suburban areas where Democrats were hoping to make inroads.

Democrats made historic gains in the 2018 midterms when they took the House back from Republicans after being shut out of power in Washington following the 2016 elections when Trump won the White House and Republicans controlled both chambers of Congress.

Republicans had hoped to go on the offensive in 2020 by targeting Democratic lawmakers in Trump districts. When the House voted to impeach the President, Republicans vowed that moderate Democrats would pay a price at the ballot box and warned that impeachment would cost the party their majority. They eventually pivoted to a message about law and order in many districts, trying to tie Democratic candidates to the "defund the police" movement and to the national party.

Amid the devastation of the coronavirus pandemic and ensuing economic fallout, it looked as if the political landscape would benefit Democrats by the closing weeks of the 2020 election, which saw Democrats -- flush in cash -- competing in once-red House districts, while Republicans worked to stem their losses.

Republicans ousted several Democratic incumbents in districts that backed Trump in the last election, including freshman Democratic Reps. Kendra Horn of Oklahoma, Abby Finkenauer of Iowa, Joe Cunningham of South Carolina and Xochitl Torres Small of New Mexico. They also defeated the chairman of the House Agriculture Committee, 15-term Rep. Collin Peterson, whose rural Minnesota district strongly backed Trump four years ago.

Democratic incumbents also suffered losses in South Florida, where they may have been dragged down by Latino support for Trump at the top of the ticket with freshman Democratic Reps. Debbie Mucarsel-Powell and Donna Shalala both losing reelection.

The GOP held onto a number of seats in districts that Democrats had targeted this year and hoped to flip, even in suburban areas that had looked to be moving away from the President. Republicans also put Michigan's 3rd District back in their column after losing it when Rep. Justin Amash, now a Libertarian, left the GOP.

Democrats did flip two seats in North Carolina that court-mandated redistricting had redrawn to be much more favorable to them and were widely expected to go blue.

Privately, Democrats are venting, with moderates accusing liberals of pushing policies easily demonized by Republicans that made it harder to win their races. Liberals argue that it's the progressive policies that are turning out the base -- not incremental approaches favored by centrist members. And many are second-guessing decisions by party leaders, including the failure of Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin to cut a big-ticket stimulus deal in the weeks before the election.

On a tense call Thursday, Pelosi tried to rally her troops by making the argument that Biden had achieved a "mandate" for Democrats -- and that House Democratic losses had more to do with lawmakers running in conservative districts where Trump's base turned out in droves to help reelect the President, according to sources on the call.

"We did not win every battle, but we won the war," Pelosi told her colleagues, sources said.

Manu Raju contributed to this report.

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Democrats keep control of the House, CNN projects - CNN

Many Trump voters in Zapata know one another, and they have formed an unofficial booster club and support group. It includes Ricardo Ramirez, 51, the president of a local bank branch, and Jack Moore, 45, an oil-field construction worker who said the Democrats of 50 years ago are not the same Democrats today.

Many residents in this part of Texas have strong Christian, anti-abortion, pro-gun and back-the-blue views that put them more in line with conservatives than liberals, and in Zapata, there is a strong sense among his supporters that Mr. Trump will bring jobs to the economically struggling region.

In a brief exchange during the final presidential debate, Mr. Biden had said he would transition from the oil industry because of its pollution, a remark that did not go unnoticed by Zapata residents, including Yvette Gutierrez De Leon, 56, who is a secretary for an oil-field services company and who voted for Mr. Trump.

At the end of the day, in the little bit of oil field that is still left, if it goes away tomorrow our county will go away, Ms. De Leon said. Oil is all we have here.

Isela Gonzalez-Lindquist, 42, a saleswoman at a Laredo mattress store, said she voted for Mr. Trump even though she was opposed to his plans to extend the border wall in the area, because she believed it would hurt wildlife and infringe on the rights of property owners.

I want to convey that he is not perfect and we know that, but he is the best candidate for the job, she said. I like Trumps grit and that hes not a career politician.

James Dobbins reported from Zapata, and Manny Fernandez from Houston. David Montgomery contributed reporting from Austin, Texas.

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In Texas, an Emerging Problem for Democrats on the Border - The New York Times

Yet heres one thing I worry about: As we celebrate these ballot efforts, theres a risk that we downplay the threat drugs pose. As Ive written, a quarter of the kids on my old school bus in Oregon are dead from drugs, alcohol or suicide deaths of despair so I strongly believe that decriminalizing drugs should not lead to any relaxation about their dangers.

Under the new Oregon measure, manufacturing or selling drugs will still be crimes, but possession of small amounts of heroin, cocaine or methamphetamine would be equivalent to a traffic ticket. The aim is to steer people into treatment so that they can get help with their addictions.

