The failures of Silicon Valley Bank and Signature Bank have emerged as turning points in key Senate races heading into 2024, with Democrats quick to seize on the issue and in some cases attack their opponents over it.
In California, Reps. Katie Porter (D), Barbara Lee (D) and Adam Schiff (D) — who are all vying for the seat being vacated by retiring Sen. Dianne Feinstein (D) — have made the role of banks a central focus of their campaigns over the past week.
Arizona Rep. Ruben Gallego (D), who is running for Senate, has used the failures to criticize his potential rival, Sen. Kyrsten Sinema (I), over her ties to the financial world. And Ohio Sen. Sherrod Brown (D) has called for tougher regulations as he faces a competitive reelection next year.
“One of the basic pillars of a functioning modern economy is that people are confident that their money in the bank is safe,” Joe Sanberg, a Democratic mega-donor based in California, told The Hill. “We were so close to that totally breaking down.”
“The best governance is the governance we don’t notice because it stops problems before they emerge,” Sanberg said.
The development comes as Republicans ramp up their critiques of the Biden administration and other Democrats, signaling it could be a likely line of attack heading into next year.
Most of the focus on the GOP side has been at the presidential level, where candidates have already started labeling Biden as ineffective and suggesting Democrats are too focused on things like inclusion standards and haven’t paid enough attention to oversight.
“Going after Biden over the SVB collapse is good politics for Republicans,” said Keith Naughton, a GOP consultant and principal at Silent Majority Strategies.
“Now that it has come to light that SVB handed out a ton of bonuses and loans on the eve of their meltdown, GOP candidates can make the case that Treasury and Biden were asleep at the switch and are sticking taxpayers with the bill,” he said.
Former South Carolina Gov. Nikki Haley, who is running in an open Republican presidential primary with hopes of taking on Biden, sharply condemned the president’s moves.
“Joe Biden is pretending this isn’t a bailout. It is,” Haley wrote on Twitter. “When the Deposit Insurance Fund runs dry, all bank customers are on the hook. That’s a public bailout. Taxpayers should not be responsible.”
Florida GOP Gov. Ron DeSantis, a likely White House aspirant, first claimed banks were too focused on diversity, and then blamed overall management problems while leaving out that he previously championed fewer regulations.
Naughton said that Republicans would be wise to focus on painting the opposition as corrupt.
“With such a large customer base of rich tech firms that support Democratic causes, Republicans have a strong corruption angle to use as well,” he said.
But Republicans looking toward 2024 will nonetheless have to juggle the Trump factor in their campaign calculations. Former President Trump, who’s gaining momentum in some polls, signed a 2018 law relaxing regulations that Democrats say contributed to these current banking problems.
Candidates in California, one of the most liberal states in the country, are already trying to drive home that point.
Porter, a key ally of Sen. Elizabeth Warren (D-Mass.); Lee, a liberal anti-war advocate; and Schiff, who’s deeply involved in oversight and foreign policy, all agree that more regulation is needed. Lee and Schiff voted against the deregulation legislation before Porter, who has been outspoken on consumer rights, came into office.
Schiff wrote a letter to the Department of Justice, Securities and Exchange Commission, and Federal Deposit Insurance Corporation asking to explore what role if any Goldman Sachs played in the SVB debacle. He also put forward a proposal to curb high pay for some banking executives in the wake of such massive failures.
Porter, meanwhile, has tied her previous statements warning about banks’ overreach to fixes while in office now. She recently introduced with Warren legislation that would repeal that 2018 banking deregulation bill.
“Obviously Katie Porter will be a major player in the discussions moving forward,” said a progressive campaign strategist. “She also predicted the crisis years ago,” the source added. “Porter reasonably could be getting national attention on this.”
In Arizona, sharper lines are being drawn between Gallego, a congressman from a working-class background, and Sinema, who hasn’t yet announced whether she’ll run for reelection but who’s nonetheless emerged as his main opponent.
Gallego has focused on Sinema’s ties to the business sector. In 2018, Sinema, then a Democrat, and other centrists voted to ease regulations, a decision that progressives are hoping will haunt those running for reelection.
“As the dust settles on the SVB bailout and we wait to see if there are any criminal implications for the bankers involved, [Arizona] seems like a good place to start asking how people feel about bankers getting away with giving themselves bonuses as their customers were left in freefall,” said the progressive strategist.
It’s “obviously a part of the larger case Gallego is making for next year, that Sinema consistently sides with bankers, hedge fund managers, and billionaires over everyday people,” the strategist added.
As the fallout continues, a source familiar with Gallego’s campaign signaled that they plan to emphasize how the systematic failures can impact ordinary lives at home. The campaign also intends to keep hitting Sinema on her ties to Wall Street and corporate donors.
On Thursday, they got a jump start on that after Politico reported a lengthy account detailing her closeness to the corporate sector, including private equity. “The only people she’s willing to fight for are tax cheats and private equity billionaires,” Gallego wrote in a statement after the story was published. “She’s already auditioning for her next job in private equity.”
A spokesperson for Sinema said she “does not comment on campaign politics.”
Still, some argue that there’s an appetite across the country for a more moderate approach to reform and that the rhetoric around banking from some of the most liberal figures in the Democratic Party is not always helpful.
Some are looking to Brown, who is gearing up for what’s likely to be a competitive race in Ohio, to strike that balance.
The Senate Banking Committee’s chairman is expected to have a highly visible role in oversight from his position on Capitol Hill. On the campaign trail, he’ll also have to convince voters in a state that has been steadily trending red that his approach to economic populism is viable.
He recently said the committee will hold a hearing on the two banks’ failures, saying it’s “critical” that lawmakers “get to the bottom of how Silicon Valley Bank and Signature Bank collapsed” in order to better serve and safeguard the public.
“Sherrod I’ve watched a lot and I really like,” said Tim McCarthy, the former president of Charles Schwab.
McCarthy, however, cautioned that Brown may be tempted to tack toward his party’s left wing, especially when voices like Warren and other liberals in the Senate are loudly sounding alarms.
“He gets into the same thing that any kind of politician does,” he said. “If he doesn’t do a certain amount of lip service to an old socialist cause, then he gets pulled down. He’s a bit hamstrung.”
“But at least he’s balanced and reasonable,” McCarthy added. “He has to sing the story a little bit.”