On Sunday, the Federal Deposit Insurance Corporation (FDIC) bailed out the depositors of two midsize failed banks (Silicon Valley Bank and the Signature Bank) on the theory this would stanch a potential panic that could engulf the entire financial sector. The bailout might yet work, but the Band-Aid has only stopped some of the bleeding.

As in the 2008 financial crisis, failures in the US banking system are turning out to have international repercussions. In the United Kingdom, HSBC Holdings, an immense bank, mobilized to buy the UK arm of Silicon Valley Bank (SVB). This would presumably protect UK depositors in SVB. On Wednesday, Switzerland’s central bank announced that it is prepared to support Credit Suisse, a faltering bank. The central bank went on to offer Credit Suisse loans of up to 50 billion Swiss francs (or about $54 billion). Back in the United States, 11 major banks came together to inject $30 billion in deposits to shore up the shaky balance sheet of First Republic Bank—again to stave off a collapse and the ensuing contagion of panic.

If the 2008 economic meltdown was a full-blown pandemic, what we are now witnessing is the early stages of a spreading virus being met with a vigorous quarantine response. The question is: Why did the financial reforms introduced after the Great Recession not prevent a new wave of bank failures? Writing in The New York Times on Sunday, Senator Elizabeth Warren blamed the current situation on the watering down of the Dodd-Frank Act of 2010, which strengthened banking regulation: “With support from both parties, President Donald Trump signed a law to roll back critical parts of Dodd-Frank. Regulators, including the Federal Reserve chair Jerome Powell, then made a bad situation worse, letting financial institutions load up on risk.”

Warren’s point about “both parties” is deadly accurate. Any fair account of the banking crisis would place the lion’s share of the blame on Republicans, who have been united in their opposition to regulations. But Republicans weren’t the only political actors involved. In 2017, Donald Trump signed executive orders weakening enforcement of Dodd-Frank. This was followed in 2018 by a bipartisan law rolling back parts of Dodd-Frank.

That law was supported in the Senate by 50 Republicans and 17 Democrats. The Democrats who voted “Yea” tended be centrists—notably Mark Warner of Virginia, Chris Coons of Delaware, Tim Kaine of Virginia, and Joe Manchin of West Virginia.

As The Lever notes, SVB president Greg Becker actively lobbied on behalf of weaker regulations and was especially close to Senator Warner. Becker “held a fundraiser at his Menlo Park, California, home in 2016” for Warner and the “bank’s political action committee also donated a total of $10,000 to Warner’s campaigns in the 2016 and 2018 election cycles.”

Even after last week’s collapse of SVB and Signature Bank, the 17 Democrats who supported the regulatory rollback remain unrepentant. NBC reported on Thursday, “Moderate Senate Democrats who voted to loosen regulations on midsize banks in 2018 are standing by their votes in the wake of Silicon Valley Bank’s collapse, joining Republicans in resisting enhanced scrutiny for financial institutions.”

The campaign donations that Democrats receive from banks, and in particular from SVB and Signature Bank, now present a political problem for the party. In The New Republic, Timothy Noah notes,

Republicans receive more in political contributions from banks than Democrats, of course. The pattern was particularly lopsided from the mid-1990s to the mid-2010s. But beginning in 2016, these contributions started evening up, and by 2020 Democrats were getting $26 million to the Republicans’ $29 million. The gap widened again in 2022, but Democrats still got 40 percent of the haul. Fox News reported Wednesday, with great delight, that Silicon Valley Bank and Signature gave more to Democrats than Republicans in recent years. That’s not quite right; in the 2022 cycle, Signature gave Democrats only 40 percent. But, yes, Silicon Valley gave Democrats 77 percent, and in 2020 it gave Democrats an astounding 96 percent, while Signature gave Democrats 59 percent.

Ironically, one of the figures who illustrates the tight connections between Democrats and the banking industry is one of the cosponsors of Dodd-Frank, former Massachusetts representative Barney Frank. After retiring from Congress in 2013, Frank joined the board of Signature Bank—a position that has earned him more than $2 million. Explaining his decision, Frank told the Financial Times, “I worked as a member of Congress for a certain objective. And then having retired, not having a pension by my choice, not wanting to be a lobbyist for reasons personal, I need to make some money.”