That focus on treatment, which Oregon will fund with marijuana taxes, is critical. Seattle has in effect decriminalized possession of hard drugs, by exercising prosecutorial discretion, but it never adequately funded social services for people wrestling with substance abuse. That has led to a backlash among voters irritated by open drug use.

We did miss the boat here in Washington State when we licensed cannabis, Dan Satterberg, the prosecutor in King County, which includes Seattle, told me. We should have dedicated much more of the tax revenue to building a better public health response to our behavioral health crisis. The states that are just getting into the pot business should learn from our mistake.

The new Oregon law is modeled after one in Portugal, which pioneered decriminalization and has emphasized treatment of those with addictions. As a result, Portugal now has, along with Greece, one of the lowest drug fatality rates in Western Europe. I visited Portugal a few years ago to report on its drug situation, and I found that while no narcotics policy works as well as we might hope, Portugals succeeds much better than others.

I hope other states will also experiment with addressing addiction through public health measures. A useful next step would be to provide safe injection sites, thus saving lives of many people who now die from overdoses.

Criminalization of drugs in the United States has failed by every metric, notes Alex Kral, an epidemiologist with the nonprofit RTI International. Oregons new policy offers us a much needed opportunity to evaluate alternatives to criminalization of drugs.

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Republicans and Democrats Agree: End the War on Drugs - The New York Times

The worst ideas on the progressives' policy and personnel wish lists including government competing head-to-head with the private sector will be shelved," said Peter Freeman, a principal at FS Vector and a former House Republican aide.

Cliff Roberti, co-founder of Federal Hall Policy Advisors and a onetime House Republican staffer, said a Biden White House and Republican-controlled Senate would be a net positive for the financial services industry especially given pre-election expectations.

Those expectations of a Democratic victory were stoked by polls and financial contributions that indicated the party had a big edge heading into Election Day. But many of the candidates underperformed in battleground states and control of the Senate may remain in flux until early January, when both of Georgia's Senate races are apparently headed for runoff elections.

No matter who wins a majority in the upper chamber, banks and other financial firms still face headaches over Bidens ability to appoint new leaders to federal agencies. But even here he may opt to name more moderates to those posts to avoid confrontations if the GOP takes the Senate, lobbyists said.

Bankers will be in better stead with more stability on the congressional side if Republicans maintain Senate control, said Paul Merski, vice president of the Independent Community Bankers of America. You wont have dramatic shifts in banking policy. The real change may be how you address the regulatory agencies and the Senate could have an influence on that as well.

Progressive groups are so alarmed that they're urging Biden to use every option to sidestep potential GOP obstruction of his nominees. One tool is the Federal Vacancies Reform Act, which allows a president to elevate existing government employees and Senate-confirmed officials to lead agencies.

"From those strategic perches, Biden can reverse much of Trump's unpopular deregulatory rampage," said Jeff Hauser, executive director of the Revolving Door Project.

But most significant legislation would probably not get very far.

All those bills the House has passed over the years waiting for a Democratic Senate may or may not come to fruition, Consumer Bankers Association President and CEO Richard Hunt said.

Since winning control of the House in 2018, Democrats have passed new safeguards for consumer credit reporting and proposed a nationwide cap on interest rates for loans. Those would likely be impossible to enact as law with a Republican Senate, as would Democratic proposals to expand banking services offered by the Postal Service and to create a public credit reporting agency.

The biggest unknown would be the extent to which Senate Republicans would go along with economic relief that Biden and the Democrats as well as Wall Street executives and investors say is desperately needed on a massive scale amid a resurgent coronavirus.

A smaller-scale stimulus bill would be a loss to banks and other financial firms that stood to benefit. But Senate Majority Leader Mitch McConnell (R-Ky.) kept hope alive Wednesday, saying he believes a rescue plan was necessary and needed to be finished by the end of the year.

A stimulus package is still possible, maybe probable, but it will likely be a smaller deal than in a blue wave scenario, Stifel Chief Washington Policy Strategist Brian Gardner told clients in a report Wednesday, when a GOP Senate looked like a strong possibility. We think it will be under $2 trillion, which could disappoint investors.

House Speaker Nancy Pelosi has been pushing for a package of more than $2 trillion, while McConnell has warned that many Republicans will not support a bill that exceeds $1 trillion. While President Donald Trump has sent mixed signals about how much stimulus he favors, Biden has pressed for a new round of substantial aid.

But after that, lobbyists say financial firms should feel relieved.

Biden has pledged to increase the corporate tax rate, raise levies on wealthy individuals and increase capital gains taxes from levels long enjoyed by private equity investors. Those are off the table if the Senate stays in Republican control.

A "Blue Wave" was also expected to unleash layers of new regulations and scrutiny sought by Democrats, as well as progressive-leaning watchdogs that Biden may have nominated for key financial posts, but now all that would face stiff opposition if Republicans keep the Senate. Sen. Elizabeth Warren (D-Mass.), one of Wall Street's biggest critics in Congress, has been pushing to be named Treasury secretary if Biden wins. Bernie Sanders wants to be Labor secretary.

