The House is out this week but the Senate is in—and with last week’s Silicon Valley Bank collapse, lawmakers are debating the need for more financial regulations to keep banks in check. We’ll take a look at that story, then we’ll get to a Q&A with freshman Rep. Hillary Scholten.
Is SVB Backlash Building?
Late last week, Silicon Valley Bank collapsed and was taken over by the Federal Deposit Insurance Corporation (FDIC). On Sunday, the Treasury Department and Federal Reserve announced they would guarantee all deposits—even the uninsured ones—while offering favorable loans to other banks that may face liquidity problems.
The Biden administration’s de facto bailout came swiftly as it sought to prevent the panic from spreading throughout the financial system. While many heavy hitters on the Hill praised the quick response, critical voices are emerging. The question is whether Congress will take legislative action—or settle for its usual partisan bickering. (Disclaimer: The Dispatch was a Silicon Valley Bank customer.)
Key lawmakers such as North Carolina GOP Rep. Patrick McHenry, chairman of the House Financial Services Committee, have expressed confidence in financial regulators. Sen. Mitt Romney called the feds’ response the “right decision.” Yet other leading Republicans aren’t so sure.
“Building a culture of government intervention does nothing to stop future institutions from relying on the government to swoop in after taking excessive risks,” Sen. Tim Scott, the top Republican on the Senate Banking Committee, said in a statement. And in a Fox News appearance, he called the response “the greatest form of corporate cronyism that we’ve seen in a very long time.”
Asked about whether the senator had plans for legislative action in response to the crisis, a spokesperson for Scott raised rhetorical questions: “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?”
For his part, Kentucky Rep. Thomas Massie has slammed virtually everyone. “Most elected Democrats are openly advocating for crony capitalism right now,” he tweeted. The FDIC is “taking the insurance premiums that were paid in to protect depositors under $250,000 (little guys) and using it to cover deposits of the very rich.”
But this is Washington, and partisan fault lines are also emerging as Republicans look for ways to lay the blame at the feet of the Biden administration, and some Democrats point to Trump-era legislation.
“Democrats’ reckless spending caused record inflation,” South Carolina GOP Rep. William Timmons tweeted on Saturday. “The Fed is trying to get that inflation under control by raising interest rates,” which he said are “now bringing down banks.”
Democratic Sen. Elizabeth Warren, a member of the Senate Banking Committee, took to the pages of the New York Times Monday to blame “a toxic mix of risky management and weak supervision” that plagued SVB. The risky management—which involved investing depositors’ money into long-term Treasury bonds that became less valuable as interest rates increased—was the bank’s fault. But as for the source of weak supervision, Warren singles out a 2018 law that partially rolled back the Dodd-Frank Act, a 2010 law responding to the 2007-2008 financial crisis.
“Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks,” Warren wrote, calling for congressional action to reverse the 2018 changes.
The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which passed with support from both parties, reduced the frequency of Federal Reserve “stress tests” for banks of SVB’s size while not fully ditching the requirement. It was endorsed by former Rep. Barney Frank of Dodd-Frank fame, who was on the board of Signature bank until it, too, was shut down on Sunday.
Republicans won’t be keen to take Warren’s advice when it comes to legislation. But there is widespread agreement that federal supervision of SVB was inadequate: The Fed is conducting an internal investigation of the matter, and McHenry said he wants to look into it as well.
Catching Up With Rep. Scholten
Two years ago this month, we caught up with Rep. Peter Meijer, who was then the new representative for Michigan’s 3rd Congressional District. Since then, Meijer has lost a primary race for reelection and his seat has been filled by Rep. Hillary Scholten, the first Democrat to represent Grand Rapids since the 1970s.
We recently interviewed Scholten, an immigration attorney and former Obama administration official, about her experience in the House thus far (edited for length and clarity).
Haley: What about Congress has surprised you the most?
Rep. Scholten: Honestly, I think how friendly folks are across the aisle. You don’t get a good sense of it from watching the national news media because the national media thrives on conflict. But at the end of the day, Republicans and Democrats are talking in the well on the House floor, you know, we see each other around town. And we’re very friendly. We’re colleagues.
After January 6, relationships across the aisle got a lot more tense. I find it interesting that this is what’s stood out to you.
That’s why it surprised me, because that was what my perception was as well. This freshman class is unique in the sense that we raised our hands to run in the wake of one of the most violent political clashes that this country has witnessed in recent history. And we came with a purpose and intention of lowering the temperature, building relationships across the aisle, and creating a more workable, harmonious Congress. It’s not true with everyone: Each side has extremes. From my perspective, there certainly still are individuals who minimize the impact of January 6. I think that is a danger to our democracy.