On Thursday, I interviewed Frank and asked him why he opted out of the robust congressional pension program. He explained to me that, as a gay man, he didn’t expect to ever marry and have a family (the recognition of marriage equality allowed Frank to marry Jim Ready in 2012). Further, he thought the congressional pension was “too generous” and he wanted to be free of accusations from political foes that he was living high on public funds.

Beyond his pension decision, Frank disputes that joining the bank board constitutes a problem, noting that he’s involved in other enterprises that grow out of his work in Congress, notably supporting gay and lesbian rights. In an interview with The New Yorker, Frank argued against Warren’s contention that the 2018 Act partially rolling back Dodd-Frank is a factor in the current crisis. Even before joining Signature Bank, Frank had argued for a partial loosening of bank regulations, although he has a complicated relationship with the 2018 rollback act. According to The New Yorker, “Frank claimed that, were he still in Congress, he would have opposed the bill, but he also defended it publicly multiple times, and even released a statement, with Dodd, that said, ‘This bill is not a big hand out to Wall Street.’” Frank told The New Yorker, “I don’t see any argument that there was something that was going on that would’ve been stopped if [SVB and Signature Bank] had got the same scrutiny as JPMorgan Chase. No one has made a specific connection there.”

In addition to this policy disagreement, there is also an ethics dispute. Frank insists that as a former lawmaker with expertise in banking regulation, it is acceptable for him to serve on the board of a bank. He sees serving on a board as an activity distinct from lobbying.

Jeff Hauser, founder of the Revolving Door Project, disagrees. “Barney Frank wasn’t brought on board to evaluate potential loans,” Hauser told me, “or to develop sophisticated hedging strategies. [Apparently, Signature never hired anyone to do that!] Frank was on Signature’s Board to provide political weight, to represent the bank in meetings with progressive groups (e.g., tenant organizations), and to be a voice for the bank’s political agenda. And he did all of those things effectively. Signature grew in political power because of their association with Frank. If it quacks like lobbying and influences like lobbying and is paid like lobbying, it doesn’t really matter what word you use to describe Frank’s role—it is lobbying in every sense but the legal. And the only reason that the law doesn’t reflect common colloquial understandings is that members of Congress have no incentive to expand the artificially narrow legal definition.”

The banking industry also has easy access to former president Barack Obama and former House speaker Nancy Pelosi. On Tuesday, Theodore Schleifer of Puck posted an extensive report on the lobbying efforts of billionaire venture capitalist Ron Conway, whose firm SV Angel was a depositor at SVB. On March 9, Obama and Conway shared a stage at the SVA Founder Summit. The following night, Conway had dinner with Obama and Pelosi. As Schleifer reports, Conway is expected to support Pelosi’s daughter Christine if and when she makes a bid to replace her mother in Congress. Schleifer adds that Conway “leaned on their shared history to help save Silicon Valley Bank, which was the focus of the trio’s dinner conversation.”

Over the next two days, after the SVB collapse, Conway continued to press his political allies for a solution, hoping the bank would be bought out and the depositors made whole. Schleifer writes:

On Sunday morning, an acquisition looked unlikely, and [Treasury Secretary Janet Yellen] had just gone on television and suggested that no bailout was in the offing. So Conway made one final plea, I’m told, calling Kamala Harris to register his displeasure and anxiety. Conway expressed to the vice president, with whom he goes back decades in San Francisco politics, his concern that the FDIC and the Treasury Department were putting up various blockers to solving the crisis.

Hours after this conversation with Harris, the FDIC announced a bailout for all SVB depositors—including those whose deposits exceeded FDIC coverage limits.

We can’t know for sure whether Conway’s lobbying was decisive. After all, he wasn’t the only tech billionaire with his hand out. What we can say with some confidence is that far too many Democrats have far too cozy a relationship with big banks and their largest clients in the venture capitalist sector, which contributed to the permission structure that allowed for reckless investment strategies.

If, as after the 2008 financial crisis, there is a populist backlash to the SVB bailout, Democrats are going to be a major target. But beyond the political fortunes of the party, this kind of coziness with the rich endangers progressive politics.