Americana

What the Silicon Valley Bank blowup tells us about politics in 2023

The News

Republicans and Democrats in the presidential mix didn’t anticipate the collapse of Silicon Valley Bank or Signature Bank, but they quickly knew which of their off-the-shelf ideas would save the financial system.

The View From Republicans

For Florida Gov. Ron DeSantis, and for many congressional Republicans, the culprit was wokeness, a bank too “concerned with DEI and politics” to focus on its “core mission.” That synced up perfectly with GOP efforts to ban ESG investing, echoing last month’s attacks on the Biden administration for being too distracted by “woke initiatives” to clean up after a train derailment.

For Mike Pence, the only would-be presidential candidate who voted against TARP in 2008, the problem was a bailout culture; it had replaced the American “freedom to fail,” and needed to be dismantled.

“Banks make foolish decisions enabled by imprudent government policies and the American people pay the price,” Pence wrote in a Daily Mail column on Tuesday, a day after ex-U.N. Ambassador Nikki Haley — who rose to fame in the post-TARP tea party days — denounced the “Biden bailout.”

“When the Deposit Insurance Fund runs dry, all bank customers are on the hook,” Haley said in a statement. “Depositors should be paid by selling off Silicon Valley Bank’s assets, not by the public.”

And for Donald Trump, the specifics of the crisis and response were less important than that something bad was happening under his successor’s watch. “JOE BIDEN WILL GO DOWN AS THE HERBERT HOOVER OF THE MODRRN AGE [sic],” he wrote on Truth Social. “WE WILL HAVE A GREAT DEPRESSION FAR BIGGER AND MORE POWERFUL THAN THAT OF 1929. AS PROOF, THE BANKS ARE ALREADY STARTING TO COLLAPSE!!!”

Vivek Ramaswamy, the wealthy and anti-”woke” asset manager seeking the GOP nomination, told Semafor that the “real problem” was a failure to apply the rules already on the books — thereby “teaching large depositors at smaller banks that they can simply throw money at risky banks without diversifying or conducting diligence.” The failed bankers were taking advantage of a system they’d already distorted.

“The deeper problem is that the Federal Reserve has been trying to play God for too long,” said Ramaswamy. “Stop playing this misguided game of trying to balance inflation and unemployment where the Fed has repeatedly failed.”

South Carolina Sen. Tim Scott, the ranking member of the Senate’s banking committee – and a potential presidential candidate – wasn’t interested in new regulation, either.

“If this is such an outlier in the system, why wasn’t action taken?” said a spokesman for Scott. “Regulators failed to do their job with regards to SVB, and if regulators can’t do their job with what the law gives them now, why is giving them more regulations the better route?”

The View from Democrats

Democrats saw an easier fix, channeling frustration at the tech and finance leaders wrapped up in the SVB fallout into a campaign for more regulation. On Monday, President Biden blamed “the last administration” for signing legislation, supported by nearly all Republicans and a handful of Democrats, that exempted large regional banks like SVB from extra scrutiny.

“I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely that this kind of bank failure will happen again,” said Biden. The White House also pushed back hard at the suggestion it was staging a bailout, emphasizing that individual depositors and businesses, not bankers, were being protected. “This is very different than what we saw in 2008,” said White House Press Secretary Karine Jean-Pierre.

Two of California’s candidates for U.S. Senate raced in that same direction. Rep. Katie Porter told supporters she’d write “legislation to reverse that risky law,” teaming up with her mentor, Massachusetts Sen. Elizabeth Warren, while Rep. Adam Schiff planned his own bill to “claw back” SVB executive bonuses.

Arizona Rep. Ruben Gallego, who’s challenging independent Sen. Kyrsten Sinema for her seat, attacked her for supporting the 2018 Dodd-Frank rollback and said that Republicans would struggle to blame “wokeness” for the tumult. If 2022 GOP nominee Blake Masters ran again, said Gallego, he’d have to explain his mentor Peter Thiel’s role in the bank run; if any other Republican ran, Gallego would attack the “woke” distraction.