But even without help from Congress, his regulators could move ahead with plans to scrutinize banks for climate change risk and to rewrite anti-redlining rules. How far they go depends on whom Biden hires.

Biden wouldnt need to worry about the Senate confirmation process when it comes to naming temporary leaders of the Consumer Financial Protection Bureau, a powerful independent agency set up by Warren, or the Comptroller of the Currency, which regulates national banks. The former vice president could appoint new heads of those agencies on an acting basis soon after his inauguration and take time securing Senate confirmation for more-permanent replacements.

He would not be able to immediately replace the heads of the Federal Reserve or the Federal Deposit Insurance Corp., unless they stepped down, but Democrats could quickly ascend to acting leadership roles at the Securities and Exchange Commission and Commodity Futures Trading Commission.

Biden's Treasury secretary would lead the Financial Stability Oversight Council, which consists of top regulators across government and was set up after the 2008 financial crisis.

The risk of harmful legislative changes is considerably diminished, and a Republican Senate will provide an important counterbalance to an aggressive regulatory agenda, Roberti said. With that being said, significant regulatory risk will remain for the industry particularly for financial institutions and other heavily regulated sectors.

Biden-picked officials could enact rules to rein in CEO pay and also expand disclosure of corporations' climate-related and political spending activities, said Lisa Gilbert, vice president of legislative affairs for Public Citizen. Graham Steele, a former Senate aide who now directs the Corporations and Society Initiative at the Stanford Graduate School of Business, outlined in the American Prospect last year sweeping steps agencies can take on their own, including capping the size of big banks and cracking down on private equity management fees.

Isaac Boltansky, policy research director for Compass Point Research & Trading, said the combination of Biden and a GOP Senate would benefit the financial industry.

"With the Red Wave off the table, this was the best possible outcome for banks as it effectively takes tax increases off the table and it should foster a renewed sense of structural stability that has been absent in recent years," he said.

"There are broader concerns including the arc of the recovery without sizable stimulus but at least for today, a steady tax code, some fiscal support and a stable macro backdrop is a win for banks."

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Bankers, fearing Democrats' 'worst ideas,' unite in support of divided government - POLITICO

Democrats went into election night anxious, hoping for an opposite result than on election night 2016.

Hours after the first polls closed, they are feeling an overwhelming sense of dj vu as President TrumpDonald John TrumpBiden claims a 'mandate' to govern, calls for end to 'partisan warfare' Mark Meadows tests positive for coronavirus Georgia Senate race between Perdue, Ossoff heads to runoff MORE builds leads in the South and Democrat Joe BidenJoe BidenBiden claims a 'mandate' to govern, calls for end to 'partisan warfare' Mark Meadows tests positive for coronavirus Trump supporters scream at Telemundo reporter during live broadcast from Maricopa ballot center MOREs hopes fall largely on the same states that doomed Hillary ClintonHillary Diane Rodham ClintonSantorum urges giving Trump time to accept defeat: 'This is a very emotional time' Stacey Abrams earns praise as Biden leads in Georgia Nevada Democrat Steven Horsford wins reelection MORE four years ago: Pennsylvania, Wisconsin and Michigan.

Many Democrats went into the evening cautiously optimistic that Biden could defeat Trump. The most hopeful operatives had their eyes on a landslide.

Those hopes began evaporating as Trump built a lead in Florida, and as The New York Times needles showed the president overwhelmingly likely to win not only the Sunshine State, but North Carolina and Georgia as well.

House later, none of those states have been called, but Trump is in the lead in all three. Trump also leads in Texas, another state Democrats dreamed of winning.

I feel the exact same way I felt in 2016: nauseous, said one former Obama administration official. It feels the same.

Another Democratic strategist summed it up this way: Its catastrophic.

This is so much worse than 2016. In 2016, we were surprised. In 2020, we supposedly learned our lesson, the strategist said. And we didn't.

The strategist and other Democrats pointed to Trump's dizzying schedule in recent days where he held multiple events, and they were quick to lay blame at Biden's strategy of trying to play in red states like Georgia and Texas.

At the same time, Biden allies cautioned that it was still early in the night.

Democrats are feeling optimistic that Biden will flip Arizona, where he has built a lead in the populous Maricopa County.

Counts in Michigan, Wisconsin and Pennsylvania, the so-called blue wall that Biden had vowed to rebuild, are ongoing. Counts could go on not only for a number of hours in all three states, but perhaps days, particularly in Pennsylvania.

We still have a path, one Biden ally said. We all need to calm down.

Democratic strategist Eddie Vale also said he felt like it was too soon to draw comparisons to 2016.

I could eat these words, but I think people are over panicking on our side a little, he said.

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For panicking Democrats, 2020 is dj vu all over again | TheHill - The Hill