I’m not minimizing the threat that poses to our democracy or people who deny the results of the 2020 election, but those are the things that the national news media focuses on. They don’t focus on the bipartisan work that we’re doing every single day in our committees. I sit on the Transportation and Infrastructure Committee and the Small Business Committee, where there is a lot of bipartisan agreement. There are going to be policy differences, but by and large, there’s agreement.
Which members have you formed strong relationships with in these first few months in Congress?
Our freshman class is actually really strong. So I’ll say especially among some of the freshmen women, we’ve really bonded and I would consider each and every one of them a good friend. On the other side of the aisle, my fellow freshman from Michigan, John James. He is literally right next door to me in our office buildings. He and I joined forces and showed a strong bipartisanship commitment by sitting with each other at the State of the Union. I literally crossed the aisle and sat with him on the Republican side. He’s a great colleague.
Did former Reps. Peter Meijer or Justin Amash give you any advice about representing the district?
There has been so much collaboration. Both Congressman Amash and Congressman Meijer have been so generous with their time and their advice and their staff. We have kept on individuals from the former congressional offices in the district who have worked for Congressman Amash, Congressman Meijer, even going back to Vern Ehlers and Paul Henry. One of the things that has defined representation in this district for so long is a real spirit of service-oriented leadership but also independent thinking. Individuals who are going to not just toe the party line, but who are going to be responsive to the needs, the demands, and be a good reflection of the district. And I am so honored to be continuing to carry that mantle.
Part of your campaign got particularly controversial when Democratic groups boosted John Gibbs, a 2020 election denier, over Peter Meijer in the GOP primary. What did you think of that tactic?
My opinion was just like everything else: I’m just going to keep my head down and run my race. I treated it like just any other piece of campaign gossip that came across the wire. It had nothing to do with me. I was just head-down, focused on running my race. The thing that I think really stood out to me when the dust settled after the campaign was that we were really giving people something to vote for instead of something to vote against.
A recent New York Times investigation revealed an alarming amount of child migrant laborers in your district. How have you responded?
When this story broke obviously with the focal point of Grand Rapids, Michigan, I was sick and disgusted that something like this was happening in our district and immediately responded with action. I called the White House. Because I’ve been doing work in this space for so long, I knew exactly where the fault lines were and how we needed to fix this and create a safety net for these kids. So we asked the administration to form an inter-agency task force between the Department of Labor and the Department of Health and Human Services, and they did, and we’re continuing to work with them to make sure that we have a proactive and engaged response. This system just depended far too much on children reaching out and taking the initiative to talk about being put in these exploitative conditions. There is so much more work that needs to be done. There was a multisystem failure that created this problem, and we need a multisystem response to fix it.
Have you been talking to colleagues about immigration legislation to respond?
There’s been a lot of work in this space already. We don’t need to reinvent the wheel. I don’t think we’re at the bill stage yet, but there are a lot of open-minded individuals who are ready to tackle this issue of immigration reform head-on and with a fresh perspective. I was talking earlier about our freshman class coming in with a really renewed energy, and I hear so often, “Oh, it’s never going to happen. We’ve never been able to do it.” And we simply cannot let the failures of the past excuse us from trying. This is a major economic issue. It’s a workforce development issue. It’s a humanitarian issue, and it’s one that we absolutely have to solve.
How does your Christian faith influence your job in Congress?
My faith has inspired and informed my vocational aspirations from such an early age. My parents instilled in me a strong sense of making sure that our faith was calling us to a life of service. My mom exemplified that in her work as a public school teacher. And it’s what inspired me to commit my life to public service as well, working as a social worker, going to broken places in our world where we need individuals who are just bringing fresh, service-oriented, humble perspectives. And I think there’s no place that needs that more than Washington, D.C.
On the Floor
The House is out this week.
The Senate is considering executive nominations. Senators will also begin debating a measure to repeal the 2002 authorization for military force in Iraq, with a vote on final passage possible early next week.
- General B. Chance Saltzman, chief of space operations for the U.S. Space Force, will appear before a Senate Armed Services subcommittee this afternoon to testify about Space Force programs and the Defense Department’s fiscal year 2024 funding request. Information and livestream here.
- The Senate Budget Committee will meet Wednesday morning for a hearing on President Joe Biden’s new budget proposal. Shalanda Young, director of the Office of Management and Budget, is set to testify. Information and livestream here.
- Treasury Secretary Janet Yellen will answer questions during a Senate Finance Committee hearing Thursday morning about the administration’s fiscal year 2024 budget plan. Information and livestream here.