“Not everything in the world is a noun, a verb and ‘woke,’” the congressman told Semafor. “Thinking that way is how we end up with Republicans de-regulating these banks to the point where they become ticking time bombs for the economy.”

David’s View

What makes this populist backlash different? The response from DeSantis and many GOP House members is maybe the most telling example yet of how railing against “wokeness” has replaced inveighing against big government as the go-to rhetorical move for modern Republicans — sometimes to an awkward effect.

Republicans haven’t entirely given up their small government message on banks and bailouts — especially politicians like Pence and Haley who rose to prominence in the Obama era. During the 2010s, Tea Party conservatives also swirled their small-government ideology with resentment against “the food stamp president.” But the emphasis has shifted.

Democrats, forever frustrated about how TARP was handled, haven’t changed as much. They supported regulation then, they support it now, and over the last 48 hours they were clearly irritated by how Republicans pinned SVB’s failure on liberalism – as if plenty of banks with the same “woke” public values, and without as many panicky high-risk depositors, weren’t doing business as usual this week.

One big difference however: The Biden White House is far more concerned about the appearance of bailing out the banks than the team of technocrats who served under Barack Obama.

There will be hearings, and there will be campaign speeches, and the songbook for all of that is being written this week. Republican leaders pushed back on the “woke bank” talking point on Monday calls with their conference. But it may prove durable.

I’d expect Republicans to ask if regulators were distracted by their “commitment to equity” — especially because SVB’s CEO, Greg Becker, was on the board of the San Francisco Fed. That’s not all: “San Francisco Fed head Mary Daly is considered herself to be quite a wokester,” former Trump economic advisor Larry Kudlow told Fox Business viewers on Tuesday.

COLORADO. Staggering off their worst election cycle in decades, Republicans elected state Rep. Dave Williams to lead their party — just a year after Williams lost a bid to appear on the ballot with “Let’s Go Brandon” added to his name. “We are the party that elected Donald J. Trump and we are not going to apologize,” Williams told delegates in Loveland.

IOWA. Donald Trump made his first 2024 campaign stop in Iowa on Monday, echoing other 2024-curious visitors like Mike Pence and Ron DeSantis by promising to “bring back parental rights” in public schools and end “transgender insanity” with federal funding threats. He diverted from that topic to go after “Ron DeSanctus” for opposing ethanol subsidies when he was in Congress.

Further down the ticket: Auditor Rob Sand, the last Iowa Democrat holding statewide office, is squaring off against Republicans in Des Moines, who want to limit his office’s ability to investigate public records with what he’s called a “pro-corruption bill.”

NRCC, “Not Safe.” Most Democrats in competitive states and seats voted with Republicans to block the D.C. Council’s updated criminal code. Fifteen House Democrats targeted by the GOP’s House campaign group — two of them in Trump-won districts — voted to keep the code. Their gift is this digital ad, which attacks D.C.’s “city council” (a term the district doesn’t use, as it advocates for statehood) for lowering some criminal penalties and asks why these 15 Democrats were okay with it. The climactic pitch: “So crazy even President Biden won’t support the anarchy.”

Vallas for Mayor, “Brandon Johnson Wants to Defund the Police and Raise Taxes.” It’s a familiar script in Chicago’s mayoral races: Elect my opponent, and the city will collapse. Ex-Chicago schools CEO Paul Vallas keeps pounding Cook County commissioner Brandon Johnson on crime and taxes, and accuses him here of wanting to “defund” police, a term he’s avoided throughout this race as he emphasizes his public safety plan rather than his musings about “defund” during the George Floyd protests.

Friends of Brandon Johnson, “Wrong for Chicago.” None of it slowed down Vallas in the primary, but a quote calling himself a Republican, some “likes” on social media posts criticizing affirmative action, and the “pension holiday” he approved as schools chief all make it into Johnson’s first negative ad. The message: Does a city that gave 82% of its votes to Joe Biden really want to take a flier on this guy?

