(Bloomberg) -- Donald Trump’s 2018 rollback of bank regulations is haunting Senator Kyrsten Sinema following the collapse of Silicon Valley Bank.
Sinema was one of 50 Democrats in the House and Senate to support the law, which many Democrats now blame for the SVB fiasco. More than a third are no longer in Congress, including several — such as Claire McCaskill of Missouri and Heidi Heitkamp of North Dakota — who lost Senate reelection races that year.
As a member of the House in 2018, the vote helped Sinema establish her bipartisan bona fides. Five years and multiple bank failures later, it has become a liability in Arizona, a crucial battleground state.
Like Sinema, Democratic Senators Joe Manchin of West Virginia, Tim Kaine of Virginia, Jon Tester of Montana and Tom Carper of Delaware supported the law and are up for reelection next year. So, too, did fellow independent Angus King of Maine.
They all had to tap dance around their vote last week, with most placing the blame on regulators. Yet unlike those senators, Sinema, now an independent, is already facing a strong challenge from the left in Arizona, a state that President Joe Biden narrowly won in 2020.
“Sinema is in the pocket of Wall Street and her vote put hardworking Arizona, their families, and their small business, at risk of another 2008-like meltdown,” tweeted Democratic Representative Ruben Gallego, who is running for the seat.
Sinema ducked into an elevator last week when asked if she had a reaction to Gallego’s criticism, which has become a common refrain since she opposed Biden’s efforts last year to increase tax rates on corporations and the wealthy.
Her spokesman, Pablo Sierra-Carmona, said the senator isn’t focused on campaign politics.
Last August, she demanded a Democrat-only bill retain the carried interest tax break for private equity. Without her vote, the bill would have failed and so Democrats grudgingly acquiesced in the final hours of months-long negotiations.
To respond to the bank debacle, Sinema signed on to bipartisan legislation to claw back executive bonuses and stock sale profits within 60 days of a failure. And she wrote a letter with Republican Thom Tillis of North Carolina chastising the US Federal Reserve for its supervision of the San Francisco Fed.
The response from Sinema, who still caucuses with Democrats, isn’t all that different from other moderates who have singled out regulators — and not the 2018 law — for what happened.
“Zero,” Tester, a senior member of the Banking Committee, said when asked what effect the 2018 law had.
Yet unlike Tester and Manchin, Democrats in Arizona have a viable alternative in Gallego.
Sinema has yet to announce whether she will run for reelection but has filed as an independent, allowing her to avoid a Democratic primary and head directly into a three-way general election.
That vote could percolate in other campaigns, including that of Senate Banking Chairman Sherrod Brown of Ohio. Brown is the only Democrat who opposed the 2018 law and is up for reelection in a state Trump won in 2020. Trump won the Rust Belt state in 2016 and 2020, but Brown has an appeal to voters there as well.
“They’re always doing the bidding of Wall Street,” Brown said of Republicans, but added his party isn’t innocent either. “There are some that don’t fight hard enough. I’m not going to mention names, but there are some that don’t.”
In California, three Democrats vying for an open Senate seat — Representatives Katie Porter, Adam Schiff and Barbara Lee — are trying to distinguish themselves on the issue.
Porter is working with Senator Elizabeth Warren of Massachusetts, who has endorsed her campaign, on legislation to undo the 2018 law. Schiff introduced legislation on clawbacks.
It’s not just Democrats who are focusing on banking regulations. Senator Josh Hawley, the Republican who beat McCaskill in 2018 and so isn’t tarred by his voting history here, has floated restoring provisions of the Depression-era Glass-Steagall Act, which prevented commercial banks from engaging in investment banking and was repealed in 1999, during the Clinton administration.
“Customers in Missouri shouldn’t be bailing out tech billionaires in California,” he told reporters.
Lucas Kunce, a Democrat who is running for Hawley’s seat on a progressive populist platform, wants to go further.
“We need to end the culture of corruption in D.C. that has allowed banks to write the rules on banking, then count on bailouts when things go wrong. Bringing back Glass-Steagall is just the beginning,” he said.
No Republican Senate seat, however, is up in a state won by Biden.
--With assistance from Laura Litvan.
(Adds a chart; an earlier version of the story corrected characterization of Brown in 15th paragraph)
©2023 Bloomberg L.P.
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