Silicon Valley Bank’s demise drives early days of California’s 2024 U.S. Senate contest

DAVIS—

With a slightly crooked mirror in the background, Rep. Katie Porter sat in her room in Irvine and rocked Instagram Live as several regional banks teetered to collapse, depositors frantically seeking to withdraw money. money from their accounts.

Porter told his followers the basics of how banks hold customers’ money, why Silicon Valley Bank was closing, and how as a child the local bank in his Iowa farming town experienced a form of instability. similar.

She also lambasted Republicans and some of her fellow Democrats for voting in 2018 to roll back some regulations and controls under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress passed in the aftermath of the financial crisis more than ten years ago.

“There you go, Republicans didn’t listen and a lot of Democrats didn’t listen,” Porter said in a video that has garnered about 26,000 views. “It’s crazy.”

The second-largest bank shutdown in U.S. history was a telling moment for Porter, whose campaign to succeed Senator Dianne Feinstein has so far been steeped in themes of economic fairness and how whose slowdowns disproportionately hurt low-income people.

Still, the events of the past week are unlikely to become a defining issue in the 2024 U.S. Senate race in California. His two main opponents, Democratic Representatives Barbara Lee of Oakland and Adam Schiff of Burbank, voted against the 2018 rollbacks. Porter was not yet in the House of Representatives, but opposed them during his first campaign. in Congress the same year.

For his part, Schiff supported the original Dodd-Frank passage and in 2014 told The Times that it would be a mistake to repeal this supervision of banks. This week, he introduced a bill with Sen. Richard Blumenthal (D-Connecticut) that, if passed, would seek to claw back bonuses and stock sales from bank executives in the two months before the collapse of a bank. It would also levy a 90% bonus tax on bank executives who earned $250,000 or more in the year their bank was taken over by the Federal Deposit Insurance Corporation.

Additionally, Schiff’s office sent a letter to several regulators and the Department of Justice asking them to review Goldman Sachs’ role in the demise of Silicon Valley Bank. It was signed by 19 other members of the state delegation, including Lee but not Porter.

“This combination of poor oversight and greedy bank management has proven catastrophic,” Schiff said in an emailed fundraising pitch Wednesday.

In the aftermath of the Northern California bank’s collapse, Lee linked this banking management to his personal history of receiving public assistance and its support for poverty-relief programs. She said the Biden administration’s decisive action to rescue bank depositors averted catastrophe, adding that times of economic uncertainty like this trickle down to voters.

“Their jobs could have been at stake,” Lee said of the bank employees and the startups whose assets she owned. “This is a very important issue for voters. We know that it is the shareholders and CEOs who mismanaged these banks who must be held accountable.

Yet the collapse of the SVB and the bailout of the First Republic have highlighted how the financially precarious state of American life will be a central theme in the race for the Senate – with each candidate striving to impress on voters how he would be an energetic watchdog of the financial sector. .

“Politicians are more aware that people at all ends of the political spectrum are living lives of economic scarcity and injustice,” said entrepreneur and anti-poverty activist Joe Sandberg, who backs a 2024 ballot measure for raise the minimum wage in California. “What’s common in America is living paycheck to paycheck. What’s rare is having financial security.

The bank’s recent failure was followed by the Biden administration which said it would guarantee depositors all of their money, even amounts above the Federal Deposit Insurance Corp’s normal limit of $250,000. Signature Bank also failed and several others revealed they were in trouble. Candidates and people watching the race said middle-class economic hardship would be a major issue among voters across the state.

“I think Katie Porter has a very strong message about the recklessness of financial institutions and the distribution of power in a totally unequal way,” said former Obama communications adviser Bill Burton.

“To the extent that it’s an issue of this campaign cycle, I think it’s too early to say honestly. And while Adam Schiff hasn’t made a name for himself on these issues, I don’t think let it be beyond him to find a way to credibility.

On Tuesday, Porter introduced a bill alongside Sen. Elizabeth Warren — who recently endorsed it — that would repeal a central part of the 2018 reversal of the Dodd-Frank banking laws. If passed, banks with assets of $50 billion or more would be required to more regularly assess whether they have enough liquidity to repay losses in the event of a market downturn and meet more stringent requirements. regarding the amount of capital they hold.

This threshold is currently $250 billion; Silicon Valley Bank’s assets under management were $213 billion.

Porter, a UC Irvine law professor before he was elected to Congress, in an interview with The Times, took a not-so-subtle dig at Schiff, suggesting that his opposition to the 2018 legislation had more to do with his battles with Trump that a deep believed restoration was wrong.

“He wanted to be Trump’s antagonist and in many ways was,” she said, showing her willingness to attack a rival early in the campaign. “It was a vote against Trump. When you look at who else voted for it…it’s a lot of people who were in his kind of political circle of influence.

A spokesperson for Schiff’s campaign said “Porter’s false negative attacks on Adam will only increase the support he enjoys among voters interested in progress on homelessness, public safety and economy, not denigration”.

The longtime congressman from Burbank is best known for his recent work on the Intelligence Committee and his pivotal role in the impeachments of former President Trump.

The former prosecutor seems aware that he needs to move beyond his opposition to Trump and talk about the rising cost of living in a state where homeownership is increasingly inaccessible and the homeless shelterism is endemic. A recent poll by the Public Policy Institute of California found that 55% of respondents were worried about not being able to pay their rent or mortgage next month.

For Schiff, the failure of the SVB is linked to an inherent injustice in economics, which “works for bank managers who take excessive risks with other people’s money”.

“I’ve been so focused on democracy lately,” Schiff said in an interview this week after taking part in a homelessness awareness campaign in his district.

“Economic issues and democratic issues are really part of the same pole. When things don’t work out, when people see their quality of life falling below that of their even more insecure parents or children, they begin to be open to a demagogue who comes along and says only he can fix things. .

A recent Times poll found Schiff had the support of 22% of registered voters, with 20% backing Porter and 6% for Lee. The rest chose other candidates or were undecided. No well-known Republican has entered the race so far.

On the UC Davis campus this week, Porter stood in front of a whiteboard — her signature prop during congressional hearings — in a crowded classroom in front of about 75 cheering students.

There was little mention of the bank’s collapse, with issues focusing more on women’s reproductive rights, environmental issues, and the labor movement. Still, Porter was quick to reflect on her experience in Congress and her love of oversight hearings where she peppered banking and pharmaceutical executives with tough questions.

Freshman Jack Jacobs listened intently, trying to decide who he would like to work for this election season. He had also attended the Schiff event at the university, which he said had a bigger turnout and was held in an auditorium. Environmental issues were a priority for him, but seeking to make the economy fairer through better housing policies was also important.

“I’m looking for someone who’s going to be more liberal. I definitely don’t want a person who is like moderate, who is going to be another [Sen.] Kirsten Sinema or [Sen.] Joe Manchin,” he said, referring to two Democratic senators who recently clashed with their party over voting rights and environmental legislation.

In Arizona, newly independent Sinema is now being challenged on the left by Rep. Ruben Gallego, who this week criticized her for rolling back regulations, saying, “When the bank lobbyists asked me to weaken the banking regulations, I said no. When they asked Senator Sinema, she asked how much – and voted yes. Now we will all pay for his mistake.

Like Gallego, Porter has pointed out how his opponents have taken money from corporate political action committees and sees focusing on the haves and have-nots of capitalism as a powerful issue.

“It’s all about people feeling like there are two sets of rules about the economy,” she said. “Rules for people who are at the very top, and then for the rest of us.”