How popular is Ron DeSantis in Florida? Very: He won re-election by a landslide and leads Joe Biden in a hypothetical face-off by 9 points. (Donald Trump leads by just 7 points.) How popular is his war on wokeness? It’s lagging his approval rating, with most voters — including most white voters, who back him for president by 22 points — opposed to this description of his effort to roll back left-wing ideas and administration on campus. A proposed ban on abortion after six weeks of pregnancy is even less popular, with 75% of Floridians opposed. Both ideas were bottled until after the governor’s 2022 win.

Vallas got 33% of the vote in last month’s primary, and Johnson ended up with 22%, but with plenty of potential voters to win. Mayor Lori Lightfoot, who’s staying out of the runoff, carried the city’s majority-Black wards, and voters who backed her now support Johnson over Vallas. So do the supporters of every other also-ran, except for Trump-voting Black businessman Willie Wilson, who endorsed Vallas last week.

WHITE HOUSE

Tucker Carlson asked, and they answered — eight current or potential Republican candidates for president, fielding six questions each about American support for Ukraine’s war with Russia. After a year of vague but skeptical answers to Ukraine questions, DeSantis planted his skeptic’s flag.

“While the U.S. has many vital national interests,” DeSantis responded, “becoming further entangled in a territorial dispute between Ukraine and Russia is not one of them.” Once critical of Barack Obama for not delivering lethal weapons to Ukraine, DeSantis warned that giving the country long-range missiles or F-16s, as some in the Pentagon now support, could lead to “a hot war between the world’s two largest nuclear powers.”

Nikki Haley, who didn’t respond to Carlson before the rest of the answers were published, released her own answers on Tuesday: Supporting Ukraine was in America’s interest, Russia was trying “brutally expand by force,” and a Ukrainian victory could prevent “a wider war.”

Mike Pence was the only other respondent jostling for space in that lane: “There is no room for Putin apologists in the Republican Party,” he said in a statement to Carlson. “This is not America’s war, but if Putin is not stopped and the sovereign nation of Ukraine is not restored quickly, he will continue to move toward our NATO allies, and America would then be called upon to send our own.”

SENATE

Ex-Bridgewater Associates CEO David McCormick keeps acting like a challenger to Pennsylvania Sen. Bob Casey — releasing a book on how to “renew America,” sitting down with Sheetz whisperer Salena Zito, and, even less mysteriously, hiring staff for a potential Senate campaign. The McConnell-aligned Senate Leadership Fund is urging the multi-millionaire to run again after losing the 2022 primary to Mehmet Oz by 972 votes.

HOUSE

The DCCC and NRCC sketched out part of the 2024 battlefield last week — 29 “frontline” districts where Democrats will play defense, and 37 GOP targets where Republicans will try to expand their majority.

All 29 of the Democratic frontline members made it onto the GOP’s target list. Just five of them represent districts carried by Donald Trump in 2020: Alaska Rep. Mary Peltola, Maine Rep. Jared Golden, Ohio Rep. Marcy Kaptur, Pennsylvania Rep. Matt Cartwright, and Washington Rep. Marie Gluesenkamp Perez.

President Biden carried the rest of the frontliners’ districts by an average of 6.9 points. He did even better in some of the NRCC’s biggest reach seats, like central Florida’s 9th District — a landslide Democratic seat that Rep. Darren Soto only won by 7 points last year, as Democratic turnout evaporated across the state.

“Déjà vu,” said DCCC deputy press secretary Tommy Garcia. “Having learned nothing from 2022 — where Republicans’ overzealous predictions were met with Republicans’ worst midterm performance of its kind since 1962 — the NRCC is once again targeting seats that are simply out of reach.”

Off the map entirely: Some of the reach districts where Republicans expanded in the final, heady days of the midterm campaign, like Northern Virginia’s 11th district and every seat in the Chicago suburbs. On the map, for forward-looking reasons: Swing seats in Ohio and North Carolina, where Republicans won control of state supreme courts and legislators are expected to draw maps that will elect fewer Democrats.

• 21 days until Chicago’s mayoral runoff and Wisconsin’s state Supreme Court election
• 63 days until primaries in Kentucky
• 236 days until elections in Kentucky, Louisiana, New Jersey, Mississippi, and Virginia
• 602 days until the 2024 presidential election

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— Dave