Rep. Gallego calls out Sen. Sinema for ‘Wall Street values’

Rep. Ruben Gallego lashed out at Sen. Kyrsten Sinema over a vote five years ago to change banking regulations, linking that move to the implosion last week of Silicon Valley Bank and more tremors rumbling through the financial sector.

“There are those that can look back on our careers with pride, knowing that we stood on the right side of history when it comes to protecting the financial wellbeing of Arizona families,” Gallego, D-Ariz., said Tuesday as he stood outside the bank’s Tempe offices. “And then there are people like Kyrsten Sinema, who stood on the wrong side of history.”

Gallego said bank lobbyists “bought Sinema’s vote” and pointed in particular to three Silicon Valley Bank lobbyists who gave her campaign maximum contributions two months before the vote to roll back parts of a 2010 banking overhaul known as Dodd-Frank.

Sinema, I-Ariz., was a Democratic member of the House of Representatives at the time. She was one of 33 House Democrats to join with nearunanimous support from Republicans to raise the threshold for the most rigorous federal scrutiny of banks, a move that excluded smaller banks, such as Silicon Valley Bank.

Gallego, who is running for the seat Sinema won in 2018, voted with most House Democrats to leave Dodd-Frank as it was.

His attack on Sinema draws attention to a common vote when they were both in the House and provides more fuel for her critics, who already cast her as beholden to the financial industry she helps oversee from her Senate committees in Washington.

“Simply put, she voted to give banks free rein, and I did not,” Gallego said, noting that banking lobbyists appealed to him as well as to her. “When these lobbyists asked us to support their deregulation, all I could think about was 2008, when family savings were wiped out. … It took eight years for this state to recover, and some parts of our state are still hurting.”

Sinema, who quit the Democratic Party in December, has filed preliminary paperwork to run again but has not formally announced if she is doing so. She sidestepped Gallego’s attacks on her.

“Kyrsten is not engaging in campaign politics and is instead keeping her focus on solutions and ensuring those responsible are held accountable,” a Sinema spokesperson said in response to Gallego’s comments.

The changes to Dodd-Frank are facing renewed scrutiny amid the collapse of Silicon Valley Bank, the largest bank failure since the 2008 financial crisis.

The 2018 changes in Dodd-Frank meant that most banks no longer automatically had to pass “stress tests” that simulated the effects of severe economic downturns on their finances. The threshold for such required checkups went up from $50 billion in assets to $250 billion.

The Fed maintained the discretion to still require the stress tests of certain banks with $100 billion or more in assets, which would have included Silicon Valley Bank.

The complete picture of the bank’s problems likely will take months or longer to develop, but the effects of inflation, social media and a uniquely well-heeled client base, as well as lighter oversight, may have played a role.

Sinema is a member of the Senate banking and commerce committees.

Dodd-Frank was passed in 2010 after the crisis in subprime lending helped fuel the housing crash that defined the Great Recession.

The collapse of Silicon Valley Bank, and significant concerns about other banks in recent days, led President Joe Biden to publicly reiterate the safety of deposits for account-holders on Monday.

The tumult in the financial sector creates new economic concerns for the Federal Reserve as it tries to bring down inflation rates through higher lending rates without triggering a recession.

Both Sinema and Gallego have at least some campaign ties to Silicon Valley Bank.