With a mirror slightly askew in the background, Rep. Katie Porter sat in her Irvine bedroom and flipped on Instagram live as several regional banks teetered on collapse, with depositors frantically seeking to pull money from their accounts.
Porter walked her followers through the basics of how banks hold customers’ money, why Silicon Valley Bank was closing and how as a kid the local bank in her Iowa farm town experienced a similar form of instability.
She also castigated Republicans and some of her fellow Democrats for voting in 2018 to rescind certain regulations and oversight under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress passed in the wake of the financial crisis more than a decade ago.
“Lo and behold, Republicans didn’t listen and a lot of Democrats didn’t listen,” Porter said in a video that attracted about 26,000 views. “That’s bonkers.”
The second largest bank closure in U.S. history has been a told-you-so moment for Porter, whose campaign to succeed Sen. Dianne Feinstein has so far been infused with themes of economic fairness and how these downturns disproportionately hurt people with low incomes.
Still, it’s doubtful that last week’s events will become a defining issue in California’s 2024 U.S. Senate race. Both of her major opponents, Democratic Reps. Barbara Lee of Oakland and Adam Schiff of Burbank, voted against the 2018 rollbacks. Porter wasn’t yet in the House of Representatives but vocally opposed them during her first congressional campaign that same year.
For his part, Schiff supported the original passage of Dodd-Frank and in 2014 told The Times it would be a mistake to repeal that oversight of banks. This week he introduced a bill with Sen. Richard Blumenthal (D-Connecticut) that, if passed, would strive to claw back the bonuses and stock sales of bank executives in the two months before a bank’s collapse. It would also levy a 90% tax on the bonuses of bank executives who earned $250,000 or more the year their bank was taken over by the Federal Deposit Insurance Corporation.
In addition, Schiff’s office sent a letter to several regulatory agencies and the Justice Department asking them to examine Goldman Sachs’ role in Silicon Valley Bank’s demise. It was signed by 19 other members of the state’s delegation — including Lee but not Porter.
“This combination of poor oversight and greedy management of the bank proved catastrophic,” Schiff said in a fundraising pitch emailed Wednesday.
In the aftermath of the Northern California bank’s collapse, Lee connected this bank run with her personal story of having been on public assistance and her support for anti-poverty programs. She said the decisive action of by the Biden administration to rescue the bank’s depositors averted catastrophe, adding that moments of economic uncertainty like this reverberate with voters.
“Their jobs could have been on the line,” Lee said of the employees of the bank and startups whose assets it held. “It’s a very important issue for voters. We know that it’s the shareholders and CEOs who mismanaged these banks that need to be held accountable.”
Still, the SVB collapse and the rescue of First Republic highlighted how the financially precarious state of American life will be a pivotal theme in the Senate race — with each candidate striving to convey to voters how they’d be a forceful watchdog of the financial sector.
“Politicians are more aware that people at all ends of the political spectrum are living a life of economic scarcity and unfairness,” said entrepreneur and anti-poverty activist Joe Sandberg, who is backing a 2024 ballot measure to increase the minimum wage in California. “What’s common in America is living paycheck to paycheck. What’s uncommon is having financial security.”
The bank’s recent failure was followed by the Biden administration saying it would ensure depositors get all of their money, even amounts above the normal Federal Deposit Insurance Corp. limit of $250,000. Signature Bank failed as well, and several others revealed they were in trouble. The candidates and people watching the race said the economic straits of the middle class will be a potent issue among voters across the state.
“I think that Katie Porter has very strong messaging related to the recklessness of financial institutions and the power being distributed totally unevenly,” said former Obama communication adviser Bill Burton.
“To the extent it’s an issue this campaign cycle, I think it’s too soon to say honestly. And even though Adam Schiff hasn’t made a name for himself on these issues, I don’t think that’s beyond him to find a path to credibility.”
On Tuesday, Porter introduced a bill alongside Sen. Elizabeth Warren — who recently endorsed her — that would repeal a central part of the 2018 rollback of the Dodd-Frank banking laws. If passed, banks with $50 billion in assets or more would be required to assess more regularly if they have sufficient cash on hand to pay down losses during downturns in the market and meet more stringent requirements for the amount of capital they hold.
That threshold is currently $250 billion; Silicon Valley Bank’s assets under management totaled $213 billion.
Porter, a UC Irvine law professor before being 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 than a deeply held belief the rollback was wrong.
“He wanted to be the Trump antagonist and was in many ways,” 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 folks that were in his kind of circle of policy influence.”
A campaign spokesperson for Schiff said Porter’s “false negative attacks on Adam are only going to increase the support for him among voters who are interested in progress on homelessness, public safety and the economy, not mudslinging.”
The longtime Burbank congressman is best known for his recent work on the intelligence committee and his central role in the impeachments of former President Trump.
The former prosecutor appears aware that he must go beyond his opposition to Trump and speak to the rising cost of living in a state where home ownership is increasingly inaccessible and homelessness is rampant. A recent Public Policy Institute of California poll found that 55% of respondents were worried they’d be unable to pay rent or their mortgage next month.
To Schiff, the SVB failure tied into an inherent unfairness in the economy, which “works for bank executives who take excessive risks with other people’s money.”
“So much of my focus has been on democracy lately,” Schiff said in an interview this week after participating in homelessness outreach in his district.
“The economic issues and the democracy issues are really part of the same pole. When things aren’t working, when people see their quality of life slipping below their parents’ or their kids’ futures even more in doubt, they start to be open to a demagogue who comes along and says he alone can fix things.”
Recent polling from The Times found that Schiff has the support of 22% of registered voters, with 20% backing Porter and 6% for Lee. The remainder chose other candidates or were undecided. No well-known Republican has entered the race thus far.
On the campus of UC Davis this week, Porter stood before a whiteboard — her signature prop during congressional hearings — in a crammed classroom before about 75 eager college students.
There was little mention of the bank collapse, with questions more focused on women’s reproductive rights, environmental issues and the labor movement. Still, Porter was quick to return to her experience in Congress and her love of oversight hearings where she has peppered bank and pharmaceutical executives with tough questions.
Freshman Jack Jacobs listened attentively, trying to decide whom he’d like to work for this election season. He had also attended the Schiff event at the university, which he said had a larger turnout and was held in an auditorium. Environmental issues were a priority for him but seeking to make the economy more equitable through improved housing policies was also important.
“I’m looking for someone who is 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 have opposed their party on voting rights and environmental legislation recently.
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In Arizona, Sinema, newly an Independent, is now being challenged from the left by Rep. Ruben Gallego, who this week criticized her for undoing regulations, saying: “When bank lobbyists asked me to weaken bank regulations, I said no. When they asked Sen. Sinema, she asked how much — and voted yes. Now we are all going to pay for her mistake.”
Like Gallego, Porter has highlighted how her opponents have taken money from corporate political action committees and sees focusing on the haves and have nots of capitalism as a potent issue.
“It’s all connected to people feeling like there’s two sets of rules on the economy,” she said. “The rules for the people who are at the very top, and then the rest of us.”