The burden of the recent failures at Silicon Valley Bank and Signature Bank will not fall on American taxpayers, according to President Joe Biden, promising “the money will come from the fees that banks pay into the Deposit Insurance Fund.” Biden also said his administration is investigating how the banking collapse happened in the first place and is asking Congress and regulators to strengthen regulations for banks so a failure like this doesn’t happen again.
Straight Arrow News contributor Ben Weingarten takes a look at some of the major storylines that have emerged:
Would there be contagion? What would the consequences be of this massive bailout that authorities won’t call a bailout, of the bank’s largely uninsured depositors – and how great will the costs ultimately run? Why did this bank in particular get this support? Was Washington, D.C. favoring Silicon Valley and the startups and venture capitalists so exposed to it? Where do interest rates go now? Who was most culpable – the Fed for blowing this massive bubble in financial assets, and encouraging broader speculation and risk-taking that helped make SVB so large, then punctured it – or the banks’ executives who took on totally unhedged risk leading to the collapse? What will the political effects be?
There are going to be many threads to pull at in the weeks ahead. But did you catch this one? In a call between members of Congress, their staffers, and representatives of the Fed, Treasury, and FDIC on Sunday, March 12, when the non-bailout bailout of SVB was being announced – prior to market opening – Democrat Senator Mark Kelly asked a question. According to Republican Congressman Thomas Massie, Kelly asked, in Massie’s words, “if there was a program underway on social media to censor information that would lead to a bank run.” Massie told journalist Michael Shellenberger’s “public” Substack that “I believe he couched it in a concern that foreign actors would be doing this. But he didn’t suggest the censorship should be limited to foreigners or to things that were untrue. The people from the three agencies couldn’t answer him and just sort of took a pass on the question.”
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